Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Folks, we are still in the Ways and Means Committee room. We're doing the business of Ways and Means. We are looking at H886, an act relating to creating a cost of competing adjustment. That is so many Cs for me to ever get out of my mouth. And we had two folks set up to testify today, and we have one with us. And I am very looking forward to hearing from Chris Duncombe about how all of this is working around the country. The floor is yours. Thank you.

[Chris Duncombe (Education Commission of the States)]: Great. Thank you to the chair and members of the committee for inviting me to be with you here today. My name is Chris Duncum. I'm a principal with Education Commission of the States. Quick background: ECS is a national education policy organization. We serve state education leaders in all 50 states and DC. We are not an advocacy organization so I'm here today to provide some context for the discussion on H86 and happy to share what we're seeing around the country on how states are adjusting for different costs of living differences across their state. So I'd also provided a written summary that accompanies my remarks today with some links to some of the state examples with some additional supporting information. I was gonna just talk through the methodology used by states and the scale of how states use these regional adjustments in their K-twelve funding formulas. Please ask questions throughout. I'm happy to take them as they come up. In terms of the methodology, states primarily use estimates for cost of labor in the state, an estimate for salaries for teachers or similar occupations that have a similar educational background, cost of labor estimates have to control for years of experience and educational background, as I mentioned, or you could just be measuring where more senior teachers are located in the state. Alternatively, states also use cost of consumption measures, and then the third is to use a contracted study to determine their own index, and I'll kind of talk through each of those methodologies in a little bit more detail. For cost of labor, there is a measure that's published annually by National Center of Education Statistics. It's called the Comparable Wage Index for Teachers. It's not published annually, but it's published regularly. The last update was 2022. This allows for geographic comparisons for spending differences on occupations that have a similar background as educators, and it can be used at the state level or the district level. So that is a national resource that is made available. I mentioned that some states will develop their own index. Maine and New York are two examples of states that I've included in that written document kind of summarizing their approach. Maine's essential programs and services formula adjusts for a regional cost of labor estimate. They've developed their own index and it is done for 35 different labor market areas in the state and it compares the average teacher salary in each labor market area to the state average. And so they have several reports that were published, some more recently than others. I think the last one I found was 2019 kind of talking through the detailed methodology of that approach. New York is another state that has developed their own index for making this regional adjustment. They do it for a smaller number of labor market areas, eight labor market areas, or I'm sorry, nine labor market areas, apologies, and they do it based upon a comparison of 60 different occupations with a similar educational background as teachers. A challenge to using your own index is that it's not necessarily regularly updated. New York hasn't updated their regional cost index since 2006. That's something that we see for a lot of states that develop their own index as opposed to using something that's posted nationally, so that can be a challenge if you decide to do your own index. So that's, those are a few state examples that use a cost of labor to develop their regional cost adjustment factor in their K-twelve funding formula. The other approach that I mentioned is cost of consumption. Colorado is a state that uses data that comes from the Consumer Expenditure Survey that's published by the Bureau of Labor Statistics. They contracted a study to develop this index that takes into account, I'm just making sure I have the right inputs, costs for housing, transportation, food, healthcare, among other items, and that went into the development of their regional cost adjustment factor for their formula. Colorado has also been looking at the application of their cost adjustment factor, whether to apply it to their entire formula or just a portion. Previously Colorado only applied their cost adjustment factor to personnel expenditures. They adopted a new formula that's being phased in right now that would apply their cost adjustment factor to their entire formula rather than just looking at personnel costs. Next, I was going to move on to talk about scale, but I can pause here if anyone has any questions about either of those methodologies.

[Emilie Kornheiser (Chair)]: I have a few. Does anyone else have any before I ask mine? Yeah.

[Unidentified Committee Member]: Chris, looking at your Alaska example, I noticed that it has a cost factor range of one to 2.116, why isn't there a negative cost factor there as well?

[Chris Duncombe (Education Commission of the States)]: So the one would just be there's no adjustment. So you're asking why some aren't being adjusted down?

[Unidentified Committee Member]: Right.

[Chris Duncombe (Education Commission of the States)]: Yeah, I'll have to look at that. I'm sorry, I'd have to look at the application of that index. I wonder if it's set so that yeah. No, actually, that's a good question. I'll to look back at Alaska's index and follow-up with you. Sorry. It's been a little bit since I've looked at Alaska's index.

[Unidentified Committee Member]: Thanks, just curious. Thanks.

[Unidentified Committee Member(s)]: For these states, can you give us a sense or a range of how they cap spending above the foundation?

[Chris Duncombe (Education Commission of the States)]: States typically don't cap K-twelve spending. So locals that want to go above and beyond what is provided through their foundation formula have that opportunity. States, and I think I've provided some background resources for members on this committee on the caps that do exist on states are typically related to property taxes, whether there's growth in assessment rates or total collections of property taxes. So those are usually the limits that are in place by states that kind of restrain growth in K-twelve expenditures, but states typically don't have a cap on local spending for K-twelve education. There are a couple exceptions. I didn't pull that information for this discussion today.

[Emilie Kornheiser (Chair)]: If you could do it, you don't mind following up just at some point with that, that would be helpful. Thanks.

[Chris Duncombe (Education Commission of the States)]: Yeah. And I think I already have a summary of that, and so I can just follow right up after this meeting with you, representative, with that information.

[Emilie Kornheiser (Chair)]: Thanks, Chris. Is it a follow-up to what you just said or a new That's

[Unidentified Committee Member(s)]: a bit different. Go ahead. No, you go. Chris, I had a question. As I'm thinking through labor costs, really in Vermont, those are all negotiated, district by district at the negotiating table.

[Rebecca Holcombe (Member)]: Do you have a sense of these states that have applied a geographic cost factor that's really focused on labor? Do they have statewide teacher contracts, most of them? Or are they negotiating that locally?

[Chris Duncombe (Education Commission of the States)]: States negotiate locally. Some states will have a statewide salary structure, so they'll have either required starting salary or throughout each tier of teacher's career, a minimum salary amount that districts have to provide. And so that can factor into the development of their regional cost index. But most of those negotiations are happening at the local, not the state level.

[Emilie Kornheiser (Chair)]: Okay. But those costs of labor are based on the costs of sort of teacher contracts rather than cost of labor at large in that region.

[Chris Duncombe (Education Commission of the States)]: And the Like example cost

[Emilie Kornheiser (Chair)]: of all labor at that region.

[Chris Duncombe (Education Commission of the States)]: Exactly. The examples I provided are they can include teachers or they can exclude teachers because they're trying to see what the actual cost is outside of teachers that have similar educational backgrounds for the larger labor costs in that area and not get influenced by any state policy related to teacher salaries. So depending on so there's some examples where teachers are not included, an an example is in New York, somewhere the teacher salaries are included, an example is Maine. So

[Emilie Kornheiser (Chair)]: when teacher salaries are not included, is the focus on other school staff or is it labor writ large in that region?

[Chris Duncombe (Education Commission of the States)]: Labor writ large.

[Rebecca Holcombe (Member)]: Where I was getting turned around a little bit because these are focusing on perhaps, I don't wanna make it more urgent, but what teacher salaries should be in a region based on what a labor market looks like. But there's that mechanism in there of the negotiating table that means that that may not actually reflect reality of what teacher salaries are.

[Emilie Kornheiser (Chair)]: So, it seems like both things happen.

[Rebecca Holcombe (Member)]: Yeah. Representative Holcombe? I have two more. I wanted to ask you about an additional cost of competing. I know that there's growing research, particularly on the charter sector, that looks at the impact of market competition or district spending, how they spend and what they spend on, but also on total levels of spending. And I wonder if any state is adjusting the foundation to account for the impacts of market competition.

[Chris Duncombe (Education Commission of the States)]: I have not seen examples when I've when I prepared these remarks on states setting their regional cost adjustments to factor in private sector or charter school salaries as the the deciding factor for what they should be set at. I I understand the rationale that that you're explaining representative for doing that, but I don't I don't have any state examples of states doing that right now. I have seen states try to do recruitment efforts to try to boost starting teacher pay. An example was Montana last year where they would provide a financial incentive to districts if starting pay was a certain percentage of average pay in the district. But that's just within the public sector, not going into a private sector or public charters. But that's an example of the state trying to provide a boost to starting teacher pay, or to districts that have starting teacher pay that aligns more closely with average pay in the district.

[Rebecca Holcombe (Member)]: Just to two follow ups on that. So I think one of the things that we've seen in the charter literature is that in the context of competition, schools shift their spending to facilities and to marketing. And I wonder if there's any, because if they don't, they lose students, they close. Is there any adjustment happening in foundation plans for that reality if states are choosing to spend their money that way? Just a question on that. I'd love to see that research if you find any of that. And then the other is, do any states have an adjustment in the foundation plan to account for the fact that when public schools are competing head to head with independent schools, they're competing in a context where some people are doing extensive capital campaigns and fundraising on the private side, and that may affect, again, the cost of operating public school in those settings. So those are two questions. I don't know if you've seen research on that nationally. None of these states that are on this list have that situation. They don't allow what we do here.

[Chris Duncombe (Education Commission of the States)]: Again, I haven't seen examples of the state foundation aid being determined by competition with private schools or public charter schools. So that's really all I have to share, unfortunately.

[Emilie Kornheiser (Chair)]: Thanks, Kristian. Can you share a little bit about the difference between the decision between cost of consumption versus cost of living?

[Chris Duncombe (Education Commission of the States)]: Yeah, and I mean, I think when we talk about a cost of living adjustment, we're thinking about consumption that's published regularly by the Bureau of Labor Statistics, and in some states that can be a more sizable expense. Alaska is an example of a state that has extremely high transportation costs, high electric and heating costs, and so that is a larger factor in their school operations budget, so it's important to account for that and they account for both labor and consumption in the index that they've developed. Whereas for most states staff is the bulk of the expense. Teachers' salaries and benefits make up half of operation budgets nationwide, Staffing writ large make up 80% of operations budgets. So states that focus on labor are choosing to focus on kind of the main driver of costs in school district budgets.

[Emilie Kornheiser (Chair)]: And so when folks are focusing on adjusting for the cost of labor, they tend to use a cost of living adjustment, not a cost of consumption adjustment?

[Chris Duncombe (Education Commission of the States)]: Yeah. Okay. Well, the cost of yeah.

[Emilie Kornheiser (Chair)]: Or are they using a cost of labor? I mean, know that we've talked about the cost of labor adjustment, but are states who are trying to adjust for the cost of labor also sometimes using a cost of living adjustment?

[Chris Duncombe (Education Commission of the States)]: Yeah, A regional cost adjustment is kind of the blanket term that's used by all states. Cost of living I've seen used for either term, but I would so I'm saying cost of labor and cost of consumption as my distinctions. Okay.

[Unidentified Committee Member(s)]: Thank

[Chris Duncombe (Education Commission of the States)]: you. I've seen it.

[Emilie Kornheiser (Chair)]: Okay. And then within cost of labor, there's sort of ways we can break that out based on sort of the regional labor market or the actual cost of the teachers in that region. Okay. Thank you.

[Chris Duncombe (Education Commission of the States)]: And I did want to just briefly describe in terms of scale, some states will do this statewide. That's the most common. Bureau of Labor Statistics publishes labor market areas. So labor market areas is the most common regional organization for these regional adjustments, but it's not uniformly done. As I have summarized in that document, Alaska does it for each individual school district. They have wide variation in costs, that's why the regional adjustment is a big part of their formula, so that is why they do it at the district level. Some states like Virginia don't include an adjustment factor statewide but just for a particular area of the state that has higher cost of labor, so they have it for the metro area around DC and some of the neighboring localities, And so that factor has not applied for school districts or divisions, as they're called in Virginia, outside of that Northern Virginia area.

[Unidentified Committee Member]: On that, Chris, thank you for that, because labor market areas are fairly small in Vermont's context. So we actually had a reduction in the number of labor market areas that the Bureau of Labor Statistics keeps up. I was wondering if we're looking at basically free labor markets in Vermont, it's really hard to maintain regional adjustments.

[Emilie Kornheiser (Chair)]: What are you thinking about?

[Unidentified Committee Member]: I don't know. I was just trying to think of, it would be easiest to use labor market adjustments without developing our own kind of regionalization by school district that requires a lot more work, whereas labor market areas would be a lot easier just to refer to in terms of cost of living within those areas.

[Unidentified Committee Member(s)]: And that's something we do in other places in Saskatchewan.

[Chris Duncombe (Education Commission of the States)]: So I believe the Bureau of Labor Statistics has both major and minor labor market areas, so I don't know if those three are the major ones and they also have minor. Can I think I have I pulled up those minor and I thought I counted 12 or 13 for Vermont? I can send you a link to the minor labor market areas that might be

[Unidentified Committee Member]: That'd great.

[Unidentified Committee Member(s)]: See, that twelve, thirteen minuteor, maybe? Alright.

[Chris Duncombe (Education Commission of the States)]: And I want to make sure I'm using the correct terminology here. They're called small labor market areas, not minor. Small labor market.

[Emilie Kornheiser (Chair)]: They're still important. They're just small. Representative Ode, did you have a question?

[Unidentified Committee Member(s)]: I was looking at right after the request. Representative Holcombe was saying, one point, you said that Rebecca Holcombe was You might need to project a little bit for the

[Emilie Kornheiser (Chair)]: All right,

[Carol Ode (Member)]: at one point, Holcombe was talking about added costs to Pete, how districts spend what they spend, does any state look at market competition? And then you said, I understand why you're asking. So can you tell me what your understanding is of what that question was so I'm sure that I understand what you're saying?

[Chris Duncombe (Education Commission of the States)]: So I think what I responded to was that I don't have examples of states that are factoring competition with private schools or public charters for determining the state foundation aid. That was, I think I understood the question, just didn't have examples of states that were factoring that into their foundation allocations.

[Carol Ode (Member)]: Sounds good, thank you. I'm wondering about, well, certainly mentioned by others around the table, but the fact that Vermont is so small, we've only got 630,000 people in the whole state and our area is small too. Would it be bad to just make it all one market and give, you know, have a statewide teacher contract covering everybody. Advantage or disadvantage to where you live in the state. I've always been concerned about increasing the salary if you live in a rural area or if you live in what we call city, Burlington, I guess is the biggest city, less than 70,000 there, but 40,000.

[Carolyn Branagan (Member)]: Anyway, I think I worry that we're ending up encouraging people to leave those rural areas and that there will be no hope for them to ever develop and become more affluent because people are attracted to where the higher salaries are. Do you understand my concern?

[Chris Duncombe (Education Commission of the States)]: Is that directed to me or?

[Emilie Kornheiser (Chair)]: Sorry, Chris. Yeah. Okay.

[Chris Duncombe (Education Commission of the States)]: I am sorry. Sometimes I don't know if this is a discussion among committee members or

[Emilie Kornheiser (Chair)]: That's very reasonable of you.

[Chris Duncombe (Education Commission of the States)]: So, I will say that states do try to account for different cost drivers, so many states will have adjustments for sparsely populated areas and small districts to account for their cost drivers, which are not higher salaries but higher transportation costs and higher administrative costs if there are a particularly small school district. So as you're looking at a regional adjustment to adjust for higher teacher salaries in particular areas of the state, it's also important to account for higher cost drivers that are in more rural areas of the state, And many states do have that regional adjust, I'm sorry, smaller rural adjustment for those areas.

[Unidentified Committee Member(s)]: Even in an area as small as Vermont, geographically in population.

[Chris Duncombe (Education Commission of the States)]: We have a 50 state database that has that adjustment for small size, and I'm just filtering by it right now. And so we identify 36 states that have this adjustment looking at some small geographic sized, we have Maine and Massachusetts both have it. Vermont. You're, I mean you all already have that in your previous formula. Generally speaking, there are larger geographic states that are more likely to have this, but there are some examples of somewhat smaller states. Obviously, Vermont is a particularly small state, but anyways, just providing that context.

[Unidentified Committee Member(s)]: Thank you very much.

[Emilie Kornheiser (Chair)]: Can you speak at all to part of representative Branagan's question about sort of how this changes internal dynamics around hiring of teachers and sort of recruiting teachers within a state. You know, if there's sort of like a higher salary on one side of the So than the other?

[Chris Duncombe (Education Commission of the States)]: I will say that the way that these are applied to foundation formulas, this is impacting the amount of total aid that is coming to a district, but it's not setting salary standards. So it's a little bit more indirect. So certainly it provides more capacity for some districts to have higher salaries,

[Emilie Kornheiser (Chair)]: I'm gonna, sorry, I'm gonna let Chris finish his sentence. I'm so sorry I interrupted.

[Chris Duncombe (Education Commission of the States)]: Oh, it's not a problem at all. Think I, I mean, what I was just trying to draw the connection that this isn't requiring or establishing the expectation that there'd be higher salaries in certain areas than others. It's just trying to provide additional dollars where there's generally higher labor or facilities costs and it's up to the school district locally typically to determine how that aid gets distributed and whether that results in higher salaries or not.

[Rebecca Holcombe (Member)]: Thank you. Rebecca Holcombe. I just want, there is a really good teacher equity study that was done a couple of years ago that answers some of these questions and I'd be happy to share it with you. And I would also just say that we need to remember that bargaining isn't just about salary, it's about work conditions, salary, and health care. And so there's a lot of variability that has, it's not about inability to pay, it's people who have chosen different priorities.

[Emilie Kornheiser (Chair)]: If you could send that to the whole committee, that'd be great. Thanks.

[Chris Duncombe (Education Commission of the States)]: Is that referring to the Economic Policy Institute or National?

[Rebecca Holcombe (Member)]: No, it was done by actually by Vermont and

[Emilie Kornheiser (Chair)]: they're Okay.

[Rebecca Holcombe (Member)]: Yeah, and we have different patterns in the nation, but they're that way for a reason. And that's sort of

[Emilie Kornheiser (Chair)]: laid out in the report. Do you also have one from a national group, Chris?

[Chris Duncombe (Education Commission of the States)]: Well, Economic Policy Institute always annually publishes a report comparing teacher salaries in each state to salaries of people or employees with similar educational backgrounds, generally looked at or described as a teacher wage penalty, which is in many states teacher salaries are lower than other occupations with similar educational backgrounds. So I thought perhaps that was the report that was being referred to, but I was incorrect.

[Emilie Kornheiser (Chair)]: That sounds really interesting. Can you send us that, Chris?

[Chris Duncombe (Education Commission of the States)]: Yep.

[Emilie Kornheiser (Chair)]: Thank you. I'm so glad you're here. Do you have anything else to share with us, or does anyone else in this room have any questions? Okay. Thank you so much. Really appreciate your time and maybe we'll see you again soon.

[Chris Duncombe (Education Commission of the States)]: Yes, and I will send you the additional follow-up information that we discussed that was related to restrictions on caps on K-twelve funding and property taxes.

[Emilie Kornheiser (Chair)]: Thank you.

[Chris Duncombe (Education Commission of the States)]: Great. Thank you all to the chair and members of the committee for having me here today.

[Unidentified Committee Member(s)]: Thanks for being here. Thank you.

[Emilie Kornheiser (Chair)]: Folks, we are gonna be back here at 01:15 to talk about H-seven 57 and Act Relating to Manufactured Homes and Limited Equity Cooperatives.