Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: And here we are with the means committee, February 18, Wednesday, October. And we are picking up h five sixty seven for a vote.

[Bridget Burkhardt (Clerk)]: Can I have a

[Charles Kimbell (Ranking Member)]: Yes, madam chair? First, we have an amendment from the House Ways and Means Committee on H567, and I would move that we find draft 1.1 favorable.

[Emilie Kornheiser (Chair)]: Thank you so much.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Do you have a second?

[Charles Kimbell (Ranking Member)]: I have a second.

[John Gray (Office of Legislative Counsel)]: Will get a second.

[Emilie Kornheiser (Chair)]: Thank you so much, Representative Waszazak. We have to really do things with this machine, folks, if we're gonna get through crossover. Thank you. Representative Waszazak has a second. Any discussion on the amendment?

[Unidentified Committee Member (House Ways and Means)]: Does the amendment include the three new positions? No, it does not.

[Charles Kimbell (Ranking Member)]: The amendment clearly is to limit total amount to be diverted to these two different funds, uses, dollars 300,000, Whereas before in the original underlying bill, it was not so restricted. Any

[Emilie Kornheiser (Chair)]: further discussion on the amendment? Seeing none, if a clerk please call the roll on the amendment.

[Bridget Burkhardt (Clerk)]: Of the amendments. Representative Branagan? Yes. I'll vote yes at Representative Burkhardt. Representative Higley?

[Mark Higley (Member)]: Yes. Representative Holcombe? Yes. Representative Kimbell?

[Charles Kimbell (Ranking Member)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Asland? Yep. Representative Ode? Yes. Representative Page?

[Woodman Page (Member)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Waszazak? Yes. Representative Canfield? Yes. Representative Kornheiser?

[Emilie Kornheiser (Chair)]: Yes.

[Bridget Burkhardt (Clerk)]: The amendment was voted favorable eleven-zero-zero. Thank you.

[Charles Kimbell (Ranking Member)]: Now we have the underlying bill, Madam Chair, which I would move that we find favorable, H. Five sixty seven.

[Emilie Kornheiser (Chair)]: Thank you.

[Charles Kimbell (Ranking Member)]: As amended.

[Emilie Kornheiser (Chair)]: Second. Thank you. Representative Kimbell moves with H567 as amended. Representative Wozazak seconds. Any discussion? Representative Higley? A

[John Gray (Office of Legislative Counsel)]: question, I guess.

[Unidentified Committee Member (House Ways and Means)]: Under Rutland's authority with the three positions, two full time, which would be paid for the unclaimed property special fund, and the one full time which would be proportionally paid from three different retirement systems. Who has the authority to do that? Is that ways of means, approach, the judge member? That's approach. Okay. Yeah. That's all I need to know. Thank you.

[Emilie Kornheiser (Chair)]: Thanks. Anyone else? Seeing no further discussion, if the court could please call the roll.

[Bridget Burkhardt (Clerk)]: Representative Branagan? Yes. All vote yes. Is representative Burkhardt? Representative Higley?

[Mark Higley (Member)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Holcombe? Yes. Representative Kimbell?

[Charles Kimbell (Ranking Member)]: Yes.

[Bridget Burkhardt (Clerk)]: Representative Masland? Yep. Representative Ode? Yes. Representative Page? Representative Waszazak? Yes. Representative Canfield? Yes. And Representative Kornheiser?

[Emilie Kornheiser (Chair)]: Yes.

[Bridget Burkhardt (Clerk)]: We have voted the bill favorable as amended eleven-zero-zero.

[Emilie Kornheiser (Chair)]: Thank you very much, everyone. We are going to take a five minute break while we wait for the Agency of Education and John to come. And so, ways and means, we are looking at school district reserve guidance. I I think last time we discussed this, we heard from the Education Commission on the States about what other states do on this. And I I think there was sort of a question about, is our legislative intent with the Agency of Education clear enough for them to sort of deliver what we want to deliver? And so I asked John to make some updates to the statute so we can gather what we need to gather, both for as we look at budgets for the next couple of years before Act 73 is implemented, There's a lot of questions about how reserves are used differently for different districts to navigate this challenging time. And then there's even more of a policy spotlight in the context of the foundation formula and school construction. And so, John, do you want to join us? Thank you. Really encourage folks to, if you can, pull up that testimony from the last time we talked about this from the Education Pension on the States, his name was Joel Chris. Chris. Chris Duncombe. Good

[John Gray (Office of Legislative Counsel)]: morning, everyone.

[Emilie Kornheiser (Chair)]: Sorry. One more sec. Does everyone know how to pull up past testimony by witness rather than by date? It's a really lovely thing. Great. Okay. Unless you're looking for something from Julia Richter and then there's too much in there for it to be final.

[Bridget Burkhardt (Clerk)]: Chris Duncong, the COODP from Education.

[Emilie Kornheiser (Chair)]: Floor is yours now that I've interrupted you three times.

[John Gray (Office of Legislative Counsel)]: Perfect. John Gray, Office of Legislative Counsel. I am going to screen share. I did take my cue exactly from that. One of the things that, Chris from ECS had linked to in his testimony was a document from the Government Finance Officers Association that provided kind of generic principles for thinking about reserve balances and the kinds of considerations that folks should undertake when they're developing their policies related to how to manage reserves or just general funds. And so I took my cue from there. And what you're gonna see in this pretty simple draft is amendment to the 2024 yield bill, which contained rulemaking authority for the agency of education to initiate by 01/01/2025, rulemaking to update district quality standards to include recommended reserve fund account standards. However, that's kind of the extent of what's that authorization initially contained. It said, do this, this date, and consult with local school officials when you do that. The discussion last week was about, in part, whether or not there was sufficient guidance as to what it means to actually recommend account standards. So this draft changes the timeline, the relevant party to be consulted with, and boosts out what that actual roommateking authority would be. So honored for the end of this year, 12/31/2026, the agency of education in partnership with the Vermont Association of School Business Officials shall complete for this rather than initiating by a particular date, this is completing by a particular date. I would just note that those, I think, can take some time, but if that process has to go, maybe this is achievable. But on our report December 31, AOE, in partnership with BASBO, shall complete rulemaking to update the district quality standard to include recommended reserve fund account standards. Then here is the actual boosted out language, the legislative guidance for this rule making. The agency shall specifically adopt rules to, one, prescribe minimum and maximum balance levels for reserve fund, and then there's a consideration that they would undertake when prescribing these balance levels, taking into consideration revenue predictability and expenditure volatility, exposure to significant one time expenses, and impact on credit ratings. You could have this just as a prescription for maximum balance levels without any particular considerations, but there are some considerations listed here just for folks to talk about. These are the sorts of things that might inform what you think appropriate levels are. Second, specifically about rules to specify acceptable conditions that warrant use of the reserve fund. So what are permissible uses? And the period within which funds may be used, so you can imagine that certain things trigger usage of the reserve fund. How long does that trigger last, basically? Third, establish best practices for replenishing a depleted reserve fund. If you had to dip in, how do you deal with that depletion, putting the period over which the reserve fund should be replenished. So what kinds of funds should be used to replenish it and over what period should you think about that? And then lastly, kind of a catchall piece here dealing with the fact that you're generating generally applicable standards. Identify the conditions that may justify deviation any broadly applicable standards adopted pursuant to this section. This is something that doesn't show up in the government finance, officers association report. This is just a thought that I had. You could imagine that if you have standards out there, folks better or worse comply with those. It might be helpful, I would think, to know when someone has, like, a justifiable reason to defer. So this is just a proposal, not something that has to be included, but it'd be nice to know what kind of conditions justify deviation from these broader standards. The four specific authorities here, what levels are appropriate, what are acceptable uses, how should you replenish a depleted fund, and then when should you or when is it permissible essentially to deviate from those standards would take effect 07/01/2026. Relatively simple and broadly drawn from that document that the ECS folks had linked to.

[Emilie Kornheiser (Chair)]: Imagine we wanted to take effect on passage just to give them a little bit more time.

[John Gray (Office of Legislative Counsel)]: Sure.

[Emilie Kornheiser (Chair)]: So they should have started already.

[John Gray (Office of Legislative Counsel)]: Exactly. This is actually extending what's being done. I mean, the other thing that we know happens during session, of course, is you're sending queues so folks are already sometimes complying with the law in the advance of it, even if you've been to law.

[Bridget Burkhardt (Clerk)]: Yeah, perhaps, I'm Burkhardt. Is there a mechanism right now when districts report their budget or their proposed budgets and the budgets that pass to the AOE, is there already a mechanism to do something like explain why their reserves might not match standards? Or do we need to say something in language about how districts are gonna report about what their reserves are and why they might deviate from the standards? Yeah,

[John Gray (Office of Legislative Counsel)]: don't know the answer to that. I'm not aware of

[Emilie Kornheiser (Chair)]: We're gonna talk to the agency right after John.

[John Gray (Office of Legislative Counsel)]: Okay.

[Emilie Kornheiser (Chair)]: Anyone else? Questions for John? Edits for John? Ideas about how to fix everything in the whole wide world? Okay. Do you have any guess, representing Branagan? Was it that last question? It

[Carolyn Branagan (Member)]: takes me a while to process stuff and then get out.

[Emilie Kornheiser (Chair)]: I'm drinking coffee, so I'm moving too fast.

[Carolyn Branagan (Member)]: Are we taking away the local control here more? Are we taking things away from local school boards? Like if they want to set money aside, for a classic example, the new gym floor, Are we limiting their ability to do that or not? I honestly don't know from this wording.

[Emilie Kornheiser (Chair)]: I mean, I think we're just adding more clarity to something we already passed in statute last year. But I don't know. John, do you wanna

[John Gray (Office of Legislative Counsel)]: The thing I would offer is these are recommended the it's rulemaking. It's just cabining the rulemaking authority for AOE, and the rulemaking is on recommended reserve fund account standards. So it doesn't speak to the extent to which folks comply with the standards or what permissible deviation is. It just says when you're developing these standards, include these factors. So I don't see it as changing Maybe I would have to think more, but it's just counting for what falls within the standards rather than saying there will or won't be standards.

[Carolyn Branagan (Member)]: So are we giving the ALE the idea that we want them to major parameters in school districts? They already know that from what we did last year, right?

[John Gray (Office of Legislative Counsel)]: This is even prior to last year. This is 2024, you'll bill this authority for developing reserve standards. Okay. This

[Emilie Kornheiser (Chair)]: That's more than an authority. It's a mandate. Yes.

[John Gray (Office of Legislative Counsel)]: Yeah. Sorry. I I keep saying it that way because we have to extend legislative powers to the executive branch, but, yes, it's mandatory. So

[Carolyn Branagan (Member)]: it's been done.

[Emilie Kornheiser (Chair)]: It hasn't been done. We just put it into statute.

[Carolyn Branagan (Member)]: And it hasn't been done?

[Emilie Kornheiser (Chair)]: Good. Hence, the renewed clarity.

[Unidentified Committee Member (House Ways and Means)]: Doctor. Can you explain why the word complete is used rather than initiate on the process?

[John Gray (Office of Legislative Counsel)]: I can try. I mean, simple thing to say is that this is setting a deadline for we want these rules by x date. You could ask the question whether or not that's achievable. I think that's a worthwhile question to ask. My guess is that because you're amending a section that already had initiate as of a particular date, You're now just clarifying that as it happened, we would like the rules. Okay. But, yeah, it's as simple as as soon as as soon as these can come out, that would be appreciated. That is my plain English read of this.

[Unidentified Committee Member (House Ways and Means)]: And

[John Gray (Office of Legislative Counsel)]: you can choose different dates, of course.

[Emilie Kornheiser (Chair)]: John.

[John Gray (Office of Legislative Counsel)]: Thank you. Thank you.

[Emilie Kornheiser (Chair)]: Appreciate your work on that. Sandra, Kelly, however you two would like to join or not join. And I'm sorry that we sent you the language so very late for you to think about.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: That was Okay. That would not be the recent language. Great. Thank you for that. I do not have the link.

[Emilie Kornheiser (Chair)]: You need to share your screen? Yeah. Sorry. Bring it you. Oh, great then. You don't have the link.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Yeah, I think it's fine. So Kelly Murphy, education planning instructor. Can you

[Emilie Kornheiser (Chair)]: hear Yeah, here's Sandra Ryan, chief financial officer.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: So what we've prepared is just a slide deck, which is posted online. And I'll just walk through the talking points. But since we were last in, we really have evaluated the language that is on the table right now for discussion and also which was just reviewed with a little bit more clarity. And so what we would like to signal at this point is that we are going to be initiating filmmaking on this. And so having some clear language is super helpful as we embark on that endeavor, because we have not done it yet. And I really want to stress that yet, our intention is to do it. And so I think the last time we were in here maybe was a little unclear as to what we were going to do. And so I just want to share where we're at between when we were in the last time and where we are now. And so what has happened is Ailey Finance has been charged with initiating formal rulemaking. And so Cassandra, our team on the finance division is going to be spearheading that, working with the district quality standards that were already put into rulemaking. So we will probably just be amending and inserting language there. We also have requested existing district fund balance policies. And so we had those previously, but we'd like to match those up to what we had brought in as industry standards as the last time and then work from there. And then we've got some internal work to do. So in looking at the data that we have within AOE that we collect from the districts, there is some variation in what's in that data. And so we really need to offer guidance on what we're going to be looking at and make sure it's tied back to things like the audit. So then we're really working with clear standards as we move forward. So we'd like to enhance the accuracy, making sure that it's tied back to the document of record. We want to make sure that all the districts are reporting consistently because we did see in the form that we use that it's not consistent across the board.

[Emilie Kornheiser (Chair)]: By consistent, do you mean everyone's using a different definition? Or do you mean that the timing is inconsistent?

[Unidentified Committee Member (House Ways and Means)]: All of

[Emilie Kornheiser (Chair)]: those things. What do you mean by inconsistent?

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Of those things probably do exist, and we'd like to look at it more closely. But what I did see in first pass is that you might What you would expect to see something categorized as, for instance, unassigned fund balance and see it in the bottom line. You might actually see characterized in a different way. And so that's what I mean by that. And so we talked a little bit about all the definitions that would go into a fund balance last time. And the reason why we provided that is because I want to make sure there's clarity around how districts are using that. That's also an area that we want to get a little clarity on when we look at the existing statute, for example, because there could potentially be a little bit of variation or conflict in the way that the statute is currently written. So that's not We might want to discuss that for the rulemaking itself. We would want to provide guidance around how districts would be using their reserves. So that's the piece around the improvement of the data quality. We're receiving it. Districts are giving us good information. We just really need to vet and really scrub how we're pulling that into the agency. We'd also like to provide training on the reserve collection and making sure it ties back to the audits, which we just talked about. And then just providing some standardization in that collection. So right now, it's assumed that everybody knows, but there is interpretation.

[Emilie Kornheiser (Chair)]: Would it be helpful for us to add a section or subsection to the language that we just looked at to reference the need for more definitional?

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: I think that could certainly help. So in the next steps, so there are several. And so as we're thinking about this, we did want to be thoughtful about providing a timeline and not keeping it open ended. And so this timeline that we have in the slides is really rough. And with the language that we have on the table right now, it will amend this timeline. But at least knowing what you're considering, we can look into that a little bit more and maybe provide in a future presentation what that would really mean. And so Cassandra and I took a look at the existing rulemaking within Act 183, and sort of came up with this timeline before we had a chance to really take a look at the language that we received this morning. So anyway, long story short, we're working right now in consulting with the districts. We'll need to bring in AOE legal counsel just to kind of review what's possible, and then Secretary of State's office with the rulemaking process. So we would think before we look at the languages on the table right now, that these were the process would be February to June. So just giving you a rough timeline just so we can start narrow what that might be.

[Emilie Kornheiser (Chair)]: You're already meaning the February we're existing in. Right.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Okay. Great. And then establishing a meaningful timeline because we do want to be realistic. We don't want to just say, we're going to do it, and then I like a big timeline. That's to be determined depending on where this conversation goes. And then we really want to identify current statute that either supports or is in conflict with the reserve guidance. And so I kind of mentioned that a little bit earlier, and there are two instances. So in the surplus statute language, it allows for districts to reserve under certain conditions, but it is not necessarily explicit in terms of specific items. So they would have to be voted. And so depending on what you want to reserve, there is, I think, a range in the types of reserves you might have. And so whether it's going for capital or maybe programming or what the intent there is. So I think that it's just a conversation that needs to be had. And then we also noticed or picked up on the construction guidance. And I feel like that's a hot topic that we'll want to talk through. And so that might have some separate contingencies. And so right now in the statute, there's a five year timeline for reporting those reserves. And when you're doing these projects, they're big projects. And depending on what it is, you might need more time. So we want to talk about that a little bit. So in that instance, we were thinking currently February to June, same timeline as the consultation and legal review and all that. We would draft the language for the review standards for rulemaking in August. So we would crest into the new fiscal year. And then we will be doing that legal review also in July and August. And then we will be initiating the rulemaking in August. So that would be the timeline in sort of the existing language. With the clarity, there may be an adjustment to this timeline. And then just last, and besides, there's the the reference materials. So just what we were considering, which we brought in last time.

[Emilie Kornheiser (Chair)]: Really appreciate that. So be prepared. So given the short notice that you had to look at the language, sort of flag the idea that we might want to add some language about you getting sort of clearer data definitions in place to some degree. Are there other Is there anything else you would like us to

[Bridget Burkhardt (Clerk)]: So when we did take quick look, we would

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: really welcome the opportunity to respond thoughtfully to the language. There are a couple areas that I think if you'll have us, we'd like the opportunity to work through, such as the time bound nature of some of the thresholds, depending on what that might look like, just because the districts themselves, there's variability in what the need might be and how they might apply reserves. And so just thinking about equity when we do that. So we do have comments for sure, but we're just happy to be able to collaborate.

[Emilie Kornheiser (Chair)]: Okay. Thanks. If we could hear from you sooner rather than later, the end of the week or early next week, that would be Okay. We're nearing crossover. Yeah. You. Any questions?

[Charles Kimbell (Ranking Member)]: I do. Just one hour. The existing uniform chart of accounts, are there already provisions within that chart of accounts for different types of reserves, different codes, account numbers, that type of stuff?

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: So I do think that you capture the chart of accounts, I'd have to look at them specifically to see exactly what would be captured within the reserves specifically.

[Charles Kimbell (Ranking Member)]: From a small business perspective, it's

[John Gray (Office of Legislative Counsel)]: really easy to create a new

[Charles Kimbell (Ranking Member)]: chart of accounts, but from a system wide standpoint, not so easy. It'll be interesting to take a look at, because if you have your unassigned operating reserve versus your construction reserve versus something else reserve, your total reserves, very interesting to see what that looks like.

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Sure, yeah, we can get more information on that. We can show

[Carolyn Branagan (Member)]: you the structure if that's helpful. That'd be helpful.

[Bridget Burkhardt (Clerk)]: I just asked a question, actually, something that Charlotte said. This was confusing for me when our district was going through school budgeting season. Unassigned fund balance isn't actually a reserve, right? It's just an unassigned fund balance, and then voters have to vote to take some of that and put it into different reserves. Is that correct?

[Kelly Murphy (Vermont Agency of Education, Education Planning staff)]: Is that how things work right now? Yes, that's correct, where the statue is.

[Bridget Burkhardt (Clerk)]: Okay. Just wanted to be clear, really for my own Or

[Charles Kimbell (Ranking Member)]: otherwise known as the kitty.

[Emilie Kornheiser (Chair)]: Thank you both so much. Really appreciate it. Yeah. Thank you. I think we are done until we're back here

[Carolyn Branagan (Member)]: at 01:15.

[Emilie Kornheiser (Chair)]: A funny start and stop day.