Vermont Legislature SmartTranscripts:

[Speaker 0]: Good morning. I wish I had some brilliant trick for you all, but I don't. Today is Wednesday, April 1, and it's 09:05. And we are picking up H nine fifty two, an act relating to capital and state bonding budget adjustment. I've received many a question about why the capital bill is here. To my memory, the capital bill often comes here. We do technically have joint jurisdiction over bonding. To my knowledge, there's no secret fee somewhere in there that we're hunting for. Hoping we can do this as efficiently as possible. John, floor is yours.

[John Gray (Office of Legislative Counsel)]: Morning, everyone. John Gray, Office of Legislative Counsel. I think we could be pretty quick here. So h nine fifty two, this is the capital bill. Just for high level context, it's a two year it's a two year bill that sets out general obligation bonding for the state for capital expenditures. The second year of the biennium, which we are in, it is a capital construction budget adjustment act. So the form that you're gonna see is a bunch of amendments to last year's capital bill, makes it harder to read, but given the cursory view that we want to take at this, and this committee will be taking at this, I don't think we really need to examine so much the line items. I'm just gonna scroll quickly through and maybe note things that could vaguely be of interest to the committee. And so the first piece that I would call it is just the style of the capital bill, which is to set out line items for different sections. And the reason I draw your attention to this is that yesterday when we were discussing how school construction was funded, it was noted that pre 2007 school construction was funded through the capital bill. And so the way that those sections would look is you would have a section just like this, and let's say building, then say education, and then you'd have $10,000,000 roughly appropriated to a set of different line items, and it'd be things like 1,500,000.0 for energy contracting, million for emergency projects, things like that, and it would be routed through the AOE to fund those particular projects. Currently in this bill, the way that it's set up is your section two pieces speak to BGS, Departments of Buildings and General Services, appropriations for their statewide projects. Largely, this bill routes funding through BGS, but there are instances where money is going through another state agency. You can see an example of that on page three, for instance, where even though these funds are ultimately going to agency of human services projects, the funds are routed through PGS. I'm gonna jump all the way to I will note that we have a clean water section. This is starting at the bottom of page four, which sets out a number of projects through ag, natural resources, forest parks and recreation. And part of why I draw your attention to this is there's gonna be a policy section later on that speaks to some water pieces that may be the reason this bill wrong. Oh. May be the reason that this bill landed in here, but I'm not certain. So one of the pieces of the capital bill is that the total funding for the capital bill is backed by new bonds, the state is issuing, and I think that you heard Sean Baker from the treasurer's office describe this in some detail yesterday. So kind of a nice sequencing of this bill arriving here. But another way in which projects are funded because the total bonding amount that CDAC authorizes is not as high as the total amount of appropriations in the bill, there's funds that come from elsewhere. So one of these funds that are used to support the capital bill is reallocation. So previously appropriated funds for capital projects are clawed back after a certain period, and that's what this section sets out as a different set of reallocations. These monies go to the bottom line and are used to fray expenditures in the bonding section of the bill, which we've just gone through super rapidly. So the first section of the bill sets out your bonding measures, then we have our reallocations, and then we're gonna come to a cash section, which I might talk about in just a little bit more detail. Let me flip to that. Okay. On page 10, we have cash funded project authorizations. This is something that's relatively new in the capital bill world years ago. Was exclusively general obligation bonding. And Then I wanna say in 2022, I think, the cash bond for capital and central investments was created, and that is used it has been used in recent years to reduce the amount of bonding capacity that is used for the capital bill and supplanting some of the debt capacity and is now being funded with cash. So this also does tie into some of the basic points about the state's overall bonding capacity. The more that you leverage the cash fund, the less that you're using bonding capacity for these purposes. So the cash fund is a part of the capital bill now. It does mean that the bill has to follow kind of a dual track process where appropriations are set out in the capital bill and then the cash pieces are actually duplicated in the budget. That's the amendment you may recall from third reading on the budget with adding those cash pieces, but this is the section that sets out those cash authorizations. And if you want a detail on any of these pieces, I would suggest talking to the committee, that'd be especially helpful. Are some many of these follow the governor's recommended capital budget, but there are some instances where the committee took a position

[Speaker 0]: mailboxes downstairs instead of delivering them right now. Can you do it another time? Thank you.

[John Gray (Office of Legislative Counsel)]: There are a few instances where the committee when it's all path as against the the government recommended. So some of these include the 3,000,000 for installation of Wi Fi system in state correctional facilities, and then discontinuation of funding for the replacement of women's reentry of correctional facilities. With that, we end the project authorizations in the capital bill and we move to the second part of the bill, which is a set of policy sections. This is why I'm guessing it arrived here, but as far as I know, and I think it's not local terms, doesn't have any dissociative impact, at least ones that could be predicted. The first I really do

[Speaker 0]: have joint jurisdiction over bonding. That's great.

[John Gray (Office of Legislative Counsel)]: This is great. I didn't get this experience last year, So policy sections. From DEC, there had been an effort to provide advantaged loan terms to certain kinds of communities. So the Vermont Economic Development Authority can make loans, and I think this is for clean water. Yes. And currently, these particular kinds of water systems, eligible mobile home park water systems are excluded from these advantaged loan terms. And so you're seeing a creation of a defined term for these water systems. And then the actual loan agreement itself, which I will talk about. Typically these advantaged loans, and this is on page 15, are limited to a term length of no longer than thirty years. And then separately, they're typically floored at 0%, as you can see at the very bottom of that page. But on page 16, you can see some notwithstanding language that creates an even more advantaged set of loan terms, and that's what subdivision five on page 16 is. A privately owned nonprofit community type system may qualify for a forty year loan term at an interest rate plus administrative fee to be established by ANR that shall not be more than 3% or less than minus 3%. So you can have this longer term length up to forty years, and you can have a negative interest rate on these. And this is to provide loans for these eligible mobile and park water systems, which were previously not encompassed in the advantaged loan terms that VO was offering. This does not otherwise disrupt five A rights. This is already existing process for providing those extra long terms with discounted interest rates. It's expanding the scope to include these mobile home park water systems, which is, as you can imagine, is part of that broader effort to simplify financing for mobile home parks and the like.

[Charles Kimbell (Ranking Member)]: John, in that note, notwithstanding Subdivision 1, could you again say what Subdivision 1 is?

[John Gray (Office of Legislative Counsel)]: Yes. So this was actually a cleanup that I had proposed to include here. It should have been in here years ago. Sub one is the loan shall be evidenced by a note payable over a term not to exceed thirty years. On 40. Because this section allows forty year loan terms, you need to not withstand. And four, which is the other piece here, that's the floor at that, not less than 0%, and you need that, and it was already in the statute, but it's expanded to include these mobile park border systems because you can have an even lower interest rate in these cases. So expanding the scope of these advantage loans for these communities, and what you see under subsection C here at the bottom of the page is that typically, I'm just gonna read it without the new language, In no instance shall the annual interest rate plus administrative fee be less than is necessary to achieve an annual household unit cost equal to 1% of the household income of the applicant alert system. So there's a floor effectively for this certification process on what it could be, what the interest rate can be, so it may not go down to that negative three rate, you're capped based on this determination of annual household user costs. But the change that's being made here is that requirement does not apply to these eligible mobile home park water systems. They are not subject to this requirement that you are floored at the 1% of median household income of the applicant water system. So they have, you can think of it as kind of the most flexible advantage terms available to them.

[Scott Muller (Joint Fiscal Office)]: It'd be more than, it'd be 2%. Right.

[John Gray (Office of Legislative Counsel)]: So that is the DEC piece, is frankly the most complicated part of the whole bill. On page 17, we have an update for division for historic preservation. This is to permit solicitation of Viets. I will note that and you see notwithstanding language here, the Vermont ethics code prohibits solicitation of GIFs, and so to ensure that you're not a violation of ethics code that's not withstood here. The piece that I would note, because what this is providing is for specific purposes, state historic preservation officer to accept and solicit these grants for use by the division for historic preservation in these particular instances, establishing and maintaining displays and exhibits at a historic site and at the Vermont Archeology Heritage Center or restoring any historic site. This is allowing solicitation, but it does have to receive approval from the Secretary of Administration. And as you see here in that request for approval, the State Historic Preservation Officer would need to specify the project and fundraising goal. I will note, because this does require notwithstanding the ethics code and people may have questions as to allowing solicitation. As far as I know, this is something that has been done for other state agencies. I would need to talk to Tucker for examples, but this would not be the first instance of extending this ability. The concern that was expressed in corrections was a slippery slope type argument that if you broadly allow solicitation. I think in this particular instance, there was maybe some comfort with the narrowness of this particular entity, but just know this is the sort of thing that raises tackles. Section 13. This is a piece that was drafted by Mike O'Grady, and this is for a Little River State Park lease as well as the commissioner into FY '27, of course, Parks and Recreation to enter a long term lease with the Vermont Hudson Association, the lease of the structure at the Little River State Park, but it provides there are specific contingencies that have to be met in f y twenty seven for that to happen, option for renewal, the fee or fee formula to be used to compensate the state, conditions on the use of the structure, insurance, provisions for termination, how any conflicts will be resolved, sort of standard contracting measures you might want resolved in advance of any agreement. On page 19.

[Charles Kimbell (Ranking Member)]: Sorry, it doesn't say subject to legislative approval.

[John Gray (Office of Legislative Counsel)]: No, so this is granting the authority for the commissioner to enter a long term lease. This is extending that authority and these are the conditions that would have to be for that to happen. So no second. On page 19 is the transfer of the Southern State Correctional Facility. This is in Springfield. So notwithstanding our typical Title 29 transfer measures subjecting to FNV, commissioner of BGS is authorized to transfer a portion of the Southern State Correctional Facility consisting of approximately 23 acres to be used for these specific purposes, economic development as an industrial parcel to the town of Springfield. And then again, we have a set of contingencies that have to be met for that authority to be exercised, obtaining state or local zoning or subdivisional approvals. There's an old existing agreement from 1999 between the state and the town of Springfield that I think has not fully resolved who would have the responsibility for maintenance and uproot the access road in order to the state's lines.

[Speaker 0]: When we became a community a regional pay school, would that be allowable under this?

[John Gray (Office of Legislative Counsel)]: Technically, there's nothing to break it. So here's the thing that would constrain that. Is

[Speaker 0]: Oh, this is, sorry, I would have thought this was the Windsor Prison, it's this paper. Okay. I

[John Gray (Office of Legislative Counsel)]: will be happy to not opine on that. There are some contingencies here. So if the town hasn't begun developing that transferred property for purposes of economic development, which a specified purpose that is contemplated here by the March 2030, the town would need to consult with BGS to examine alternative uses, so basically a check back to see if there's something better that they could be doing with that property. However, that does contemplate that the property has already been transferred, if they haven't begun developing it. So the next piece I wanted to note on page 20, in A, we repealed the previous extension of authority for transfer, which was for a different purpose, so it's replacing that transfer authority with this new transfer authority. But the second piece is, the second we just walked through is repealed on 07/01/2030. So if those contingencies aren't met, if the transfer doesn't occur, we would have to revisit authority for this piece. Transfer could not happen after July. On page 20, this is duplication. This is exactly the lines that appears in the budget. This is for the Green Mountain Youth Campus. You may recall that their spending authority extended for this particular project, but the human services committees and others have been frustrated that they haven't received information from HS on the operating costs for actually pursuing this. And so what was imposed, it's basically a block on all of that spending authority that's been extended and a requirement for monthly reporting. So in A, during the off session, AHS would need to report to joint fiscal, joint legislative justice oversight on its plan to develop the campus including fleet unambiguous written analysis of the estimated cost of an annual operating budget.

[Speaker 0]: Scott, I don't know if there's a system at the Joint Fiscal Office to track whenever something is supposed to be a report to Joint Fiscal Committee. And I'm just saying that out loud because you're sitting here, and that would probably

[Woodman Page (Member)]: be helpful for us all to figure out at some point.

[Speaker 0]: You can just say noted if you want or not. Thank you. I will wait. You. Thank you. Okay, cool. So

[John Gray (Office of Legislative Counsel)]: subsection A is to monthly reporting an attempt to receive this, I mean, the reason for the section is to get this information, so that's the A. And then the actual SIC that's imposed on subject could be, notwithstanding any other provisional law, the contrary, the departments for children and families and, buildings and general service shut out extended funds for further development of that campus in f y twenty seven until either joint fiscal committee in consultation with the institution's chairs, excuse me, approves the resumption of expenditures upon reviewing those reports or, so that's during adjournment, or if you return to legislative session, the general assembly authorizes resumption of spending by legislative enactment. So A is saying, you need to get these reports demanding the operating expenses, and then B is saying you can't resume expenditures on the Green Mountain Youth campus development until you either get off session approval based on those reports or the general assembly itself enacts legislation to resume. Who is off session approving? Chuck Fiskars. I will note that this is in the budget. So that's interesting if this information isn't it?

[Speaker 0]: It's not news, I remember having feelings about it when I saw it in

[Scott Muller (Joint Fiscal Office)]: the budget.

[Speaker 0]: Just having refreshed again.

[John Gray (Office of Legislative Counsel)]: On page 21, one of the cash appropriations that I had noted is money for Wi Fi installation, 3,000,000 for Wi Fi installation in state correctional facilities. This has been part of the committee's ongoing efforts to have Wi Fi installed. So section 17 is another report for the commissioner of corrections and the chief information officer of ADS, digital services, to similarly monthly report during adjournment to the joint legislative oversight in consultation with the institution's chairs on that installation, which has been hung up a number of times. Lastly, effective date on passage. That is for the Capitol bill. More policy in there than you might expect.

[Speaker 0]: Kristen, I think it's John. John, could

[Unidentified Member]: you go back to page 16 for me and maybe you wouldn't want to opine on this, but how does a minus 3% work? Somebody's got to pick up that.

[John Gray (Office of Legislative Counsel)]: Yeah, I honestly don't know. I think Patrick Monk at DEC might be a good person to talk to about that.

[Charles Kimbell (Ranking Member)]: Okay, thanks.

[Speaker 0]: Any other questions for John? Nope. Thanks, John.

[Edward "Teddy" Waszazak (Member)]: We know that bone marrow is gonna be

[John Gray (Office of Legislative Counsel)]: I wouldn't say it's 11, because I think

[Scott Muller (Joint Fiscal Office)]: Oh,

[John Gray (Office of Legislative Counsel)]: that's right, cataclysmus.

[Woodman Page (Member)]: Thank you, John. It's

[Speaker 0]: your turn. Windham is done. Representative Higley, you need to have that figured out before you tell them.

[Edward "Teddy" Waszazak (Member)]: Well, would be nice.

[Unidentified Member]: I've just never heard of that before, and accounting could amount to quite a bit of money.

[Charles Kimbell (Ranking Member)]: Could you say it again as to what?

[Unidentified Member]: So again, I've never really heard of a minus 3% loan rate. Know, 0%, 3%, so again, if there's a certain amount of money that comes out of there and there's a minus 3%, then there's some money that somebody's got to make up on that land. So I just wonder who that is. Is it Agency of Natural Resources? Is it

[Speaker 0]: At least Scott has answers.

[Scott Muller (Joint Fiscal Office)]: I don't have an answer to that specific question per se, Madam Chair, but for the record, Scott Muller joined the fiscal office. Typically, when I see things like this, I know there are other agencies that have had to pick up the cost of those different stipulations in the statute. We had a question like this when it comes to supervisory fees. And when we talked about it earlier, the cost of actually processing, getting fees from parolees who picked that up, and it was the agency or the Department of Corrections. So I'm happy to look into it and check with the Secretary of Natural Resources and see how that works, but I don't know the answer on top my head.

[John Gray (Office of Legislative Counsel)]: That'd be great.

[Scott Muller (Joint Fiscal Office)]: Thanks. And part of that is because this section, as John was saying, it's already in statute, and really what's changing is the expansion to include the eligible mobile home park water systems in the pool of people that could qualify for the loan. Nothing else is changing, so this is the fees that you see there, it's all what is currently in statute. So there really isn't anything to report regarding that for Section ten and eleven. We're just adding in that the eligible mobile home park systems can apply for the voluntary visa.

[Unidentified Member]: I don't think, Matt and Jerry, I need to answer it before we vote. Thank you. Interesting to me

[Speaker 0]: to find out. And when you both find out, I'd love for you to let the rest of us know.

[Scott Muller (Joint Fiscal Office)]: I will not try to multitask and email at the same time as I do. That'd be a quick that'd be a trip. So with that said, there are six times the word fee appears in this bill. Four of them are just the statute and and section ten and eleven. That's just expansion to include the eligible home park water system. Nothing's changed, there's nothing to add or subtract from this. And the last two are about the potential lease with the Department of Forest Parks and Rec and the Vermont Huts Association. That's section 13. If you happen to go to section 13, you'll notice that what this bill does is it authorizes the department to enter into lease negotiations in the future after the bill passes we then talk about what the lease could be. And as part of that stipulation of what the lease could be, it would include the fee or the fee formula that would be used to compensate the state eventually in the future, not right now. With all the stipulations, basically, there's nothing to talk about as to what the impact will be today. I did have a conversation with the commissioner, and she said they've just barely even started having a conversation about this. There is nothing to say. There's no prediction as to what the forecast could be. And I would hesitate to say what I think it might be, because I wouldn't want to be accused of trying to influence any negotiations that they happen to have going on at the moment. So, April fools, have nothing to say, I guess, is the point. But at this point in time, there's nothing else in here that would affect the revenues of the state. Eventually, there will be, and once they enter into the actual lease agreement, and we have what the terms would be, I would have a better knowledge base of what the fee would be. I could check back with you and let you know, but until the bill passes, there really isn't anything to report.

[Charles Kimbell (Ranking Member)]: Sure. I would move that we find h nine

[Speaker 0]: Let's let's just slow slow for one moment to get one.

[Charles Kimbell (Ranking Member)]: Fifth two.

[Speaker 0]: Does anyone have any other questions for Scott? Scott, thank you.

[Scott Muller (Joint Fiscal Office)]: Run away.

[Charles Kimbell (Ranking Member)]: Yeah, sure. I would move that we find H 952 favorable.

[Speaker 0]: Thanks so much. Representative Kimbell move that we find H952 favorable. Second. Representative Lamoille Zak seconds. Is there any committee discussion? The clerk please call the roll. Representative Branagan? Yes. I'll vote yes. Is Representative Burkhardt? Representative Higley?

[Mark Higley (Member)]: Yes.

[Speaker 0]: Representative Holcombe? It's not here. Representative Kimbell?

[Charles Kimbell (Ranking Member)]: Yes.

[Speaker 0]: Representative Masland? Yes. Representative Ode? Yes. Representative Page?

[Woodman Page (Member)]: Yes.

[Speaker 0]: Representative Waszazak?

[Edward "Teddy" Waszazak (Member)]: Yes.

[Speaker 0]: Representative Canfield? Yes. And Representative Kornheiser? Yes. We have voted the bill of favourable ten-one.

[Woodman Page (Member)]: Thank you. You're welcome. I could be able find that right now.

[Scott Muller (Joint Fiscal Office)]: Thank you.

[Woodman Page (Member)]: Okay,

[Speaker 0]: Reptor Waszak is going to report it. Thank you. And

[Woodman Page (Member)]: We're

[Unidentified Member]: on the next brief subject. Will we have time to share what we heard yesterday on school construction?

[Speaker 0]: Yes, I believe we'll have time this afternoon. Or maybe this morning. I don't there's I'm trying to make the agenda expansive enough that we will have time in one of those spots, but I'm not sure which one. Just let me know. Cool. Thanks. So this morning, the idea is that we are going to hear what worked in Act 46 tax treatment regarding murders and what didn't work. And then this afternoon, we're going to think towards the future about what might work in the future towards merger incentives. So the first piece of testimony we have this morning is John Gray telling us what the law was.

[John Gray (Office of Legislative Counsel)]: I remained not brave.

[Scott Muller (Joint Fiscal Office)]: We go.

[John Gray (Office of Legislative Counsel)]: A couple of things I'll do, I'm going to start by sharing the Act 46 text so that you can see it and then some follow-up amendments that touched on the tax incentive pieces of Act 46. Then I'm going to, at the end of this, back out of the text and I have kind of a slide deck that sets out a couple links to the acts themselves so that you can click on them and see some of the reports. Then there's some policy questions to consider if you're thinking about tax insulins as part of any merger. I'm gonna start with the text of acts, act 46 from 2015. And the piece that we really need to look to is sections six and seven, and then some pieces in sections 22 through 25. So the first of these is, see, 46 contained a lot of provisions, but part of what it contained was increased incentives to cause accelerated merger, and so that's what this section six is. It's kind of the most advantaged incentives available under Act 46. So subsection A of this sets out who would be eligible to receive these sets of incentives. I'm not gonna belabor the points here, but just know that you need to have some kind of eligibility condition that kicks you into the tax incentives. Who's gonna receive this? And so if you check-in subsection A, you can see the decisions that the legislature of 2015 made on this front, the particular kind of governance structures that they were trying to achieve. And if you look at act 46 more broadly, can see that it envisions sets of preferred governance structures. But the actual tax treatment itself begins on page nine. And so a newly formed school district that meets the criteria set forth in subsection a shall receive the following, decreased equalized upset property tax rate, there's the provisions of this subdivision one and notwithstanding any other provision of law, the new district's equalized onset property tax rate shall be, and then you have a set of cent discounts over a number of transitionary years. So in the first fiscal year of operation of that new district decreased by $0.10 dollars $0.08 in the second year and so forth, so that in the sixth year, you're fully transitioned to that district. The new district's concept property tax rate is what it would be absent the discount. Representative Ode, didn't we extend

[Woodman Page (Member)]: the benefits over, even though that it came down to zero? Do you know the answer to that question?

[John Gray (Office of Legislative Counsel)]: You're asking if we continue to provide different SIM discounts afterwards. So there were SIM discounts as part of Act 127 for the pupil weights as well. And then there were different sets of SIM discounts provided for depending on the governance structure that you had under Act 46.

[Woodman Page (Member)]: That go on longer than that phase out?

[John Gray (Office of Legislative Counsel)]: I don't believe so. And there's actually a provision, which I'll come to in a second, that effectively ended some of the transitionary measures even more abruptly than you might have expected.

[Woodman Page (Member)]: Thank you. Sure, Ms.

[Speaker 0]: Waszazak, and will you also forward the email to the participant? Yes. You don't have to scroll back up, but in that above language, know, like what

[John Gray (Office of Legislative Counsel)]: the districts have to do to qualify, those were all Yes. It's a set of conditions you have to meet all of, and it's meant to orient districts toward a preferred governance structure, you receive lesser incentives if you didn't achieve that particular governance structure. Some of what the subsequent history of Act 46 reveals is some of the incentives were later extended to folks who were not within the first envisioned preferred structures. So just something to think about that at the point that you expand the incentives beyond the pool of district or governance structure that you're trying

[Scott Muller (Joint Fiscal Office)]: to

[John Gray (Office of Legislative Counsel)]: achieve, you've kind of lost the incentive effect, unless it's after that point in time. Accompanying that homestead discount rate for the new district need to make a modification to the income percentage as well to ensure that those paying on income receive the same benefits. The piece that I really wanted to call out on page 10 here is, while that second seems straightforward, subdivision C here sets out something that complicates what it really means. So you might just think you're in a new district, you're getting a discounted rate reflective of being in the new preferred district. And subdivision C says, during the years in which a new district's equalized homes and property tax rate is decreased pursuant to the subdivision one, so what we just discussed, the rate for each town within the new district shall not increase by more than 5% in a single year, household income percentage to be calculated accordingly. So it doesn't spell this out explicitly, but what this is presuming is that you have a built in transition where the member towns are not receiving the district's tax rate. They're actually receiving a transition between what their town rate had been and then moving to the district rate. And this shall not increase by more than 5% is limiting the extent to which it can reach that district rate. So I point this out because if you just read a, you would think it's a relatively simple administration of a discount to the rate for the new district, but implicit in C is a transition provision. All that to say, you wanted to do something like this, I would much more explicitly say that you're transitioning than just having it be implicit in a subdivision. And some of the constraints of the 5% piece, I'm gonna talk about in a second, because as you can imagine, what this means is so long as you're within a system where your local tax rates are reflective of your education spending, if you're capped at increases of not more than 5%, you're in many ways insulated from the economic impacts of your spending decisions, they will be borne across the state rather than within the district. And that's something that the subsequent legislation reveals is trying to address that problem. So that's one thing to note.

[Speaker 0]: So, there were no penalties, there were just incentives.

[John Gray (Office of Legislative Counsel)]: Just incentives. One thing to note that is different about If

[Speaker 0]: one district is getting an incentive, that incentive has to be carried by all the cost benefit that is carried by everyone, right?

[John Gray (Office of Legislative Counsel)]: Yes. So I'm glad you brought this up, because I have more to say about the basic A, if you guys are interested in what I have to say about the basic A. So there are a couple of things that are, as you pointed out, they're complicated about this seemingly simple discount. One is that to the extent that you're offering discounts to anyone else and those costs are foreign statewide, your district's rate may rise more than it would have and then the discount is applied against that. So you're not outright receiving a 10¢ discount, you're actually bearing the cost of the other school districts in the state. The other is that as I understand it, the discount occurs within the setting of the yield, which means that it's I don't know how to say it other than there could be like a compressing effect. So when we say an 8¢ discount, it may actually be a 7.2 because of the setting up the yield, it may not be an outright eight cent discount. All that to say, if we just state the simple statements that you received an 8¢ discount on your district's sunset property tax rate the second fiscal year of operation, it's actually way more complicated than that, what you're receiving and it's unclear how different your rate is than what it would have been absent that discount basically.

[Woodman Page (Member)]: I'm not sure this solves this problem at all, but if you said, we're going to figure out, why the, never mind what the incentives are, first apply it as though nothing's happened differently in your district and then somehow use Yes. And then help them. Then they really know the dollars that they're getting. But I don't know if you already set your budget, what do the dollars go to next year's tax rate decrease or you can spend the money or what? Is it a bad thing for me to ask this right now?

[Speaker 0]: No, no. I mean, I think it might be a more helpful question this afternoon. We're trying to figure out how to sort of make it different than it was.

[John Gray (Office of Legislative Counsel)]: Yeah. And I mean, you point out something that's interesting in terms of how to apply the discount. Right? Like, do you first set the yield sort of agnostic as to any discounts and then secondarily apply this and then recalculate? So there's different ways to think about it.

[Charles Kimbell (Ranking Member)]: Similar to looking at the property tax credit, the sense that the property tax credit is paid by the property tax payers, so they have to increase the amount of taxes to pay for the property tax credit.

[John Gray (Office of Legislative Counsel)]: Yeah, I think you could use the balloon term. I might jump out of Act 46 just for a second because there's lots of other pieces to Act 46, but I think we're just talking about the tax incentives. As you know, there are mergers support grants, transitionals support grants, there's other incentives provided here, but these are just the tax pieces. And one thing you can see that legislation grappling with is how the CLA would work, like, now that you have new towns in a larger district. And there was some discussion in subsequent years whether to do the CLA at the district level rather than at the town level. But one thing

[Scott Muller (Joint Fiscal Office)]: I

[John Gray (Office of Legislative Counsel)]: wanted to hit on was jumping to the 2016 yield bill. This is act one thirty two from 2016. There was some effort to address what it meant to deal with this 5% provision, the capping of the 5%. And so this is building out some of the measures, and I'll provide a slide deck, or it's I think posted under my, but I will pull it up in a second, that links to some of the acts here. So this is trying to say, intent, the general assembly has provided incentives for voluntary school governance merger in the form of equalized homestead property tax rate reductions. The tax rate reductions applied to the union school districts equalized unified homestead property tax rate either the first four or five years in which the district operates, recognizes that even with the reductions might have an equalized unified homestead property tax rate that is either higher or lower than its pre merger rate. So that's somewhat what we've been talking about. As a result, in each of the acts and until a member town reaches the new unified rate, the general assembly shall ease a member town's transition to the new unified rate by limiting a town's equalized concept property tax rate by the 5% provision. So this is building out more expansively all those things that were implicit in that subdivision C. And this is speaking to the concern that we were just talking about, the 5% provision is not and has never been intended to be an incentive that would limit fluctuations in a member of town's equalized homestead property tax rate regardless of the spending decisions a new union school district makes. It's the intent of the general assembly that any large or unusual spending increases by a new union school district continues to be reflected in the tax rates of the member towns. And then this is clarifying how the calculations would be determined across member districts. Importantly, the yield bill in 2016 also required this report from AOE on how to actually calculate the tax rates. So this is further building out the x 46 provisions. I linked to that report in the slide that I'll pull up, but really I just wanted to jump lastly in statutory text to the act that reflects the recommendations of the AOE on addressing this concern about insulation from spending decisions. So I think that is here. This is also called Act 73, so it's very convenient. From 2017, I think this is the miscellaneous tax bill from that year. And again, it's linked in the slide deck I'll pull up. But this is providing for tax rate reductions in the same way that we've just described, but it is trying to address bad faith or alternatively put, most protective of the school district spending decisions. So in a fiscal year, this is the tax rate reduction review. In a fiscal year in which the tax rate reductions are applied to a new union school district, if the district's ed spending per equalized people increases by 4% or less over its ed spending per people in the prior fiscal year, it shall not trigger a tax rate reduction review. So this is trying to build in inflation as basically a permissible thing in which you could operate and say, you're not gonna be subject to any, review if you're just operating within this 4% figure. In a fiscal year in which the tax rate reductions are applied to a new union school district, if the district's spending increases by more than four foot bent, then it shall be subject to a review. Upon request by the secretary, a union school district shall submit its budget to tax rate reduction review to determine whether its increase in net spending for people was beyond the school district's control or for other good cause. Conducting the review, secretary selects three business managers and three superintendents to serve in an advisory role and has to consider these factors, except to which the increase is caused by planning enrollment, except to which the increase is caused by unifying employment contracts, and except to which is caused by increases in tuition paid by the Union School District.

[Woodman Page (Member)]: Can we put one of

[Speaker 0]: the similar thing in 01/2027 that we never used? That's so familiar. Do we know if we ever used this one? I

[John Gray (Office of Legislative Counsel)]: think that this one was used, this is also similar measures are contained in s 02/20 as came over. So it's offered it's shown up sometime in allowable spending type concepts. So here's how it's determined under that review. So it exceeded the 4% increase. Right? If at the conclusion of the review, this determines that the union school district's budget contains excessive increases in net spending per people that are within the district's control and are not supported by good cause, the union school district rates for the fiscal year will be determined as follows. Tax rate that would otherwise be increased by no more than 5% shall be increased by no more than 5% plus the difference between a 4% increase and the actual increase. So it's saying 4% is your permissible increase, that's within inflation. If you went above that, we're gonna take the gap between the permissible growth, that 4%, and whatever your actual ad spending is, and we're gonna add that to the 5%. So you could increase by not more than 5% plus that difference, and you're gonna have to converse on the other side. Should I slow down also? Someone in a

[Charles Kimbell (Ranking Member)]: not in a tax committee to try to understand that might be a little confusing.

[Woodman Page (Member)]: Sometimes I think that might be

[Speaker 0]: the point.

[Woodman Page (Member)]: I mean, it's like, if you sell everybody, you're going to be eight, six, four, two, zero, and if you don't have all the stuff behind it, I mean, the last bullet, it looks better than it actually might be.

[Scott Muller (Joint Fiscal Office)]: Better than it actually might be. Yeah.

[John Gray (Office of Legislative Counsel)]: So one thing for contextualizing these, I do have the report pulled up and these sections are meant to enact what the report's recommendations are, so this may be clearer language. This is linked again in the slide deck, but I'm gonna jump down to the recommendations. In order to implement the intent of the journal assembly, the AOE recommends the following changes to the law governing the maximum allowable equalized homestead annual rate change of plus or minus 5% per member towns, make an allowance of 4% for annual growth in the new unified union due to inflation and consolidation expenses, provide an appeal mechanism to the secretary of education or review board, so that's that tax rate reduction review. They list out some permissible rationales, declining enrollment, unifying employee contracts, emergency repairs, increased tuition payments. And then these are the this is the math that we were just speaking to. If the member town's prior year rate is greater than that new unified rate, the max decrease that they can get to bring them down to the union rate, the unified rate, would be 5% minus their actual percentage change, plus four. So it's building in a 4% allowable, and it's basically calculating what's permissible in the change in your rate as a function of a comparison against inflation. That's the My simple way to say it, but I wrote this still.

[Speaker 0]: And Julia's gonna join us as well.

[John Gray (Office of Legislative Counsel)]: But you may find that reading the report is more helpful than looking at the statutory text is sort of like

[Unidentified Member]: Can you go up just one? Where you had the numbers on that?

[John Gray (Office of Legislative Counsel)]: Oh, go back to the report itself. Yeah.

[Unidentified Member]: I guess I agree with the whole thing, the people around, people, representative police, what it looks like, what it says kind of stuff. Someone in the district who reads maxing decreased 5% minus eight, seven minus four. It's difficult arithmetic for the average person to get it to make sense. And I'm not Yeah. Complaining. I'm just noticing or ref I'm following representative Woodman's. Yeah. Do we understand this through our basic people? And it's just a comment as we work through our numbers and pages.

[Speaker 0]: And I think there's an interesting question about if we're using tax policy as a persuasion tool, is it more important for the public to understand it than say, like, I don't think I mean, every year I plan to do my income taxes by hand so I can become a better case and means legislator. And every year I'm like, No, no.

[Woodman Page (Member)]: So I

[Speaker 0]: think there's a real How comprehensible and perceptible do we think tax policy needs to be to the average person? Not so much. But if the point is persuasion, then maybe it does If in each phase, you to persuade me of doing something, I need that upstairs. Absolutely, yes.

[John Gray (Office of Legislative Counsel)]: So, think the simplest way to think about this particular measure is really just to think about the problem that it's trying

[Scott Muller (Joint Fiscal Office)]: to

[John Gray (Office of Legislative Counsel)]: solve, which in this case is that if you're capping folks at a 5% increase or decrease, it insulates them from their ad spending decisions. They could dramatically increase and then the increase in their rates is capped. So that's what this is trying to solve is And I think it'll be simpler to see on the upside. Let's say that their member counts prior year rate is less than the new rate. So their max increase under the law prior to this update would have been a 5% to the town rate. And what this is saying is if you have exceeded inflation, so your actual percentage change is 7% in your ad spending rate per pupil, and you were allowed 4% without triggering this, You exceeded that 4% by 3%. So you add the amount by which you exceeded inflation to the permissible increase. And so instead of being capped at a 5% increase, which would have allowed you to more greatly insulate yourself from the ad spending decisions you make, you now are subjected to a max increase of 8% of your rate, which means you're gonna feel the effects of your ad spending decision more greatly. Does that make sense? That's what it's trying to do on each side.

[Speaker 0]: And to some degree so when we passed 01/27, we put that cap on it that then broke the ed fund a little bit and because we did not add this piece into it. I don't know if folks remember that more. I remember that. Yes. Yes.

[Woodman Page (Member)]: Session. But you know what, I don't understand. I understand the words you're saying and they make total sense, but then I don't understand why you're saying five plus three to eight instead of five minus two to three. I mean, five minus three, two, why are we?

[John Gray (Office of Legislative Counsel)]: Yeah, so in the case, it's different depending on where your district is relative to the unified district. If your rate was less than the unified rate, you're being advantaged by having a 5% cap. It's not bringing you up as quickly to the unified rate. And so what this is saying is if you're spending above what would be expected for inflation and consolidation expenses at that time, you're not gonna receive the full benefit of that 5% cap. In fact, you could increase by 8%, meaning you're gonna more rapidly approach the unified rate. It's the opposite on the other side, which is that if you're above it and you're spending higher in ad spending knowing that you're gonna be brought down to the unified rate, typically you would be capped at a 5% decrease, which you want the biggest decrease that you can have. This is saying if you're spending above inflation, then actually we're gonna limit even more acutely the amount to which you can decrease. And so in that case, you would subtract, right? So, yeah.

[Charles Kimbell (Ranking Member)]: So is it one year ago?

[John Gray (Office of Legislative Counsel)]: Let me flip back to the text itself. This is across the full duration of the transition in law. So you receive those SIM discounts. If you were in the accelerated phase, that's a six year transition, 10¢, 8¢, 6¢, so on. It's a slightly shorter transitionary period if you're not in the accelerated phase, you don't get the 10¢ discount in your first year of the fiscal year of operation. But what I understand is that in practice, folks were hitting the unified rate more quickly than that full transition period. So it might just be a year, it might just be two. It would depend on where your town's rate stood relative to the unified rate to which you were moving, basically. But technically, under law, that 5% cap was for the duration of the transition. Later acts clarified that at the point that you hit the unified rate, you are now with the unified rate, and you didn't receive a 5% cap in any way after reaching the unified rate, because technically, you could then receive the benefits of not being exposed to the economic consequences of your education spending. So those are the main pieces I wanted to hit. I realize this is complicated. There is one other piece that's gonna be less applicable to a move to the foundation formula, I think. But another part, another problem that had to be solved in Act 46 related to the tax incentive to roll out was the effect of phantom pupils. So the So okay. Perfect. So that is in sections 22 through 25 of act 46. And just to talk about So I'm gonna talk about this section, which is part of the people waiting section without the new text that you see here, just to explain what the problem is. So if we read it without any struct or underlying text for purposes of the calculation under this section, again, this is your pupil weighting section, so it's determining your LTW ADM, your weighted long term membership. A district's equalized pupil shall in no case be less than 96.5% of the district's equalized pupils in the previous year. Before you had this So this is a hold harmless to say that essentially if you have declining enrollments, you're not gonna have rapidly increasing per pupil expenses as a consequence of that declining enrollment rate. If you had rapidly declining enrollment but you maintained the same ed spending, your per pupil spend would go up because you're taking the same number dividing it by smaller number. So to protect against that dramatic increase in per pupil spending, which would directly translate into districts' homestead rates, have this hold harmless provision, and it says that your pupil count is not gonna be less than 96.5% of the preceding years. But what this meant is that if you did it on the basis of the previous year's adjusted count, you are basically accumulating over time what are called phantom pupils because you've never faced the actual pupil count that your district had. Should I pause?

[Speaker 0]: I think a lot of people in the room were sort of here when phantom pupils were a thing we talked about more and it's Okay.

[John Gray (Office of Legislative Counsel)]: So what this measure is intended to do is to say, shall no case be less than ninety six and one half percent of the actual number of equalized pupils in the district in the previous year prior to making any adjustment under this section. So the 96 and a half percent, instead of being compared against last year's weighted long term membership, which reflected the 96.5 hold harmless permission, you're gonna compare it against the actual pupil count. That way you can more rapidly bring folks to their actual pupil count. Does that make sense? It's 96.5% of a more accurate pupil count against actual figures on the ground as against 96.5% of the pupil count determined under this adjustment section. So this is to try to address the pupil count provisions. And as you can see here, sections 23 through 25 address how to deal with these. So what it's saying in A is if a district's equalized pupils in FY '16 don't reflect any adjustment, then the section we just went through, which is more rapidly bringing you that your hold harmless is reflective of the actual preceding year, those provisions apply to you. But if you did receive an adjustment, meaning you did receive a hold harmless, your pupil counts declined, your student count was actually lower than 96 and a half percent of the equalized pupil count for the previous year. If you did receive that adjustment, then you're gonna receive these special provisions to bring you down more rapidly. So in FY '17, be a no case to be less than 90% of the pupils in the previous year, and in FY 18, shown no case to be less than 80% of the district's people as pupils in the previous year. So this is addressing the difference between districts that have declining enrollment and those that don't and trying to solve for that accumulation of random people.

[Speaker 0]: And I would say this is something that did not work very well. I'm not sure how well the tax incentives worked, but this did not work very well. It just caused massive amounts of confusion. And the reason that I bring it

[John Gray (Office of Legislative Counsel)]: up in relation to the tax incentives is that, of course, your homestead rates, at least under the current system, are reflective of affected by your pupil counts. So any measures to provide discounts are gonna be affected by your artificially inflated or not people

[Woodman Page (Member)]: counts. So who would be most helped on a spending scale by paying more attention to people counts, we've just tossed them out and says that's not going be part of any kind of merger incentive. Or does that benefit not?

[John Gray (Office of Legislative Counsel)]: Well, maybe the easiest way to answer this is that think happy resolution to raising this concern is that you're envisioning a different future, right, that doesn't have tax capacity weights with locally varying onset rates reflective of spending decisions. So in the future, in the foundation formula, your district's educational opportunity payment is truly just a function of the student count multiplied by the base. In which case, I don't don't really wanna use the word gamesmanship, but the trying to have pupil counts to affect the tax rates that you charge because you're trying to protect your local homestead rate, that's not the situation that's envisioned with the foundation formula rollout because that's just a uniform statewide rate. And then the payouts that you get to districts are a function of student count multiplied by base amount. You don't have the same concerns, don't you have to address the same kinds of problems if you're envisioning a foundation formula future with this statewide tax system that's envisioned in Act 73 as you do here. I just wanted to note that this was something that Act 46 did have to grapple with its tax incentives.

[Woodman Page (Member)]: And so if we end up doing the transition to foundation formula, this is not something we have to really look at. But if we're trying to address the question that one of our questions was, do we update merger incentives in Acts sixteen sixty eight as we transition? That's one of our questions. Right?

[Speaker 0]: I think regardless how we count pupils and how we account for declining enrollment as an important part of the piece, it just seems like this particular way that a previous legislature accounted for this didn't work very well. Okay.

[Woodman Page (Member)]: So we'll keep it something.

[Speaker 0]: Or maybe not, but we certainly should talk about it. We have some witnesses that have to be done who are in the Zoom and need to finish up fairly soon. So I want us to finish my sentence. And then I think we might take a pause on John Gray's testimonies, go to folks inside the Zoom, then come back to John and Julia. We have the whole day together to just hypothesize about all this. It's gonna be incredible.

[Woodman Page (Member)]: Should we be thinking about what we do pre foundation formula, and what we do in the foundation formula, while we're working through these problems?

[Speaker 0]: Oh, I think we're Yes. I think we should be talking pre foundation formula as the idea being that we want to support districts to come together to greater scale. That's the goal. Before?

[Woodman Page (Member)]: Yes. The implementation of anything? Yes. So we're gonna With our existing tax structure. And think about how we'll fix the next time.

[Speaker 0]: Are we gonna make

[Woodman Page (Member)]: two different language changes? Maybe.

[Speaker 0]: Probably. That'd amazing. Gosh, I love this week.

[Woodman Page (Member)]: I love this week. Do.

[Speaker 0]: Thanks, John. I'll be back. Hi, Broken Sheryl. I'm sorry to leave you waiting there.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Good morning. How are you?

[Unidentified Member]: Nice

[Speaker 0]: to see you again. Good morning. Thanks for being here. I think you have the prompt, what worked with Act 46? Merging incentives and what didn't. Glad to see you all.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yes. Well, thank you for having us. So my name is Brooke Olson Farrell. I'm the superintendent for the Slate Valley Unified Union School District and I'm joined by our Director of Finance, Cheryl Scarcello. And we appreciate being here and being able to provide testimony on Act 46, merger incentives, and really our long term impact on our school districts. Cheryl served in the district at the time of the voluntary merger vote and brings direct firsthand knowledge of that process and those meetings leading up to the vote. Well, I did not lead Slate Valley through the initial Act 46 vote. Did assume direct leadership following the positive vote for four of our six towns to merge in 2017. Therefore, my experience pertains more to the implementation in the impact of the merger over time. Together, our perspective span both decision making phase and the subsequent years of implementation. So this allows us to speak to both the original intent of Act 46 and the long term outcomes. So for some context, Slate Valley is the border, a border district adjacent to New York and comprises six towns five Fairhaven, Castleton, Hubbard, Westhaven and Benson are located in Rutland County, while Orwell is located Addison County. In 2019, the former Addison Rutland supervisory union unified to form the slate valley unified union school district. At the time, the district included four elementary schools serving pre pre kindergarten through eighth grade one middle school serving grades six through eight and one high school serving grades nine through 12. Slate Valley fell under the non accelerated merger pathway because a positive merger vote was not achieved by 07/01/2015. As a result, we merged under Section seven, which applies to non accelerated mergers. Under this provision, member districts were required to have a positive vote on or after 07/01/2015, with the new unified district becoming operational after 07/01/2017, and merging on or before 07/01/2019, which we did. This pathway provided a four year tax rate incentive with reductions of 8¢ in year one, 6¢ in year two, 4¢ in year three, and 2¢ in year four. Unlike accelerated mergers, however, towns and non accelerated mergers were subject to a constraint that tax rates could not increase or decrease by more than 5% annually until they reached the incentive rate or the four year incentive period concluded whichever occurred first. It is important to clarify that in Slate Valleys case, the tax rate incentives were not the primary driver behind the decision to merge, at least that is Cheryl's in my belief. The more compelling factors for communities at the time were the potential for long term financial stability through efficiencies and shared services, the opportunity to streamline administration, reduce duplication, the establishment of equal town representation on unified board that was a huge factor for us. And additionally, there was a willingness among towns to make meaningful trade offs to create a more unified system. For example, the town of Hubbardton relinquished school choice as part of the merger. This was a significant local decision and reflected the level of commitment communities made toward building a unified district structure in the hope of realizing long term cost savings over time. The incentives certainly supported the transition, but were not the central reason communities chose to unify. Our merger process itself occurred in two phases. The initial merger of our five Rutland County towns was voluntary and reflected local decision making aligned

[Speaker 0]: to

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: the goals of Act 46. However, approximately one year later, the Orwell Village School District, which was part of Addison County, was required to join the Unified District through action by the Vermont State Board of Education. So we had both a voluntary and a forced merger. And this distinction matters. Because the final configuration of the district reflects both local choice and state directed consolidation, which has had lasting impacts for our community perception and cohesion. Following the 2019 merger, the district took significant steps to realize the efficiencies envisioned under Act 46. We centralized operations reduced redundant positions, restructured our system to operate more efficiently over time. This included a reduction of approximately 50 staff positions, including administrative roles, and reorganization of our schools to align with enrollment and program needs. These actions reflect a sustained effort to deliver on that promise of efficiency. At the same time, declined by roughly 10%. Since the merger, student needs infrastructure needs fixed costs, particularly in healthcare have increased these realities limit the degree to which efficiencies alone can offset the broader cost drivers. While Act 46 created a framework for efficiency, the most significant cost savings in Sleep Valley did not come from governance consolidation alone. They came through local difficult local decisions. Following the merger under the authority of the unified board, the district closed and sold the former middle school in Castleton and reconfigured Great Spans district wide, creating a unified seven through 12 campus at Fair Haven using our existing facilities this resulted in more than $1,000,000 in annual savings. And these actions demonstrate the meaningful cost savings required that meaningful cost savings require structural changes at the school level, not just governance consolidation. However, these decisions were not easy. The closure of Castleton Village School was emotionally significant for the community and continues to be held against the district today, despite the clear financial and I would argue educational benefits. This underscores a critical point, the most meaningful cost savings come from decisions that carry lasting community impact. Slate Valley is consistently one of the lowest spending districts in Vermont with per pupil spending significantly below the state average. At the same time, performance data since the merger has improved and is now at or above regional levels indicating an efficient use of resources. Despite this, our budgets have frequently been rejected by voters. We're happy to report that yesterday we had a positive vote on our revote. So excited about that. Wonderful. Yes, and it was it passed by a big margin. So so we are excited today. But in in the last eight years, and really since the merger, our budget has required multiple votes in most cycles, including five votes for the eventual passage in fyi which I believe was the state record. The decision to merge was rooted in long term promises efficiency, sustainability and equitable governance and required real trade off from trade offs from communities. The combination of expiring incentives, a complex and often misunderstood funding system, a merger process that was not entirely voluntary, significant local trade offs such as relinquishing school choice, difficult post merger decisions such as school closure has made it challenging for communities to reconcile expectations with current realities. Based on our experience, we would offer the following align policy with long term structural realities, not short term incentives, provide sustained transition support beyond the initial merger period, Recognize that governance consolidation alone does not produce significant cost savings. Acknowledge that meaningful savings often require difficult local decisions, including school closures, ensure taxpayers have clear information about tax impacts at the time of voting, and continue to prioritize governance structures that ensure equitable representation. Act 46 created important opportunities for governance equity and operate operational efficiencies. In Slate Valley, the decision to merge was grounded and long term goals, not short term tax incentives and required trade offs from communities. I know Cheryl has a couple more thoughts she wanted to add, so I'll turn it over to her.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Thanks, Brooke. So I just wanted to share that again, that the tax rate incentives were not, did not end up being the main driver. I heard your review of Act 46 and going through the complicated calculations and whether or not you got the full incentive or whether you reach the equalized rate sooner with the minimums and the maximums. So, was complicated and it was complicated to explain it to taxpayers, which always makes it difficult when we're trying to get a budget passed and help people to understand. It just adds this level of frustration in the midst of the other things that we're trying to communicate about, you know, the programs we're trying to support and the things we're trying to do within the district when there's so much that we have to deal with just with regard to the tax rate alone and those complicated calculations. And we did have several votes. I joined the district right after the first failed vote, and then there were a few more votes and then the final merger. I have to say one of the things that also that Brook mentioned that helped was when we, the article of this agreement allowed for equal representation from each town with three board members from each of our six towns. So that means we, right now we have an 18 member board, which can be unwieldy at times. And in fact, we're having difficulty filling all the positions. How many vacancies do we have right now?

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: We have four right now.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Four vacancies. So that's a challenge that we're dealing with right now. So I think, I mean, I think on the outset, what gets the attention are the incentives. But I think in the end, like I said, it wasn't the main driver, but it does get attention. And I think it does help to bring everyone to the table when you can start talking about those things. I think in addition to incentives for the next round of mergers, which are likely, obviously going to be more difficult than the Act 46 mergers. I think like you started talking about a little bit, heard prior to the start of our testimony that there might need to be some other carrots, so to speak, to provide some incentives, perhaps some sort of merger grant. One we qualified for as one of our small schools grant, one of our schools did. And so, were able to translate that into a merger grant, you know, that is helpful in terms of just having local revenue. So perhaps there's a way to think about incentivizing some of the other things that we've done in our district. For example, if you can demonstrate reduction in staff or closing of a building, you know, and maybe even looking at, you know, how you deal with school construction. You know, I think these are the things that are going to have longer term impacts on our taxpayers. And, you know, because I think the tax rate incentives alone will not result in the number of mergers that you would hope for. I think there are other things that to consider. And so that's what I have for you today.

[Speaker 0]: I have two questions, and I think there's some other questions around the table. We've been talking about tax incentives, and I don't I think sometimes we're sort of using that language neutrally as it could be a positive or a negative incentive. I'm gonna be sort of a little more explicit and say, like, incentives and penalties.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Yeah.

[Speaker 0]: I think in Act 46, it was framed as an incentive. But if you can sort of do the math, you realize that the folks who did not receive the incentives are frankly paying for everyone else's incentives. So that was an implicit penalty. I'm curious if you think an more explicit penalty would have been useful. And then I have a second question that's fairly unrelated to that one. That's how I feel, Cheryl. Yeah.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: It's really hard to say. I mean, nobody likes the idea of a penalty. I think, you know, districts inherently want to avoid penalties, you know, the penalty, the threshold on, you know, the tax rate penalty, the threshold. I mean, I think everybody, you know, we instinctively want to avoid those things. So, I think it does, know, I think similar to the incentives, I think it helps at the start to bring people to the table because that's where you're going to start. You know, we want to obtain these incentives. We want to avoid these penalties. And I think maybe that helps just to get people to start having the conversations. And then as we start working through it, we realize there are all these other reasons that make merging attractive.

[Speaker 0]: Thanks. And then my second question was, you said more expansive or tangible merger support. What does that mean?

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Like, as I mentioned, we had a small schools grant and we were able to, because we merged, we were able to maintain that and retain that even though we otherwise would not have been able to. So, we were able to retain that. It was considered a merger grant. So, I guess, you know, maybe some just some flat, some dollar, just dollar amount incentives if there are some things that you're able to do. I don't know how that works.

[Speaker 0]: So, you're not talking about like staff teams being fanned out over the state to offer legal advice?

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: No. I'm really. I'm really talking about tangible

[Speaker 0]: Dollars. You're talking about money. Okay. Thank you. Really. Brooke, do you want to add anything to that?

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yeah, I mean, I would say, you know, for the implementation of the merger, I mean, there is a bunch of costs that comes with that as well, right? Redoing

[Scott Muller (Joint Fiscal Office)]: all

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: of master agreements, policy, all of those types of things. So there are additional costs to mergers initially, to get them off the ground in terms of operationalizing them. Thanks.

[Speaker 0]: Representative Waszazak.

[Edward "Teddy" Waszazak (Member)]: Thank you. You mentioned that if I remember correctly, the closing of the school in Castleton, and you alluded to that still being held against the district in some way. Can you just explain more of what you meant by that? I can imagine what you mean by that, but just to be able to find.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: So I think we still have a lot of no voters, not just Castleton, but also in Orwell, that vote no against our school budget. Now, because in Orwell, because they were forced to merge, right? And so they will always vote no now because of that forced merger, even though the merger tremendously benefited or well. And then in Castleton, we had at the time and this was 2020 right before COVID, we had put out a bond around, you know, doing some work at our high school to create a more expansive middle school. And that bond failed, but we went ahead and moved all of our middle school students to the high school campus anyway. I think there was some thought that by voting down the bond that the seventh and eighth graders wouldn't move to the high school campus. That was never the purpose of the vote. So I think that created some misunderstanding. And I think largely our community would like the schools to operate the same way as they always have, but it just costs less. And that's just not the reality of the situation. And then you layer on the complex funding system that no one understands, and it just creates this dissatisfaction with public school. So that's a vortex that we can't seem to get out of, which leads to multiple failed votes every year.

[Unidentified Member]: And I appreciate what you'd mentioned too about the improved student

[John Gray (Office of Legislative Counsel)]: performance

[Edward "Teddy" Waszazak (Member)]: post merger, but still struggling with those no votes, because I think that underscores something that I think a lot about is, you can't incentivize away nostalgia and humans don't always make decisions on the bottom line of the bills that they're paying or just do that much. So thank you.

[Speaker 0]: Representative Higley? I think you broke a little

[Scott Muller (Joint Fiscal Office)]: bit more on the Castleton Campus and maybe you said it, but what happened to it?

[Unidentified Member]: It happened so good.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yeah, we sold it back to the town for a dollar and then the town turned it into a rec center.

[Scott Muller (Joint Fiscal Office)]: Okay, thank you.

[Speaker 0]: I'm going ask a follow-up question about that in particular before we go to you, Representative Ode. It seems like standard practice around the state to sell school buildings to towns for a dollar. And I think that made sense when school districts and towns were similar legal entities. It seems like the further along this path we go, the more school resources are frankly sort of the property of the full state to some degree. Right? So I think that sort of releasing a valuable resource from the statewide resources is a very And then for just a dollar, it's a really interesting thing to do fiscally. And I also know that a lot of those properties are a lot of trouble and you don't really It's like a gift. The town is giving you a gift by managing it, right? And so I'm just curious about how you thought about all of that.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yeah, so that provision was part of our articles of agreement. So we were required to do that under our articles of agreement for the merger. And actually, interestingly enough, that building was actually previously owned by Castleton and Hubbard. So I should have said that we sold it to both of those towns for $1 And then think I thought bought Hubbardton's interest in the property so

[Speaker 0]: 50¢.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: No, I don't believe it was 50¢, but I'm not exactly sure what it was.

[Speaker 0]: Oh, interesting. Okay.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yeah. So I would have to do a little bit of research on that, but I don't think it was exactly 50¢. But yeah, it was a, yeah, I have no idea, but I can certainly find that out.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: And I think, yep.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Go ahead.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Sure. Didn't the town, they also tried to sell it themselves then, didn't they? Yes. Yeah.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: Yes, but then, well, there was a lot of debate whether to keep the property or sell it. They ultimately decided to keep the property.

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: But they attempted to sell it and had some interested parties. Yes. But I think, you know, the issue was also how, you know, what level of maintenance we've been able to maintain on some of those buildings? And, you know, are they in need of some remediation that had never been done. And so that makes it tricky when you're dealing with those buildings, especially an older building. I don't know when was that building built? It could have been like the 30s or 40s or

[Woodman Page (Member)]: 40s I believe.

[Speaker 0]: Thank you, representative Woody. Curious if

[Woodman Page (Member)]: a town would say to themselves. This is what our education grant lists tax produce. I think produces $5,000,000 to post the edge funding. And this is what we're getting out of the edge funding. If they see that. And then, even if it's more than the 5,000,000 and even though the formula is a little complicated. The farmers trying to ensure that the funds are given out equitably, and also that that property taxpayers lowering common lower property values are protected access to succeed income protection, really at the lower end of the scale so I wonder, do they do they see that big picture or do you show them that or get it.

[Brooke Olson Farrell (Superintendent, Slate Valley UUSD)]: We, we do show them that, probably at at nauseam. I don't think, I, you know, if you look at the history of our district going back to the 90s, even when we were separate, you know, separate towns under a supervisory Union I believe Benson 1997 has a state record for the most failed budget votes of 13. They took an entire year to pass a budget They, it seems to be connected to act sixty and sixty eight that they really don't agree with the new, with not it's not even a new formula with the premise of that law and so that has been even though we're a beneficiary as as a district. You know, we get more from the Ed fund than we send to the Ed fund, but that has not made a huge amount of inroads with the general voting population. I don't know if Cheryl, have anything you want to add?

[Cheryl Scarcello (Director of Finance, Slate Valley UUSD)]: Yeah, I agree completely. We try to convey that and it just we don't really get any traction. I mean, when you consider that for 2025, how many votes it took to pass the budget, and I mean that was the year that the change in the weighted pupils, and we were clearly we benefited from that, Slate Valley did. And it it took five votes. It was really difficult to help our communities understand the benefit that the benefit and the opportunity for the school district. And five votes is a lot. Really is very difficult on the community to keep voting because you keep rehashing all those things that are making that people are unhappy about and just grinding it out, literally, to try to get the budget passed.

[Woodman Page (Member)]: Thank you. That's answer.

[Charles Kimbell (Ranking Member)]: If I might just say, I'm getting from your testimony is make sure the financial incentives are straightforward, not too complicated, and that's not the only reason why school districts merge, and that your justice just barely settled and probably not even fully settled yet from your district merger.

[Scott Muller (Joint Fiscal Office)]: Okay, thanks.

[Speaker 0]: Never mind for back 6068. Thank you both so much for your time. Really appreciate it and all you're doing. And congratulations again on your test budget. Bill, do you mind waiting while we take a much needed break in this room? I think we'll listen a little better if we stretch for

[Scott Muller (Joint Fiscal Office)]: a minute. That's