Vermont Legislature SmartTranscripts:

[Senator Seth Bongartz]: And hard in some ways negotiations with the with the house, but they were friendly. And I think one of the things that came out of that in a way that might not have been you know, people might not have understood is that a real shared understanding developed. And that was really satisfying that there was a real sense of shared understanding between the two bodies. And we ended up with, of course, what happens with true negotiations, there's something for everybody not to like, and hopefully enough for everybody to like. We were assisted, as people always say in this situation as they always should, by the incredible work and help of both legislative council and JFO. And I have learned not to name names because when I do that, I always leave somebody out. So I really wanna say sincerely on behalf of the senate team, and I'm sure I can even, on this one, speak for the house as well. Thank you to the legislative council of JFO for all the work and really remarkable help they gave us throughout. And I also wanna thank both teams, both the house team and the senate team, who worked, tirelessly to get to, the the bill that's now in front of that's in front of you today, and I I think it's something we should we can all be very proud of. I just wanted to hit some of the major features. It retains the cost factor model in its entirety, something that was important to a number of members of this body. The effective date moves from to FY '29. There are small changes made to the makeup of the State Board of Education. The bill significantly shrinks the number of independent schools eligible to receive tuition, eliminates out of state tuition entirely, and eliminates the ability of independent schools to set their own tuition and does that. It establishes the mass the mapping task force and the ward voting task force. It establishes a framework for state aid to construction should we find the money to fund the effort. It establishes a new waiting system and also puts in place some significant additional study and analysis of the weights with reports due back, I believe, in December '26. It has some important transition provisions. It adds second homes as a tax classification, and it develops a new system for primary residential property tax relief. And I think one of the things that the bill does that maybe hasn't gotten a lot of attention is it increases transparency because one of the issues with the existing law is that virtually nobody understands it. And I'll go into that more maybe this afternoon. But and it sets us on what will be a long road to filling in all of the all of the pieces that still need to be be filled in, all the moving pieces coming together. It sets us on the long road to excellent educational opportunity for every Vermont child, and I think that's the major goal here. We talk about the tax implications a lot and property taxes. But the real goal is for this bill to set us on what will be a long road to getting to the point of offering excellent educational opportunity for every Vermont child. And that's that we should all keep top of mind, and I think it's something that, a lot of us have have had top in mind top of mind all along. And with that, I will turn it over, I think, to Saint James to go first for her sections.

[Beth St. James, Office of Legislative Counsel]: Thank you. Beth St. James, office of legislative council. So I'm gonna go through the first thirty three secondtions, which represent the education policy sections. It's my understanding that what's being asked of ledge counsel as far as this walk through goes is to really just highlight the differences between the report of the committee of conference and the senate proposal of amendment without a lot of detail. So stop me if I'm going too fast. So section one so and then to orient everyone, the senate proposal of amendment is on the left hand side of your side by side. The report of the committee of conference is on the right. Language that appears in the senate proposal of amendment, but does not appear in the report should be highlighted in green, and language that appears in the report, but does not appear in the senate proposal of amendment should be highlighted in yellow. We did our best to get everything, but I can already see places where I wish I had highlighted. So we'll do our best to point those out. So section one findings intent plan, you can see that the first highlighting doesn't occur until page three, which means there were no changes, except I found a place where I didn't highlight on page two. And it's kind of a big one. And that is that it is the intent of the general assembly in the 2026 session. I'm about two thirds of the way down to enact new larger school district boundaries that would be effective 07/01/2026. The Senate proposal of amendment had those new school district boundaries taking effect on 07/01/2027. On page three, you'll see in the report column that there's actually, you'll see in the Senate Proposal of Amendment column, a big open white space. That's because all of the language to the right of that is new to the report of the Committee of Conference from the Senate Proposal of Amendment. That's enacting updates to CTE funding, beginning the process to create voting wards, and establishing an appropriate weight for pre K students, as well as changes to pre K funding to ensure that costs are borne by the appropriate funding source depending on the age and the setting of the pre K provider. In subsection B, we're still on page three. Another substantive change here is that the Senate proposal of amendment had school board initial member and elections occurring in March 2028. The report of the committee of conference has those initial elections occurring in November 2027. And then the big one that Senator Baumgartz highlighted, the Senate proposal of amendment had those new school districts operational, meaning that they are in charge of the education of their resident students and all of our current school districts would cease to exist. Senate proposal of amendment has that taking effect on 07/01/2029. The report of the committee of conference has that taking effect on 07/01/2028. There's also a new piece of intent language at the very bottom of page three, and then taking up all of page four and about two thirds of page five related to tax rates and tax bills and not wanting to increase either of those things. And the intent language is essentially a list of all of the items that do that in this bill. And that is language that is new to the report of the Committee of Conference. Section two, I'm on the very bottom of page five, the Commission on the Future of Public Education. The Senate proposal of amendment largely adopted or largely cut out most of the commission's work and the report of the Committee of Conference does as well. You'll see that there are the main changes occur on page nine. The Senate proposal of amendment kept the commission's current charge related to the roles of the agency of education, the roles of the state board of education, what should be local control, what should be state control. And you'll see right to the right of that on page nine, all of that yellow language is struck because the report of the committee on conference removes all of the current language related to policy considerations and puts in some new language starting on page 10. So the report of the committee of conference now is required to report back to you all with recommendations necessary updates to the roles and responsibilities of school boards and the electorate. On page 11, a process for a community served by a school to have a voice in decisions regarding school closures and recommendations for what that process shall entail. That piece actually was very similar, if not substantially the same as language that did appear in the Senate proposal of amendment. And then the last charge to the Commission on the Future of Public Education is a process recommendations regarding a process for monitoring implementation of this act in a manner that is transparent and public facing. That's at the bottom of page 11. The rest of the changes to the commission on the future of public education remain the same. We're gonna go to section three, which starts at the very bottom of page 14, but substantive.

[Unknown Senator (document logistics)]: We don't have page numbers on our

[Beth St. James, Office of Legislative Counsel]: Oh, you don't?

[Unknown Senator (document logistics)]: Sorry, I take it all back. Sorry.

[Unknown Senator (questions on default tax rate)]: Okay.

[Beth St. James, Office of Legislative Counsel]: Well, we're in section three now. The school district redistricting task force. The concept of a standalone committee to look at and recommend to you all boundaries for new school districts is a concept that came out of the Senate. You all had a standalone body. And so the report of the committee and conference adopts that, but the membership is different. You'll see green and yellow on page 15. So the membership in the report of the committee of conference version is five non legislative members and six legislative members. And then the duties and charge. So in general, the task force is required to work with the future of public education and recommend to you all not more than three options for proposed school district boundaries. At least one boundary proposal has to consider the use of supervisory unions and supervisory districts, allow for the continuation of tuitioning system, etcetera. All of that language appears the same in the senate proposal amendment. And then the rest of it, the all of the concepts and topics that this task force is required to consider is truly a mix of language from the house and the senate. And so you'll see a little bit of highlighting here and there where language was taken from the house passed version. But if it's not if the language is not highlighted on the right hand column, it means it came directly from the senate version. Some other changes here is we added the department of taxes as providing assistance to the task force. I'm on page 18 now. The deliverables remain the same, a report and maps. The language that needs to appear on the maps that you all get is taken largely from the house, which is why it's highlighted in yellow, although those concepts did exist in the senate version, just not in the same language. The other big changes to this section are the appropriations, and I will just let those speak for themselves in the interest of time. The task force is allowed to hire one or more consultants, and so that is what part of those appropriations are for. Section four on page 19, school district voting where task force remains the same as passed, I'm sorry, as passed the house. It is completely different than what passed the Senate. You all passed a transitional school board concept and the House and then the Committee of Conference adopted the concept of a working group to recommend to you all voting wards that would be proportional representation based on the work of the task force. I'm gonna skip over sections where there was no change. Is that good? Okay. So we're gonna move to page 23, which is section six, education quality standards. This is class size minimums. The report of the committee of conference largely adopted the senate proposal of amendment related to class size minimums with one exception, and that is kindergarten is excluded from class size minimums in the report. The next section where we see changes is on page 27, section eight. This is the section that requires the State Board of Education to update some rules based on various changes throughout the bill. One piece that was not in the Senate proposal of amendment that is in the report of committee of conferences asking the state board to update the education quality standards rules with statewide graduation requirements. We're gonna move to page 28, section nine of the report of the committee of conference. This is a similar section to the state board. Now we're looking at the agency of education. The language that remains unchanged from the senate proposal of amendment is a bunch of reports back to you all, but the language that's highlighted in yellow is related to graduation requirements. So asking the agency of education to make recommendations to the state board for what those graduation requirements shall be. And then another big substantive difference is that the report requires the agency of education to adopt a statewide school calendar. So we're gonna skip a whole bunch of pages now, and we're gonna go to page 36, section 16. We're in the middle of the state aid for school construction sections. We're skipping all over everything above section 16 because there were no changes. But in section 16, the state aid for school construction aid special fund, the senate passed version had the fund being consisting of any amounts deposited in the fund from the supplemental district spending reserve. And you'll see that language is missing from the report of the committee of conference. And that is because the funds from the supplemental district spending reserve are now being used for different purpose. And John will get to that in his section. Section 17, there is a very small change in this section. So you can jump to section or on page 41. This is the section regarding how awards are calculated for state aid for school construction. And on the very top of page 41, there's language added to the subdivision about construction aid, which remains the same as a base amount of award is 20% of eligible debt service cost of a project.

[Unknown Senator (Chair/Moderator)]: I know

[Senator Seth Bongartz]: we're gonna do a different page number.

[Unknown Senator (questions on tax rates and documents)]: Oh. Oh, I'll make

[Unknown Senator (Chair/Moderator)]: sure you're not on June 13 either.

[Unknown Senator (document logistics)]: Some of us have June 14 and some of us have June 13 we had different copies here I think you have the June 14 one which is the more recent one so senator Baruth do you have June 13?

[Unknown Senator (interjections; homestead exemption acreage question)]: The date?

[Unknown Senator (questions on tax rates and documents)]: You have the fourteenth. We both have June 14, but

[Beth St. James, Office of Legislative Counsel]: different patient numbers. Oh, interesting.

[Unknown Senator (document logistics)]: So there are three different versions that have passed out.

[Beth St. James, Office of Legislative Counsel]: So we are in section

[Unknown Senator (questions on tax rates and documents)]: 17.

[Beth St. James, Office of Legislative Counsel]: 17. Thank you. This is approval and funding of school construction projects. Again, this is the section that talks about applications, what's considered, how the money goes out, etcetera. One, two, three, four, five pages after the start of that section, right before section 18 is the one substantive change. And that is in subdivision six where it says amount shall be awarded annually, the language and are subject to an annual appropriation for the purposes of this program has been added. The next section where there are changes is section 21. These are amendments to section eight twenty eight in title 16, which is entitled tuition to approve schools. This is the statute that tells us what schools school districts can pay tuition to. So the change, this section is largely adopted from the senate proposal of amendment.

[Senator Seth Bongartz]: Oh,

[Beth St. James, Office of Legislative Counsel]: there's missing okay. I'm gonna borrow this. Hope it's better. Nope. We've I I have there's a large change in this section that is not accounted for here. So I will figure out how to get that information to you all. But for what we have in section 21, the student enrollment, the subdivision two d, a requirement for an approved independent school to be eligible to receive public tuition. One of the criteria that needs to be met is that needs to have had at least 25% of its student enrollment composed of students attending a district fund on a district funded basis. The 25% remains the same as the Senate passed or the Senate proposal of amendment. The Senate proposal of amendment had that 25% tied to Vermont resident student enrollment. And the report of the committee of conference has that 25% tied to overall student enrollment. And there is a very large substantive piece that is missing from this section that I will get to you all and we will walk through it before we leave this room. Section I'm gonna jump to section 23. It looks like there's a change here, but we just I just collapsed two different intent sections. So there's really The language appears just not in the Senate version, just not in one section. No changes until we get to section oh, I'm sorry. I was thinking of the wrong the wrong statute. Section 21 is good. You have all the information. Strike that from the record. Section 27 is what I was thinking of. So section 27 is the section that tells us how to calculate tuition. So subsection a remains the same as past the senate. Tuition's calculated in a future state, and we'll talk about the effective dates in a second, base and weights apply to each student, and that's what the student takes with them for tuition. But the report of the committee of conference adds a couple subsections. So subsection b allows a receiving school to charge an additional fee of up to 5% of the base for every student attending the receiving school in grades nine through 12 only if the following conditions are met. The receiving school has received approval from the state board to charge the fee, and the electorate of each school district with at least one student attending the receiving school has approved supplemental district spending for the purpose of this subsection and in an amount sufficient to cover the additional fee. Subdivision two tells us that the receiving school for the purposes of this section or receiving school does not include an approved independent school in Vermont functioning as the CTE center. Subsection C tells us that a receiving school that elects to charge that additional fee must charge the same fee to each school district. It cannot charge different fees to different school districts. And subsection D allows a school district or requires a school district to pay the full tuition charged students attending an approved independent school in Vermont functioning as an approved area career and technical center. And that language is actually current law. Section 28A in the report of the Committee of Conference is brand new. It requires the State Board of Education to adopt rules to govern the additional fee analysis that it is required to do. So one of the contingencies that need to be met for receiving school to be able to charge that extra fee for high school students is that the state board has granted approval. Section 28A asks the state board to adopt rules that govern that approval process, and that those rules need to require a receiving school to demonstrate that the additional fee is necessary to educate the specific students, the fee is being applied to, and that the fee will be used to educate such students and not used to shift costs elsewhere within the applicable school's budget. This fee the section 27 has two different contingency effective dates. Subsections a and d, so the the tuition fee that would or the attrition amount that apply to every student based on weights, and subsection d, paying full tuition to a seat an approved independent school that's functioning as a CTE area CTE center. Those two subsections take effect on 07/01/2028, contingently if three things are met. Your new school districts are operational. You've received the 45A report, which John will go over, which is a report back to you all related to the foundation formula with some updated analysis. And you all the general assembly has been given an opportunity to enact updates related to the information it receives from that 45 a report. Subsections b and c related to the fee are also contingently effective on 07/01/2028, but their contingents those subsections contingencies are also new school districts are operational. You've received the 45 a report, and it contains evidence that it costs more to educate secondary students and you have failed to enact secondary student weights. Those are the contingencies for subsections b and c. Section 29, there's one very small change here at the very end of the section. So right below above section 30, this is a report back to you all related to the provision of special education and special education funding and the costs and services associated with that. The report of the committee of conference adds a requirement for that report to include recommendations for reducing the growth of extraordinary special education reimbursement costs, which shall include recommended legislative language to accomplish any such recommendations. The only other changes in the sections that I'm responsible for, the last changes occurs in section 32, and that is just updating the appropriation amounts to the agency of education for its transformation appropriations. And the overall appropriation to the agency is updated to be 2,865,000. The appropriation for school board transitions and positions remain the same. And then the contract services appropriation would then be 2,102,500. Those numbers were updated to reflect updates throughout the bill related to different appropriations, all coming out of the same pot of money. And that's it for me.

[John Gray, Office of Legislative Counsel]: Hello, everyone. John Gray, office of legislative council. We're gonna switch gears a little bit, jump into education finance sections. And so we start with section 34. I am gonna speak a little bit to each section very quickly, even if there are no changes just for tracking purposes. So section 34, while there's no change proposed by the conference committee report, know that this is your section that sets out the base amount of that 15,033 per pupil. Section 35 is your weighting section, and there are there's really two changes proposed here, one to the weights and one related to recalibration. So what you're gonna see, first is an update in the definitions portion of section 35 that's related to child with a disability. That's your special education category. And while these look quite different between the columns, the sole substantive difference between these two definitions is that child with a disability in the conference committee report speaks to those who are enrolled in any of K through 12, meaning that a pre K student would not be eligible to receive a special education weight as proposed here. You're gonna see further down highlighting related to pupils in pre K pupils in kindergarten through grade five and the like, This is just the counting section of the waiting section. You can think of the waiting section as divided into multiple tasks. We have to tally up the pupils who fall within particular categories, and then we apply particular weights to those categories. So what you're seeing here in the conference committee report is that we'll maintain counting for the grade levels themselves, irrespective of whether weights would be applied. The substantive change to the weights, comes to in subsection d. This is where the start of the application of the weights. In the senate proposal amendment, you had no grade level weights provided. In the conference committee report, what you see is maintaining existing law pre k weight of negative point five four. So that's actually a reduction in the amount. That is the sole substantive change to the weights themselves. You're gonna see some stylistic changes throughout to add subsection headers for readability, things like this is your economic disadvantage weight and the like. But the real substantive change to this section is that adding the pre k weight of negative point five four. The other change that you're gonna see in this section is to subsection h. This is your recalibration portion. There's a regular recalibration of the inputs to the foundation formula on a five year basis. And what you see proposed in the conference committee report is that this recalibration would done would be done with the advice and consultation of a professional judgment panel convened by AOE. The next, section is section 36. No change here. This is really a conforming change section, removing existing law concepts and replacing with references to EOP and your supplemental district spending. Section 37 is support grants that are provided to small schools and sparse schools. You will recall from the waiting section that existing law, small school and sparsity weights have been removed. They've been replaced with the support grant structure. The concept, that you see in the conference committee report is quite similar to what the senate passed. The real difference is in the definition of sparse area. You're gonna see that in the senate proposal amendment, we reference, geographic area corresponding to a ZIP code. What And you see in the conference committee report is updating the geographic area for determining that sparsity determination to be city, town, or incorporated village. And this is another way of trying to get a a school that is located within a sparse area. You're also gonna see duplicated for the sparse school definition. That's sub four. That's similar to small schools, which has a substantive check. Right? It has that fewer than a 100 pupils, but it also requires a state board determination. We have a similar concept proposed for sparse schools. So the sparse school needs to be within that sparse area, that's that city, town or incorporated village. And additionally, it needs to be determined by the state board to be sparse by necessity, under standards, under sections that that Beth walked through. I should pause here and say that you're gonna see highlighting at the top of each section related to the effective dates themselves, and this is something to flag, just the the timeline is different. Right? And the Senate proposal of amendment that had been an FY thirty foundation formula rollout, and what you see here is an FY twenty nine foundation formula rollout, so it's one year faster in this proposal. Section 38, no changes, proposed in the conference committee report. This is just updates to the ed fund to pick up your SDS revenue. Similar sections thirty nine and forty, no changes proposed in the conference committee report. Some of that is cleanup changes and some of it is conforming, striking existing education concepts and replacing with the new EOP references. Section 41. This is your budget vote. So this sets up the form of the budget that would go out to school districts. As you know, under the foundation formula, you're not having a vote on that foundation amount on that EOP, but you are having a vote locally if folks wanna raise additional funds, that's your supplemental district spending. And so what you see here is the ballot that's provided for that. The changes that you see here are really conforming changes related to sections elsewhere in the bill. So differences you see is that in the senate proposal of amendment, there had been no reference to the property tax classifications. We need to reference the rate differently if you have the classifications as contemplated here. So that's what you see, the reference to the anticipated statewide education tax rate as adjusted for each tax classification. It's conforming to the tax classification pieces later in the bill, but otherwise, this section looks just like what you saw from the senate proposal amendment. Section 42 is sets of conforming repeals related to the other foundation formula changes, but you do see some new additions to the repeals. So in subsection d, you see a repeal of the categorical aid pieces related to English learners services. This is related to that inclusion of the EL weight. So you can think of this as just a conforming change for that piece, something that hadn't been thought about so much until we got to the conference committee. And similarly, the merger support grants, which is your subsection e, it's a concept that wouldn't make sense with the new school district boundaries, so you can repeal those provisions. Section 43, this is something that Beth alluded to earlier. This is your supplemental district spending reserve. This is the bucket in the ed fund that captures any extra funds recapture that are raised through your supplemental district spending equalization measure. And the change that you see is in subsection c, which covers what is done with the funds at the end of the fiscal year. If if you still have any remaining after accounting for mathematical errors in the Senate proposal amendment, those went to the school construction aid special fund. But what you see in section 43 and the conference committee report is that those would be instead of transferred to the school construction aid special fund, they would flow up to the ed fund. They would be pulled out of that reserve and they would be made available in the following year to decrease the following year's statewide education property tax rates. So using the equalization measure to reduce following year property taxes. Sections forty four and forty five are the same. These are reports from AOE and JFO related to transportation reimbursement, inflationary measures, and pre k. Section 45 a is the foundation formula report, and this is one of the pieces on which the contingent effective dates ride is this particular foundation formula. And the changes that you see in this section are that JFO would contract with one or more contractors. So you're gonna see a boost in the appropriation as well, ensuring that the money that's made available is such that there's not just one person who could satisfy this particular criterion. You could hire multiple contractors. So JFO would contract with one or more contractors with expertise in Vermont's education funding system to recommend updates to the foundation formula, to move from special education weights based on disability categories. You'll remember that category ABC based on costs to reliance on the provision of special education services and to update any other weights as necessary under that recommendation, taking into account the cost savings generated by new larger consolidated school districts. In addition to that report, the contractors would make recommendations on a couple of pieces. One is familiar from the Senate proposal amendment. That's what is the right basis for determining sparsity. We have a proposal here including that town, city, incorporated village, but is that the best measure of sparsity? Additionally, looking at whether it costs more to educate a secondary student, and if so, providing an appropriate weight to capture that cost differential. Lastly, how to account for the provision of CTE within Vermont's foundation formula, which is something that shows up in a couple of places in the bill reexamining CTE or looking at CTE in the upcoming year. These would be provided to committees of jurisdiction 12/01/2026, and you can see a boosted appropriation of 400 k making available more contractors for this particular purpose. Lastly, a substantive piece of this in subsection d is that the contractors would be required to train JFO and AOE in those methodologies so that they could recalibrate under the waiting section. Without knowing those methodologies, you can't possibly do the recalibration. Section 45 b is these are transitionary measures for your EOP, but additionally related to tuition, so I'll talk about that. The highlights that you see in subsection a are just related to the different timeline that's proposed here, right? It's a rollout starting in FY twenty nine rather than in FY thirty. So those are the highlights you see. But in subsection B, you see in the conference committee report proposed a tuition transitionary measure. If you think about what the section is doing, it's adjusting across the first five years of the foundation formula rollout, educational opportunity payment that's provided. And so what you need to do, if you think about money following the student for tuition purposes, is that tuition needs to pick up the adjusted EOP in each of those first five years. That's So what you have in subsection B is that tuition would be adjusted to reflect that adjusted EOP, so that in your FY '33, everyone's on the same page. You're all at the EOP, you're all fully transitioned to the standard tuitioning measures. Section 45 c, this is just delaying the start of the Ed Fund Advisory Committee when its first meeting is called, that had been proposed in 2027 in the senate proposal amendment and that's accelerated to 07/15/2026 in the conference committee report. Section 46, we're now jumping out of title 16 and pieces that are just within the Ed world, and we're jumping to taxation. This is gonna be your section that covers supplemental district spending and the like. Some of the I do wanna call out the highlighting you see in the struck through language, you don't need to worry about. This is just making sure that we're referencing the correctly effective underlying language that's being removed at the time that this would become effective. That's your FY '29. Because those changes those sections are changing in the upcoming years. This is just a correction from editing to make sure it's referencing those correctly. The real substantive additions you see, you see statewide adjustment highlighted. You'll recall statewide adjustment is done to account for the effects of the CLA on folks' rates. That's being studied here, so it's included in the future foundation formula. You would still have that say what adjustment present. You see this definition for adjusted equalized education property tax grand list. This is a measure that's included for the equalization measures of the supplemental district spending yield. You can think of this as a cleanup change, something that could have been thought about before. This adjusted equalized education property tax grant list is trying to get at the actual taxing capacity of a district that's made available for its local vote, and so it needs to account for the application of the homestead exemption, right? If you don't account for that, then you're over accounting for the amount of property that's actually available for taxation purposes. So that's what the adjusted equalized education property tax grant list does, is it captures the actual taxing capacity of those districts after application of the homestead exemption. And you're gonna see that the definition of school district with the lowest taxing capacity picks up that adjusted change. And similarly, at the very end of this section, you see that the definition of supplemental district spending yield picks up the application of the statewide adjustment. So maintaining current law, statewide adjustment in the future foundation formula. Section 46A is a a new provision to transition the actual cap that is applied. And just to if you look back up at section 46 and you look at subdivision 22, you'll see that there's a cap included on the supplemental district spending that's been reduced from 10% down to 5%. So once all the transitionary measures are done, the cap on supplemental district spending would be 5% of an unweighted base times LTM. 46A is providing a transition for that cap. So in the first years of the foundation formula, the first five years, until everyone's fully transitioned to their EOP in FY '33, that cap would be set at 10% to account for the first years. And then gradually it would be brought down so that in fiscal year 2038, you would hit that 5% statutory cap on SDS. Section 47 is the application of the statewide rate and the supplemental district spending tax rate. What you're seeing highlighted in the conference committee report is that the assumptions that are built into setting the rates sufficient to cover expenditures from the Ed Fund need to account for the updates that we made to the supplemental district spending reserve. And so you'll recall that instead of those funds, the recapture flowing to school construction aid special fund, they would be made available to the following years buying down tax rates. That's what picked up here is that in setting that rate, you need to account for any funds unreserved in the ed fund under that process. Additionally, what you see is that the default rate is set here. What happens if no, if the general assembly fails to pass a statewide education tax rate? If there's failure to adopt, the statewide education tax rate would be the product of 110% and the statewide education tax rate for the preceding fiscal year. So you can think of it as a 10% penalty on top of the preceding year. So it's meant to be an incentive to get folks to pass a a education tax rate. You'll be familiar with the highlighting that you see here in the table. This maintains the property tax classifications with one change, but you're gonna set a statewide education tax rate and that would be adjusted for different classifications of property. And the classifications you see are homestead, non homestead, non residential, and non homestead residential, you'll recall, and Kirby is gonna touch on this, but the house provisions included an additional non homestead category for apartments. The remaining changes here, I'm gonna flip through pretty quickly. These are conforming changes for applying the statewide adjustment and referencing that statewide rate that is adjusted by category rather than having distinct homestead and non homestead like existing law. So I think we can jump to section 48, which is your December 1 letter. So this is the recommendation setting of the statewide education tax rate. This is really just conforming changes in these sections here. This is picking up that it's gonna be one statewide education tax rate that's adjusted, and then that's gonna be divided by the statewide adjustment. So maintaining existing laws, statewide adjustment measures moving forward. Additionally, in subsection D for setting the supplemental district spending yield, we need to pick up the actual taxing capacity of the district. So that's why you see updates to include adjusted equalized education property tax grant list. Section 48A is your transitionary measures for your homestead property tax rate. Much like the transitionary measures we saw before, you're gonna see highlighting that references the years. So this is starting a year earlier, so that's why you see highlighting there. But there is a substantive change to the section beyond just a one year accelerated timeline. In subsection c, you can see that on or before 12/15/2027, tax in consultation with JFO and AOE would submit a report to committees of jurisdiction with a recommendation and implementation plan to ensure that education property tax rates don't increase as part of the transition to the new foundation formula. Section 49, there's no change. This is just conforming changes tied to that statewide rate. Similar for section 40, the changes that you see highlighted just reflect pieces that Kirby's gonna speak to, which is referencing a statewide rate adjusted by classification rather than just non Homestead and Homestead. Section 51, we're jumping now to the re repeal of the property tax credit and the creation of the Homestead exemption. Your section 51 just sets out statutory purposes. No change there. Section 52 is the actual creation of the homestead exemption. There's gonna be a couple changes in before you see sorry. A couple pages in before you see the changes. And they come in by statute. The section is section sixty sixty six, and you're gonna see a wall of highlighting, so it should be pretty recognizable. The homestead exemption is set out in a set of tables that provide income brackets and percentages. What you're seeing in the Congress Committee report is largely the House proposed homestead exemption. So their proposed set of income brackets and percentages, but adopts the Senate cap of the exemption being made available against the first April in house side value. So it includes the cap that the Senate had proposed on its own concept. The one change that you'll see relative to the House's original proposal is that there once was a $3,000 income bracket, and that's been smoothed out so you have, cleaner income brackets here essentially. We can, after that, flip pretty quickly. It's conforming changes through the remainder of this section just to pick up the statewide rate reference. And we can jump all the way to section 53. What you're seeing in section 53 in the conference committee report is condensing, the Senate proposal amendment sections fifty three and fifty three a into one section. These both relate to the homestead exemption. You see a deadline of 12/15/2026. So next year, Department of Taxes to submit a proposal designing a homestead exemption that could be used in place of what we just walked through. So if they could come up with a better proposal that minimizes property tax impacts benefit cliffs, and additionally with that proposal, what you see newly added is an analysis of the implications of moving to income sensitivity measures that provide benefits to households with household income of up to 175 ks. So could that homestead exemption be moved up to a higher income bracket and what would be required to do that. Section 54 through 56 are conforming changes related to the property tax credit repeal, and then section 50 and there are no changes there. And then section 57 is a few limited updates to the directives for the Ed Fund Advisory Committee. Some of the changes that you're seeing here are just picking up the new foundation formula that would be in place at the point that this examination is occurring. So updating weighting factors in light of the foundation formula, updating the income sensitivity in light of the homestead exemption rather than the PTC, And then the new provisions that you see at the very end of this in I and J, how to maintain intradistrict equity under Vermont's foundation formula and whether weighted foundation formula payments are leading to improved outcomes across all populations, accounting for that weighting. In the senate proposal amendment for sections fifty eight and fifty nine, there was a contingent, and this is differently contingent than the other sections. This had no specific date. This was your potential future transition to an evidence based foundation formula. Those sections have simply been deleted. And with that, I am good to turn it over to Kirby.

[Kirby Keaton, Office of Legislative Counsel]: Okay. Kirby Keaton, Office of Legislative Counsel. I'm gonna walk through the last sections for you. We start with the concept for creating a tax classification system in the future. The senate version of things had, wanted to study that, so there was just a study. What the report of the committee of conference has is a return to the house language, but with some tweaks to it for that concept. So we start in section 60, which is the definitions or the statute on the grand list. It's that reverts back to the houses version of things, except that this section and the next section are now contingent on the new school district system becoming operational before tax classifications take effect. Previously, it was going to just happen based on a date. Getting into section 61 of the report, there as John mentioned, there's the removal of the apartment classification, which the house had proposed, which leaves you with just one new tax classification, which is non homestead residential. You can think of that as residential properties that are not being used as homesteads. So that could be second homes, short term rentals, vacant properties, things like that. There's also a new definition, which is not highlighted in the document here, but I would draw your attention to subdivision three on, at least for my document, page 104, which is a new definition for non homestead residential. This is a much broader definition than the house language. It leaves a lot of the definition up to the Department of Taxes to create through rule. It's anticipated that when this is revisited next session, that the definitions will be changed and that will be flushed out more. And then we have section 61 A, which is the transition to this new classification system. This has moved up a year to 2027. And there's also a contingency added for this section. The Department of Taxes won't do the work it needs to do to transition to the new system unless maps are created to create new districts next session. So that's the change there. 61 b is the property classifications implementation report, which is from the house language. There's a subsection B added to that. So if you see on page at least 106, if you have the same thing that I have, that the Department of Taxes will come back next year and suggest some multipliers. These multipliers that John had mentioned for setting up new numbers, factors to multiply the tax rate by for each classification. So one of these multipliers that the department will come back with would be one that has the non homestead residential properties, the second homes category to pay for the homestead exemption, the new homestead exemption that John went over. And another set of numbers that the department will come back with would be to cover any or to mitigate any forecasted property tax increases on homestead property payers under the new system. And then we have section 61 C, which is new. It's just an attempt section stating that when the multipliers are considered in the future, that the general assembly will also reevaluate the entire tax classification concept. That's something that you'll have to do, so there's not a lot of legal weight to that section. 61 d is a perspective re repeal of the tax classifications. And this is a contingency that states that if if things fall apart here and and this new system doesn't become operational and tax multi tax rate multiplier specifically are not put into law in the next session or two that the tax classification concept does not take effect. That brings us to section 62, which relates to regional property assessment, the creation of regional assessment districts. The only change from the Senate version there is that everything was moved up a year, so that would take effect in 2029. In section 63, that's the transition to the regional assessment districts. That's exactly the same as the Senate passed version. Section 64 is the regional assessment district stakeholder working group, which was not changed at all. And the rest of the section 65 through 69 are miscellaneous provisions with a lot of technical fixes, and it's the same as the senate version. And there's your bill.

[Unknown Senator (Chair/Moderator)]: So, I think while we have, the chancellor and the AIO here, it's great if you have questions of them and then questions of the conference committee, maybe we save for the afternoon when we may not have

[Unknown Senator (questions on class-size minimum effective dates)]: vice counsel and JFO. Senator Shipp?

[Unknown Senator (questions on default tax rate)]: May I ask a question of, I think it would be John Gray. I don't see oh, great. So it's regarding section 47 and the default tax rate of a 110%, should a future legislature fail to act. I'm curious what other practices or standards can you refer to where we have that in place? And I just wanna cite that my understanding was when the school district budget fails, they get to borrow up to 85% of the previous year. And I'm also curious with the yield bill. If we didn't pass a yield bill, what does that default to? I'm just curious where the 11010% the automatic increase comes from and what standard or comparisons we have in state government to do such a thing. The last thing I'll say just to sort of lead the question a little bit more, I just remember senator Mazza, when I contemplated such a notion about automatically increasing fees so that we wouldn't have to deal with a fee bill every three years, that was poo pooed right off the bat as, something that would take away the power of future legislators legislatures. So could you tell me more about the 110% and normalize it for me?

[Unknown Senator (document logistics)]: Yeah. Sure. Sorry. Is that section 47?

[Unknown Senator (questions on default tax rate)]: Section 47 of the committee of conference report.

[Unknown Senator (interjections; homestead exemption acreage question)]: Okay. So that is an option.

[John Gray, Office of Legislative Counsel]: You could have no default rate.

[Unknown Senator (interjections; homestead exemption acreage question)]: The thinking here was what kinds of options you could provide that maybe provide less risk and who are not funding any. And so the thinking was you need to create something that's sufficiently strong incentive to get folks to pass a an education tax rate. But you couldn't avail yourself, like, in the current

[John Gray, Office of Legislative Counsel]: system, and I think it's perfect for asking for. In the current system, you have a callback for the yield to hire new yield, so you have that piece for reference.

[Unknown Senator (interjections; homestead exemption acreage question)]: But part of the mechanics in the existing system are that because you have a

[John Gray, Office of Legislative Counsel]: statutory homestead and nonhomestead rate to actually reference. Right? They aren't just set. Okay.

[Unknown Senator (interjections; homestead exemption acreage question)]: This bill is sufficient to cover expenditures.

[John Gray, Office of Legislative Counsel]: You actually have a process that's built out in law for those pieces, and it's included to account for the variation in the homestead rate. You have basically technical provisions in the existing system that mean that to an extent, the fallback would have accounts for some variation. It doesn't count for that huge variation. It would count for some variation. You don't have that luxury in the new system, which is just setting the statewide education tax rate sufficient to cover expenditures from

[Unknown Senator (interjections; homestead exemption acreage question)]: the EDFAR.

[John Gray, Office of Legislative Counsel]: Right? That's the sole directive for

[Unknown Senator (interjections; homestead exemption acreage question)]: what that rate is. So some provision was to be included

[John Gray, Office of Legislative Counsel]: to set the callback rate, and the second was that a 110% of last year's would be sufficient to spur folks to do that. You can choose any sort of default rate. Right? And it's just a choice of what the background

[Unknown Senator (document logistics)]: is gonna be. But, of course, the

[Unknown Senator (interjections; homestead exemption acreage question)]: intention, as I understand it, is that you hope

[John Gray, Office of Legislative Counsel]: never to have to rely on a callback rate because what

[Unknown Senator (interjections; homestead exemption acreage question)]: that means is that the legislature has failed

[John Gray, Office of Legislative Counsel]: to set a statewide education tax rate.

[Unknown Senator (questions on default tax rate)]: I'll just close by saying I I see I heard you say it's an incentive for a future legislature to act. I could also see a perverse incentive to inhibit a future legislature from acting to default the tax rate to a higher percentage amount. Thanks.

[Unknown Senator (Chair/Moderator)]: Yeah. Go ahead, ma'am.

[Unknown Senator (questions on tax rates and documents)]: This may be a basic question, and I'm looking at Kirby because I think it was in your section. But in our district, we've had situations where the non homestead rate has been a much lower rate than the homestead tax rate, and I'm not totally sure how this bill would impact that situation. Because it sounds like we're making new categories, but we're also changing some other pieces. If you could just tell me what happens in that world.

[Kirby Keaton, Office of Legislative Counsel]: As far as tax rates go under this, there's the multipliers I mentioned. Right. Yeah. Those those are set at one point o right now.

[Unknown Senator (interjections; homestead exemption acreage question)]: Yeah.

[Kirby Keaton, Office of Legislative Counsel]: So in the future, would you decide to increase or decrease those sorts of different classifications. The three classifications would be homestead, non homestead, non residential, which is what's left over after you take out the non homestead residential.

[Unknown Senator (interjections; homestead exemption acreage question)]: Does that make sense?

[Unknown Senator (questions on tax rates and documents)]: Yes, no, it does. Yep.

[John Gray, Office of Legislative Counsel]: That would

[Unknown Senator (questions on tax rates and documents)]: be a rate. 81 is kind of what you're title. Yeah.

[Kirby Keaton, Office of Legislative Counsel]: And so if that's your if that's your concern then yeah you'll in the future it's thought

[Unknown Senator (interjections; homestead exemption acreage question)]: that you can adjust those. Okay.

[Kirby Keaton, Office of Legislative Counsel]: The overall tax liability once that's, you know, applied to the property values could mean

[Unknown Senator (questions on tax rates and documents)]: Different outcomes. Okay.

[Unknown Senator (document logistics)]: Thank you.

[John Gray, Office of Legislative Counsel]: And and put us back for one, you would mean that for now, if you've made

[Unknown Senator (interjections; homestead exemption acreage question)]: no change, they would be the same.

[Unknown Senator (document logistics)]: Okay. They'd be the same. Right. That's helpful. New York State.

[Unknown Senator (questions on tax rates and documents)]: Thank you.

[Kirby Keaton, Office of Legislative Counsel]: But but if you're gonna note that, should note that there there were sections that if you don't set new rate multipliers though, that's one of the contingencies to not do tax classifications. Like if you wanted to keep it at one point o or you make no changes to those multipliers in future sessions, then that repeal that I went over could kick in then. Because it's it would be seen as you don't wanna do it anymore if you don't want to tax those differently. Does that make sense?

[Unknown Senator (questions on tax rates and documents)]: It does. Okay. As a concept. Yeah. Thank you.

[Unknown Senator (questions on class-size minimum effective dates)]: Curb you. It says in our sec I think it's 61B. The commission shall recommend these tax rates. So I didn't understand the difference between one and two. There are there setting two different sets of tax rates and they're not is there a relation

[Unknown Senator (Chair/Moderator)]: between one and two or

[Unknown Senator (questions on class-size minimum effective dates)]: is it the rate both the both cover the revenue and also, you know, both does it have to meet one and two or they're just two separate rates that are not related to

[Kirby Keaton, Office of Legislative Counsel]: each other? So so this is what we're talking about the lower the multiplier. The department will recommend two different sets, and, then it would be up to the general assembly to

[John Gray, Office of Legislative Counsel]: do something with that information.

[Unknown Senator (questions on class-size minimum effective dates)]: So this is this is not going

[Kirby Keaton, Office of Legislative Counsel]: to affect the law. This will

[Unknown Senator (questions on default tax rate)]: rest give you options.

[Unknown Senator (questions on class-size minimum effective dates)]: But they're they're unrelated, the two sets.

[Kirby Keaton, Office of Legislative Counsel]: They're they're on they would they would cover different things. Right.

[John Gray, Office of Legislative Counsel]: Like, one

[Kirby Keaton, Office of Legislative Counsel]: would be a set that would cover just paying for the homestead exemption. The other would be paying for all additional costs to homestead taxpayers.

[Unknown Senator (questions on class-size minimum effective dates)]: Good. And this would be for Trinidad St. James. And I'm sorry, I wasn't here when you went over this, so you might have covered it. But I'm talking about section 21, a tuition to approve schools. And when you go down to sub a two e, one of the requirements is that the school complies with minimum class size requirements contained in subdivision one sixty five, sub 89, of Title 16. That doesn't exist until the year after that goes into effect. So what impact would that have on payment to to schools when it doesn't exist?

[Beth St. James, Office of Legislative Counsel]: So the class size minimum, one sixty five a nine, is section I

[Unknown Senator (questions on class-size minimum effective dates)]: think it's section six.

[Beth St. James, Office of Legislative Counsel]: I'm the loudest of the three. Couldn't pick me up, but you could get okay.

[Unknown Senator (questions on class-size minimum effective dates)]: Now you're holding it up there. I believe it's section six, but that goes into effects effect 07/01/2026.

[Unknown Senator (questions on tax rates and documents)]: Yes.

[Unknown Senator (questions on class-size minimum effective dates)]: Whereas what I'm talking about goes into effect in less than a month.

[Beth St. James, Office of Legislative Counsel]: That is a great point. So

[Unknown Senator (questions on class-size minimum effective dates)]: So when that happens, what what do they do?

[Beth St. James, Office of Legislative Counsel]: It's a great question. Okay. I mean, that's just something that I think I overlooked in all of our activity over the last several months and days and weeks. I think realistically, if that law does not exist, then there is nothing for them to comply with.

[Unknown Senator (questions on class-size minimum effective dates)]: Yes. So therefore, they comply. That's what I was hoping Yep. That you would say.

[Beth St. James, Office of Legislative Counsel]: The the other piece to that the the practical piece to that is that compliance with class size minimums, if you fail to comply with class size minimums, repercussions don't start unless it's three consecutive years.

[John Gray, Office of Legislative Counsel]: Yes.

[Beth St. James, Office of Legislative Counsel]: And it's a may, not a shall. So But thank you for pointing that out. Thanks.

[John Gray, Office of Legislative Counsel]: If

[Unknown Senator (Chair/Moderator)]: there are no further questions, I will suggest that we thank profusely our ledge council and joint fiscal folks, and then we've gaveled out until 02:30. So, that gives time if you have questions for anybody to, get them answered, we will, and we will be back here at 02:30. Yes.

[Unknown Senator (document logistics)]: Sorry. Sorry.

[Unknown Senator (Chair/Moderator)]: I thought we were done.

[Unknown Senator (interjections; homestead exemption acreage question)]: Maybe this is a stupid question, but, the exemptions or credits that are baked into the bill, do they

[Unknown Senator (document logistics)]: I know they don't cover necessarily entire portion of

[Unknown Senator (interjections; homestead exemption acreage question)]: the value of the home site, but does it cover the entire home site in, like, physical acreage? And how

[Unknown Senator (document logistics)]: would this interact with like current use with farms or

[John Gray, Office of Legislative Counsel]: Sure. So the exemption, much like the existing property tax credit, is tied to house site, which is a subset of what you can think of as homestead. Right? Homestead would pick up your dwelling and it'd have the parcel. House site is the dwelling, but the two acres around. So it's circumscribed. It's more limited provision. It is consistent with the way that income sensitivity measures are dealt with today with the property tax credit. So it's not making a shift in that approach to what house site is for purposes of the income sensitivity. It's just shifting from a PTC to an exemption. So it would depend on where it falls within that two acre. Yeah.

[Unknown Senator (Chair/Moderator)]: Okay. Thank you very much.