Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: We are still here. It's still sixteen till the morning, 11:35. We are picking up Holcombe amendment to h nine fifty five. Is on our committee page and in our emails. Representative Holcombe, the floor is yours.

[Rebecca Holcombe (Member)]: First of thank you. And sorry to take up your time because I have the feeling we'll be hearing a lot of amendments. Jim and I came to this amendment in response to three motivators. We've now heard twice by memo and in person from the American Institute of Research that we incorrectly applied weights in the current formula, which means we have artificially lowered the weighted spending in some districts in a way that shifts costs to others. In anticipation of the review of S-two 20, I did spend quite a bit of time reviewing data from JFO on district poverty rates, district practices, weights and exposure to the excess spending penalty. And I realized that this error is actually driving disproportionate penalties, both in my region of the state, but also on districts that have quite high poverty, including one with 72% poverty rate. And the chair of the Thetford School Board wrote to ask me, and I quote, to gather information on why our town is so impacted besides blaming district boards for poor management. And I think they are really struggling because they are struggling to figure out where they can cut without doing harm. And so I did respond to that, and Jim has as well. And we looked at what the Bedford School Board could actually do to reduce their exposure to the penalty, especially in the context of the descent off and the decreasing weights that they currently face. So I'm going to address all three of these to explain why this amendment is for you. And it's actually, we'll get there. The first is the error of weights. And as Doctor. Colby testified, I also went back and looked at her prior work and I realized that we had made this mistake in applying the weights in 01/2027. Because the weights are wrong, per Doctor. Holcombe, then I really have to believe that any application of penalties based on those weights may also lead to errors in terms of who we identify as subject to penalty. The excess spending penalty is based on weighted average spending. So to the extent some districts are overweighted and have artificially low weighted spending, they will both be shielded from the penalty, but they may also affect who else is subject to the penalty. Overweighted districts both lower the average weighted spend and they push costs onto other districts and they change who is going to be hit. Meanwhile, we've heard that shorten this. But my point is if we are going to follow the science, we need to follow the science. Because if we had, we would not have made this mistake and a different set of districts might be experiencing this penalty. I don't know why we didn't do that, but I do know that applying penalties to a formula that has errors is likely layering error on error. JFO did confirm that there are several possible unexamined effects of the decision to apply these weights to students who are tuition. Spending per weighted people may be arbitrarily lower in those districts. It may distort incentives to merge because overweight weighted districts may have lower tax rates than neighbors because of the weight, so are fiscally benefiting currently now from not merging. Overweighting of tuition may shift costs onto other predominantly operating districts or larger districts. And it can lower the excess spending penalty threshold and it distorts which ones are affected. So that's a summary. The second issue is just the practical impact. And I wanted to see if I could find evidence that this was true. Because normally, I've supported an excess spending penalty for reasons that we discussed here in this committee and in every district in which I've worked and every district in my community has paid attention to that. We discussed the penalty as a way to benchmark our own local effectiveness and budgeted with that threshold in mind. But what I did see in the data, which JFO very kindly presented to me, I was able to evaluate whether I'm seeing distorting effects that are consistent with that hypothesis. And I did find many cases where districts with lower levels of economic disadvantage and much smaller districts were overweight in ways that really lowered them relative to other districts that have even higher poverty. And that doesn't discourage the kinds of behavior that we really want to see. So, for example, and I've shared this with Representative Page, the tiny K-twelve, K-six, sorry, district of Morgan, which pays tuition for all of its students, has none of the variable costs of operating a school. It sends all of its students to Derby for school, but it receives proportionally more weights than Derby despite being wealthier and thus has a weighted spending per people that's about 20% lower than that in Derby. So under those incentives, why on earth would a Morgan want to merge with the Derby and lose that benefit? It also creates a fairness issue even for districts that are not next to each other. For example, Fairfax, which operates at every grade level, has a higher rate of economic disadvantage than Windham. It's over 5% higher than Windham. Its spending per ADM is about $3,000 lower than Windham, but its spending per weighted student is about 3% higher. So again, misapplication weights is going to affect how we pay taxes and our vulnerability to that spending penalty all across the state. And if you extrapolate from this, and the data do suggest that systemically, the penalty may not be hitting the districts that we think are really driving some of this cost. And I would argue, especially in the Upper Valley, which is near some of the highest job density in Northern New England, we could be creating some unusual effects. The third and the real motivating impetus for this for me was the question from the chair, who is genuinely struggling to explain the rapidly escalating costs, even as they make cuts in their local budget. And he asked, how could that for reduce its tax exposure and the imposition of the penalty? And for me, what that says about us as a body. He and the THEPR board, again, they are trying to figure out where to trim costs. I did look into what made them different from some other districts that have a similar structure as them that are wealthier, but are not hitting this penalty. And here are a few things that Thetford and Thetford Academy could do right now or for next year that would shield them from the excess spending penalty. And these things are all things that actually are done in other districts currently that are wealthier and not subject to this penalty. I think you need to think about what that means about us. Some of these things would lower the tax burden in other districts that also pay tuition to Bedford Academy and are also subject to the penalty, including Heartland. TA could start immediately to practice selective enrollment so that it served a smaller number of students who are more costly to educate, something that it has proudly refused to do. And when I door knocked that town, I was so proud of the way, no matter who you were, everybody felt like they belonged at Bedford Academy. But that would lower their operating costs, and it would facilitate lower tuition. TA could stop complying with the education quality standards that apply to public schools and it could stop hiring licensed teachers, which means it would not have to provide the full range of services that public schools are required to provide. Again, it is the only public school approved school in the state. It's one of only two schools that have met those higher standards. But that does mean it has a higher cost structure. However, TA also currently has some of the highest test performance of a school in the state and the narrowest achievement gaps in the state. And if it begins to erode its commitment to quality standards and its commitment to qualified teachers, it's possible that those outcomes could be threatened. That effort could also designate. It's the only school district that has made the commitment to be a community school at the secondary level, even though it's provided in the historical academy, which is an independent school. And that could lead to lower payments if it also forced parents to top off tuition in order to enroll in what Intel now has functioned as a community school. If it required parents to pick up the balance of tuition, that would certainly shield their tax liability. It would shield the liability of districts that pay tuition the Bedford that currently pay for the full cost of education in our region. It might also have the effect of preventing some Bedford students and students in neighboring tuition districts from enrolling at TA if their parents couldn't afford to top off the tuition. And it would probably shunt disadvantaged students in the region towards public schools, including in neighboring states, further concentrating disadvantage. The community and Thetford Academy could also engage in aggressive private fundraising to offset costs at Thetford Academy. This would reduce tuition costs for Thetford School Districts and some towns that pay tuition to TA. But in reducing the tax exposure here, which reduces redistribution and reduces our estimates of the real cost of education in our region, they would be abandoning this idea that they have really held tightly to from their very beginning, and it was one of the first secondary schools in the state, this idea that they exist to provide fair access and fair opportunity to all kids in our region. And finally, I realized that by continuing to treat education as a public common good and a shared responsibility, these are behaviors I think we should be supporting and which I believe are consistent with our state's constitutional obligation to give every kid a fair chance. Thetford and Thetford Academy have put themselves in a position in which they are now penalized. And we have created a system that encourages Thetford to behave in ways that undermine those very goals in order to protect themselves from fiscal penalty. I'm very grateful to the Bedford community and communities like that who believe all it means all because they are trying to protect equitable access for every child despite errors in the current weights and despite inequitable practices being used elsewhere. And as I look at the growing impact of the penalty, the X220 model, which is an exacerbated version of the excess spending penalty, I don't know how that community would cope with a 1,600,000,000 hit on top of everything else they're trying to deal with. I worry about the people who've been struggling, the people I meet at the dump, who tell me that they're really worried about the costs that are beyond what they can manage and the impact on that burden, the surrounding house as well as their kids. I'm not saying we should just strip the mistaken weights and potentially harm just a different group of kids because we haven't figured out how that would work. But I would hope that this body would show the same courtesy and regard for the districts who are being penalized currently by our error. In our area, some of the districts harmed have higher proportions of students in need than some of the overweighted districts, making this application of penalties even more injurious and unfair. This amendment is designed to ensure that districts are not unfairly harmed by harm mistake. It suspends the excess penalty penalty, something I have supported in past practice for the twenty eighth and twenty ninth school year, which is a period of transfer funds of a future state. And with that, I just hope you will support me in supporting Thetford's commitment to the kid has a fair chance, I hope you'll consider voting for this amendment to avoid layering error on top of error in a way that incentivizes increasingly inequitable behaviors.

[Emilie Kornheiser (Chair)]: Thanks, Rebecca. Yeah, Chittenden.

[James Masland (Member)]: Needless to say, very supportive spendment, and I'll add more of a personal explanation on why and what for, and I can also say, in committee and out on the floor, I'm very grateful for Rebecca's representative Holcombe's flying her vast expertise and experience to this discussion because I can't possibly navigate this thing as articulately as Rebecca Holcombe can. On a personal level, four of my kids went to that particular camp. All four graduates did very well, are productive, leading, you know, good lives productive members of society. But I would also say, regards to how the school board, the taxpayers got to this place, is we're familiar, all of us, that act 16 came out slightly before I was elected here, which was some time ago, and separate taxpayers and our school board has been using the law correctly and honestly to the best of all of our abilities ever since. And so the fact that we find ourselves with this year with a $1,600,000 above threshold spending penalty has to do not with careless or foolish spending on behalf of the Supreme Court. It's because they've been doing the that the law encouraged them to do. That's why we're in the situation where we are right now. I was talking to another member who said, in effect, with me here that's on the floor, who's been paying for the excess spending in death rate. Well, the Ed Fund has been. But as the law has provided, and it's basically the way Act 60 was constructed, modified in Act 68, and through the multiple change here, and in every instance, the Deferred School Board, the Deferred taxpayers have been doing what they were supposed to do. So we find ourselves in this crazy situation, which is, as Rev. Holcombe pointed out, is a confluence of errors in laws that we constructed and different school boards, different education people doing what they were supposed to be doing, as we've understood. So two years of grace would give deferred taxpayers an opportunity to adjust our sights, guess, say, figure out a way to navigate this situation to bring about a more equitable and just solution. Yes, the education fund has been, I guess you could say, funding our excess spending. There's other words I can use there. But nobody was deliberately trying to take advantage of anybody else's system. This is the system we collectively constructed over several decades. I think it's all of our obligation collectively to try to disentangle it, and letting go of this excess spending threshold, which we've worked through in this community, is an appropriate way to do it. When Ways and Means was downstairs, then Representative Ansel was chair. One of the reasons why that we worked with Texas and M, was because it turned out to be effective. It's an effective rate on schooling, on school taxing, but when you see it in advance and you can adjust to it, that's one thing. When you find you've got a million and a half dollars hit, jeez, use a legislative term of art, it's categorically unfair. So that's my personal note, and I hope the committee will support the amendment. Thank you.

[Emilie Kornheiser (Chair)]: Thanks, Joe. So my understanding is that the Senate Finance Committee put S-two 20 into the yield bill last night, and they're planning to vote it out today. And so whether we want to or not, we're going to have a lot of time to discuss the excess spending penalty and get significant analysis and take significant testimony about what it would mean to remove it, which is right now sort of our only cost control, really sort of partner cost control in the system. And then to also understand the analysis of what the implications would be if we did remove it. And so my recommendation to us would be the yield bill is a must pass bill, and so we're going to need to take significant testimony on that to work through it and to understand the implications. I appreciate what your town needs, you all. And I'm curious what the implications I think I heard you, Representative Holcombe, that a lot of this is because we're weighting non operating districts, and I'm not sure what removing the weights from Thetford would do for No one's talking

[Rebecca Holcombe (Member)]: about cutting weights. We're saying don't add penalties. Yes. You don't have the right weights. Correct. We understand that. No one's talking about removing weights. And what we're also talking about is this is also a region partly because of proximity to high job density. And if you look at the heat maps, it's right on the other side of the border. We have extraordinarily high housing costs. And all of these districts made a commitment to reduce salaries so that the people who teach in their schools could work in their schools. And this trait chose to level up health care, not the districts, because that was the trade off that they had made in the factories. So many of these districts, including Bedford, are caught now with high health care and high salary.

[Emilie Kornheiser (Chair)]: And these are very important conversations to have, and we are going to have them in the context of the yield bill when it comes over. But this is a lot to do on very little notice.

[Rebecca Holcombe (Member)]: You're saying to postpone action on this.

[Emilie Kornheiser (Chair)]: Well, think we would need to vote this down, Representative Branagan, in order and then have that conversation when the yield bill comes over. And glad to hear from both of you about the impact it would have on your district so we can take that into account when we discuss the yield bill. Representative Higley?

[Mark Higley (Member)]: I'd like to have three minutes with the Republican members as Sure. People move

[Carol Ode (Member)]: Yeah, absolutely. Do you want to do that now or do you want to have a

[Emilie Kornheiser (Chair)]: conversation first? It's totally up you. If

[Mark Higley (Member)]: there's still a discussion, that's fine.

[Emilie Kornheiser (Chair)]: Anyone else want to say anything before we I think you had a hand up or no. Just a clarifying question. Now putting

[Carol Ode (Member)]: two twenty as we walked through it in

[James Masland (Member)]: the yield bill or two twenty as introduced, do you know?

[Emilie Kornheiser (Chair)]: I think it's two twenty as we walked

[James Masland (Member)]: through it,

[Emilie Kornheiser (Chair)]: but who knows what will happen there. Yes. Anyone else want to say anything before we take a break?

[Carol Ode (Member)]: No. I find myself in an odd position because obviously this is one of my things the school my school district is looking for because the way it's forwarded, it's not only from operating costs, but it's also about school construction. But I would love to have a larger conversation with it in concept of the yield bill, so I'll vote against it.

[Emilie Kornheiser (Chair)]: Thank you. Okay, we're gonna take a break, and we'll be back here.