Vermont Legislature SmartTranscripts:

[Rep. William Canfield (Vice Chair)]: What's after you're in?

[Rep. Emilie Kornheiser (Chair)]: Good afternoon, ways and means. Welcome back from town meeting break. It is Tuesday, March 10. And we are starting our testimony today. It is Ed Finance Tuesday, and we are starting off hearing from the School Boards Association and the Superintendent's Association about the school budget votes that just happened.

[Julia Richter (Joint Fiscal Office)]: To compete with cupcakes.

[Rep. Emilie Kornheiser (Chair)]: Yeah, sorry. Afternoon.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I'm Chelsea Myers. I'm the Executive Director of the Vermont Superintendent Association.

[Sue Siglowski (Executive Director, Vermont School Boards Association)]: And I'm Sue Siglowski, the Executive Director of the Vermont School Boards Association. We'll read a little

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: bit of testimony, just so you're aware, the Vermont School Boards Association and the Vermont Superintendents Association collect town meeting day results in live time. So this is the result of that collection. We are, of course, fallible, but we think we have it right. So that's why everything says unofficial on it. If you need something official, I think that you'll point to the next witnesses. Voters approved over 83% or 95 school budgets up to now, demonstrating a show of public support for Vermont education. 19 school budgets were defeated so far. Vermont has 56 supervisory districts and supervisory unions and 124 school budgets that support them. In this year's March votes, on Tuesday's town meeting day in the previous days, 112 budgets were voted upon. 11 budgets will be voted on between May 9 or March 9, excuse me, and May 12, including the Essex Westford School District on April 8. Out of the nineteenth defeated budgets, 12 have a history of prior budget defeat since FY20, with one budget having a defeat history of six times since FY20. The defeated budgets represent school districts that serve approximately 15,000 students in total, and it does not vary. Projected weighted per pupil spending range from $11,961 to $17,777 and averaged $14,802 in the districts with defeated budgets. It shows a huge range, right? That aligned with a percentage increase of per pupil spending from FY 'twenty six of 1.3% to 20.05% and an average of 8.5%. Again, that's of the defeated budgets. Of note, several referenced proportionally large decreases in weighted pupil counts with a large disparity between percentage increase in education spending and percentage increase in per pupil costs. That weighted per pupil cost was a big There were some communities that had really drastic decreases, and it might be worth reaching out to figure out why that was such a percentage decrease this year. Other cost drivers mentioned in budget materials, I went through all the budget materials of all the defeated budgets that they referenced were increased wages, health care costs, tuition payments, and decreases in the block grant for special education and federal funding costs.

[Sue Siglowski (Executive Director, Vermont School Boards Association)]: The cost of health insurance premiums and HRAs are included in school district budgets and paid by Vermont taxpayers. The cost of public school employees health insurance exceeds $300,000,000 per year. The cost increased by 16% in FY25, 12% in FY26, and 7.4% in FY27. These costs are including a larger and larger portion of Vermont school budgets. In 2018, health benefits made up less than 10% of school budgets. It's now around 15%. If health benefits continue to grow current pattern, they will make up 20% of school budgets in a few years. To deal with this issue, school boards have to hold the line on the remaining parts of the budget. Healthcare is squeezing out other education initiatives. With projected education spending at 4.2%, it is clear that healthcare is squeezing out those other education initiatives. We both recommended and it is common practice to not model with any anticipated tax rate buy downs, though some mentioned it as a possibility in their budget materials. School administrators and school boards got to work considerably earlier this year for budgeting. In August, our associations along with the Vermont Association of School Business Officials released a budgeting memo to support early planning efforts. School leaders made challenging decisions with their communities to best support students and taxpayers, with some deciding to make significant staffing changes. And we've included, you have this in written testimony, all the information that we just provided to you. We've also included at the end a link to the unofficial live updates for the budget vote results and we'll be continuing to update those as the remaining budgets get voted. You can refer to that and see the updates as time goes on. That's the conclusion of our testimony.

[Rep. Emilie Kornheiser (Chair)]: I'm particularly interested in what you said about the gap in per people spending growth and budget growth, and the reduction of people counts, I don't know, just what trends you're seeing there. I know a small number makes a big difference in smaller districts, obviously, but

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: Yeah, this is strictly from going through budget materials. So I have not actually spoken to them. So we are going to hold a session at our association for those that have defeated budgets. So I might be able to find out more. But they reference pretty drastic percentage decreases in long term weighted ADMs in a couple of different communities. And then when you look at that compared to the percentage increase in their education spending or sometimes level spending, it's clear that the long term weighted ADM is having a pretty big impact in those communities. That is not across the board of defeated budgets, but I did notice it as a handful of some of the districts that are considerably low spenders in the grand scheme of things.

[Rep. Emilie Kornheiser (Chair)]: Have you had a chance, or will you have a chance to dig into if that's a reduction in pupil counts or a reduction in weighted pupil counts. And then I wanna We tried to move away from ghost pupils or whatever. Is that the actual phrase? Whatever it was. It's very confusing. But maybe we should be averaging over longer time frames to clean up that curve a little. I don't know.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: Yeah, the AOEs

[Rep. Edward “Teddy” Waszazak (Member)]: may have more data, but from what I

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: understand, the majority of the ones that we're talking about pupil counts were about the weighting, not the actual pupils. So one that I read was about a decrease in the actual number of

[Rep. Edward “Teddy” Waszazak (Member)]: students that they had. Do

[Rep. James Masland (Member)]: you have a sense of

[Rep. Bridget Burkhardt (Clerk)]: the mix of the disputed budgets of towns or districts that were seeing tax capacity through waiting increase under Act 1.87 or decrease? Did you know any split between those or any trend in that regard?

[Rep. Edward “Teddy” Waszazak (Member)]: I don't know. I'd have to

[Rep. Bridget Burkhardt (Clerk)]: because that was That's one thing I've been asking the districts that I represent, whether they can dig into a bit. Both of them saw waiting really change much more dramatically than actual seated students changing. And my question for them, which they're struggling to kind of get their brains around a little bit, is how much of that was actual changes in the profile of our students and how much of it was both the town they represent were phasing in at 127 restrictions, basically, on their tax capacity. And it was a little bit too much of an exercise, I think, the business office to try to dig into that. But I'm curious about that in budget stuff.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: Can look into it. It seemed like there were kind of two camps, but this is a generalization. So I do want to preface that. It's like those that have a history that were linked to voter behavior and that element and then anomalies or big swings in one factor or a couple factors that was unexpected for those budgets this year. So they kind of felt like it was in two camps. And I did talk to some superintendents, and we had some heartbreaking ones, right? Like we had one with seven, was defeated by seven votes, 30 votes, 17 votes. That's the kind of numbers, that's not across the board, but several, I would say five or six of those 19 were razor thin margins.

[Rep. Charles Kimbell (Ranking Member)]: Of those votes that were so close, was the turnout about the same?

[Rep. James Masland (Member)]: Okay.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I can ask that.

[Chris (Joint Fiscal Office)]: All right.

[Rep. Charles Kimbell (Ranking Member)]: I'm just wondering if it was a greater number of people came out. And then the range is amazing to go from 11,961 up to 17,000. So at least one was over the excess spending threshold. How many do you think are or were?

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I have a if someone can remind me of the exact number of the excess spending I have in a spreadsheet, what the per pupil is.

[Rep. Charles Kimbell (Ranking Member)]: 16,473. It just came to me.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: And again, I'm making sweeping realizations here and just looking at their budget materials. One of those is talked significantly about tuition costs. And so I imagine there wasn't a whole lot and special education costs. So I imagine there was a whole lot of wiggle room. It's a small district. So I think that was a big swing for them. When there's factors that they can't control and the pupils decrease, I think there wasn't a whole lot of room to move around. But again, I'm just speaking from their budget materials.

[Rep. Emilie Kornheiser (Chair)]: How many of these have Australian ballot and how many of them are vote?

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I have that somewhere, but I have Okay, cool.

[Rep. Carolyn Branagan (Member)]: In the next round coming, some of the districts north of me have been reporting very significant drops in students who are economically disadvantaged, and they're saying that's affecting their weighted spending per people. Do you have any sense of what might be driving that?

[Rep. Edward “Teddy” Waszazak (Member)]: That might be a question for the AOE.

[Rep. Emilie Kornheiser (Chair)]: Anything else you want to share

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: with us? No, sorry, I don't have more answers. Oh my goodness, no. I'm afraid to do some more investigation if people wanna send me questions.

[Rep. Emilie Kornheiser (Chair)]: And your unofficial live update is always very helpful. Thank you very much for it.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I feel like a newsroom on that day.

[Rep. Emilie Kornheiser (Chair)]: No, it's really That's what I was told about you on that day.

[Rep. Carolyn Branagan (Member)]: Like, it's the spreadsheet, I can't wait to see it. Thank you. Thank you.

[Rep. Emilie Kornheiser (Chair)]: Your next thing. Would you all like to join us?

[Kelly Rutland (Education Finance Director, Agency of Education)]: Hi, Kelly Rutland, Education Finance Director, and I've got Ted Gates, our senior fiscal analyst here with me. I'm gonna share my screen so we can run through the memo that's been posted online. I need permission to share.

[Rep. Carolyn Branagan (Member)]: Thank you.

[Kelly Rutland (Education Finance Director, Agency of Education)]: Okay, so just getting into it. So we are where we were pretty much last time in terms of the number of districts that we have in. So there are 105 reporting at this point. Last week, we did send out reminders to those that have not reported to report, just so that we can get the preliminary numbers in. We will get the rest of them in for the final budget booking. These are the results that we have at this point. And then of the we just heard an excellent presentation of the districts that have approved, There was a thirty day petition period. So that is how we would then collect the final budgets and log them. So it's a long way of saying that in the next couple of weeks, we'll be sending out a final collection to the districts and be getting that back in probably early to mid May. But we'll update you as soon as we have more information. So as I was just mentioning, I'm just going to run through these bullets really quickly. They're pretty much the same. So we've got 105 of the 122 districts. 16 districts are using the projection of 4.2%. 80% of the districts have submitted budgets for this preliminary flexion. Then And we're at about 93% of long term weighted ABM and education spending. So this is 4.2% over the 5.8% that was projected in December. I did update these bullets just to add that right now we're showing that there are six districts that are over the excess spending threshold. So we'll keep an eye on that and report as we know more. But I just wanted to share that we are monitoring that at this point. And then I just wanted to, based on what we do know, share a little bit more detail in terms of the ranges. And I'm actually going to zoom in a little bit here just so that it's a little closer.

[Rep. Charles Kimbell (Ranking Member)]: Kelly, before you go on, I think you said in a previous meeting that it was 6% in the previous year as well that we're over the excess spending threshold. Only six, I'm sorry, six school districts. It was the same number.

[Rep. Emilie Kornheiser (Chair)]: I think the same six districts.

[Kelly Rutland (Education Finance Director, Agency of Education)]: It's probably the same six districts, but I can validate that. We were No. Can certainly share who in the next reporting. Yes, six districts at this point, but we'll report back on who they are and what the delta is. So, getting into summary by size. So, I thought it would be interesting to at least share those who decreased their budget. And so we did have 12 districts that are reporting at this point that they are having a decrease in their budgets or they're not increasing.

[Rep. Emilie Kornheiser (Chair)]: Decreasing or is their budget decreasing? Education spending.

[Rep. Carolyn Branagan (Member)]: Thank you. Do you

[Rep. Emilie Kornheiser (Chair)]: have a sense of if

[Rep. Bridget Burkhardt (Clerk)]: their budgets are decreasing too?

[Kelly Rutland (Education Finance Director, Agency of Education)]: Can you take a look at that, just

[Rep. Carolyn Branagan (Member)]: to see what comparison

[Kelly Rutland (Education Finance Director, Agency of Education)]: is? And so the average of these 12 districts is about 3.7% down. And you can see what the range is, it's 43,000 to 797,000. And then next, I took a look at those budgets that were increasing. And I chose 6% because that was above the December projection, just to give a sense of what that is. And there's 36 districts in that camp. And the range of increase, again, is huge here. 27,000 to just over 4,000,000. So there's just a wide variety of size and scale within those budgets. But just wanted to give just a general sense of what is happening within the individual budgets. Next, we did take a look at the long term weighted ADM. We just wanted to get a sense of what average increases were within certain buckets of budgets compared with the weighting. And so as you can see here, in the smallest district, it's a 51,000 average or 8.2%. And just to give you a sense of the range in terms of their budgets, it's 19,000 to 1,400,000.0. So relatively small, but an up just because there's not a lot to work with there. And then in this next bullet, as we get sort of on the next two have the most districts in it. So the second bullet, there are 62 districts within this range. And their budgets are 1,100,000.0 to 15.6. And you can see that they're about 3.9% average increase. And then next, the third bullet, there's 23 in this bullet. And you can see that there's an average increase of just under 900,000, 4.5. And the range in this area of budgets is 4,200,000.0 to 3,600,000.0. The last two bullets, there are fewer budgets in them. Each are showing 12 districts within each bullet. And this fourth bullet here, there's you can see it's one almost 1,400,000.0 on average increase. And it's the the budget range there is 24,600,000.0 to $4.42600000.0. And then the last, just to share that the range is 39,900,000.0 to 109. And I think you can probably guess who the 109 is. But that's quite a swap. So one district is at 19,000, because there's only 1.15 weighted pupils in that district. And then Burlington is at the 109,000,000.

[Rep. Emilie Kornheiser (Chair)]: We might spend a lot of time talking about 8.2%. But if we're only talking about $51,000 that really is very little on the ad fund.

[Kelly Rutland (Education Finance Director, Agency of Education)]: And I wanted to show this just so that you can see within the range of projection that we're demonstrating that. And then you can also see where the weighting falls in. And I did hear from the prior testimony some of the questions that were being asked. So we'll come back with some of the trends.

[Rep. Emilie Kornheiser (Chair)]: I think a big question that's gonna continue to be for me is as we're entering year three or four of this real scarcity environment for budgeting, the difference between ed spending and budgets, I think it's going to get more and more variable and more and more really important to keep an eye

[Kelly Rutland (Education Finance Director, Agency of Education)]: That's great. Happy to keep track of it. So this chart that we have here, we put together just so you could see graphically where the long term weighted ADM falls. I just want to make the distinction and clarification with this piece that what you're seeing here is the percent change in the long term weighted ADM year over year versus what we were seeing above, which was the percent change in education spending. So you can see that in the middle here is where the majority of those budgets are. And you can see the percentages change 2.3 to 6.4 with 39 districts. And then we put down at the bottom here the failed budgets that we have in at this point. You can kind of see where they fall in the long term weighted in ADM. So it's a different way of looking at it. But hopefully helpful. And you can see the largest number is in the column where the 33 districts are represented. And so just kind of scrolling down into the charts, you can kind of see the two tables that we presented on in previous testimony. Those have not changed. But what we did do is provided sort of a chart on the failed budgets. You can see in the highlighted columns or cells that those are projected budgets. I just wanted to call those out. So three of the failed budgets, we don't have official numbers booked yet. Then you can see where they stack up. So we did try to put this in order here. So ranging, just looking at the change in education spending from '26 to '27, we're at a 0.8% increase to a 10.9% increase. So we did show the education spending for these budgets here and then long term weighted ADM. And then we also showed what the change was in the percentage of Ed spending by long term weighted ADM for these budgets, just so you had a little bit more information. But will certainly come back with more trends. That's what we have prepared for testing the age for today. Any specific questions?

[Rep. Charles Kimbell (Ranking Member)]: It gets confusing with everybody's new name.

[Kelly Rutland (Education Finance Director, Agency of Education)]: Yes, and actually I'm glad that you asked about this particular district because when I was putting in the county, this is actually in Orleans, I Windsor next to this is actually New Orleans County.

[Rep. Emilie Kornheiser (Chair)]: That makes me feel so much better about not knowing for this. Thank

[Kelly Rutland (Education Finance Director, Agency of Education)]: you for asking, and I need to update this chart because I had sent it off and I was like, but that's the thing that is in here that's not correct. Some people know.

[Rep. Carolyn Branagan (Member)]: So what conclusions can you draw on this? Do we know why he's 19, decided to vote no, or what came to the government no because he hasn't said all

[Rep. William Canfield (Vice Chair)]: of them?

[Kelly Rutland (Education Finance Director, Agency of Education)]: Well, I mean, I think we know how the budgets have come in. I think that there's more information to be gleaned. As was mentioned previously, some of the margins were razor thin. We did get 13 of the 19 failed districts to report on their approval ratings to us. On average of those 13, they were at about 45% approval rating. So I guess what you could say is that these budgets were close. What I wanted to go back and look at is the other budgets and the approval rating, because on the other side of the equation, there's probably budgets that passed that were also really close. And so I think it just gives us more information to look into as we're looking at the budgets and their final status.

[Rep. Carolyn Branagan (Member)]: I'd just like to say that my personal opinion is that the student weights are playing a big role here. I know I've heard from a board member, so my hometown is Georgia. And one of the board members called me a couple weeks before town meeting and said we've lost 38 children, 38 students and that he knew that that was going to affect the budget and cost per pupil

[Kelly Rutland (Education Finance Director, Agency of Education)]: already. So I feel like

[Rep. Carolyn Branagan (Member)]: that had an impact on the voters. I don't know if the voters knew that, but the board knew that.

[Rep. Emilie Kornheiser (Chair)]: I'd be curious to learn which of these are smaller school districts within a supervisor union that are not the full K-twelve range, because it seems like quite a few of them from my initial, and then certain districts that it's unusual for them to vote now versus districts that are, it's more usual.

[Rep. Carol Ode (Member)]: Thank you. Out of those 36 districts that had an increase of more than 6%, so that one that's over 4,000,000, do we know what the percent is and is it related to maybe a bonding issue or do we know that much about that particular increase?

[Kelly Rutland (Education Finance Director, Agency of Education)]: I can bring back the detail.

[Rep. Emilie Kornheiser (Chair)]: Anyone else?

[Rep. Charles Kimbell (Ranking Member)]: I always just get confused on the numbers in terms of the number of districts, school districts, because we're talking about 119 forever. The number here is 122. Yes. 53 supervisor unions, but previous speakers came up with a different number. So can you help me reconcile those?

[Kelly Rutland (Education Finance Director, Agency of Education)]: So we typically capture 52 supervisory unions. And then in terms of the number of districts, and actually in walking through this, there are 119 that I would say are kind of traditional in nature. And then there are three that are the unorganized towns. You may also see some variation in the numbers there. I think it's in the composition. It's dependent on that, I would say.

[Rep. Emilie Kornheiser (Chair)]: And then sometimes we just totally unorganized chorus about analysis.

[Rep. William Canfield (Vice Chair)]: Right, yeah.

[Rep. Carolyn Branagan (Member)]: Makes it really

[Rep. William Canfield (Vice Chair)]: solid. Yep, got it.

[Rep. Emilie Kornheiser (Chair)]: Anyone else have any thoughts, questions from this?

[Kelly Rutland (Education Finance Director, Agency of Education)]: Thank you very much. Thank you.

[Rep. Emilie Kornheiser (Chair)]: So we have a lot more to wonder about now, but not really any new definitive information. And so I'm going to ask Julia to join us again and share the exact same table that she's shared before.

[Julia Richter (Joint Fiscal Office)]: Hello. Hi, good to see you all again. I'm Julia Richter, Joint Fiscal Office. As the Chair mentioned, same three documents that are on the committee page under my name that we've been looking at prior to town meeting. Do you want me to go ahead and share the outlook? Yeah, that would be great. Thank you. The other two, of course, are the annotated guide if anyone needs a refresher in terms of what different lines And they're then also that PowerPoint that's outlining some of those major yield decision points that need to be contemplated when setting yields and the rates.

[Rep. Emilie Kornheiser (Chair)]: And so even with all that information, where are we on the Do the you bottom line, but that means something technical in this scenario. So, So, used a different

[Julia Richter (Joint Fiscal Office)]: prior to town meeting week, when we came in to talk about the updated budget data, As you heard, we don't really have new budget data to share and to include in the modeling. We have an understanding of how budgets performed. But until we know how those school boards will respond to failed budgets, we don't know what they will be. So to that end, what we are looking at here is the Education Fund outlook that is reflecting all of the information that we have available at this point. So that is all of the submitted budget data that the agency was just talking about, including those budgets that were failed, the budgets that have not yet submitted data, we're still holding the projections from the December 1 letter for consistency, still using the same grant list data, we're still using the January consensus revenue forecast. So to that end, do you want me to walk through what each of these columns do a refresher on the columns? That sound good, folks? Great. Let's do it. Column A, again, FY '26, it's still preliminary because we don't yet know how revenues are gonna tie out. Well, the BAA was signed. Moving into column B, this is our first FY27 column. So what is being calculated for the yield fill. What we're looking at here is if there were to be no one time money from the general fund used to buy down property taxes in one year, the entirety of the education fund surplus estimated from fiscal year twenty six of $22,000,000 would be used to uniformly lower property taxes. And that there would be a uniform average bill change estimated to increase by 10.1% in FY twenty seven. So that's compared to FY twenty six. And again, I know you all know this, but that's an average. So there would be a wide range across the state.

[Rep. Carolyn Branagan (Member)]: I have a quick question,

[Rep. Bridget Burkhardt (Clerk)]: if it's okay, just to clarify. So I thought when we were using the 5.8% assumption about spending growth, we were at 11.9%. And then when we switched to a 4.2%, then we got down to the 10.1%. Because I'm looking at the EdFund outlook from the last Friday before we were on town meeting break, and it had 4.2% as the statewide education spending growth. And that got us to 10.1% before a bill change. This one has 5.8% back in, that assumption back in, but we're still at

[Rep. Carolyn Branagan (Member)]: 10.1%. So I'm confused.

[Julia Richter (Joint Fiscal Office)]: I'm not sure which one you're looking at. The one that should be posted on the committee page under my name has the 4.2%. There is a chance that if you recall prior to town meeting, was a typo where I we had done the preliminary change to the budget information of adjusting to that, to 4.2%.

[Rep. Emilie Kornheiser (Chair)]: Okay. Also,

[Rep. Carolyn Branagan (Member)]: I think what we pulled up off the website is different. Sorry,

[Rep. Edward “Teddy” Waszazak (Member)]: this is so small of a screen,

[Rep. Bridget Burkhardt (Clerk)]: I can't read it on the screen, so I have

[Rep. Carolyn Branagan (Member)]: to pull it up. I think it's the one posted that's different from the one panel.

[Rep. Bridget Burkhardt (Clerk)]: Sorry to break your flow.

[Julia Richter (Joint Fiscal Office)]: Was really glad. I'm glad. Glad. I'm sending this to Sorcha so that she can update it. That really is just a typo.

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I had forgotten about that. Had forgotten of you.

[Julia Richter (Joint Fiscal Office)]: So the updated outlook, which I think some wires got crossed, probably on my end, of which Outlook to be posted. The one that should be posted is the one that corrects the typo, which is what I'm sharing on my screen. The only difference in all of the numbers between the one you're looking at and the one that's on my screen is literally the fact that I forgot to update the 4.2 from the 5.8, because that's a hard coded line. Anyways, thank you for catching that. So yes, exactly. With the drop from the 5.8% spending growth to the 4.2% spending growth, that is exactly why we moved down to the 10.1% average bill change compared to the December 1 letter. Okay.

[Rep. Carolyn Branagan (Member)]: That makes sense. Thank you. Thank you. Sure.

[Julia Richter (Joint Fiscal Office)]: So then the next column is if there were to be the 100 and Or actually, I'm going take a step back before moving on. The other piece of this that I didn't talk about, but I should have, is all of these FY27 columns are assuming that phase down of the purchase and use tax and a phase up of the meals and room tax going into the education fund. It's revenue neutral, the education fund, But that's why those lines are highlighted in purple.

[Rep. Emilie Kornheiser (Chair)]: Folks, as other folks at JFO who are more purchase and use meals and rooms tax people get clear on exact numbers that would make sense to have round things, that will get updated. But it will be revenue neutral for the Ed Fund regardless, if that makes sense.

[Rep. Carolyn Branagan (Member)]: K. Yeah. Representative Lamoille?

[Rep. Edward “Teddy” Waszazak (Member)]: Are we still since bunch of data as of 02/2126, do we have any we had said that that 1.49 might move a little bit. Do you have any sense of whether that's moving at all? Shifted, changing?

[Julia Richter (Joint Fiscal Office)]: Sorry, what do you mean by the 1.49? The

[Rep. Edward “Teddy” Waszazak (Member)]: general fund transfer. We had talked earlier that that may not be the final Do number that is available to us right we have an

[Rep. Emilie Kornheiser (Chair)]: idea? That's still the number that we are working with.

[Rep. Carolyn Branagan (Member)]: Don't really know how to frame this, and this is a policy question. There are so many moving parts right now, and one of the challenges about multiple moving parts is when we move additional parts, it's hard to

[Julia Richter (Joint Fiscal Office)]: figure out what's causing the change.

[Rep. Carolyn Branagan (Member)]: And so for things that are revenue neutral, what is the policy logic between moving funding streams?

[Rep. Emilie Kornheiser (Chair)]: Oh, on the purchase and use of meals or rooms tax? The transportation fund Why not just move money from the general fund to the transportation fund? Well, because we don't so I think the thinking is that just a cash transfer has a more one time has a one time vibe to it. Sorry, I don't have better words And than the move of the percentage feels like a more permanent step towards a solution for the transportation fund. It certainly is not going to fix the challenges of the transportation fund. But it's an acknowledgment that the general fund is going to tend to transportation fund. In a dream world, it would probably be easiest to change percentages between the general fund and the transportation fund. But there isn't a natural place to do that, really. And so we have this funny thing hanging out in the middle of our thing. I mean, on a for me, on, like, a grand scale, like, I think it's I I personally have always been a little uncomfortable or curious about the fact that we think that, like, the revenue source should go with something that feels sort of relevant to whatever, like to whatever the it's paying for. So purchase and use in the transportation fund because its sales tax on cars should be for the transportation fund. I can see how that made sense when bill when it was first passed. Because we all want to have that nexus when we pass it. But in the end, it's all just money that moves around. I

[Rep. Carolyn Branagan (Member)]: think that was my point. It's just money that moves around. What I worry about is that we run risk of losing the story Too many parts at the same time.

[Rep. Emilie Kornheiser (Chair)]: Yeah. And I think there's something to be And if we want to not lose the story, I guess the story is that purchase and use has a nexus with the transportation fund. And so that makes sense of the thing to do if we wanna keep track of the story, but it is a little ugly.

[Rep. Carolyn Branagan (Member)]: Guess the story, I think the story that's drew me in two ways and means is aggressivity or regressivity of the funding source and what we think are the prospects in the next couple of years. The choices we make there are going to shape every single alligator in world that we look at.

[Rep. Emilie Kornheiser (Chair)]: And Chris can share more with us. Both of those, for whatever it's worth, both of those revenue sources are growing at the same rate. I think there's a question about which is more progressive or regressive. I feel like they're both a mix as revenue sources.

[Julia Richter (Joint Fiscal Office)]: Well, the only reason I

[Rep. Carolyn Branagan (Member)]: ask is because we often talk about needing to be bold and do big things, and very often that just involves shifting funding sources. It doesn't actually involve changing structural issues. Totally. Agreed.

[Julia Richter (Joint Fiscal Office)]: Column C. Column C. So column B is if we were to use the December one letter assumptions, includes using the Ed Fund surplus to uniformly lower rates and bill increase. The column C is if there were to be the $104,900,000 of one time general fund coming into the education fund, and if the entirety of that one time general fund money were to be used to uniformly lower the average tax bill in fiscal year twenty seven across non homestead, homestead and income sensitized taxpayers. That policy decision were to be made, then that would result in an estimated uniform average increase of property tax bills by 3.8%. Know, to

[Rep. Carolyn Branagan (Member)]: have your thoughts and conversations just had here, I wonder what we're actually incentivizing when we make a transfer and have the tax impact go down. Wonder if we could even generalize how that falls about people's decisions on the load and what they're choosing to spend money on and not spend money on? Or is that just two years for them to try to figure out?

[Julia Richter (Joint Fiscal Office)]: I can't answer that question. I think that would be a question for the field or for the agency.

[Rep. Carolyn Branagan (Member)]: President Branagan?

[Chelsea Myers (Executive Director, Vermont Superintendents Association)]: I don't

[Rep. Carolyn Branagan (Member)]: really want to spend a whole lot of time on this question because there's all kinds of answers, but I know one thing that bothers people in my district, in fact, in my entire legislative district, is forced to be test sourced. So many times, well, if we were getting something for that money, it wouldn't bother me so much. The whole, the testing thing is something that somebody's got trouble.

[Rep. Emilie Kornheiser (Chair)]: And I think many people are very focused on supporting our students and making sure that they have the best possible education. And I do continue to encourage people who are curious about test scores to go talk to experts in the field about it, because it's a very, very complex thing, both how you communicate those numbers and how testing works and how testing is prioritized or not prioritized and what that means for actual educational outcomes. So encourage you to go.

[Rep. Carolyn Branagan (Member)]: I agree with that, but for some reason, agency keeps a couple of times a year coming out with these smarts. And people look at it, compare our town to other towns, and it's there in black and white.

[Rep. Emilie Kornheiser (Chair)]: I think there's a lot of gray under the black and white. Thank you for helping me move into that element of format. So I think that what we're trying to do with the general fund transfer is make sure that people can afford to pay their property tax bills. And yes, there are definitely knock on effects from that. And I've heard people's concerns about that we're removing some of feedback mechanisms and communication between district budgets and voters. I think that's true for some part of voters. And then a lot of people are living their lives and just need to pay their property tax bills. And I think we have a responsibility in this committee to make sure that people can afford to do that. Yeah, totally.

[Rep. Bridget Burkhardt (Clerk)]: Issue is that even if we weren't buying down, there's still mechanisms in the way budgets are built that disconnect voters from their property tax bills. So for example, and I'll just use self reliance as an example, the school board set a very reasonable target that the pool budget is not going to go up more than 3.4%, which was what inflation was in August when they started looking at the budget. However, because those other revenues that are coming in that no one really deeply understands, voters don't deeply understand, that come in from federal sources and other different grant programs and things that are not the education fund, those things decreased a whole bunch this year. And so South Burlington was asking for 8.5% more from the Ed Funds than it had in previous years. And that's what gets at your property tax. So the voter's already a little bit disconnected from the reality of what the spending is at the school. The spending is still going to be capped at that 3.4%. That's what got voted through. But tax bills are still going to go up significantly.

[Rep. Emilie Kornheiser (Chair)]: And the times when we might have had a more direct relationship, that was pre Brigham, and that did not work either. So there's a lot to be said between the balance between that connection, that direct connection, and any equity whatsoever.

[Rep. Carolyn Branagan (Member)]: So are we still Okay talking about that general fund transfer as being 104.9? That's what it's going to be.

[Rep. Emilie Kornheiser (Chair)]: That is what the Appropriations Committee is accounting for right now, yes. If that's your question. Yeah. Yes.

[Rep. Carolyn Branagan (Member)]: And the $22,000,000 last year, is that just already on

[Julia Richter (Joint Fiscal Office)]: the suit? Julia, will you explain the suit? Sure. So the 104,900,000.0 yeah, that's the general fund monies that are being incorporated into the budget construct. The $22,330,000 that's education fund surplus, and that's what's estimated to be unreserved and unallocated when the fiscal year FY '26 closes. So that's because of things that have happened since you all were in this position last year that have resulted with an additional 22,000,000 falling to the bottom line. And that's that one time money from the Ed Fund surplus that's being used. Is that struck on one of

[Rep. Carolyn Branagan (Member)]: these lines? Yeah, you can see

[Julia Richter (Joint Fiscal Office)]: it on lines 36 and line 37. So in fiscal year '26, that's your column A, you see current year unreserved and allocated in line 37 of being 22,330,000.00. And then moving into all of our FY '27 constructs, you see that that becomes the estimated prior year unreserved unallocated. And you see that in line 36 of the twenty two point three three. You also see these amounts sort of between zero or 1,000,000 on line 37 of the current year, unreserved unallocated for FY '27. And that's because for solving the yield model for these different uniformity of bill changes, that's as close as we can get to zero.

[Rep. Emilie Kornheiser (Chair)]: Yep, that was a little bit.

[Rep. Carolyn Branagan (Member)]: So I appreciate that conversation, because I think we need to talk about this, and I agree that we have to figure some way to transition through this year. What I was told repeatedly by a couple of people, a couple of my districts, was that the increase this year that is attributable to local budget is smaller than the increase attributable to our decision to buy down tax rates last year. And their concern was that when you're managing a multimillion dollar enterprise, what you need is some predictability, because it's very difficult to make smart long term, long range budgeting decisions when your rates are flopping all over the place like a fish on the dock, because of some decision that we make after they put their vote to voters. They're serious of us, not just because they can't. And so they don't know, do they use their reserves to buy down the transition? Do they make that investment in the new boiler or some insulation that will permanently break down the cost of operation? They literally can't plan long term because we're disrupting their operations. So I hear us, but to the extent that we go in after the fact and do something, we are making it difficult for them to manage the reserves they have and budgets and resources they have. They know they need to cut their deal. And it's not just schools, by the way, the Department of Corrections budget up 5.75%, agency administration up 5.5%. Everybody's trying to figure out how to stay as low as possible. But to the extent that we can provide a fiscal environment that is stable, I think we'll see school districts making better long range decisions. With the foundation health plan, foundation for? It depends where you are. I mean, think I will tell you that I think a lot of them, I'm hearing severe concern. People might be more concerned about the foundation plan than they are about the masks, to be honest. I think

[Rep. Emilie Kornheiser (Chair)]: that if we construct all of the pieces around the foundation form, though, in a stable way, and we haven't done that yet, and the tax policy that's connected to it, we will create stability. But we still have these few years that we need to create stability for. And I really appreciate you flagging that. And so I wonder That's why, for me, I feel like this third, third, third is a really clear path forward that's gonna create some stability during the transition. And is acknowledging that we need to do something about property taxes, given that we likely won't have fresh hot revenue next year.

[Rep. Carolyn Branagan (Member)]: Transition tied up because we've got multiple transitions here. It's not just the x 73. I'm talking about the x 73. The federal too, what they've Does

[Rep. Emilie Kornheiser (Chair)]: anyone have any

[Rep. Carolyn Branagan (Member)]: Hi, Julia.

[Rep. Emilie Kornheiser (Chair)]: Would folks like to go through the other columns? Yes. Okay. Represent Waszazak, did you have something before we went to the next phone? It's okay if you do.

[Rep. Edward “Teddy” Waszazak (Member)]: It's tangentially related. Okay. So

[Rep. Carolyn Branagan (Member)]: Okay. I I do. Go ahead. Represent.

[Rep. Bridget Burkhardt (Clerk)]: Can I ask two rogue questions before we meet this conference? And you probably answered these in weeks and weeks ago because we go through this every week. Statewide education and grantless growth, that projection changed from 14 down to 10.4%. Do you know why that was?

[Julia Richter (Joint Fiscal Office)]: So that's a change between FY 'twenty six and FY 'twenty seven. And that reflects a little bit of softening of grand list growth from FY 'twenty six to FY 'twenty seven. The nuances of that, I would defer to the tax department, because that's coming from tax and their equalization study.

[Rep. Emilie Kornheiser (Chair)]: I mean, I think we all The sort of skyrocketing property values has mellowed out a little bit. Separate from, there's grand list growth from property values going up and there's grand list growth from new buildings. Right. Yes. And there are all kinds

[Rep. Bridget Burkhardt (Clerk)]: of initiatives about new buildings that aren't coming to fruition yet. But it's just Yes. That was kind of my question, is how much of that is

[Julia Richter (Joint Fiscal Office)]: I will say that the bulk of this growth is not sticks and bricks. It's not that Just market value. Actual new sticks and bricks. But it's growth and value. Okay.

[Rep. Bridget Burkhardt (Clerk)]: And then the statewide adjustment, is that also that changed from 72.4% to 70.3%? Yeah, so that reflects, you'll recall that

[Julia Richter (Joint Fiscal Office)]: the statewide adjustment is that adjustment to the common level appraisal, the CLA, and that's the average CLA across the state when comparing it to 100% of fair market value. So it does make sense that unless you see a significant increase in the amount of reappraisals year over year, that as property values continue to grow and reappraisals do not keep pace, that we will see property values getting further and further away from 100% of fair value.

[Rep. Emilie Kornheiser (Chair)]: And just to add to the hypothesizing that we did with our last witnesses, I was talking to one representative whose budget wasn't voted in for the first time in a very long time. And his hypothesis was basically that they have not reappraised in an incredibly long time and their CLA just

[Rep. Bridget Burkhardt (Clerk)]: In some places where they have reappraised. In certain markets, it's still changing so fast that that has a significant swing on what the property tax rate looks like, and therefore whether or

[Rep. Emilie Kornheiser (Chair)]: not above the same.

[Julia Richter (Joint Fiscal Office)]: Yeah, for example, I

[Rep. Carolyn Branagan (Member)]: would go back to just the discussion about thirty-thirty-thirty. I think with the foundation plan, can catch what we're spending. We're not reducing the need. If you to reduce the growth of spending in special ed, we actually need leaders at the state level on special ed. If you want to improve instruction, you actually need someone to lead on improving instruction. You keep going through the list. We can't solve those problems in ways and needs. What I can say is that I appreciate the idea to blunt the blow this year and think about the transition. We have a number of initiatives that we have approved as a body that are going to increase quite significantly in the next couple of years. And we have approved some initiatives that are going to potentially reduce revenue available. So we have in place both new demands on school districts and reduced revenues to school districts. And I don't see any policy yet being discussed in the body that's actually going to slow growth and extend it. And so I am not comfortable with saying we're going buy down tax rates because I still maintain if we want to make ourselves more sustainable, we need to figure out a way to actually tackle those drivers of cost. And one of them is health care. They brought that up today. There are a whole bunch of others that we could do, but they're not going to be solved by any of the policy that is currently in place. And so I don't know what the greatest demand is. But I also know that if we are going to do mergers, for example, there's going to be significant costs associated with that. That was budgeted for an Act 46. It is not budgeted for an Act 73. So we don't even know what the demands are going to be in the next couple of years. And they are going to be there. We just haven't killed anyone for them.

[Rep. Emilie Kornheiser (Chair)]: And I think that's a lot of our continued work this year, is to figure out what costs we haven't accounted for. And what costs we haven't accounted for in the foundation formula, and make sure we are accounting for those costs.

[Rep. William Canfield (Vice Chair)]: We're talking thirty, thirty, 30. Is that like in columns E and F?

[Rep. Carolyn Branagan (Member)]: Yep.

[Rep. James Masland (Member)]: Right? That what we are talking about?

[Rep. Carolyn Branagan (Member)]: Yeah.

[Rep. Edward “Teddy” Waszazak (Member)]: Right here.

[Rep. Emilie Kornheiser (Chair)]: And D. Okay.

[Rep. William Canfield (Vice Chair)]: Was proposed in the Governor's budget? So you're to spend a third of that. What happens to the balance? Is it dedicated to next year?

[Rep. Carolyn Branagan (Member)]: Julia, that's the question we're asking, Bill.

[Julia Richter (Joint Fiscal Office)]: So yeah, columns D, E, and F are all getting at this construct of a third of the one time 104.9 general fund monies were to be used to lower property taxes in fiscal year twenty seven, and then the remaining two thirds would be held in a reserve. The difference across these columns is where that one third of the $104,900,000 is being dedicated to. Is it being used to uniformly lower property tax bills or used for a specific property class? For instance, what we're looking at here in column D is we see that transfer of the $104,900,000 coming into the education fund. One third would be used to uniformly lower property taxes, And then the other third would be held in reserve, in a tax rate offset reserve, or whatever you choose to call it. That's what it was called a few years ago.

[Rep. Charles Kimbell (Ranking Member)]: I wonder if you got that up.

[Julia Richter (Joint Fiscal Office)]: That's line 35. It's where you see the 699000000. Do you have a cursor on to it?

[Rep. William Canfield (Vice Chair)]: That's two thirds, not the other third.

[Julia Richter (Joint Fiscal Office)]: Yeah, maybe I misspoke. It's one third in FY twenty seven and then two thirds sitting in reserve.

[Rep. Carolyn Branagan (Member)]: For future legislation.

[Rep. Emilie Kornheiser (Chair)]: Yes. Of the ways that I personally legislate, I don't know about the rest of you, is that I don't really trust future legislatures very much. Great, I'm glad we all agree on

[Rep. Bridget Burkhardt (Clerk)]: that. However,

[Rep. Emilie Kornheiser (Chair)]: what I have seen is in my time, which is not forever, but is sometime, it's a real consistency around when we put Ed Fund money in reserve, it goes to property taxes the next year. I have not seen money pulled out to go back to the general fund or things like that. And that's just in my time. I'm sure it's happened sometime in history.

[Julia Richter (Joint Fiscal Office)]: The piece of this, and of course, I'm not a lawyer, there are those provisions around dollars moving out of the education fund. Recall, there's that poison pill provision. So there's that piece where if Education Fund dollars are used for a purpose other than what's laid out in statute and that provision is not withstood, then there's significant property tax implications. So there's another piece associated with that, that once those dollars are in the education fund, they're harder to move back out of the education fund.

[Rep. Emilie Kornheiser (Chair)]: So we have not withstood that voice mail any

[Rep. Edward “Teddy” Waszazak (Member)]: a time. That's how I to see.

[Rep. Emilie Kornheiser (Chair)]: Can you talk about the differences between the different ways the thirds are

[Rep. Carolyn Branagan (Member)]: Yep.

[Julia Richter (Joint Fiscal Office)]: So column d uses one third in FY '27 to uniformly lower property tax bills, which would result in an average estimated increase across all classes of 8% as compared to the 10.1% if no one time money was used. Column E says, what if one third of the $104,900,000 were used solely to lower homestead property taxes? And that would result in I solve for the income yield also to correspond with that homestead property tax increase. So that would mean that homestead and income sensitized property tax bills would raise on average by 5.4%. The non homestead, because it would be receiving none of that general fund money, would be increased by 10.1%. Again, that Ed Fund surplus of $22,000,000 would still be used to uniformly lower. And lastly, column F, this is saying if one third of the $104,900,000 were to be used in FY 'twenty seven, And of that one third, half of it, so a sixth, would be used to lower homestead property tax bills on average. And then the other sixth would be used to increase property tax credits appearing on FY27 bills. So that would result in the homestead and income property tax bills going up on average 7.7% before factoring in a change of the property tax credit, which would also be increasing by 13%. And again, the non homestead would, on average, be estimated to increase by 10.1%. You see that bump in the property tax credit here in line. That's one B. Where it's increased from 134,200,000.0 to 151.7. And in all of these scenarios, that $69,900,000 twothree remaining is put into that reserve.

[Rep. Emilie Kornheiser (Chair)]: Folks, does anyone have any questions for Julia? Thank you, Julia. Let's have a quick conversation about Can you leave it up but not have to sit there anymore? Is that okay? Sure. Yes. I wanna have a quick conversation and then give Chris actually a chance to explain some of the purchase and use numbers to us and something else while he's up there. But I can argue myself in, like, any direction on columns d, e, and f. Does anyone have any thoughts on any of them? Yeah. Represent Waszazak?

[Rep. Edward “Teddy” Waszazak (Member)]: I think until we have stronger classification language, and it pains me to say this, I think we should just uniformly buy down both rates. Just thinking of uniformly buy down the rates between homestead and non homestead. There's a lot of folks, second homeowners particularly under that non homestead rate that I frankly just hate spending any Vermont taxpayer dollars on. But it's also my small businesses on Main Street vary, small restaurants who are really local restaurants who are really struggling right now to make ends meet, And those are folks who would get hit harder.

[Rep. Bridget Burkhardt (Clerk)]: And long term

[Rep. Edward “Teddy” Waszazak (Member)]: apartments. Raids out, yeah, renters. So I think that I don't love the third, third, third, but again, I can talk myself into that. But going anything but a uniform lowering of the rates on both homestead and non homestead, I don't think we can do.

[Rep. Carol Ode (Member)]: Representative Woodman did a good job of speaking for me.

[Rep. Edward “Teddy” Waszazak (Member)]: I must have made a mistake, Representative.

[Rep. Emilie Kornheiser (Chair)]: Thank you. I just want to flag again. It's hard to remember back when the economists were here with us at the beginning of the session, but the time of general fund abundance is very much waning. Yes. Yeah. And we're not There's no expectation that we will have an extra $100,000,000 to do anything next year, unless other policy changes happen. Thank you, Representative Waszazak. Anyone else have

[Rep. Carol Ode (Member)]: I don't think so.

[Rep. Emilie Kornheiser (Chair)]: Does anyone if we do do the third, third, third, does anyone want to do anything other than uniform?

[Rep. Carolyn Branagan (Member)]: Okay.

[Rep. James Masland (Member)]: Can argue I'm gonna have have constituents to do all kinds of things. Yeah.

[Rep. Emilie Kornheiser (Chair)]: He said it right?

[Rep. James Masland (Member)]: The table basically, we need to settle on something on the site since sensitive.

[Rep. Carolyn Branagan (Member)]: Can someone play out the ratios? What do mean? You said you don't

[Rep. Emilie Kornheiser (Chair)]: like the third, third, third. Oh,

[Rep. Edward “Teddy” Waszazak (Member)]: I mean, you know, I think that the other no one trusts future legislatures, and I think the legislature is also a body that responds to urgency. So separating it out over three years, I think, kind of gives the legislature an excuse not to act or say it's been dealt with, that makes me nervous too. I completely understand that in theory, three years from now, we'll be close to interpretation of academic briefs, I understand that a lot.

[Rep. Charles Kimbell (Ranking Member)]: I'm not sure if I understand you correctly to say you're in favor of a third, a third, a third, or just a uniform buy down on property tax.

[Rep. Edward “Teddy” Waszazak (Member)]: I think whatever we do, it has to be uniform. We could use the whole 105 next year, it has to be uniform. We could do half and half for two years, whatever it is.

[Rep. Charles Kimbell (Ranking Member)]: I have the same suspicion of a future legislature, even if we put real controls around it about and we'd have no idea, which is always a good reason to hold on to money as to what next year looks like, but we have no idea what next year looks like.

[Rep. Edward “Teddy” Waszazak (Member)]: What's the next eclipse?

[Rep. Emilie Kornheiser (Chair)]: Maybe just cut a leaner one. But we're always custom in cycles. Okay. Herbs and Masland.

[Rep. James Masland (Member)]: Yeah. If there's a a third, a third, a third, and we can assume certain people will want to manipulate the third, third, you know. We just need to be prepared to articulate what

[Rep. Carol Ode (Member)]: are

[Rep. James Masland (Member)]: we doing, what we're doing, and why we want to avoid that, because it's easy to say we're saving that in reserve. That's just a short little argument, so.

[Rep. Carolyn Branagan (Member)]: And I think people are asking us to act

[Rep. Edward “Teddy” Waszazak (Member)]: boldly now, And saying like, okay, we're doing a

[Rep. Carolyn Branagan (Member)]: little bit this year, but a little bit the year after, a little bit

[Rep. Edward “Teddy” Waszazak (Member)]: the year after that, I don't think it's gonna, it's not gonna land well at Mary.

[Rep. James Masland (Member)]: I would say even by the time things get back from the Senate, it may change somewhat. We needed a part two.

[Rep. Edward “Teddy” Waszazak (Member)]: I'm sure it's

[Rep. Emilie Kornheiser (Chair)]: out. You know, I thought that last year and they didn't So change a it was like the first yield bill in the history of the universe that did not because usually the yield bill has to change regardless of policy preferences. It just has to change because the numbers get updated. And so that was a wild surprise that they just Thank you.

[Rep. Carolyn Branagan (Member)]: Anyone else? Yep. I like the third. I absolutely think it should be uniform, and I just can't help but be concerned about what Rebecca's talking about. It's so easy for, I keep hearing over and over, well, what will decide what they're going to spend? I mean, in little tiny ways, in so many big ways they don't. And I'm concerned with, unless we can respond somehow, how we set the equal opportunity payment and adjust that for what we are piling onto a school district to do, that I don't understand how we can expect schools to deal with the uncertainties they have to deal with and with what, in addition, we ask them to just over and over. And that is becoming more and more of a concern of mine. So, know, I'd like to see something built in so that when we ask for a new initiative to happen, there is funding from the general's body, or if there isn't,

[Rep. Edward “Teddy” Waszazak (Member)]: that's it.

[Rep. Carolyn Branagan (Member)]: That's how I feel. I appreciate that.

[Rep. Emilie Kornheiser (Chair)]: Okay. I'm gonna we're gonna switch gears very slightly, and I'm gonna ask Chris to share with us how the purchase and use in meals and rooms stuff works. Very technical description. Sarsha, can you post that when you get a chance

[Rep. Edward “Teddy” Waszazak (Member)]: to use those? Oh, cool. Thanks. Stunburn.

[Julia Richter (Joint Fiscal Office)]: Hello,

[Rep. Carol Ode (Member)]: everyone. Chris. Chris Rutland from the Joint Fistal Office. Hope you all had a nice break.

[Chris (Joint Fiscal Office)]: So I made an unusually short slide deck for me with a very boring title called Splitting Tax Revenues Across the Three Major Funds. I will show you

[Rep. Emilie Kornheiser (Chair)]: It's a really nice title.

[Chris (Joint Fiscal Office)]: I will show you It is factual, and I aimed for policy neutrality while crafting it.

[Rep. Carol Ode (Member)]: Hopefully, this works. Why don't I click there? Oh, there we go. Alright. So, the first time

[Chris (Joint Fiscal Office)]: I ever used AI was to make this picture last night. If you remembered Emilie Byrne's slides from the all member briefing of we think of the major funds as big major funds, but it's really sort of a chain link fence that you all make decisions to pass things through.

[Rep. Emilie Kornheiser (Chair)]: You wasted electricity to make that big difference.

[Chris (Joint Fiscal Office)]: That was pretty much the sum total of my presentation. Are there any questions? So, I just wanted to walk everybody through here. I'm gonna show you two slides. I wanna give everybody a level set on what the governor's proposing in the budget, and then show you a different construct that the chair had just mentioned. I just wanna get everyone on the same page, though, about what was in the gov rec so you have something to compare to with this conversation. We all are familiar with the fact that the transportation fund is short in order to meet its federal match needs and all the other demands being placed on it. So the governor's recommend was to move an additional $10,000,000 into the T Fund beginning in this year. And his proposal was to do that by gradually stepping down the amount of motor vehicle purchase and use tax that goes to the T fund, or that currently goes to the Ed fund, and instead redirected to the T fund. So, if you looked in the language that was recommended, it set sort of a declining cap in the amount that would go to the Ed fund, and that amount declines by 10,000,000 every year until it zeros out in FY '31. And you'll see on that graphic here that when you factor in the expected growth in the purchase and use tax, it ends up being a little more than $50,000,000 over the five year period. It ends up by FY '31 being $58,300,000 that would be going to the transportation fund instead of the Ed fund. The T fund would get all the growth purchase and use that happens over that time. I also really wanna point out here that the governor's recommend in 'twenty seven backfills the Ed Fund by $10,000,000 with a transfer from the general fund. But there is no articulated plan to continue that arrangement in years beyond FY27. So, everything looks neutral, for lack of a better term, on the Ed Fund in FY27. But when you move into future years, there starts to become a hole there that starts at 21,600,000.0 in FY twenty eight, grows to 58,300,000.0 in FY thirty one. This committee doesn't need to be reminded that by default, in the absence of offsetting revenues, or some other change in policy, that hole gets backfilled through property. So, the chair had mentioned, what would it look like if instead of doing this $10,000,000 switcheroo in one year, if something very similar to $10,000,000 in magnitude happened, but involved shifting some of the allocations of the meals and rooms tax and purchase and use tax around to try to keep the Ed fund net neutral from this, not just in FY27, but in years beyond. So, I went on Excel and started flying around. And the closest I could get to $10,000,000 using whole percentages would be the scenario that I called alternative scenario eight here, just for discussion purposes. And there's two elements here. One would be to shift the percentage of the purchase induced tax allocation to the approximate equivalent of $10,000,000. And that would mean lowering the Ed Fund share from one third to 27%, and increasing the transportation fund share from two thirds to 73%. That works out to be an impact of $9,900,000 in FY '27. And then it stays pretty close to $10,000,000 throughout the life of the forecast. It grows a little bit just with the organic growth that we would expect in purchase and use tax, but it gets you really close to that $10,000,000 initially.

[Rep. Emilie Kornheiser (Chair)]: A really annoying request. I'm so sorry, Chris. Can you, at some point, update this slide to have it be 33.3% instead of a third? I know it's not exact. You can put an asterisk. But I feel like if other people are gonna read this, moving between a fraction of a percentage is hard for the brain. You bet. Thank you.

[Chris (Joint Fiscal Office)]: I appreciate your comment about whole percentages being ideal.

[Rep. Edward “Teddy” Waszazak (Member)]: Yes.

[Rep. James Masland (Member)]: What does Ray react to that?

[Rep. Carolyn Branagan (Member)]: Represent Waszazak. You remind me, Chris, so on your second bullet point,

[Rep. Edward “Teddy” Waszazak (Member)]: 25 to 29 is correct. So, 25.69 is 94.

[Chris (Joint Fiscal Office)]: Uh-huh, that's a very astute observation.

[Rep. Edward “Teddy” Waszazak (Member)]: Well, thank you so much.

[Chris (Joint Fiscal Office)]: The other six goes to the clean waterfront. So, the second piece of this would be increasing the allocation of meals and rooms tax that would go to the Ed Fund by 4%. So to go from 25 to 29% and correspondingly decrease the share that goes to the general fund from 69 to 65%. Doing this avoids creating that proverbial hole in the Ed Fund in years beyond FY '27, because that shift of purchase and use tax revenue would be backfilled on an ongoing basis by that meals and rooms tax revenue. So, the net impact to the hedge fund would be very, very close to neutral. Dollars 900,000 ahead in FY '27, going up to $1,300,000,000 in 2031. The reason why that has a little bit of fluctuation is because the two taxes are both growing, but at slightly different rates. The forecast expects the compound annual growth rate for each tax to be over 3%, but deals and rooms would be slightly higher than purchase and use. But if you notice on the chart at the bottom there, you don't see that big spike in FY twenty eight in the Ed Fund of it being in the hole by over $20,000,000 and then that whole growing to over 50,000,000 by FY thirty one. So, you should also just know, the slide was busy enough, and I wanna add more to it, that whatever you see as the Ed Fund gain in this, obviously, is a direct reduction in available revenue to the general fund. So, it is a one for one switch there. But when you factor in the fact that we're trying to round these percentages to whole numbers that are for a reasonable person to manage, and you factor in the two slightly different projected rates of growth, it works out remarkably close to a wash. So,

[Rep. Charles Kimbell (Ranking Member)]: Chris, that is year to year. On the previous slide it was cumulative. 59,000,000.

[Chris (Joint Fiscal Office)]: That's not cumulative, that was

[Rep. Charles Kimbell (Ranking Member)]: for each discrete year. The change from the previous year was, so it's not 58.3 change from 2030.

[Chris (Joint Fiscal Office)]: No. That that is that is a that is the fact that by 2031, the Ed Fund will have lost $58,300,000 of purchase and use tax that it gave that it switched over to the transportation fund.

[Rep. Charles Kimbell (Ranking Member)]: And then short below, it would also be the accumulation of all those columns in the bottom right.

[Chris (Joint Fiscal Office)]: And we're literally just adding right down the row.

[Rep. Charles Kimbell (Ranking Member)]: So that'd be $4,849,000,000 impact to the general fund over that period of time.

[Chris (Joint Fiscal Office)]: If you add them across? Yes.

[Rep. Charles Kimbell (Ranking Member)]: Would be increasing at all

[Rep. Carol Ode (Member)]: purchase use taxes as well as meals and rooms?

[Chris (Joint Fiscal Office)]: No, the rates would be unchanged. What would change here is

[Rep. William Canfield (Vice Chair)]: No. This

[Chris (Joint Fiscal Office)]: does not presume any change from the way the taxes currently work, in terms of the rate and who it applies to. This takes the numbers right out of the revenue forecast, and all it does is divvy up how those revenues are distributed across the three major funds a little bit differently.

[Rep. Carol Ode (Member)]: Chris, tell me again, you probably mentioned it, why we can't use just a dollar amount. We have to put a percentage to come up

[Chris (Joint Fiscal Office)]: with that. It's a policy choice. I think this was a, If you set a dollar amount and the legislature does this all the time in the budget process, that's sort of a year to year decision that's often made in session law. This would be a change by changing the allocations of where the revenue goes. That is a statutory change that is ongoing. It gets factored into the revenue forecast ongoing. Sometimes I

[Rep. Emilie Kornheiser (Chair)]: would say just the dollar transfer is a one time swipe up to it, this has a permanent vibe to

[Rep. Carol Ode (Member)]: What if for some reason we have a huge increase in the purchase of news times, then we're going to

[Rep. Emilie Kornheiser (Chair)]: have a whole lot more And the transportation fund would be super happy.

[Chris (Joint Fiscal Office)]: We don't I would also say if you do see a big increase in purchase and use revenues under this scenario, the Ed Fund would still capture some of that growth, because the Ed Fund would still be getting 27 of the purchase of its tax instead of 33.3.

[Rep. Carolyn Branagan (Member)]: Over your practice. Ms. Ode? Thank you. Until it phases out.

[Chris (Joint Fiscal Office)]: Until what phases out?

[Rep. Carolyn Branagan (Member)]: I'm concerned about the same thing you're concerned about. It's always thinking before. Like

[Rep. Emilie Kornheiser (Chair)]: phasing out, what are

[Rep. Carolyn Branagan (Member)]: you talking about? At some point, aren't we moving toward, at some point, transportation fund is where you get all of this.

[Rep. Emilie Kornheiser (Chair)]: This proposal is just talking about this one change. Next year, if we see an opportunity for more change, we could make more change. But this proposal is just this one change. I think that's wise. I'm glad about that. But even so

[Rep. Carolyn Branagan (Member)]: Okay. Never mind. We could put protection in, we could say that we're going to let them, let it phase over to the transportation fund, but that we will get, or they will get no more than X number of dollars so that we get all

[Rep. Emilie Kornheiser (Chair)]: the growth. I would say that all the major funds are our funds here in the Ways and Means Committee, and we are responsible in this committee for making sure that all the funds have sufficient revenue. I feel like we all have extra crush on the education fund lately because we've been spending so much time on it, but we are responsible for sufficient revenues in all the funds.

[Rep. Carolyn Branagan (Member)]: I have been very

[Rep. Emilie Kornheiser (Chair)]: supportive I think Chris' favorite fund is the transportation.

[Rep. Carolyn Branagan (Member)]: I think that they are gonna pull down federal money if they have money.

[Chris (Joint Fiscal Office)]: Yes, I would also just note that of the three major funds, the small but mighty T fund has the weakest rate of projected growth year to year of all the funds. It is projected to grow less than 2% year over year.

[Rep. Carolyn Branagan (Member)]: I can try any of the visits and see why that's a problem, because I can drive it around the community.

[Rep. Emilie Kornheiser (Chair)]: I think we all have communities that we can

[Rep. Carolyn Branagan (Member)]: show people the problems with the transformation funds.

[Rep. Emilie Kornheiser (Chair)]: Okay. Anyone, any other questions for Chris on this? Okay. We are going to put the education fund thinking away for just a very brief moment. We're gonna think about miscellaneous tax for just a brief moment, if everyone could do that with me. Thank you. And then we are going to go back to the education fund after that. Chris has some language from the joint fiscal office about the ten year tax study that we need to put into the miscellaneous tax bill. And I just wanted to make sure that everyone was familiar with it so that we don't have any surprises.

[Rep. Carol Ode (Member)]: Can we already see this okay? Alright. Well, hello again.

[Chris (Joint Fiscal Office)]: So I don't know if the committee remembers this, but every ten years, the Joint Fiscal Office for the for the last since at least the nineties, has done a pretty deep dive on Vermont's tax structure. And the last time we did this was approximately September ago. So we are on the cusp of doing another ten year tax study. The committee might remember that you all had added in your budget letter to house appropriations a request to give the Joint Fiscal Office some money to do this study, which, thank you. But we also need some verbiage to go with this study. And I went back through the three most recent studies that I could find. And some of the language in here is very similar and standard to what have been in other studies. But some of it is a little different, because each of the prior studies has had a slightly different focus. So, I'll just go through here real quick and walk through the language. It's pretty standard at the top. We have to conduct a decennial study of Vermont state taxes. It would cover the period starting in 2015 and run through 2025 with some historical analysis and some other state comparisons. This has been a key feature of all the other reports we've done. Take a look at taxation levels and tax responsibilities per capita per income level and by incidence on typical Vermont families and businesses of different configurations. This is something we've done in prior studies. Analyze and identify any issues or trends relating to tax flake, tax avoidance, and gaps in enforcement. This is something that has been mentioned in the past, it seems that there's been some interest in looking at this recently. Recommend areas of further research and analysis. We have had this in the last few reports, and different topics have come up. The last one said, Hey, you should take a closer look at demographics and tax incidents and business cycle fluctuation, because that happened right around the time when we were recovering from the Great Recession and really seeing the demographic shifts coming with the baby boomer generation starting to age out of the workforce. And that led to a body of research that some of my former colleagues did after that. So, for this current year, or this current cycle, it seemed like it would make sense that one of those things we would look at areas for further research could be ways to further research the topics of wealth and income in Vermont's aging demographic, given some of the conversations and developments with the estate tax, and the fact that our demographic trends have not reversed since the last study. There is also a piece in here that's based on the study, as part of the study work separately, take a look at how some of the income eligibility criteria for some of our tax provisions and benefit programs interact, to see if there are potential gaps in eligibility or benefits cliffs that exist under our existing tax laws that you all might wanna take a look at. I know there's a lot of interest in understanding the issue of benefits cliffs. It is an enormous issue that takes hundreds of hours of staff time to do. But this seemed like a good way to start that conversation by really having a nexus between how do some of the tax credits and provisions in our tax code interact with some of the benefit programs? And are they causing any unintended consequences with eligibility criteria or not?

[Rep. James Masland (Member)]: Yeah, didn't mean to interrupt, just wanted to get out of the list. But when you say benefit cliffs, Those of us constituents out there can say, Oh, this is easy, I can tell you about VR. But it's interesting to see, hear you say it takes hundreds of hours.

[Chris (Joint Fiscal Office)]: Oh, is not easy at all, because there are many, many different benefit programs that all have different eligibility criteria. So you need to understand all of those and how they interact, and then basically map them as income goes up. And the end product of it looks very similar, but the back end Or very simple, but the back end to get there is an enormous undertaking.

[Rep. James Masland (Member)]: Different criteria for each one, basically. Explains a lot.

[Rep. Carolyn Branagan (Member)]: I really appreciate this being included in the study.

[Rep. Emilie Kornheiser (Chair)]: Some of them, I remember one of

[Rep. Carolyn Branagan (Member)]: my professors saying things can be significant but not substantively meaningful, and so I think some of the benefits costs are going to matter much more than some of the others. And I also wonder if it will you capture magnitude? I mean, was thinking I was talking to somebody who turned down an increase in their salary because the loss of health care would have been so substantial.

[Chris (Joint Fiscal Office)]: So I think you raise a really good point, I'm glad you did. You'll notice that the language here is intentionally crafted to be guiding, but not overly prescriptive. So, as we do this work, we can apply that very lens. It's been my experience working on various summer committees and reports here that sometimes we get very overly prescriptive in the charge, to the point where the work collapses under its own weight. And I would like to avoid that happening. So, it'd be great if you all give us the broad direction and let us come up with something that we think will be valuable and useful to the legislature, with that very much in mind.

[Rep. William Canfield (Vice Chair)]: The

[Chris (Joint Fiscal Office)]: last part is really, really exciting. Tax is gonna help us, as they always do. And this contains a one time appropriation for consulting work, data analysis, and other expenses related to the study. The report would be due on or before January 15, because it's a pretty substantial undertaking for us to do. And just to give you a sense of the type of consultants we've used in the past, we've used an outside accounting firm to do sample tax runs, to help us deal with the sample family configurations and business configurations. We've had people help us with graphic design and layout, data analysis. So there are ad hoc projects of small dollar that we can contract out to professionals, and that helps us get this done. Because if you all haven't seen it, it is a very large, voluminous study, and it takes-

[Rep. Emilie Kornheiser (Chair)]: It's kind of voluminous.

[Chris (Joint Fiscal Office)]: Large and voluminous. None of these pages were intentionally left blank.

[Rep. Carol Ode (Member)]: So, it's a lot of work for

[Chris (Joint Fiscal Office)]: us to do. So, we appreciate your guidance and your advocacy for making sure we have the resource.

[Rep. Edward “Teddy” Waszazak (Member)]: Is that the last one?

[Rep. Carol Ode (Member)]: They're online, I can give it to you if you want.

[Rep. James Masland (Member)]: No, I'm just Is that last ten years?

[Rep. William Canfield (Vice Chair)]: It is,

[Rep. James Masland (Member)]: yeah. Okay, that's right. That's the question, thank you.

[Rep. Emilie Kornheiser (Chair)]: And I think the last one is also posted on our page under today, anyone wants to check it out.

[Rep. Edward “Teddy” Waszazak (Member)]: And I assume, or is it coming so that it is accounted for somewhere?

[Rep. Emilie Kornheiser (Chair)]: We put it in our budget letter.

[Rep. Edward “Teddy” Waszazak (Member)]: The notes come out. Oh, it's that one. Yeah.

[Rep. Emilie Kornheiser (Chair)]: Thank you so much, Chris. No problem. Appreciate it. Folks, it's so warm in here, and we're gonna take a five minute break.