Vermont Legislature SmartTranscripts:

[Senator Ann Cummings (Chair)]: Patient is alive. We are live. This is Senate Finance. This is Thursday, January 8. Today, we are going to kind of continue on our review of Acts 73, and Julia is here. Yesterday, John went over all the tax law sections with us. Julia's gonna talk about the numbers and what's there and what's coming. And then we are going through s two twenty. John Ray is gonna walk us through it, and that is the bill we just got, I assume it's here, that is the Pro Temp's proposal to limit growth in school spending for the next two years. And so we will walk through that. Next week, I'm scheduling all the fondly known as the principal school boards, NEA, and whoever else would like to talk. I feel somewhat concerned that there is no taxpayers organization to represent the taxpayers so that we would hear from all sides. But if there's any taxpayers out there that would like to testify, just let us know and we'll hear from you. Tomorrow we're going to hear from the Agency of Education and updates from them as to what they've been doing. I'm looking at this point. We've got this task force saying that we wouldn't save money from larger districts, administration saying we've got to do larger districts or else, and I'm looking for some hard numbers. Even if we have to take a theoretical district and say, this is what your theoretical district would look like. This is how the numbers report. So Yes. So we'll see how we do that. But right now, we have Julia. Oh, no. I'll let you know if she's had the present

[Senator Thomas Chittenden (Vice Chair)]: She's in the task force. Task force for

[Senator Scott Beck (Member)]: group eleven.

[Senator Ann Cummings (Chair)]: Oh, yeah. Okay. She's doing the presentation of the task force. She did tell me that. With the how I think the houses. Their attitudes and They're doing it right. Yeah. They told me they were doing that oh, maybe it was at noon because the task force was one I wanted to do jointly. That would be a good idea. They are doing the non residential non homestead residential bill next Tuesday until Charlotte would just tell them we'll be joining them. If we can't get Room 11, we will do Zoom. We're we're Zooming. We're we're Zooming. We're Zooming? No. We're Zooming. These chairs are definitely more comfortable and conducive to listening to Room 11. So, we will be hearing that presentation during this. I'd hope to do the task force, but we will have Devin also to talk to us. Julia, Laura is here, so This is your first time. First time of many in here this year, most years.

[Julia Richter (Joint Fiscal Office)]: Thank you. Yeah. Great to see you all again. I'm Julia Victor, Joint Fiscal Office. I have been asked to come in today and do a review of Act 73. I know that you had a council in walk through act 73 yesterday. So a lot of this should look familiar, and this is more of a general understanding of act 73, specifically the the finance. I'm assuming you'd like me to go ahead

[Senator Ann Cummings (Chair)]: and share my screen. Yes. K. That's helpful if anyone else is watching at home, but they can see what we're talking about. Right.

[Julia Richter (Joint Fiscal Office)]: So this is posted on my committee page under my name. A reminder, we're nonpartisan. It's a lot of us. You saw a lot I saw a lot last year.

[Senator Ann Cummings (Chair)]: Our committee will be a dick's assheet. I hope not. No shooting messengers is allowed in this room.

[Julia Richter (Joint Fiscal Office)]: Shooting messengers? Shummy. No. You got shooting Oh, you see, I it's not allowed. Okay. Thank you.

[Senator Scott Beck (Member)]: Discourage. Discourage. So

[Julia Richter (Joint Fiscal Office)]: what we're gonna be talking about, brief review of Act 73, the high level pieces, and then I'll be going into a deeper review of one of the slides that we went through at the end of last session and then some new ones, so a deeper review of the fiscal pieces. So the foundation formula, supplemental district spending, also referred to as SDS, property classifications and tax calculations, the homestead exemption, and the fiscal transition mechanisms. So not intending to be an exhaustive review of the many pieces of Act 73, but a reminder of the major fiscal mechanisms. So briefly, brief review. This should feel familiar from yesterday. I know back as John Kirby Gordon here. There were a number of education quality and governance changes in the act with varying effective dates, some contingent, some not. Some of those were class size minimums, creating a structure for the state aid for school construction program, but did not include a funding source. Narrowing the criteria for independent schools that may receive tuition, changing the appointing authority for a couple of state board members, and appropriating funds to AOE to support a transformation and establish some new positions. And then moving on to the funding changes, and these are the ones that I'll walk through in more detail. So, contingently effective in FY 2029, contingent on receiving the cost function report, as well as the implementation of your school districts. Foundation formula is created with a base amount that's adjusted annually for inflation. Schools and students with additional needs or circumstances receive additional funding. And then this completely replaces Vermont's existing education funding system. Also allows for supplemental district spending, SDS, where districts could choose to put to voters to spend above the foundation formula above the education opportunity payment. And if voters approve it, then that will result in a local tax rate to raise the SDS. Special education funding has changed from a census block grant model to a weighted funding model, and there's a transition mechanism included to phase in the education opportunity payments. We'll walk through each of these in more detail. Also continually effective 07/01/2028 are the education tax changes. So this is that homestead exemption, the capped homestead exemption that replaces the current law property tax credit. We know that the parameters are adjusted for inflation, that it's forecasted to lower tax bills of Vermont households with lower household incomes. We'll walk through that modeling briefly again. It establishes the new property tax classification, and it implements a transition mechanism phase of the education tax changes. It also created regional assessment districts for reappraisals across the state, but that piece is not contingent like the other funding pieces. So, the foundation formula, continually effective FY 2029. This is a brief review of how the education opportunity payment, that foundation formula amount is going out to school districts. So in general, a foundation formula takes the base, multiplies it by the weighted pupil count, that results in the foundation formula payment, which Act 73 titled the education opportunity payment. The established foundation formula in Act 73 set a base of 15,033 per student, and then included weights for certain weighting categories to be applied against the base. So the weights and the base were based off of the memo from doctors Colby and Baker from April, and these are all of the weights that are included in the foundation formula. So there's pre K weight, which was the one weight that was not included in the Drs. Colby and Baker memo, and that is a holdover from pre Act 127. Then we have the tiered English learner weights. So you'll recall, dependent on the level of English proficiency of a student, they will get a different weight. So the highest or the lowest proficiency will receive the highest weight. There are the special education or child with a disability weights. The categories refer to different special education needs. And lastly, there's the student from economically disadvantaged background weight.

[Senator Scott Beck (Member)]: Senator Contreras, ask me. There's maybe too much to fill, but

[Senator Thomas Chittenden (Vice Chair)]: I tell me. So on the category ABC, is it if the student is identified with a disability or if the student receives service? Are they on IEP or is that do do have to be an IEP to qualify or can you

[Senator Scott Beck (Member)]: be an IEP or a five zero four? I don't know. Okay.

[Julia Richter (Joint Fiscal Office)]: I do know that this is based off of disability and not based off of service.

[Senator Scott Beck (Member)]: So That would indicate maybe five zero four too. Okay.

[Julia Richter (Joint Fiscal Office)]: So we, JFO, are under contract right now for a sense of review of the foundation formula with a we're working to get under contract with a consultant. Part of the scope of work

[John Gray (Office of Legislative Counsel)]: Okay.

[Julia Richter (Joint Fiscal Office)]: Is to examine changing from this current way of waiting special education to reliance on services.

[Senator Scott Beck (Member)]: Okay. Okay. I'll be interested. Certainly. They'd be wildly different if I'm, like, required to fund that. Okay. So

[Julia Richter (Joint Fiscal Office)]: so these are the weights within the foundation formula. There are also the small school and sparsity support grants. So you'll recall that in addition to the weighted pupil count, there's a grant for schools that are small by necessity and schools that are sparse by necessity. There are two criteria for each of those grants, and the grants aren't mutually exclusive. So the small schools grant is for the average enrollment for two years to be fewer than 100 pupils and to be considered small by necessity. And the State Board of Ed was required to suggest or recommend the definition of that, and they have published a report that's linked here and includes IOE in in that work.

[Senator Ann Cummings (Chair)]: It has report

[Julia Richter (Joint Fiscal Office)]: to me. Has. Yeah. There this link here will take you to the report. So state board of ed outlined the number of considerations and includes that the agency should be responsible for the ultimate determination.

[Senator Ann Cummings (Chair)]: Okay, so we might let them know that they can talk about that tomorrow. Okay. Spreads schools report.

[Julia Richter (Joint Fiscal Office)]: And this report came from the State Board of Education, not from the agency of education, but included a directive for the agency to support in the determination of smaller spars by necessity.

[Senator Ann Cummings (Chair)]: Okay, so we will need someone from the state board to Yeah, talk to alright. So we don't have

[Julia Richter (Joint Fiscal Office)]: So both the, in addition to the base amount, that $15.33 that's increased by inflation annually, so too are the grant amounts for the small school support grants and as far as school support grant. Act 73 also created contingency effective supplemental district spending. This is that if school districts have the option to ask voters to approve supplemental district spending or SDS above the education opportunity payment and other categorical aid. So essentially upon approval so a school district decides it wants to spend up to 5% of its long term membership multiplied by the base amount, put that to a vote of voters. If voters prove it, then a school district needs to raise that amount in the supplemental district spending tax. The supplemental district spending is raised through that local property tax, which would be equalized across the state. That tax would be applied to homestead and to non homestead property. And you'll recall, you all did a lot of work in this room talking about the supplemental district spending tax and what to base it against. So the way it works is essentially we will look at all school districts across the state and their grand list value per pupil. And the school district with the lowest grand list value per pupil, we see what it can raise on a certain tax rate. Every other district can only keep the amount that that lowest wealth district can raise on the tax rate. All of the amount that's raised on that tax rate above that amount is then recaptured at the state level.

[Senator Thomas Chittenden (Vice Chair)]: Did you say that that's on all properties? Yes. So

[Julia Richter (Joint Fiscal Office)]: that those funds that a district has ratings on its supplemental district spending tax rate, but it does not do not equal in supplemental district spending or recapture inflow to the supplemental district spending reserve, which will then be used in the following year to decrease the overall property taxes.

[Senator Christopher Mattos (Clerk)]: And that's just uniform across figuring out the yield for the following year, right?

[Julia Richter (Joint Fiscal Office)]: So there no longer is going to be a yield, which we're gonna get it to. So the SDS yield, yes. At the end of the slides, and I can pull it up if it's helpful, relate to the actual mechanic number example. I'll of walk through it. Yield, the SDS yield is linked to the grand list value per pupil of the lowest value district. So that's what the SCS yield is referring to. This bit here, with the reserve flowing through to lower the uniform tax rate, You'll recall, and we'll talk about this in a minute, that essentially there's gonna be one tax rate that is then adjusted by different factors.

[John Gray (Office of Legislative Counsel)]: Yep.

[Julia Richter (Joint Fiscal Office)]: So the reserve funds will be used to lower that one tax rate before the factors are applied against it.

[Senator Christopher Mattos (Clerk)]: I need to get my terms correct now.

[Julia Richter (Joint Fiscal Office)]: They're all lies, sir.

[Senator Scott Beck (Member)]: I know. No. Just when you learn.

[John Gray (Office of Legislative Counsel)]: I know.

[Senator Ann Cummings (Chair)]: Couple more weeks, we'll all be fine. Okay.

[Julia Richter (Joint Fiscal Office)]: I mean, of the reasons we're doing this multiple times is there's a lot. Yeah.

[Senator Christopher Mattos (Clerk)]: I appreciate it. Yeah. So

[Julia Richter (Joint Fiscal Office)]: do you want me to talk more about SDS, are we good on that?

[Senator Ann Cummings (Chair)]: And this is to make it compliant with. Mhmm.

[Senator Thomas Chittenden (Vice Chair)]: Yep. Same rate for the same length.

[Senator Ann Cummings (Chair)]: Yeah.

[Julia Richter (Joint Fiscal Office)]: Okay. Moving on. So Act 73 also contingently effective, same day, implemented changes to property classifications and the calculation of property taxes. So we know that prior to Act 73, there's two classifications of property, homestead and non homestead, homestead being the principal dwelling and all surrounding acreage, not homestead, literally all other property that is subject to property tax. Act 73 split the non homestead classification. So it maintains the homestead, which is consistent with the current definition of principal dwelling and surrounding acreage and split non homesteads to be non homestead residential, which we can think of as second homes, Airbnbs, and then non homestead nonresidential, which is all other property that's subject to a property tax.

[Senator Christopher Mattos (Clerk)]: Which the it's a little confusing because in my head, non homestead residential would include apartment buildings, that's actually a non homestead, non res, correct?

[Julia Richter (Joint Fiscal Office)]: My understanding is that that was the intent of the legislation. There may need to be a little bit of technical cleanup, but that is how it has all

[Senator Ann Cummings (Chair)]: been interpreted. Yeah. And when we hear from the Department of Taxes, they are going to be looking for some more clarification about mixed use buildings. And the other one that came up, I think it was last year, one of the proposals, if you remember, was to raise the rate on non homestead because we need to raise the money because we had to go back because to fund the rebate, the tax rebate that year because the rebate is based on last year's taxes and so it wouldn't have picked up. What was pointed out at that time is that our housing authorities, our subsidized rental units, cannot raise their rent. Their rent is limited to a proportion of Income. Their resident's income. And so they are kind of separate there. And I don't know if there's anything we can do about that, but they they are different than a for profit residential unit in which the landlord can pass on the cost to the tenants. They are limited. They really don't have much of another source of revenue except us. So that's something we might wanna hear a little bit more about at least as we go through this to be aware of the issue.

[Julia Richter (Joint Fiscal Office)]: Yeah. I will say, and I know you're gonna hear from them next week, but the tax department has published their report, which is also linked in this slide deck, their property tax classifications report, which talks about a lot of this in detail and post next steps. So in addition to the changing of classifications, Act 73 also changed the property tax rate to create a uniform statewide property tax rate that's then adjusted by the different factors per the the classification. So we know that currently homestead is subject to that globally adjusted homestead tax rate based off of the district's per pupil spending divided by the statewide yield, and that the non homestead rate is or the equalized non homestead rate is uniform across the state. Act 73 changes this to create a single uniform statewide rate, which is then multiplied by those statutory factors per the classifications. Act 73, as it passed, each of those property classifications has a factor of one, meaning that if nothing else happens and everything comes into place, all properties, regardless of classifications, will have a uniform rate, an equalized uniform rate. So in order to have varied rates for different property classifications, additional legislation will need to be passed. Part of estimating we require the tax department to solve for different factors that could be used for certain goals. So those are also included in the report that we're just mentioning. Part two of the report talks about various factors, one of which would pay for the homestead exemption. Speaking of the homestead exemption, Act 73 also created, contingent the effective, the homestead exemption and repealed the property tax credit. So we know that under current law or previous law, home said property taxpayers are eligible for a property tax credit based off of their income and Caledonia value, and those parameters are fixed in statute. Contingently effective, Act 73 repeals that property tax credit and replaces it with a homestead exemption in which a certain portion of the claimant's house side value is exempted from the homestead property tax. Only permitted against the first $425,000 of equalized house site value, and it's tiered based on income. So the lower a household's income, the more it exempt from that property. Well, we might wanna talk about setting some kind of an inflator on that. Inflator have been included. Yeah. With the state exemption.

[Senator Ann Cummings (Chair)]: Because that's it's been a fight between the house and the senate every time I've been involved about whether or not we should raise the income level and the house value. Senate has generally wanted to raise them. And so we've reached the point now where the exempt housing value doesn't really calculate with the recent inflation of housing values

[Julia Richter (Joint Fiscal Office)]: even though they have income that hasn't been inflated like that. Yeah. So the the homestead exemption included in act 73 has an inflation adjustment attached to both the household income as well as this cap of $425,000,000

[Senator Ann Cummings (Chair)]: That's a wrong friend, I didn't remember.

[John Gray (Office of Legislative Counsel)]: I have a question, it might be way too into

[Senator Christopher Mattos (Clerk)]: the weeds and might be a question for tax, I don't know, but

[John Gray (Office of Legislative Counsel)]: I'll pose it

[Senator Christopher Mattos (Clerk)]: anyway. Currently, kind of an issue that I always see in real estate sales is that when somebody sells a home and they have a credit, that credit is theirs. So at closing, the buyer has to pay the seller that credit, which travels with them. And in this case, you'll have a lower tax bill based on an exemption off your property. Would that still travel with a seller to their next property?

[Julia Richter (Joint Fiscal Office)]: I don't know. That's

[Senator Christopher Mattos (Clerk)]: Too many days. Okay.

[Julia Richter (Joint Fiscal Office)]: Yeah. Know. I don't know.

[Senator Ruth Hardy (Member)]: I I don't well, mean, it we should talk to tax about it. Yeah. Because it's based on the property value and a combination of property value and income. So I don't know how that would travel because the new property would have a different value.

[Senator Christopher Mattos (Clerk)]: But it would still take off whatever that value

[Senator Ann Cummings (Chair)]: would be?

[Senator Ruth Hardy (Member)]: Yes, it depends on the value of

[Senator Ann Cummings (Chair)]: the property. I've tried to fix that since day one, when I'm still on judiciary. Yeah, it's considered, if you go to

[Senator Scott Beck (Member)]: It's based on income.

[Senator Ann Cummings (Chair)]: It's based on your income and your house value. Right,

[John Gray (Office of Legislative Counsel)]: right.

[Senator Christopher Mattos (Clerk)]: Yeah. It's a flat, like if you make x amount of dollars, your exemption off whatever your house is valued at

[Senator Scott Beck (Member)]: for

[Senator Christopher Mattos (Clerk)]: It $4.20 just subtracts it. So if

[John Gray (Office of Legislative Counsel)]: you sell and buy something else that's

[Senator Christopher Mattos (Clerk)]: a different value, it would just be tracking that same number.

[Senator Ruth Hardy (Member)]: But credit is something you're paid, an exemption is something you don't have to pay.

[John Gray (Office of Legislative Counsel)]: Well, you're It wouldn't travel in

[Senator Ruth Hardy (Member)]: the same way. Yeah.

[Senator Ann Cummings (Chair)]: Yeah. The argument was when it went in that it belongs to me, it's based on my income and my taxes.

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

[Senator Ann Cummings (Chair)]: if I buy another house in Vermont, going to be so it travels with me. I think it's with some of it sold more than one house where it was traveling to Florida that the you know, you're asking this buyer who's getting nothing. Okay. They have to but what they do is they pay for the rebate the rest of the year. Yep. And you're asking them to pay that when these people are not paying property taxes.

[Senator Christopher Mattos (Clerk)]: I'm in the same boat. The realtors

[Senator Ann Cummings (Chair)]: have not been happy with this since day one. We've had the realtor's lawyer and our lawyers and everybody's lawyers. We were here till midnight. But I'm not think this is a different thing. Because the credit is up. It would like to know, here's your credit. Yeah.

[Senator Ruth Hardy (Member)]: But as an exemption, it's like something you don't do rather than something you

[Senator Ann Cummings (Chair)]: Well, but I think it'll it's not tax.

[Senator Christopher Mattos (Clerk)]: I think it'll be the same. Like, tax will determine what your exemption amount. Is it gonna be an actual dollars being sent to the town?

[John Gray (Office of Legislative Counsel)]: Because you're gonna want the full tax bill. So say you have a

[Senator Christopher Mattos (Clerk)]: $10,000 tax bill, you get a $3,000 exemption, that's now called an exemption. That means the state is gonna send $3,000 to the town if you were personally paying 7,000. But it's Like it works now.

[Julia Richter (Joint Fiscal Office)]: Yeah. Isn't it the amount that you

[Senator Ruth Hardy (Member)]: don't pay taxes on? It's the amount of your property.

[Senator Ann Cummings (Chair)]: Yeah. It

[Senator Ruth Hardy (Member)]: depends on the amount and the rate.

[Senator Ann Cummings (Chair)]: We will come to a decision and decide what we wanna do. Because this is one of these assets not been settled since we did Act 60. And I think just for better or for worse, we will decide, it travel with you? Do you get paid back? I mean, I yeah. I guess And and also, first, we'll figure out how it works.

[John Gray (Office of Legislative Counsel)]: Yeah. Yeah. I was just gonna say probably

[Senator Ann Cummings (Chair)]: Yeah. We'll figure out what we wanna do when the in the in the that the property because the value will be a lot higher.

[John Gray (Office of Legislative Counsel)]: Can I

[Julia Richter (Joint Fiscal Office)]: John

[John Gray (Office of Legislative Counsel)]: Gray, opposite legislative council? I think the answer to your question starts on page one ten of Act 73. So if you end up taking a look at section 32 BSA, section sixteen sixty three, the actual text that's relevant is starting at the top, page 111. So talking about, this is the section that previously described the transfer of the credit. What you see here is at the top of page 111, any homestead property tax exemption related to that residence based on transferor, so the seller's household income shall see to be in effect on the transfer and a transferee who is eligible to declare the residence to the homestead, but for the requirements to own it on April 1, would be eligible to apply for that exemption even though they received the home after April 1. So their income didn't qualify them for the income sensitivity measures even though they got the house after. But the transfer award would lose the benefit of the homestead exemption on that property rep because they

[Senator Ann Cummings (Chair)]: But if they buy another house

[John Gray (Office of Legislative Counsel)]: They buy another house.

[Senator Ann Cummings (Chair)]: Not, then they can re appeal. And they Yeah, because it's

[Julia Richter (Joint Fiscal Office)]: not an actual credit, it's

[Senator Ruth Hardy (Member)]: a thing you get, an exemption is a thing.

[Senator Thomas Chittenden (Vice Chair)]: Yeah, that all makes sense.

[Senator Ann Cummings (Chair)]: Yeah, and the value of the house is likely to change, think what we do right now, it could go up, it could go down.

[Senator Scott Beck (Member)]: That's probably person could be upsizing or downsizing when they purchase next month.

[Senator Ann Cummings (Chair)]: I think

[Julia Richter (Joint Fiscal Office)]: the one other thing that that's helpful too, and the conversation, and I know that you've been talking about this, but the exemption decreases the liability. So it is a change in the, just the general that you can't decide.

[Senator Christopher Mattos (Clerk)]: So will it, in that sense, will it, if you didn't have an exemption, you had a $10,000 bill without an exemption, but then you have a $3,000 exemption, let's say have a $7,000 bill, does the state send $3 to the town?

[John Gray (Office of Legislative Counsel)]: It's an actual decrease in the the house buying value on which so it's unlike the previous where you pay the full bill and receive a credit. Yeah. You literally pay less in taxes. Yes.

[Senator Ann Cummings (Chair)]: Yeah. You don't pay taxes

[Julia Richter (Joint Fiscal Office)]: on the payments.

[Senator Christopher Mattos (Clerk)]: Full bill. The state sends money for the family. So, if you have a credit, you pay the net number.

[Senator Ann Cummings (Chair)]: The goal of this, I was told, was to raise the goal of the second homes tax, I believe it's in the report, was to raise enough money to cover this exemption. Because right now, your income is 30,000 and you own $150,000 house, x amount, a $100,000 of that house value or whatever's in the chart, you finally remember all the zigzags, you are not paying taxes on that value. So you just are not you're not getting a rebate, you're just not paying those taxes, which means your town or the state in the but you wouldn't be rebated on your local tax. Right? How

[John Gray (Office of Legislative Counsel)]: The municipal property tax credit continues to exist if

[Senator Ann Cummings (Chair)]: that's Yeah. So that that one is still there, but that's for people below 47, are we up

[Senator Christopher Mattos (Clerk)]: to But 2,000

[Senator Ann Cummings (Chair)]: so the hope is the second homes tax will cover the cost of this bill. Remember last year you had the whole calculation about Oh, yeah. People, it would be cheaper not getting income sensitivity because you raised the rates

[Senator Scott Beck (Member)]: Yeah. You raised the

[Senator Ann Cummings (Chair)]: pay the yeah. And all

[Senator Thomas Chittenden (Vice Chair)]: that That would solve the problem.

[Senator Ann Cummings (Chair)]: So if you could A chunk of money. Yeah. If you could raise enough money on the second home's tax to cover the exemption, then it should lower the rates A lot. A lot.

[Senator Scott Beck (Member)]: But

[Senator Ann Cummings (Chair)]: until all the listers do all the relisting, I think they'll tell us we can't really tell you how much you will make, but that gives you a goal as to how much you want to adjust that 1%. If you go to 1.1 or 1.5 or two, It will depend on how much money you wanna raise and how much you probably can raise without there being significant backlash. Assuming this is second one. Assuming. Yes. That's always assumed. Okay. So, we have fixed two problems.

[Julia Richter (Joint Fiscal Office)]: Great.

[John Gray (Office of Legislative Counsel)]: Stole your thunder there.

[Julia Richter (Joint Fiscal Office)]: You're on

[John Gray (Office of Legislative Counsel)]: the roll. Sorry.

[Julia Richter (Joint Fiscal Office)]: Oh, so never apologize. First of all, I love the weeds. And second of all, if there's a weed question that I can't answer, it's a I think it's an interesting question. So don't know all of these answers.

[Senator Ann Cummings (Chair)]: Think part of the problem is this committee never went over a lot of this particular bill. The bill that was presented in here was not the same as the bill that ended up being presented on the floor. So we have and even then it didn't come over until, like, two I think all told we had it for five days and three of those days were around the floor till 03:30. So we really didn't have a lot of time with this bill or any bill. I told people that that will not happen this year. It's crossover for nothing. We'll see. Okay?

[Senator Thomas Chittenden (Vice Chair)]: I'll get a bumper sticker made to that effect.

[Senator Ann Cummings (Chair)]: Rest nothing. Over nothing. I can still do it if the governor can do it. Right?

[Julia Richter (Joint Fiscal Office)]: To your to your point about committee work, that's a great segue into the homestead exemption. The homestead exemption that was included in Act 73 is quite reflective of the work that was done in

[Senator Ann Cummings (Chair)]: this committee. We did do a lot of work in here.

[Julia Richter (Joint Fiscal Office)]: So what we're looking at here is the homestead exemption structure in this table where you've got your household income brackets and the corresponding exemption for each one of those. So for instance, if your household income is 10,000, you would be able to exempt 95 percent of the first 425,000 of equalized house site value. You'll recall that the estimate is that the homestead exemption included in Act 73, all else equal, would cost approximately 35,000,000 more than the property tax credit in the same year. And to the comment earlier by the chair, statutory amounts. So all these statutory amounts are increased annually by inflation. This is that visual structure of the homestead exemption that was included in Act 73. So we see this step down dark green line to represent the exemption percentage, and that corresponds with the left hand y axis. That household income on the x, and then the right hand y axis corresponds to the maximum exemption. And you see that regardless of household income, all households can exempt the first 425,000 of their house site value. Not the first 420, but a percentage against the first four Yeah.

[Senator Ann Cummings (Chair)]: I was gonna say, no. That sounded too good to be true.

[Julia Richter (Joint Fiscal Office)]: I included this slide because I am including including a couple of the big tables that we looked at last year, but you'll recall that this modeling is very complex and requires a number of assumptions. So some of those big ones is we used FY '25 data, we applied the property tax credit in the same year and ignored the lag, we projected income and held everything equal.

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

[Julia Richter (Joint Fiscal Office)]: was that table that we looked at with the estimated number of bilayer groups used in the homesteady pension modeling. So, of course, we only did the modeling up to households with a 115,000 of household income because that was the only data available. And the way to read these charts, you'll recall is, for instance, for a household with income between 0 and 5,000 and a house equalized asset value between 0 and 50,000, there are approximately 40 households, or there were approximately 40 households in that group. This was the table that we looked at that showed the estimated average net education property tax liability for those same groups. So generally, on average, what were those groups estimated to pay after taking into account the property tax credit being applied in the same year? So for instance, the same household group would be estimated to zero that way. And then this was the chart that you'll recall we looked at all of these tables examining impacts of the estimated homestead exemption. So this table is showing the average change of the homestead exemption compared to the property tax credit. So the cells that are white or not shaded are representing an average increase of a corresponding amount with this change in policy. So this would be an average increase of $52 to the annual property tax bill at FY '25. The shaded cells are representing a decrease by the same corresponding amount.

[Senator Christopher Mattos (Clerk)]: This is the balloon we were trying to move around. Right? Yes. Yeah.

[Senator Ruth Hardy (Member)]: And I

[Senator Ann Cummings (Chair)]: Yeah. You know, remember those games where you had, like, squares and one was empty and you had to move them around? That's what we did with this. I'm surprised that's the one we landed on, but we did I don't know how many different versions of this, and I wouldn't be surprised if we did a different one before we were finished.

[Julia Richter (Joint Fiscal Office)]: One of the big nuances about the balloon that we spoke about a lot last year was because this is being compared against the current system, there were certain cliffs against which the balloon was gonna be popping around. Right? So we have that household income threshold of 90,000 of household income in current law for the property tax credit, where the amount of house site value that can be used drops from 400,000 to the $2.25. So because there are already those artificial parameter not artificial, but there are those parameters set in statute against which we're applying the modeling against, they naturally are not going to be all of the shapes that you would expect if it were to be compared to a

[Senator Ann Cummings (Chair)]: blank slate. Yeah, it's compared to what you're paying now. Exactly. Yeah.

[Julia Richter (Joint Fiscal Office)]: And this again is on last year's. Yeah, this is last year's bottling. Moving on, I've included There were a number of transition mechanisms also contingent the effective. I've included the three fiscal transition mechanisms for Act 73. Also, some of these will look familiar to the committee because you all put some of these in. There's a transition from a district's education spending to its education opportunity payment. There's the transition of the cap of supplemental district spending. So what percentage can a district choose to spend in supplemental district spending? It decreases over time. And lastly, there is that cent discount, transition from homestead property tax rates. So the transition from education spending to education opportunity payments. This is essentially calculated by looking at the difference between what was a district's education spending inflation adjusted, what are they getting for their EOP, and then slowly phasing them into their EOP, either up or down. And this is done by calculating the education opportunity payment transition gap. So that's done by subtracting the district's education opportunity payment from the inflation adjusted FY '25 education spending to get that transition gap, and then multiplying that transition gap by 80%, then 60%, then 40, then 20, and adding that the education opportunity payment or subtracting it. Right? It could be either a phase off or a phase down. The supplemental district spending transition. So this again is the amount that a school district is permitted in supplemental district spending if it's approved by voters, and this decreases over time. So the first five years after assuming that this all comes into play, the first five years, school districts would be permitted to spend 10% of the long term membership multiplied by the base amount. And then starting in FY 2034, it would come down by one percentage point each year until we get to the statutory 5% in fiscal year 2038. Finally, there's the homestead property tax rate transition. This is also calculating a transition gap. So similar mechanism to the EOP transition. To calculate the tax transition gap, that's done by subtracting the taking the FY 2028 homestead tax rate and subtracting the assumed FY '29 homestead tax rate. That assumed tax rate is what would the tax rate be if there were no transition? So first, we're so it's sort of calculating that FY '29 tax rate if there were no transition, using that for calculating the tax transition gap, and then recalculating the tax rates based off of that transition gap. And again, it's it's phasing down to be 20% each year until we get to FY 2033. And these are sent discounts. And finally, a few considerations. I think we've spoken about most of these, but many of the pieces of Act 73 are contingently effective. All of the ones we spoke about detail are contingently effective on outstanding policy work, so school district boundaries and an updated cost function report. So for these pieces to come into effect, something needs to happen. We know that there's a lot of reports and follow-up work that have come to all of you over the off session and are coming in these days that respond to the charges in Act 73. So there's a lot of reports and work. There's also a lot of ongoing work beyond what you've gotten thus far. So there's work that's going into the out years beyond this legislative session in response to Act 73. So these are some of the topics of work in the coming years following act 73. One of which is this the report from JFO that'll be coming next December. And that is all I have prepared. And here at the end are those a few more detailed resources are for some of the deeper overview of SDS and more information about quintet adoption. Okay.

[Senator Ann Cummings (Chair)]: Okay. Questions? More questions. This will get clearer if we go along. Think can at the potential formation of new districts.

[Julia Richter (Joint Fiscal Office)]: Most of the money piece, the fiscal pieces, so the funding pieces, the fact pieces, some of the governance and quality pieces aren't are intended to be effective. And the regional assessment districts are not intended to be effective. But

[Senator Thomas Chittenden (Vice Chair)]: Property tax exemption is that

[Julia Richter (Joint Fiscal Office)]: That's effective. The exemption.

[Senator Ann Cummings (Chair)]: So, we have governor who's saying he wants the districts. We have a district task force who has come back and said, we don't think the districts will save money and we aren't recommending any, but I gathered but we're going to have to make some decisions about base we're gonna start moving forward on. I'm going to be meeting with the chair of education tomorrow, and I'll see what he's thinking. I know last year that committee did work on districts, so I we'll see if I can get an idea as to where we will move forward, and I hope that the Department of Education can also give us some indication as to we said with the five giant districts that were recommended last year and do they have any numbers that would disprove the task force saying that that wouldn't save money. And see if we can't start on the same page at some point to move forward. Mean, it all attested my from last year when we talked about that extensively.

[Senator Thomas Chittenden (Vice Chair)]: Yeah. Don't look at it as saving money because, I mean, the foundation is the foundation. Right? I mean, it is what it is. Yeah. So what you're talking about is would a one district configuration be able to, you know, get more money down to the kids and use less of it at the Administrative level. Administrative level. And, you know, which is the best district for delivery and efficiency and income and outputs, not whether it's gonna save money because the foundation is what it is. Mean, we have a Yeah. Well, no matter what district configuration we pick, the foundation is the foundation.

[Senator Ann Cummings (Chair)]: It's a Yeah.

[Senator Thomas Chittenden (Vice Chair)]: And I think that all

[Senator Ann Cummings (Chair)]: save enough money to be able to invest enough money to improve education? I mean, those are the questions that when you go out to talk to the public, we don't have answers for.

[Senator Scott Beck (Member)]: They're all gonna cost the same.

[Senator Ann Cummings (Chair)]: They're all gonna cost the same, then why go through? Yep. So I'm hoping all that somebody crunched numbers at the department because this is really their proposal and I'm gonna leave it to them to defend it. And then we will see where we're gonna go as a group. Okay. Any questions for Julia? Thank you. Good. Okay. John.

[Senator Scott Beck (Member)]: Shall we?

[Senator Ann Cummings (Chair)]: Okay. Let's walk through our newest bill. Got we've got three or four other bills. We're gonna do a walk through this week. The what not. No. We probably require action this year in forty eight days, which is the allowed cell towers to go to an alternative permitting process to act with 50. I think it's been in for a decade, and we keep sun you know, putting a sunset on it in three years. I put the bill in as a placeholder, just taking away the sunset. I have no idea if that will hold. It hasn't in the past, but that one there is a sunset, so it will either go away. It will go away, I think it is, next August or July unless we take action. So that's the one that I know has a time constraint on it, I'll try and get that moving as quickly as possible so it has a reasonable chance of getting through the F body. And it'll be a nice break. And we will be starting on health care, probably, or health insurance the end of next week. So this is gonna be the most unpleasant year I can think of.

[John Gray (Office of Legislative Counsel)]: This excites me. This sounds good. You want me to talk?

[Senator Ann Cummings (Chair)]: Yes.

[John Gray (Office of Legislative Counsel)]: Okay. John Gray, sublungs of counsel. Do we know if senator Barita's coming?

[Senator Ann Cummings (Chair)]: No. Not that I know

[Senator Scott Beck (Member)]: of. Okay.

[Senator Ann Cummings (Chair)]: I think he's giving you all the joy.

[Senator Christopher Mattos (Clerk)]: I get

[Senator Scott Beck (Member)]: all the thoughts. Yeah.

[Senator Ann Cummings (Chair)]: He actually did quite a presentation on the floor the other day about his thinking.

[John Gray (Office of Legislative Counsel)]: That's good then. It expands out of zooming in, but that's pretty good. Okay. So we're talking about S220. This is an allowable growth bill.

[Senator Scott Beck (Member)]: I'm just

[John Gray (Office of Legislative Counsel)]: going start with the statement of purpose. Bill proposes to limit the growth in each school district's per pupil education spending in fiscal years '28 and '29 to a specified allowable growth percentage of the district's prior year per pupil ed spending. Before I talk about the text, I'm just gonna kind of give you what this does. You may be familiar with previous allowable growth proposals, those were often done in the form of an alternative excess spending threshold, right? So they preserve that structure where you could go above your allowable growth percentage, but you would be taxed on the basis that you exceeded the threshold. This is not like that. This is a straight cap. This is an allowable growth cap. It does not pass you above a particular percentage of your district's head spending in the prior year. The district literally cannot spend more than the proposed allowable growth percentage. So that's what this is. And just to note, you're gonna see the fiscal years 2029 listed. Julia helpfully pointed out FY '29 is of course the first year of foundation for the roll out. So I would think of this act as agnostic as to what's otherwise going on. You could touch this piece later depending on what's happening, but just know that this is a two fiscal year cap on education spending. It would not impact this year's school budgets. It would impact the following year fiscal year 2018. We got this nice short session. So for fiscal years in question twenty eight-twenty nine, a school district's per pupil ed spending shall not exceed the sum of the district's per pupil ed spending in the prior fiscal year and the district's allowable growth. So you're getting basically an allowable amount of growth above your prior year ed spending and that would be the effective cap of which you could spend per pupil. Intuitively, allowable growth, that's just the product of that growth percentage and your ad spending in prior fiscal year, that's what produces a nice dollar figure for you. The actual method for calculating, the actual thing that tells you what your school district could spend above the prior year ed spending is this allowable growth percentage. The way to think about it before I talk about the text itself is just it gives you an allowable growth percentage as a function of where your district's ed spending stands relative to the highest spending district. The less that you spent in the prior fiscal year, the more that you would have an allowable growth percentage. Like some intuitive sense, the more that you had in education spending, the lower your allowable growth percentage would be, and we'll talk about this, but there is a minimum percentage, so it does enough flattening out at the hiring event sort of thing. So housing calculated allowable growth percentage is 9% of the difference in per pupil education spending in the prior fiscal year between your district and the highest spending district, excluding Gore's, because those could throw off what that highest spending district is, right? So take 9% of the difference between your district and the highest spending district and then express that as a percentage of your district's per pupil at spending. Note however, on lines nine and ten, there is a minimum allowable growth percentage of 3%. What this means is at the upper end of spending districts, school districts would be at this 3% figure. That's the lowest allowable growth percentage that you could have. And if you were on the lower end of Ed spending in the prior fiscal year, you could have, I think empirically, as high as 9%. I mean, theoretically you could have a much higher percentage, but I think empirically you're gonna see a range between school districts that have model growth percentage of 3% up to something like 9%. I can talk about the calculation, but it is that plain English description. So you subtract your districts per pupil spending from the highest per pupil spending in the prior fiscal year, you divide it by your districts per pupil spending, and then you multiply that by 9%. So it's giving you a specified percentage of the gap between you and the highest spending district, and that sets an actual path and not a threshold at which a school district's ed spending per pupil would be set. That's the full bill. Takes effect July '26, again affects FY '28 and '29. Have you talked through some of the math or the concepts here? Note that the figures chosen are policy decisions, What this percentage factor is 9%, that's gonna determine how magnified the difference is, And then your floor, so that's where it flattens out.

[Senator Ann Cummings (Chair)]: This has come a long way. I was first told it was in the works, it was a flat two year set. And this has, I think, come a long way to be more tolerable or more in touch with perhaps the reality. If it's the right numbers, I don't know, but it definitely has

[John Gray (Office of Legislative Counsel)]: mellowed over time. So, I'm happy to talk about some of the mechanics. I should raise with you that there are potential constitutional concerns with this. I'm not taking a position on

[Senator Ann Cummings (Chair)]: Right, but what are they?

[John Gray (Office of Legislative Counsel)]: So, one could be under the education clause, Vermonters have a fundamental right to education. Depending on how this is perceived, let's say for instance, if you treated, and this isn't necessarily the case, but if someone makes the claim that the budgets that would have been voted absent the cap are the amount of funding that's required to produce education for grown hunters, you You could say that there's a potential for violation of the education clause because you would be depriving students of their fundamental right to education. I'm not saying that that's what this does. Just pointing out that someone could make a claim along these lines. Alright. The second one, which I think a clearer argument than the fundamental education right argument, is the Brigham argument. Basically, could claim, like a challenge under Brigham alleging a cap imposed, which differentially imposes, limits the amount of per pupil spending, which would differentially limit the amount of people spending permissible in each school district deprives them substantially equal educational opportunities. What I mean by that is just this, by imposing a cap, what you say is, in this lower spending district, you can only spend up to this amount. Right?

[Senator Ann Cummings (Chair)]: Right.

[John Gray (Office of Legislative Counsel)]: And in a higher spending district, they are literally allowed under law to spend more per pupil. I don't know how slam dunk the argument is. I'm not saying that it is, but that's the form an argument might take under Brigham. Something you might say opposing that argument is you can imagine other arbitrary caps in place that clearly wouldn't trigger this. So let's say that you said the lowest spending district can spend no more than a million dollars per pupil, but you didn't impose such a cap on the highest spending district. Probably no one would take issue with that even though they literally have a different ability under law because practically nobody's spending a billion dollars per pupil. But this is quite different than that, the figures are lower, it's just to say under this proposal school districts would literally have different amounts of per pupil spending that they could pursue. Is

[Senator Thomas Chittenden (Vice Chair)]: it true that those arguments would also be further mitigated by the fact that it's temporary?

[John Gray (Office of Legislative Counsel)]: I I don't know. I mean, you could say in the sense that it limits the range in which people could challenge, right? It means it limits literally the availability of the courts for those purposes, and depending on how quickly you pursue this, but if someone were to sue injunctive relief in advance of it, right, and say that this shouldn't come into effect. Yeah, I think maybe what you're getting at is there an emergency exception basically kind of going that we're saying, generally not the way that constitutional rights work, but the legislature may have different you know, there may be some difference in this in this context. And like I said, I don't know that either of those are slammed up arguments, just things to be aware of. Okay.

[Senator Ann Cummings (Chair)]: This is two two years. Two years. And how long would it take a lawsuit to work through the courts at

[John Gray (Office of Legislative Counsel)]: That this I don't know. But I just mean to say someone still has a right to that education even during a two year period. There

[Julia Richter (Joint Fiscal Office)]: always is.

[Senator Ann Cummings (Chair)]: I think we are trying to find a way to give some relief to taxpayers, and this still allows some growth. If it's the right number, well, I don't know. But I think we will have all the relevant groups in next week, and they will give us their feedback as to what is a reasonable expectation. I think it is reasonable to expect that a year from now, the state will not be putting in a $100,000,000 to buy down the tax rate, which means the voters will see the full hit of their budgets.

[John Gray (Office of Legislative Counsel)]: That.

[Senator Ann Cummings (Chair)]: That's it sounds like we've chosen not to. It's just because our money's not coming in. This was the first year there was no surplus in the Ed Fund to buy down that the the rates. And this is for two years. If you're determined to do a second home tax, that will take two years to get into effect, at which point there will be relief coming in the form of revenue.

[John Gray (Office of Legislative Counsel)]: If the full rollout is happening, part of this will be due to FY '29 because you wouldn't even have a purchase price. I don't want to go off the line of question. I just had more thoughts in response to Senator Vivek's earlier question. Another argument people might make from the framing that you have is that it could be argued that it compresses the band per pupil education by imposing the cap. So people will take different positions on the constitutionality of this proposal.

[Senator Ann Cummings (Chair)]: Will anybody like it? Taxpayers, probably.

[Senator Christopher Mattos (Clerk)]: I don't know.

[Senator Ann Cummings (Chair)]: Probably they'll probably say it's not enough. I mean, if nobody likes it, it's probably good anything. But it should So

[Senator Ruth Hardy (Member)]: I just wanna make sure I'm understanding the math correctly. Mhmm. And then just have a couple comments. But so if I'm I'm looking at paragraphs b, little I, just the math part of it. Mhmm. So if you're the highest spending district per pupil, let's say you're 30,000 per pupil, and you so you take your 30,000, subtract by 30,000, you get zero, so you would not be able to spend more. Your cap would be

[John Gray (Office of Legislative Counsel)]: Your cap would be the minimum of 3%.

[Senator Ruth Hardy (Member)]: Oh, would be 3%.

[Julia Richter (Joint Fiscal Office)]: Oh, I see.

[John Gray (Office of Legislative Counsel)]: Okay. If you're only looking at B, you're totally right, which shows the calculation. The line that you'll need to see is on lines nine and ten provided with the minimum allowable.

[Julia Richter (Joint Fiscal Office)]: I see. Thank you. So

[John Gray (Office of Legislative Counsel)]: the the way I tried to set it up is two a is, to my mind, the plain English description of what's going on. Okay. And then two b is spelling out the math, but it's true that in two b I don't say, and I could add Multiply. Online 20, you know, multiply the percentage by 9% provided that in no case shall the minimum allowable percentage be lower than I three

[Julia Richter (Joint Fiscal Office)]: was just looking at the b. Okay. Okay. So the lowest would be 3%.

[John Gray (Office of Legislative Counsel)]: Three seven.

[Senator Ruth Hardy (Member)]: The highest would be 9%.

[John Gray (Office of Legislative Counsel)]: That's an empirical question. Think maybe Shirley can speak to that. My understanding was it would be around the 9% figure. The way to think, like using a hypothetical, say that your highest spending district is 20,000 and your lowest spending was 10,000. You're half the spending, so you would end up with a 100% difference, which that 100% would be multiplying by 9% to give you a 9% allowable growth factor. So Okay. Assuming that someone has assuming that the lowest end is around half of the highest spending, that's what your maximum allowable

[Senator Ruth Hardy (Member)]: Okay. And this doesn't there's no factor again inflation, and, you know, we've seen huge increases in in health care costs and other costs. Is is just assuming that costs are gonna be under 3%?

[John Gray (Office of Legislative Counsel)]: I it imposes the harder that that's right. That's it.

[Julia Richter (Joint Fiscal Office)]: Okay. I think

[Senator Christopher Mattos (Clerk)]: that's the way to

[Senator Ruth Hardy (Member)]: It's actually addressing any of the cost drivers in education. It's just imposing a random path.

[John Gray (Office of Legislative Counsel)]: Which I think where the concerns around the fundamental education piece come in is just if you have uncuttable costs. Right. And they had to cut

[Senator Ruth Hardy (Member)]: It's not it's not addressing those at all. It's also not addressing tax rates because you can have a lower per per people spending, you know, school bus school districts can cut their budgets and still have their tax rates go up. So it actually won't help taxpayers in some districts, in in fact, probably many districts, because there's not a direct correlation in lots of cases by the rate and the amount.

[John Gray (Office of Legislative Counsel)]: While your per pupil spending could go up in a year, could not go up in a year, you could still have higher taxes than the previous year depending on total total Ed spending across the state. In this case, if it's having an effect, it is reducing overall Ed spending, meaning that it is reducing tax rates for car insurance, if that makes sense. But it depends on the effect, right? If people

[Senator Ann Cummings (Chair)]: Yeah. And it also

[Senator Ruth Hardy (Member)]: depends on the the CLA and the impact of the CLA on the tax rates. But it it is not it is not fundamentally addressing the cost of education or being able to

[Julia Richter (Joint Fiscal Office)]: read property caps or leave or No, I don't think

[Senator Ann Cummings (Chair)]: this a stop gap for two years, which coincides with the time that all of this is supposed to go into effect.

[John Gray (Office of Legislative Counsel)]: The point is to reduce overall ad spending Right. Which is what the cap would do if boats operate within the constraint or otherwise. What it depends on is that they needed a cap to operate in this particular way. If the cap has an effect, it reduces overall ad spending, which does mean we need less revenues to raise Yeah. Broken ad spend. We can only grow 3%

[Senator Ann Cummings (Chair)]: We've had Ed Spend. And we will get those numbers.

[John Gray (Office of Legislative Counsel)]: Exactly, if school budgets are coming out higher than your allowable growth percentage that's permitted under this, it is reducing the Ed Spend in that case.

[Senator Ann Cummings (Chair)]: And that would be a good question for us to do to the Department of Education as what are the numbers this year? What are they looking like? And maybe this year they can tell us what the cost drivers are.

[Senator Scott Beck (Member)]: Well, public understands this.

[Senator Ann Cummings (Chair)]: I think this is simple enough.

[Senator Scott Beck (Member)]: I don't think so.

[Senator Ann Cummings (Chair)]: You don't think so? No. So you would just rather say a flat cap or no?

[Senator Scott Beck (Member)]: Well, the more complicated you make this, the more it's like the system we have now, but worse on steroids. I don't think the public will understand this. So

[John Gray (Office of Legislative Counsel)]: I can offer a different way. There's a different way to achieve a similar outcome that looks different and may be simpler to explain. So if you think about the equity effects of an allowable growth cap is like we talked about at the beginning, permits it lower spending districts a higher allowable growth percentage. This is part of what makes it difficult to explain, is that you have varying percentages based on school district. But if you had a cap that said every school district can spend no more than 1,000 per pupil more than they did in the prior year, that has a differential effect by district. You had 9,000 in person That's a way. Exactly. So that has a similar, approach. It's a non percentage way of describing a similar concept. Maybe more intuitive to folks. And so that a thousand has a different impact if you're a 10,000 spending district versus a 20,000 spending district.

[Senator Thomas Chittenden (Vice Chair)]: But that doesn't do anything for pitchforks in '27. Oh, no.

[Senator Ann Cummings (Chair)]: I agree. But the the job bill lowers the vending districts that we'd like to have. Okay.

[Senator Scott Beck (Member)]: But

[Senator Ann Cummings (Chair)]: that also, if we don't do this, do we do anything and just leave the taxpayers looking at who knows what next year? I kept hearing the we were calling our Kill Your School Board meeting last night. I kept hearing hurts people. I'm sorry? Hurts people? Yeah. That phrase? Mhmm. Oh, hurts. Cutting education hurts people. Raising taxes hurts people. We are in a situation where there is nothing we can do that doesn't hurt somebody and that's a really miserable place to be. But doing nothing will also hurt everybody. So, we're gonna have an interesting year, and I think the next few weeks we will really just be trying to get a road map as to what is allowable to be talked about and what you know, where where is where is this road trip headed? It sounds we have a redistricting commission that has a different definition or destination than the bill. We have an administration who has a destination that is somewhat reflected in the bill, and then we have the people, and the people that don't want any change are not happy, and the people that want a whole lot of change aren't happy.

[Senator Scott Beck (Member)]: We should treat people equally. Yeah.

[Senator Ann Cummings (Chair)]: So we will see. There it goes. Any questions for John? I I think this is a little this is I feel better about this bill than the original proposal. I don't know if it's the solution, but I think it has definitely become more workable as as it's gone through the last week or so of being put to paper. We'll see where it goes. Can guarantee that your emails will be busy.

[Senator Scott Beck (Member)]: So, you know, as you look at any of these bills, even how it's, as you think of the various populations and how they will be affected, practically, in the short and sort of medium term, and then you think of what people want or don't want. And again, have, depending upon the population, you have some people who want A and some people who want B, and kind of reconciling that is gonna be a real challenge for us.

[Senator Ann Cummings (Chair)]: It is. It is. It is painful for us to do this, and I think, like most people, we avoid pain and wait till we just reach the crisis.

[Senator Scott Beck (Member)]: Well, mean, think as you said last year, though, leaving things the way they are is worse than just about any of the solutions that have been suggested. Yeah.

[Senator Ann Cummings (Chair)]: I doubt that there are any schools that are really feeling good about their budgets because of the pressure there on One of my local schools is laying off two classroom teachers. Okay. Questions. Questions for Julie. Is there anything Joint Fiscal can run or analyze in this for us? Have you done it? Are you prepared to present it? Again. That's helpful. That one thing would be helpful. Sure. We have the words. Let's think about the numbers. One of all to the gills is already. Back to. Welcome back. Welcome back.

[Julia Richter (Joint Fiscal Office)]: Thank you. I'm Julia Richter of Janetho.

[Senator Ann Cummings (Chair)]: Such a

[Julia Richter (Joint Fiscal Office)]: I don't have any slides prepared because I wasn't It's okay. Planning to testify on this, and I do have a chart with Barrett and some numbers if that would be helpful. Yep. So everything that I would echo everything that John has said about the math. I think that the primary piece to start on is to your earlier conversation, we don't know what school district budgets will look like in FY '28 and FY '29, and so we can't forecast forward looking at FY '28, which JHO can't predict what FY '28 budgets will look like. That being said, we have done estimates of if the If this bill were to be implemented in fiscal year twenty twenty seven, the estimated savings would be approximately 67, dollars 68,000,000. So the way that that is calculated is essentially looking at for our preliminary budget education spending estimates in fiscal year twenty seven. You have those numbers from the agency. What would the permitted education spending fee for allowable growth under s two twenty? Is that the number? Under s two twenty, calculate what the the total education spending would be. Looking at a difference. So looking at how much would be what would education spending be if people were to be capped by this bill in FY '27? That is the preliminary estimate of 67,000,000. How that would shake out over school district tax rates would depend, of course, on the other pieces of the education fund, the performance of non property tax revenues, other education expenditures, and that being said, we know a reduced in expenditures for the education fund, all else equal, does lead to a decrease in property tax rates overall. I do have a chart. Would that be helpful for me to show the the graph? Okay. I'll need to join the Zoom again.

[Senator Ann Cummings (Chair)]: And we will know a little more. Believe it's next Friday. The Thursday or Friday, the board is meeting. We're getting the revenue forecast for the coming well, we now in July, the coming six months. So I don't think anybody expects it to be really rosy, but we will have some forecasted numbers that we will be working under. And next next Friday, we're doing a joint. I assume it's on Zoom. Or aren't we all? No. We're at Room 11. We're all oh, we've got Room 11. Okay. But it's with senate approves. With the senate approves. Tom Cabat will be here to go over his fiscal forecast with us. And then we will at least know what the future is projected to look like in terms of revenue or nothing else.

[Julia Richter (Joint Fiscal Office)]: Yes. And then we will come in and show the education for that one for forecast. Do you want me to go ahead and share my screen? Yeah. So this chart may look slightly familiar. While it's different, it is similar to other allowable growth percentage charts that we've looked at in the past. So I'll walk through what we're seeing here. Each one of these blue dots represent a district. They have excluded the gores from this chart consistent with the bill. So what we're seeing here is these blue dots correspond to the left hand axis, and this is the FY '26 hurdle weighted pupil spending. This line, the green line sitting above the dots represents the allowable growth percentage for each of those districts. Well, it it represents what the allowable growth percentage would be if this were implemented in FY

[Senator Ann Cummings (Chair)]: '27. And this doesn't look that dissimilar to I don't think it was last year. I think it was the year before when there was a proposal, probably 10:00 at night, that we we lower I think that we lower the allowable growth or we put a penalty heavier on it, and they were very, very close. Yeah. So this

[Julia Richter (Joint Fiscal Office)]: so the allowable growth percentage follows the same general mechanism in this bill as in previous allowable growth proposals in which it's based off of prior year's highest per pupil spending and the difference between the district and that highest per pupil spending. This this is different because that the underlying formula of the allowable growth percentage calculation in s two twenty is different than the other allowable growth percentage calculations we've looked at because to John's point, you can see this this dark purple line corresponds with the right hand axis, and this is the allowable growth percentage of each of these districts. So you see it's the minimum of 3% and that factor of 9%. Whereas the previous allowable growth percentage that did pass was five point that that factor was 5.5%. This is a higher factor and a higher score.

[Senator Christopher Mattos (Clerk)]: But that was a oop. So that was a tax rate cap, not a spending cap. Right?

[Julia Richter (Joint Fiscal Office)]: There was a tax rate cap of 5%, but I'm actually talking about another 5%. 5.5%, their allowable growth percentage was passed a few years ago before it went into effect, it was repealed. And the underlying formula for calculating that allowable growth was the factor of 5.5%. So when we looked at the, when John was showing the language in this S-two 20, the factor is 9% rather than the 5.5.

[Senator Scott Beck (Member)]: What's the average up there?

[Julia Richter (Joint Fiscal Office)]: What's that average going to be? Average per what?

[Senator Christopher Mattos (Clerk)]: The sorry. The the growth percentage allowed.

[Julia Richter (Joint Fiscal Office)]: The median is 3%.

[Senator Christopher Mattos (Clerk)]: Makes sense.

[Senator Ann Cummings (Chair)]: I don't know what the

[Julia Richter (Joint Fiscal Office)]: mean is, but I can follow-up with you on that.

[Senator Ruth Hardy (Member)]: What what did you say the the amount is 67,000,000?

[Senator Christopher Mattos (Clerk)]: And

[Senator Ruth Hardy (Member)]: how much is the entire head fund again?

[Julia Richter (Joint Fiscal Office)]: Two point I don't know if I could top my head. $2.1500000000.0. Billion. Okay. So,

[Senator Ruth Hardy (Member)]: I mean, an easier way to do this, guys, is just to address cost factors that are what what is costing more money instead of putting a constitutionally questionable gap that could potentially impact districts negatively, we dig into what the cost factors are in education, and they were we were reminded of them over and over and over again last year. That would be a more equitable and potentially longer lasting solution to this problem? 2.5. 2,500,000,000.0. So 67,000,000 of 2,500,000,000.0. I can't do that percentage in my head. I'm not doing that fucking well, but you mean do you know it? Okay. You say

[John Gray (Office of Legislative Counsel)]: 2.68.

[Senator Ruth Hardy (Member)]: 2.68. A tiny percentage. It's this juice is not worth this piece. We could save more than that doing our cooperative education service model.

[Senator Ann Cummings (Chair)]: Well, I think this would be immediate and for two years if someone can find a proposal that would save at least for more than this and bring hard numbers in because that's what I haven't seen yet. These are hard numbers. This is what we would do next year. I don't limit growth. And then bend start bending the curve down, then that it wouldn't be the first time that what came in here is it what came out. So I think this committee is gonna be open to any alternative proposal. I think the problem is we've had three years of double digit inflation. We've been putting a $100,000,000 a year in for general fund. That's money we haven't had for the food banks or housing or we could be building, you know, energy efficient apartments, we could be doing a lot of other things with $100,000,000 and we're not adequately funding up mental health agencies, which schools need in order to provide the mental health services. So, given the anticipated revenue forecast, I've been told we will not have a $100,000,000. So, people

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

[Senator Ann Cummings (Chair)]: going what's already burdensome with all that buy down, people are going to have to put the full bill next year. So the goal is to do something to limit that growth in your tax bill unless until we are scheduled to do 70 '3 or whatever we end up replacing it with this year or modifying it to. We also it will take two years to do any kind of a tax adjustment, mostly the second homes tax, which seems to be the most obvious. If any of you don't know, the transportation committee would like the purchase and use tax revenue back. They also would like sales tax on automotive parts back. They never had those, but they would like them and they are in serious financial trouble over there and because we're putting a 100,000,000 into education, we don't have a 100,000,000 to put in to help us match our federal grants and pave our roads or help our towns pave and plow our roads, which are only gonna get worse. So there aren't a whole lot of pleasant options out there, and we will be under pressure to give

[Julia Richter (Joint Fiscal Office)]: our revenue.

[Senator Christopher Mattos (Clerk)]: So

[Senator Ann Cummings (Chair)]: this is this is a proposal by one member. If we can crunch numbers and come up with something else, more power to us. And I'm open to any, except taxing maple sugar candy, which is the last time we had a sugar tax proposed. That's where it died.

[Senator Ruth Hardy (Member)]: Let me think of a few things that

[Senator Ann Cummings (Chair)]: can save us $67,000,000. Okay. Well, I've I think I mean, this is just limiting the growth by that much. It's not saving. It's slowing the growth. It's still going to grow by up to 9%. But if the growth is driven by health care costs and inflation, then it's manifesting

[Julia Richter (Joint Fiscal Office)]: as costs. Yes.

[Senator Ann Cummings (Chair)]: But the people that are paying it, paying the tax bill are also seeing an inflation in their healthcare costs and salaries are not growing at nine to 12% a year. I get it, but education, we have to provide adequate education per our constitution. And when we start of willy nilly cutting positions, then we're

[Senator Ruth Hardy (Member)]: not providing adequate education to students.

[Senator Ann Cummings (Chair)]: It becomes a problem. Maybe we should Well, think we're assuming that we're gonna Cost of money in here. That this number will cause us to willy nilly cut programs. You don't think you're gonna do? I said, we haven't heard I think we might next week, but we haven't heard Right. That this will have that. Yeah. That's true. Open to hearing Yeah. About The only key here, what is on the record in this room, and if that but I'm looking for hard numbers. I know we have already laid off a significant number of teachers. I would would not be surprised if we did not have a significant number of budgets go down again this year, and probably next year. And, the taxpayers do not have an organization that speaks for them, which leaves us only hearing half half of the equation. So, hey, that's it. But if anyone else has proposals, bring them in. We'll see where they go. Alright. Still letting you out of here at 03:00.

[Senator Thomas Chittenden (Vice Chair)]: Tomorrow?

[Senator Ann Cummings (Chair)]: Okay. And tomorrow, the what I don't know what the weather's gonna be tomorrow. It looks really iffy. Oh, don't say that. Sketchy.

[Julia Richter (Joint Fiscal Office)]: It looks sketchy.

[Senator Christopher Mattos (Clerk)]: Don't say that.

[Julia Richter (Joint Fiscal Office)]: Can it chase?

[Senator Scott Beck (Member)]: It looks

[Senator Ann Cummings (Chair)]: January. Yeah. So we will, as we usually do on Fridays, watch it. I can't say we're gonna get a nice storm or a snowstorm or a rainstorm. It'll probably depend on how high the road is not even dry. If it looks like it's gonna be bad, we can change the agenda and get you out of here early. It's gonna be raining up where we live.

[John Gray (Office of Legislative Counsel)]: It's just high at 40. Is that it?

[Senator Scott Beck (Member)]: But it's

[Senator Ann Cummings (Chair)]: gonna be a a winter So

[Julia Richter (Joint Fiscal Office)]: it is down here. If it if it don't

[Senator Ann Cummings (Chair)]: get down to the three inches of ice under Yeah. At South Point, we should be fine. I have to drive over

[Senator Ruth Hardy (Member)]: the mountain tomorrow, so I

[Julia Richter (Joint Fiscal Office)]: prefer to leave. I'm going to get people out.

[Senator Ann Cummings (Chair)]: I'm trying to get you out by June 30 on Friday's weather. 100 over the middle of bridge. We should go off live.