Vermont Legislature SmartTranscripts:

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: You knew this recently? We are live.

[Senator Ann Cummings (Chair)]: We are live. Guys, we're here. We are live. I know it's a

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Friday, but we need

[Senator Randy Brock (Member)]: Put you

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: on the Joint. Okay.

[Senator Ann Cummings (Chair)]: Put you on something. This far is no table. It's not settled. Okay. Alright. We're good. We're all on our face. We're gonna be some shiny faces. It is Friday, and I'm going to try and get you out of here in good hour. We're gonna start today. We've been over several things. We have spent at least one afternoon going over Act 73 and what was in it and what's happened. We have been over the financial sections of that now with Pledge Counsel and our Trust Fiscal Office. And today we're gonna hear from the Agency of Education. And we still need to come up with a foundation formula, but under Act 73, all of that is contingent on the formation of new districts, and I am looking I've got the bill and the administration has said this is saving the money that will allow us to go do the foundation formula. I've got a task force that was assigned to look at this issue in detail and they are saying this just doing this in larger districts will not save enough money. So I'm hoping this committee can start to get some hard numbers, because we are a numbers committee, to work on So, we could make some determinations based on the facts as to what the next step might be or need to be. I know we are now a year later than we were when this bill was passed, so the timelines, which were very tight to start with, are going to need adjusting. We went over the bill yesterday that proposed to cap school spending for two years. And so I have Commissioner Saunders on first.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Jill, I'm gonna ask you. Yes. So, Secretary Saunders got split over to Senate Ed, so we are glad you conquering.

[Senator Ann Cummings (Chair)]: Oh, he did not help me. Yeah. He did lunch just so we know what each other's doing. Yeah. Try and stay on the same page.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: We have not yet mastered our cloning program that we've been working on for

[Senator Ann Cummings (Chair)]: last year. When you learned how, what?

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yes. Absolutely. So for the record, Gilbert's Campbell, deputy secretary and chief of operations for the Agency of Education. I'm joined here today by two members of our Ed Finance team. We'll have them come up and actually be leading most of the kind of report out, and then I can pop back over for any the what's next conversation. One thing that I wanted to signal that's a really significant change for the agency between last session and now is we went through a major reorganization. We've shared lots of documents around this. Always happy to come back and talk about it. But one of the areas that we really identified was an area of strategic focus for us was around education finance. And so we, as you know, that was really a one person show for a really long time. And so that limited our ability to provide the kind of accurate and timely analysis that you all are often looking for to inform your decision making. And then also provide expanded support to the field. So, we've invested with people resources as part of our rate org, and critically, we have filled our education finance director position, and that's Kelly Murphy who's joining me today, and I'll let her introduce herself and a little bit of her background, and if you all can introduce yourselves so she gets to know you.

[Senator Ann Cummings (Chair)]: Last week, and you did her.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: I believe you did. Yeah. She's she's a familiar face around these parts. And then also Ted Gates, who's our senior fiscal analyst and is really sort of a counterpart to Jake Feldman, who you've all worked with really closely from the past department. We also have and they'll talk about this additional staff on that team. We're So really feeling like we're moving in the right direction to really expand our capabilities and work really closely with JFO. And Julia, I hope you're feeling that on your end as well. So with that, I will step away. I'm gonna let Ted and Kelly step up and introduce themselves, and then I'll be right over here and available to come back in.

[Senator Ann Cummings (Chair)]: Just move the chair, extra chair. Do need to do?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: I'm gonna take the second chair.

[Senator Ann Cummings (Chair)]: Even the second chair here is better than most. Yes, but this guy is easier. One in the health and welfare committee creeps, and I expect to see him give way. It's very uncomfortable. It is and it's very uncomfortable. So we try and not penalize our police. So, what I'm gonna do is go ahead and

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: just maybe introduce myself real quick, then Ted's gonna get the slide up for you so he kind of runs through the presentation that we have today. But my name's Kelly Murphy. I am the new Education Finance Director. I started last week, so I am brand new. Before this, I was the Acting City Manager of the City of Montpelier, and in Fire Rules of the City, I was the Assistant City Manager and the Finance Director. And before that, I was in Finance Management. And so I'm really looking forward to coming back over on to the state side of things at a really critical time. And so I'm super excited to roll my sleeves up and get into it. And with that, I'm going to have maybe head and flip to the next slide here, which just gives you sort of an overview of our team, you can kind of see that we've really built things out. Deputy Secretary mentioned that, and so Ted's gonna get into some details here, I'm gonna hand it over. Nice to meet you all. I'm happy to answer any key that I need for you.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: So I'm 10 gauge senior physical analyst. I've been with the for about six years on the side. I've worked originally with the rollout of the assets to EDMS project that we had. So in terms of your anticipation of us presenting finance school school spending data over the next few months, this is kind of a timeline. So what we collect for the December first letter is a very simple preliminary estimated percentage growth rates for the districts that respond to the survey. So we did that in November. We had roughly two thirds of the districts respond to the survey representing about 80% of total spending. So it's a pretty robust response rate, think. And the state average growth rate for Ed spending was 5.8%. If you wonder like how accurate would that be going forward, I'm not really sure. However, last year, FY '26, in that same collection asking if the growth rate estimate was 5.71% and actual growth rate churn would be 5.73. So on that particular case for that year, it was pretty close. So perhaps we can count on that. The next data collection that we are just finishing up is the long term weighted ATM collection. We're at this stage now. We're getting sign offs from the superintendents, we're almost at the finish line. So I think we're gonna have that probably by the street. The next collection is our preliminary budget collection, where we actually are collecting layout and detail now, and we'll have all those budgets in by mid February, if not sooner. So it's a rolling submission. And as we get data as we get submissions to that cert, we can report on the other remaining districts that haven't submitted in.

[Senator Randy Brock (Member)]: Can I ask what do you mean by line item detail?

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Line item detail.

[Senator Randy Brock (Member)]: Oh, detail. Okay. It's a detail. We're

[Senator Ann Cummings (Chair)]: trying to finish it.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: We don't have that power to

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: You're not.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: And then after town meeting day and when the votes come in, then we do our final budget collection. Then they have the thirty day waiting period, so if the budget doesn't get voted for, we can enroll back to June before we get those final assignments. So that's our timeline for collecting and being able to present school spending data to you guys. In terms of the long term weighted ADM process, sometimes there's sort of a frustration with that process, and we've been trying to make improvements. This year we made some improvements and we sent out, we tried to have a very specific communication, set of communications to the stakeholders and superintendents and the data managers within the district and the business managers, and we tried to follow that timeline. We're still a little bit behind, but it was fairly successful this year, I think I can say. So in terms of that process, the data managers at the districts work with our DMAD group, the data management and analysis group that had data we and they configure their student enrollments and demographic information and send that to the DMAD group through a process, through a data standard known as Ed Fi. Actual ABN calculation is a function of this individual student's enrollment status and specific entry and exit dates during the beginning of the school year. It's highly dependent upon the data integrity of their student information systems, and there can be a lot of turnover with the data managers or new data managers that aren't quite sure about the system, so there can be hiccups. The data managers work iteratively with VMAN on sending that data up to the AOE. And then when we get that data, then on the finance side, Kelly and I, we calculate the the weighting, the long term weighted ADM. And again, that's an iterative process that the data comes in, so that's shared iteratively by our team with the business managers and that the weighting, just as a refresher, is based on the specific grade levels, pre K, elementary, middle, and secondary.

[Senator Ann Cummings (Chair)]: New term to me. Data managers.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Oh, uh-huh.

[Senator Ann Cummings (Chair)]: I'm wondering because we know we have a broad spectrum of school sizes. Is there a difference in maybe staffing? Do all our district already have data managers or are you got a

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I I would I wouldn't say that every district has a title a like that. Sometimes it's I used to be a data manager at Orlando at West in Harvard for five years, so we had that specific position. At one point, my title was something different. At one point, reported to the IT team, and another, for the rest of the time, I reported to the curriculum director. So it's been within each district, it can it can depend. There might not be a person that but there is always somebody who manages student information systems and responsible for reporting that data for the incoming.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Okay. Why variability in background and training qualifications as you would anticipate?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Yes.

[Senator Ann Cummings (Chair)]: Okay.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Yeah.

[Senator Ann Cummings (Chair)]: That tells me something. Senator Hardy.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Thank you. Hi. Hi. Welcome. It's nice to meet you. Nice to

[Senator Ann Cummings (Chair)]: meet you.

[Senator Ruth Hardy (Member)]: I'm senator Ruth Hardy. I wonder I've heard from a bunch of school districts, last year. So maybe it's better this year, but with significant problems about the grade reduced lunch data.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: That's where

[Senator Martine Larocque Gulick (Member)]: I'm That's where you're

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: going to talk about that. Okay. Perfect.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. So just as a review, it leaves the weightings, grade levels, the frame reduced lunch status, which there's different ways to collect that data. In the end, it's just where they reduce lunch or not. It's yes or no. And then if it's yes, then they get the waiting for that. The English language learner, same thing. And then the district's varsity, the population density, and the school districts, and then small school fleets. Additionally, within a long term weighted calculation is early college students, we call it phantoms because we don't have every single student. There's a formula for that. And then safe foot students also get added to that. This was a timeline that we shared with the superintendent. So, you know, we spelled it out very carefully, and we worked with them to establish this timeline. So it started in October 1, various steps where we collect the data from their data You

[Senator Ruth Hardy (Member)]: said you were gonna get to you didn't answer the question.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Think I sent that out.

[Senator Ruth Hardy (Member)]: You you oh, is it coming still? So you were gonna speak a

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: bit before

[Senator Martine Larocque Gulick (Member)]: you reduced lunch.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. Okay. So in terms of the confusion, if there was any, so yes. So it's it's the the data collection was a iterative process, and there was various different places where there could be data faults. In one case, as we discussed, data may not be new, and it's a 15 figure correctly in their system. It's I'm honestly not going into the commission because it's time on the team, etcetera. There's a number of different measures that we use to determine different interviews. Once that's direct service, the big one, direct certification, like, if they're signed up for Medicaid and things like that, that data flows. Yeah. Yeah. Yeah. In most cases, those things were working correctly. There also could have been situations where the SIS vendor that they were using, whether it was PowerSchool or any kind of campus, didn't have something configured correctly for that particular district or system wide, and it wasn't being or they didn't configure correctly, their system wasn't it wasn't being counted properly. So there was a number of different areas where there could have been shortfalls in different years' lunch. Systematically over the course of all, though, we did eventually collect all the areas that we showed. There not any drop in spring boost lunch compared to last year. In fact, spring boost lunch students as a percent of overall, they gave us actually up this year by a small amount. So we did actually collect what we think is accurate.

[Senator Ruth Hardy (Member)]: Well, what I was hearing from districts in my area was that they were reporting the data correctly and they were checking their systems, but when they were getting the data back from you you AOE, they were getting incorrect data as far as pupil waiting by a significant amount, like a lot of error.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: And so one area that I might so I said there could be an issue with their sys or the data manager said that was a third area I didn't intentionally forgot, but it could be that the the algorithms over on the demand side, on which sys banner it was and how it was working. The brain produced lunch calculations might not have been working correctly. So by the by the time that data came to me, my process has been the same since day one, and it's it's correct. So but there could have been issues with how the D band would work in specific patterns on those trainers to launch the terminations.

[Senator Ruth Hardy (Member)]: So are you doing any kind of auditing, or are you doing any kind of checking? Because it

[Senator Ann Cummings (Chair)]: was significantly off.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: But, senator, I I think actually what's really important here is that there's a process. Jill, I need

[Senator Ann Cummings (Chair)]: Oh, sorry. I have mentioned so. The record. You caught it there. Reintroduce myself. Yeah.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: So, again, for the record, Gilbert Campbell. So I think there there's it's important to clarify how these processes work. So the first, and what Ted is really signaling here, is that the vast majority of inputs for long term weighted ADM come from districts. And we know that there are significant data quality and process impediments. And and senator Cummings, you actually signaled some of those, which have to do sort of with the training and background. We've heard from data managers. They rely on actually the registrar in schools, many of whom are not trained on the input of this data. We've identified things like the household income form is actually the obligation of their food service director, and they're not necessarily speaking to their data managers. Right? So we had an example this year of about several dozen paper income forms sitting on someone's desk that never made it into their student information system. So we've already identified that there's issues in the districts, and we will continue to work with them on improving the data quality. I'm I'm going I appreciate this. So, Sandra, I'm going to just

[Senator Ruth Hardy (Member)]: Well, can I can I respond? Because I I don't think you're hearing anything.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: No. I am. And I'm I'm laying out with the process is. So if you can permit me to answer your question. Once we receive that, in the past, the way that this worked, this was in the past, a new change was processed, is that the data managers submit the data, and then the long term weighted ADM calculations were produced in a spreadsheet and sent to business managers. And it's really at that point in the process that those significant errors or variability was identified. So the data was submitted, and then the business manager said, woah, wait a minute. This is way off from last year. Then they would come back. The data managers would fix the data. It would be resubmitted. A new version would go out. We identified that this was not the process that was working. Right? So last year, midstream, we actually, at the leadership level said, everybody stop how you're doing this. We actually need the ADM to be verified and certified by data managers and superintendents. Because that's the data that matters. And then we're gonna ask that the long term weighted ADM is verified and certified by business managers and superintendents. What I was going to hear is that that process may have identified some issues that may have happened. Maybe district level issues. It may be our Ed Fi system wasn't intaking correctly. No one was ever asked to sign off or certify on inaccurate data. So the final long term weighted ADM certification was data that was validated and certified by business managers and superintendents. So that's what I'm signaling here, that there was a messy process. There always was a messy process. This year, and this is what Ted was actually laying out, and you'll see over the next several slides, is we really codified this into a very particular process with very particular deadlines. That relied on that ADM data, which is the critical input, had to be, again, reviewed, validated, and certified by data managers and superintendents. And at the same time, to avoid this, whoops, we caught this at the end, Ted and his team created a calculating tool that business managers could use to work with their data managers to kind of get more real time. We're submitting this data. It's spitting this out. And we really asked for our district partners. They should be working together on their end as they're seeing these discrepancies, and then they come in and make corrections. So by the time we're getting to the place where we are now, we have one final certification of the ADN, and 48 of our 52 districts have signed off, and one final certification of long term immunity. We've got, I think, the numbers on that as of So I'm answering your question, but what I'm signaling is that nobody was ever asked to validate, certify, sign off on data that was incorrect. We went through the process of correcting that data.

[Senator Ruth Hardy (Member)]: Okay. I guess I get to decide if you've answered my question, not you. And then, but what I'm hearing from you is that you think that the problems are at the district level and that what I heard from my district was that the problems were at the AOE level and that you were sending back incorrect data when they've sent you the correct data. And so, I perhaps this year, it sounds like you have a a better, different process. So, perhaps, you have fixed that process. I hope that's true. And I appreciate that you're looking at systems. Sounds like you've done a lot of work to try to fix that. You've been on both sides of the

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: On my side, again.

[Senator Ruth Hardy (Member)]: Of the calculus. Speak

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: the data.

[Senator Ruth Hardy (Member)]: But but what what I heard was that the data that districts were getting from AOE was incorrect for a number of districts and significantly incorrect. So hopefully your new system or new processes will fix that. So

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: I wasn't saying that. I acknowledge that the issue may have been on our side, but what I was describing was a process whereby when we identify an issue with data, that our team works with the districts to identify what that issue is, to identify where the correction needs to happen, and then resend out the data. That's a data collection process. Right? The data never comes in perfect theme and quality, never on the first try. It never happens from the districts that way. And if we need to if we've identified an issue with our algorithms or the way that the EdFy was ingesting the data, then we fix that on our end, and then we resend it back out and check. So I was describing a process. Alright. Thank you.

[Senator Ann Cummings (Chair)]: Let's move this.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Okay. So this is the timeline that we that we shared with superintendents and worked with them on. And and high level, again, it was kind of a two part process. We collected the data from the student information systems in the first box. Data managers and super superintendents signed up on that first. Immediately afterwards, I send them a document and the business managers and superintendents sign off on one one single number, which will be long term weighted for fiscal year twenty seven. And so that's where we're at right now. It's in the final throes of getting the signature to print long term weighted. K. And these are the counts where we're at as of yesterday or the day before. The first line ADM, those are the sign ups for the explicit information data. 48 out of 52 completes. And then the second line, long term waiting ATM, I have to catch up to them. I've been preparing this presentation, for example, and I haven't been working with the districts, but we still have at least two thirds of the districts that have signed up on the long term waiting. Again, I anticipate getting close to 100% by next week. Okay. Okay. So moving on now. So in terms of collecting school spending data for fiscal year twenty seven, the only thing we have collected so far was for the December 1 letter. And again, that was just a single percentage, single number of percentage estimate for their expenses, increases in education spending. So if I plot that data in this graph, that's the blue line. So the blue line is every single district. And you can read on the blue line off of the left axis. So those are the percent increases in ed spending. So it ranges from anywhere from one to 2% on the low end up to 12 to 14% on the high end. For the districts that did not respond to the survey, just superimposed the state average, which was 5.8%. So that's why there's all those blue dots in the middle that it's a straight line, which is assuming that they're using the state average. And of course they won't. It's simply higher or lower. But for now, that's what we did. Is this

[Senator Ann Cummings (Chair)]: on the slide deck that you've seen? I don't see this slide.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: What was submitted?

[Senator Ann Cummings (Chair)]: I don't know, this slide isn't, I don't see it.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Okay, we'll make sure that you get the very updated version. I thought that

[Senator Ann Cummings (Chair)]: we had sent this over this one. Sorry

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: about that.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: That's okay.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: So again, blue line represents the percent increase in head spending. The green line, if you're wondering, well, like, which districts are these? So the horizontal axis, it's numbers would the letters would be way too small to say the name of each district. So I sorted the spending just by lowest to highest. So it's just the bottom axis is just a number line. You can ignore it. But the green the green line represents the size of each district corresponding to their dot on the blue line. So for example, you know, the the high spending districts on the left were generally speaking, their spending increase was fairly low, less than the average by 20%. So that's where some of the bigger districts were. And then way at the at the top at the high end, it's kind of a mix of low to medium spending or low to medium sized districts. Does that make sense? And then in the middle, the ones that we've just extrapolated, they didn't respond to the survey. It seems to be kind of small. This is just raw education spending, not waiting. Right.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Correct. Okay.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yep. Okay. So does that make sense, the green line and blue line? Yep. The green line represents the size of this

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Okay.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: And the blue line is their their head spend increase amount. Okay. 26 to 27. K. So then using the long term weighted ADM numbers that we have today, we do have numbers for pretty much all the districts. I take their ad spending from the previous slide, divide that by long term median and to get ad spend per pupil using long term weighted ADM. Again, I rank that lowest to highest, and that's again the blue line, So that's FY '27. The orange line is FY '26 just for comparison purposes. It's been for a long term weighted end. They look the same. Obviously, FY '27 is a little bit higher. And again, the green line is the size of the district. So in terms of ads spending per pupil, it looks like the biggest districts in the state are kind of in the middle. And then, you know, there's not if you're looking at the green line, there's not really strong path. I don't know. The big districts appear to be, but there's not really sort of correlates, not like all the small districts on one end and all the big districts on the other end. They're just kinda scattered. The red line represents the f y twenty seven excess spending threshold. It's about 16,500, roughly. So looking at this data, it looks like there's going to be quite a number of districts on the blue line that are above the excess spending threshold. However, when you do the excess spending calculations, they get to deduct the spending that they have on the expenditures that they have for principal and interest payments for any bonds prior to 07/01/2021. So after you deduct the exclusions from their spending, it's looking like we were at the national meeting this morning, and we took a quick little poll, and it looks like there's all gonna be about four or five districts that at this moment are looking like they might be over the excess spending threshold, and some of them are working towards lowering their numbers so that they don't cross that threshold. Last year, there was about six. I think that's that's reflected in an upcoming slide. Any questions on this slide or this data?

[Senator Ann Cummings (Chair)]: It would be helpful, I think, to be able to see a couple years like that. I think the question is we've lowered the excess spending

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: threshold.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah.

[Senator Ann Cummings (Chair)]: We've got a proposal to cap. Yeah. It's also been suggested we lower the I think the question is, is that a deterrent? Is have we got fewer schools doing that this year than last year? And who are the schools? We've got a bunch of smaller but some mid sized schools, even some large ones that are coming up on that line. So what is the driver?

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I think the districts do try the excess spending threshold is affected as an attorney. I think that most districts, you know, listening to the business managers talk about it, they don't wanna you know, they they don't become popular with their voters. They're cleaning the voters, you know, thin concept. Yeah. It it is a distraction.

[Senator Ann Cummings (Chair)]: Locally, there's been some discussion.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Your district's in protection. The penalty

[Senator Randy Brock (Member)]: was on pause last year. Isn't that right?

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: The penalty was last year, but, yeah,

[Senator Ann Cummings (Chair)]: during the COVID years.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Be a

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: sport owner.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah. It was posturing COVID.

[Senator Ann Cummings (Chair)]: Where we did the waiting so that schools that saw a sudden jump didn't get nailed. But K. No. It went back in one. Yeah. We did it the year before, but it was in last year.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. So last year so it it's on one of these bullet points.

[Senator Ann Cummings (Chair)]: The first painful year dealing with

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Last year, I think there was about six that were over. So I think it's, like, the next the last the middle bullet point in FY '26. Six districts were over by anywhere from $400 to $1,500 over the threshold. Just reading through the bullet points. So the excess spending threshold, again, it's only applied to end spending after the excluding principal interest payments. The calculation is 118% of the average end spend. The current statutory threshold is 118% of FY twenty five expenditures adjusted annual for inflation. In FY '26, there were six districts over the threshold. In '26 was fifteen ninety six, and this year it's sixteen four seventy. And as you said, when it was last in place back in fiscal year twenty one, was eighteen seventy five six. If you had carried that forward, building indexing into inflation, it would be well over 20,000 by now under that old pile, and and it's actually down 16. So it is against lower.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: It's not.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. Yeah.

[Senator Randy Brock (Member)]: The weighting is totally different. Yeah.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: The weighting. Yeah. Yeah. That's true. So it's it's one. And we won't know like, again, we did a quick random poll. There was four or five districts maybe, but we won't know until we actually collect evidence.

[Senator Ann Cummings (Chair)]: Final budgets are voted, actually.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yes. Yep.

[Senator Ann Cummings (Chair)]: Which might not be in March.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Right. So, again, for moving on to cost drivers, when we collect the data in November in the survey, there's some check boxes with some pre pre populated cost drivers that they can select. So it's not a, they don't get ranked, it's not quantitative, it's just anecdotal. Yes, these are cost drivers that we identify with. So obviously salary growth and health insurance were common items this morning. Districts were discussing the pressures from the NEA on their ability to manage salaries over time. So that was an issue that came out this morning. And then again, same thing with health insurance. You know, it's something that's beyond their control and it's something they can't

[Senator Ann Cummings (Chair)]: And I

[Senator Martine Larocque Gulick (Member)]: loathe that. Serve on the

[Senator Ann Cummings (Chair)]: guess it's gone. I don't serve anyone. I wish I'm a of public education. And one of the few things everyone agreed on was that separating the discussion of benefits, I. E. Health insurance and salaries was a real deterrent at least from local schools into having any control because it was nothing to trade off. And the agreement was that they should be done together, but they couldn't reach agreement on at what level, a statewide or a local level, but that that it was separated out with thought that especially smaller schools were ill equipped to go into bargaining with essentially the NEA as professional arbiters and mediators and that doing it at the state level would, you know, balance the playing field, but it might be worth taking a look at how that's worked out. I've heard that several of larger private schools have left the state system and are actually saving money, so I think that would be worth looking at and if they could save money by leaving the tribe the rest of it.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I will add that I'm just waiting to stay warm.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: We also, when we held our statewide strategic planning retreat in November, so we had over 9% of our districts attended, legislators were there, state board members, and one of our breakout sessions was around, know, if we were looking towards fewer districts, what are some of the major areas of focus? There was actually a very strong consensus from superintendents, business managers, and and this is reflected in our report that we provided to you all, was a a look at some of these policy decisions, and one of them there was a strong consensus on what is a statewide teacher contract or a statewide teacher salary schedule and time health benefits as part of that marketing package to it. So we've also heard that from the field. We heard it echoed again today at the FASBL meeting. So this is an area that they are identifying as a cost pressure for them, and there's policy decisions that could be made that would actually help to alleviate some of those pressures.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Also, this morning, some folks raised again tuition increases, whether it was independent schools or tech centers. Those are things that they can't control.

[Senator Martine Larocque Gulick (Member)]: What was that name this morning? Were you in

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: the Oh, the

[Senator Martine Larocque Gulick (Member)]: the House

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: and of Business

[Senator Ann Cummings (Chair)]: Oh, okay. They're not the

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Sorry. Baswell?

[Senator Ann Cummings (Chair)]: Thank you. Yes. It's always a

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: good place to get on the ground. Straight talk.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: K.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Cost again, on the thread of cost drivers. This is just a snapshot look at expenditures. This graph is actually from FY24 data, but it's not gonna change drastically from one year to the next. So this kind of obviously shows the salaries and benefits of the major single expense for districts. So coming in roughly at, like, 70 roughly three fourths of their expenditures for salary and benefits, and then purchase services and then the other the other segments. And then so this is a point in time looking at the growth rate for these different sorry. I should also mention this is not their total expenditures. This is just their general fund. So we we when we look only at their general fund, that kind of zero tries to focus in on their ad spending amount because pretty much a 100% of their ad spending amount is in their general fund. So it's not totally spent like this excludes federal spending, for example, but still so trying to keep it the attention of the ad spending amount. So again, it's still the same general fund monies. This is the growth over five years from 2020 to 2025. So the five year growth, and this is by what we call object codes on the left. So the object codes are salaries, benefits, various purchase services, supply of property, debt payments.

[Senator Ann Cummings (Chair)]: That's interesting because we've been told that it's health insurance, which is the base benefit, is growing. But it's not growing according to this, but if the purchase property property services, professional services, if you weren't purchasing them before then the starting point is zero because if not, some of them are going up faster than insurance.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: They're a much smaller proportion of the budget. But

[Senator Ann Cummings (Chair)]: it puts increases into it's not just health insurance that is increasing its cost. The impact on the whole budget is different.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah, and I'd like to provide a real world example that we saw come through really clearly when we were doing our special education reporting and strategic planning. So we know that special education is an area in the workforce where there's severe workforce shortages. Right? And the result but it's also a mandatory service. Right? So there is no negotiating what happens there if a student has a service that's needed on their IEP that district must deliver. Right? And so one of the results of that shortage is that we've seen an increasing reliance on contracted services, which oftentimes can be three times as much. So, that may be some of that growth is lacking the in house professional services in districts for critical areas areas. And we know that in special education, that is a cost driver.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Is that included in the purchase professional services? Yeah. The the sort of contract with Yeah.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: A contracted speech pathologist. Right? And we know those services are often being provided, particularly in rural areas, say, in, like, a a teleservice, but you still actually have to have an adult in the room. Yeah. So we're talking about, like, double. Right?

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: It does that does that also include the the the line three there? Does that also include the purchase services at therapeutic schools or would that be considered tuition? Where where would that fall?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: That would be under tuition. Tuition.

[Senator Ann Cummings (Chair)]: Yeah. And that's not up here. Yeah. Okay. Other

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: purchase services.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Other other. Yeah. Other. Yeah.

[Senator Ann Cummings (Chair)]: Oh, okay. No.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Okay. The.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Oh, I see. I'm sorry. And this slide is also not in the

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Oh, our bottom is here.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: The salary breaking. Administrative.

[Senator Martine Larocque Gulick (Member)]: Is that administrative paraprofessional? All of them. All of

[Senator Randy Brock (Member)]: Have you found any inconsistencies at all in how schools or districts report purchases in terms of how they classify it and what subject area? Yes. There's always TEDs.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: There's always trust. Yes.

[Senator Randy Brock (Member)]: So our state auditor twenty years ago, and I remember we pointed out that as a consistent problem in education. And every time I've looked at it since, it hasn't approved.

[Unidentified Committee Member]: Yeah. And then and

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: problem the uniform chart of accounts.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. The problem with inconsistent They use

[Senator Randy Brock (Member)]: the same chart of accounts.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: How they use it. Exactly. Yes. So you can institute chart of accounts, but then people interpret it differently. And we had a we had a committee of business managers that we call the handbook committee because we have a great good handbook that is described in all the other related components. And they were they they meet monthly to discuss issues like that and try and arrive at more consistent coding using the UCLA for things. There's still gonna be Yeah. There's still gonna be differences.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Well, I think that one thing I'll sort of observe in just kind of my shorter time in this space, it's only been about three or four years that I've been really engaged in in, you know, from chartered accounts and beginning to understand it, is as as you all are asking questions, policy and decision making is really starting to really hone in on this. A great example that we ran into last year was everybody wants to quantify the cost of mental health services. Mhmm. And there is no code. Right? There's no code for that. And we went out to the field and we actually were like, okay, here's a methodology that we could use. And if you ask the business managers, they'd be like, yeah, okay, we could see that. But the second you ask people who actually are doing the programmatic work, they're like, oh, no, no, no. You're missing these, all of these expenses. Right? And they're not coded in the same way. So we've identified that as the use of this information becomes so much more consequential, there's additional number one, it's training and standardization of how they code it, and then additional refinements within their systems that would help us to you know, it would be great if we could someday say, everyone's gonna code mental health. You know, if you're doing these activities, that is a mental health cost. But if you're doing these activities, that goes over here. And we're just not there yet, but I think that we're we have agreement about the stakes around this data are much higher than they used to be, and so the refinement really needs to happen. So it's going be a process. I hope it's not twenty years.

[Senator Randy Brock (Member)]: Well, I mean, another major part of the process is looking at individual schools and looking at their numbers compared to other similar schools. You can make very wrong conclusions on the basis of data inaccurate. Yeah. Thank you,

[Senator Ann Cummings (Chair)]: Chittenden. Thank

[Senator Martine Larocque Gulick (Member)]: you. So, I'm on a school board, I sit in or am adjacent to those negotiation discussions. And so, I'm really interested in the salaries figures. It's just an observation. This is a five year look back and that coincides with COVID. And there's been a tremendous amount of pressure on the fact that teaching during COVID became really difficult and post COVID as well. Fewer people wanted to go into teaching because of this position of teaching, profession of teaching, and there was, I think, maybe at least a small exodus. There was definitely pressure for this profession to be compensated maybe in a different way or looked at differently, etcetera. And I'm wondering, is there, do we have data pre five years that would just help us understand if COVID has been a driver that I'm envisioning anyway?

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I think short answer is yes, have data, but because we instituted the New York Hospital in 2020, then doing the comparison could be, could introduce some difficulties that would make it difficult to compare side by side, but we know if it's possible.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: We know that anecdotally, though, as well, because I was very much involved with those funds. Districts took very different approaches to that teacher retention issue. Right? So some of them did pay raise increases across the board, which now are built forever into their pay scale, their COLA, their retirement. And some districts did one time bonuses or hiring bonuses. That was probably the best practice. And it was nationally that was sort of put forward as a best practice. I don't think that all districts did that. And so I would say, as with all things in Vermont, I think it depends on the district. But there's certainly, you are signaling something correct. During COVID, there's real upward pressure on salaries. And at the time, they were flush with money to do it. And we kept going fiscal cliff, fiscal cliff. Right? But it's really hard when you're managing a global pandemic and you're managing the pressures in stools, which absorb so much of it, to, you know, not use those bowel movements that way and even knowing what you're setting yourself up for. So I think probably folks with the best of intentions may have made some short term decisions that have really big long term impacts. Yeah. Thank you. Can shoot that.

[Senator Randy Brock (Member)]: I find it interesting that other than property, the item up there that has the least percentage increase is the one that we're hearing about from the district system, the tuition. It's gonna have less than a percent than all the other ones. Yet they're citing that as a problem.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Again, depends on the district, right?

[Senator Randy Brock (Member)]: Yeah, sure.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: All districts and not all districts pay tuition. So the districts that do pay tuition, it could be a really big cost driver for them. But districts that don't pay tuition, it would be a zero.

[Senator Randy Brock (Member)]: Does that include therapeutic?

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I think that would be almost all insurance. Yeah,

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: but they could ask one or two kids versus like a district that tuition's almost everybody or everybody.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: And again, we also heard differential impacts for CTEs, right? Some CTEs are charging significantly more intuition, but we all need to tackle that system. That's right.

[Senator Ann Cummings (Chair)]: I mean, that's the biggest issue in

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: that area. Obviously depends on the region and what you're doing.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: I think the impacts are quite different.

[Senator Ann Cummings (Chair)]: I think I'm gonna move us.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Look. We finished. Question?

[Senator Martine Larocque Gulick (Member)]: I would love that one. Okay.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Well, they never have questions. First, I had I hope we will have you back.

[Senator Ann Cummings (Chair)]: This committee's gonna have to figure out financing. The governor is sticking with I don't know if it's five districts or just some districts or what. But at some point, we're going to have to get some hard numbers as to how much money we would save, where would we save it, as opposed to we know it's gonna cost more in transportation. Not

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah. But a good question.

[Senator Ann Cummings (Chair)]: Yeah. I mean Good. Because, arguably, if we went to a foundation formula, then schools, when they have a limited budget, they couldn't export costs out of the ed fund, would have to make some of these decisions, which now we are being asked to make for them. And I'm I'm trying to figure out the numbers because if maps come to us, that's what we're gonna have to figure out is are we saving? Are we saving enough? Is it enough to make any difference on the tax rate? Is it enough to offset the just stress and change, turmoil that individual schools and districts are gonna have to go through. It will be disruptive and it will be, you know, a few years, new routine and reality, what did we call it, the future state, for all of us to get used to living in the future state, and so it's, you know, I'd like to see the numbers that assertion is based on, that by going to the bigger districts, however many you want to choose, will save us enough money to bring that tax rate down significantly. Okay. That's our another no. I guess it was just Ruth's.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Do you guys have data yet on federal funding and the loss of federal funding? I I it was mentioned in one of the slides, but I didn't see numbers associated with it. Did I know that

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: it has?

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: So as of right now, what exactly like, our our I think we were here in May, like, one of our last testimony. We are still in that state right now. So right now, in terms of dollars coming from Ed and USDA, we have no change because they forward fund. We Congress has not made any move in any direction that we could say, oh, this is where they're going. So we are literally in exactly the same place that we were in May, which is that Senate proposed one budget bill, house proposed another, administration proposed proposed something close to house, and they've done nothing on it since.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: Well, there there was Medicaid changes.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: So I think there's gonna be a lot of school based Medicaid program.

[Senator Ann Cummings (Chair)]: Okay. That's the one I saw on the the bad fund outlook of a decrease in Medicaid. But,

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: sorry, Well, we can yeah. Julia and I will we'll triangulate on that, but we've been working with our partners in AHS and we are not anticipating any major change. In fact, we're looking to expand these to school based Medicaid with some kind of major reforms. Okay.

[Senator Ann Cummings (Chair)]: Okay, I mean, I see things, it pops up. On special ed and the Department of Special Ed is being wiped out and it's not being wiped So today, I would see that as maybe our most vulnerable place that would never come through with the money they said they'd do, and they may end up with the But actual

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: that's a place that they

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: have failed. I would be so OSEP, which is the the Office of Special Education, is, as of right now, isn't we're not seeing a lot of change at the federal level. IDEA

[Senator Ann Cummings (Chair)]: is a funding program.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Looks to be at least level funded. They're the all the proposals, no one's looking for gut IDEA, bipartisan program. Right? But I always do want to remind us, these federal funds are really, really important. But when we're talking about the overall, like, the percent within our system, we're talking about five to 10. So, it's important money. It's money that's supposed to go to our most vulnerable students. But our as a portion of our entire education funding system, it's not very much. As a portion of, like, the impact on the agency of education, it's important. Right? We actually have a lot of folks whose job it is to manage and run these federal programs. They're funded with federal dollars. Part of our reorganization was actually to help insulate us from these impacts. We're keeping a very close eye on it. Where I think we might anticipate seeing reductions and, again, this is like crystal ball stuff. We really don't know. Would be around Title II, which is professional development funds. We actually utilize those funds to do some of those big statewide initiatives like literacy that we all want. There's no money in our appropriations, so we use those dollars. Right? We're we're quite scrappy about this. We probably should anticipate a reduction in the title that supports migrant education. I don't think that's all that surprising. Baby English language learners. So we will absolutely continue to come back to you just as we did all last session, but it's sort of like we're at where we were at the end of

[Senator Ann Cummings (Chair)]: last session. The core, at this point, our core education funding, would tend to I mean, not a 10 to 15% increase, but we're we're not anticipating everything just going down to No. We aren't that dependent. That's right.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah. I mean, there's other states where this this has a much larger impact than ours. Those are higher poverty states. I I do you know, just your sort of original question around modeling. Right? We've we'll continue to work really closely with JFO, and I know Julia would signal all the unknowns. Right? And tell us sort of specific policy decisions are made. It's always really hard to model some of these things out. And the one sort of thing I I want us to be thinking about a little bit as we're having these conversations, it's something that I I think about a lot, is we have couple of districts that are approaching that 4,000 mark, which we is is scale based on remember what's called the evidence based model? It's the pipe assembly model. There was a reason you all chose four to 8,000. It is a a research based, evidence based approach. Right. So there is real, you know, thirty plus years of research to back that. But what I would say is even our districts that are operating at scale as a district system have a lot of small schools, very small class sizes, and are not as necessarily, despite their best efforts, because this is not a criticism of those districts, are not staffing with the level of precision that we would want our districts to do. Right? So while it's helpful always to look at some of our larger districts, even they would say, we still have some systems constraints that are just that's just part of our system. Right? We acknowledged last year when we brought forth our proposal. It was a proposal that contemplated our exact building portfolio, including all the small schools. Right? So I just want us to caution that as we're thinking about, like, what is our basis? What is our cost savings? It's not just reducing administrative overhead. Yes. That will save some dollars. Shared contracted services. I actually don't know whether or not transportation would be more or less expensive in a consolidated system. I I think it might actually be less than we might be able to provide more services. We need to do that analysis. Right? Right. But we actually fundamentally need to make some changes in how we operate our systems. You all acknowledge that with class size minimums. That was actually a move that you made in policy that is acknowledgement of the inefficiencies in And that forward, right?

[Senator Ann Cummings (Chair)]: That is not contingent.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yes, that is the so FY '27 is the first year. We I set up a class size working group with the field. We're working on refining definitions based on that '73. What is our data collection and reporting? What's the cycle so that they can inform their FY '28 budgets? There's a lot of districts that are doing it. They're they're putting forth very unpopular budgets that are meeting, that are compliant with that '73. No one's getting there the first year. Right? That's okay. But we're gonna make progress towards it, and we're gonna be very sort of clear and transparent. So I'm happy to come back in another time and give you an update on that work, but it's it's good work. It's underway with the field, and they're trying to

[Senator Ann Cummings (Chair)]: make those moves. Because I understand until you have a specific district map to organize. It's yeah. But for us to set a policy Yeah. Which is emotionally very difficult because people read that and probably rightfully so because in many areas, we are over schooled. We have too many schools for the number of students we have in that area. But if we can't show them that they will save money, and I think when we did act 46, we dropped the ball. We just said, okay, this is it. We've done it. We all went home, and we didn't take it up again until it hit crisis. And so we can't look at that and say that was a success, everyone agrees. If you look at the map, there's a quilt hanging on the wall over there, freedom and unity, and it's a patchwork of Vermont. But in terms of that's what our school governance structures worldwide. And this is a large and very difficult social change for people. I just moved to when they closed the varied city schools. It was one every three blocks, I think, and there used to be enough kids there. I mean, Barrie has lost Mark Hilliard's lost hundreds since I was mayor. Barry's lost thousands. And they've lost that in students. But it was painful. Mhmm. But it was one very small area where you could calculate. And we're gonna have to get that much more specific, I think, as to what this will mean. Again, it may not mean we're gonna cut your taxes. It may mean they just won't go up as much as they used to. Because inflation keeps going up. We're trying to get a handle on health care. We did a couple of big things last year, but that's a national problem. We're worse than many, but but it yeah. We we really we

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: need to start getting support. We're very well prepared to support that modeling in in partnership with JFO. So Okay. We're ready for this. Okay. We can do this. We get you We need some decisions then.

[Senator Ann Cummings (Chair)]: Yeah. We'll let us know when you're ready

[Senator Martine Larocque Gulick (Member)]: to come in, and and we will get you in. You. So, Chair, I really appreciate you bringing up the larger districts with school closures because I am in the second, I am in a district with this, probably the second largest school districts in the state and One of my districts did close an elementary school and they did exactly what they should do. They turned it into their own therapeutic school, which is a great use of that space. Our district is, we're definitely monitoring our student population drop and are defining enrollment and thinking about, and openly thinking about at our board meetings, including the school. So it's something that is out there in the and we're preparing our community for the possibility of that happening. We're doing it thoughtfully. We're doing it collaboratively and sort of prepping people for that possibility. I don't want to say inevitability because you don't know.

[Senator Ann Cummings (Chair)]: We are building a lot of apartments in Burlington, but I

[Senator Martine Larocque Gulick (Member)]: really love everything you're saying and I agree so much with your desire for reform. Right now, I'm looking at what Natural Resources is doing with their mapping for land use. And I'm thinking to myself, why couldn't education have a similar kind of really super robust mapping process, similar to the land use model? Because it sounds absolutely amazing. And as someone who sat for four months trying to draw maps with our task force, I often felt that longing for that kind of a process. So I just had to get that out there. I think we were given short shrift in a four month process to draw lines on a map. It just didn't feel fair. And it certainly didn't feel professionally, like it didn't feel right. You know, we weren't using all of the various resources that we could have, and we weren't getting the engagement from local communities. Even though we did have the public hearings and everything, the process for land use is much more deep and much more robust. And so I just want to put that out there. I wish we could have given ourselves the time to do it properly.

[Senator Ann Cummings (Chair)]: Watch the reading. That was like fine. I used to was spend mapping. For a long time. I

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: think, you know, we've we've put off our decisions for a long time. Right? And so now it feels like an emergency, but you didn't really identify it. Like, we know what we know what the obstacles are. We know what the issues are. And, you know, I'd all, like, I'll sort of leave on a, like, final yeah. I mean, really, it really was. It was so I I met with Randy Lowe, who's the and I asked her if I could share this, with this superintendent for Bennington Rutland. And as you may know, they actually just went through a process of voting to close several of their schools, and they did an eighteen month process. Right? And they kind of did a straw poll of their towns. They said, we don't wanna close our schools. They made the case, you know, looking at student outcomes, looking at opportunities for students for eighteen months. The town said no, but it wasn't binding. And the school board was frankly very courageous and voted to close their schools. And I was talking to Randy about this and and her school board chair. And they said, as leaders, this was really, really challenging for us. But now our job is to prove the value of our decision for the people in those towns. Right? And I I think like, Senator Cummings, what you're you were speaking about and what the governor was talking about with Barry. Right? It was hard, But the value then has to be proven to the families, the students, the communities. Right? We understand the fears. Like, we are not owned yet to what the fears are and change. And we have to show the opportunity and show the value of this opportunity.

[Senator Ann Cummings (Chair)]: What you mean by that? Don't know. They closed their elementary schools. One's a Head Start Center.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah. Another is the senior living, one is the historical society, and then now there are schools operating at scale, right, that are able to offer programs that they weren't before, right? And so I just thought that what Randy said, what Superintendent Loew said was is it's exactly kind of the approach that we're taking is we we get it. You know, I I wish that we had another fifteen years to bring everybody along, right, for fifteen years, but we already have fifteen years worth of declining student outcomes. We feel real urgency here that we cannot allow for a process that might take another ten to fifteen years. And there it's not just the rising costs of the system. There's cost in having, in terms of student outcomes, opportunity and quality in having a fragmented system. And that would help

[Senator Ann Cummings (Chair)]: It because it's not an attack on teachers. It is not an attack on class. We used to have the highest graduate one of the highest in the country, the highest in New England, high school graduation rate. The concern was we had one of the lowest continuation rates. We are now seeing we are the worst in New England in high school graduation rates. I've been told, and it's pretty good authority, that it is young white males, rural males, without a high school education in a rural state, unless you wanna take over and do the job all our legal farm workers are doing, there isn't much of an economic future for you. The logging industry is declining, the granite industry, which used to provide good union jobs for large numbers of people here, has declined, thus varies decline. Agriculture is declining, and it's now big business. A few small farms make it, but it's especially dairy farming, it's become much larger. That's concerning. But the schools especially, and I've heard it from several sources, are concerned they don't get any of their placement things for a year or more or heaven. I'm not sure what all the tests are. There's national, we do our own, and we're not the education committee, but if we could somehow get a sheet that shows what is happening to our students and perhaps where, you know, Chittenden County is large in Vermont. It's an average school probably for most places. It is wealthier than many portions of Vermont. My county is rational in in many ways in its districts and and it is wealthier than many stations as a whole. But if I I can paint the picture now that if we do nothing, we're laying off teachers. They're laying off two classroom teachers. We're laying them off. In some instances, we're hiring other people to fill in. We are the present situation is not good for kids in many instances. But I think we also need the ability to show what is possible Yes. In a more local fashion.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah, and I think, so we have to recognize that without change, our current system is one that is cut. Right? That's the option. Cut or spend more. And even spending more, you're still cutting. Right? Most of our districts are spending more and cutting. English. That is the current system. Right? Schools are being closed in remarkably painful ways. Senator Cummings, you live this all the time. Right? Teachers are being laid off in a small district rather than could we have in a more rational system, how might you redeploy those teachers? I often talk about and my staff hears me say this all the time. It's remarkable that we have simultaneously workforce shortages and, by far, the smallest teacher to student ratios in the nation. Something isn't adding up there. How so how might you reorganize those teacher resources in a way that is respectful and planful? How can you plan for attrition? We have something like a 5% retirement rate every year. Well, if you do that over four years, like, there you go. You're actually absorbing some of that attrition rate in ways that are not forcing you to lay off early career teachers that you really wanna keep in the workforce. Right? How do you raise salaries in high poverty rural districts so the teachers that live there are not driving to Chittenden to teach? They're actually staying in their communities because they can make enough to work and live there. Right? How might we have a planful, rational system that is not highly fragmented while retaining? Everyone's very concerned, and it's understandable, about losing their local identity, but that is not the same as local control. Right? Keeping your school's local identity is a goal. We want our schools to have their own vibe, their own community. They're the heartbeat of their community. There is no cookie cutter school in Vermont. That's the whole we want deep roots in our community. Right? But how do we actually have a rationally organized system that is respectful of the people within it, rather than what we have now, which is a system that is, it's declined. Right? It's the status quo is declined. This is where our urgency comes from. This is and this is where we wanna keep working with you all. We understand. Like, these are really hard decisions, and we understand that when you go home to your constituents, you're hearing a lot of loud and angry and sometimes really scared voices. So we want to work with you on the system that's rational, cumene, and perceptible. But ultimately, that results in better outcomes for kids. Like, that's our job at AOE. Right? Better outcomes for kids.

[Senator Ann Cummings (Chair)]: If you could get us some data on what is going on. Sure. I really recommend

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: that folks read that Boston Globe article is a wake up call for everyone. I really, really hope that folks read that. We actually put out a big press release when it came out, and I think nobody picked it up. It is stark. The Boston Globe article that the governor referenced that says New England schools are declining and nobody seems to care. And Vermont is the decliner. We have the the fastest decline in literacy outcomes in the nation.

[Senator Martine Larocque Gulick (Member)]: I don't want to get into a big debate right now, but I, so I'll just be super brief. We know why we have high or low teacher to student ratios, because we're the most rural state in the country. I mean, that's, yeah. That is a big part of it. We have to deliver and education is part of our constitution. We have to deliver equitable education to every kid no matter where he or she lives or they. I also I just have to say what I would like you all to prove to me is that we can lower costs and we can lower education spending and improve outcomes. Sure. That is a circle in a square, And I have yet to have any proof that that's even possible because that seems like a fairy tale to me.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Well, so happy to come back. Yes. Why do we come back? I think we have very clear examples in other states that you guys know. Much better student outcomes at lower cost for people, all of the same issues. Right? You have to remember that we are a rural state, but there are states that are just as rural with higher poverty. And they're I will look forward to seeing that here.

[Senator Ann Cummings (Chair)]: And why did he say rural? Thing I learned last year is that that is based on the number of towns we have with fewer than 10,000 people or there's a number. I don't remember it. And we do. We have a lot of towns, but they're a lot closer together in most instances than they are in Montana Montana or or Wyoming Wyoming or or Texas. Yeah. So where we don't have a lot of people, we have a lot of towns with a few people in them, and many of them have their own schools. Yes. But in the the distance scale, we're very different than other rural states. And other states, almost every one of them, if not all, have one large metropolitan area. We don't. Burlington is just starting to reach any national standard. We don't have a Kansas City, you know, that is the income generator. New Hampshire has the Nashua, Massachusetts border area, and the rest of the state is empty. It's a different it's your tax base, and we have a lot of little tax bases. This is the smallest state capital in the country by far. And yeah. 8,000 people. So that I think is is one of the differences. We we can do more moving people around in a rational manner because there's fewer people, but we're closer together. Do you

[Senator Martine Larocque Gulick (Member)]: have mountains and rivers and infrastructure?

[Senator Ann Cummings (Chair)]: So does it Montana and Wyoming? Bigger ones. I mean, at Texas, it's mostly flat, but it's 50 miles between ranches. It's

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: need to Every state is unique. Yeah. But there are just certain fundamentals that are Okay. But we share with other states. Data would be helpful. Yeah. Because Sure. For us as we go forward. Yeah. And I wanna remind us that we've provided a lot of modeling last year. There's a narrative that's going around that there wasn't modeling. There absolutely was. And we'll come back to it. We'll refine it based on whatever those maps are that you're going to contemplate. There's only so many ways to slice the apple within the constraints of

[Senator Ann Cummings (Chair)]: that subject.

[Unidentified Committee Member]: I mean,

[Senator Ann Cummings (Chair)]: I think the modeling I think we got you.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: We're prepared. We got

[Senator Ann Cummings (Chair)]: you first, and the modeling was happening as as Yep. It was being

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: And we were refining, refining, refining,

[Senator Ann Cummings (Chair)]: And once it left here, this committee didn't get to see final modeling.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Sure.

[Senator Ann Cummings (Chair)]: And there was more modeling going on in the committee of conference, so I think as we start this year, I would like to get as much data in here. A lot of the education stuff is not ours, but we have to develop the financing and we have to be able to justify that with improved educational outcomes. Yeah.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: And I think we always have to remember, like, as you've heard us say all the time, right, it's a three legged stool. Right? Changing the funding isn't going it's not it's not the only lever. Governance is not the only lever. All of these things have to happen together to ensure that the quality leg of the stool is always held up. So there's a lot of policy moves. This is really complex work. Right? It's really complex work. And so, you know, will just having larger districts save everybody money? No, not if we don't change our practices. Right? So you, when we look at some of our larger districts, they continue to staff under 46. They just went, everybody in. Right? They continued to staff in the same way. They didn't necessarily change their systems. Right? So looking to a governance change is not necessarily going to change your spending outcomes if you don't change the way you staff, the way you run your systems, the way you contract. Right? Maybe we build we built those budgets. We actually have those budgets, and we

[Senator Ann Cummings (Chair)]: have seen Maybe what we're missing is the middle piece, is the systems change. What will that look like? Sure. You know? What because we have the proposal for the sharing districts, its name I'm forgetting, but where you would have a central, you know, human resources department and you might have a central data manager, which then would argue you could get a trained data manager who would do better. Yeah.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: And I I think Which improves quality. Right. Specialization not too good quality.

[Senator Ann Cummings (Chair)]: Would that model work as well, but, and we're already five minutes over, that model, we've got two models going here. Both are talking about shared combining services, combining, you know, management at some levels. And so that but would every school share its teacher data with that other school? I don't know. So that may be something. Okay. Alright. Thank you. Thank you, Pat. You all have

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: good conversation to start us off.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Oh. Maybe I it's sorry. Me.

[Senator Ann Cummings (Chair)]: No. That's okay. Well Charlie did not make

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: I will say that if education finance doesn't break you down, promise you

[Senator Ann Cummings (Chair)]: I will. I said I spent the morning doing this. That's all I'm ask you.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yes. Okay.

[Senator Ann Cummings (Chair)]: They said they were just getting water. I'm gonna give it two more minutes to run to the fountain and run back. I still have water with the chocolate. I

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: might I know that we're giving you're handing out, like, appointment things. Yeah. You can

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: just assign a couple to me or what however many you need to. I might leave because I don't want to hit ice over the mountain. Oh, okay. I start send that yesterday. Yeah. But then I'm gonna take off. But just give me whoever you want or just send them to me, Charlotte, if that's okay. Okay. Don't they'll just be

[Senator Ann Cummings (Chair)]: Yeah. Good morning, your dad. I'll do Gulick's Day. One. Alright. I think we've only got three or three. Just don't give all three of them to me. One. If you only

[Senator Martine Larocque Gulick (Member)]: have three, just give me five.

[Senator Ann Cummings (Chair)]: But I don't know that just glancing at them that anyone was obviously in anyone's district. Uh-huh. We have not gotten the big ones. I assume we will get the new tax commissioner and the new Can we do a lot of our commissioner, but they have not arrived. When they arrive, we will have them in for an interview.

[Unidentified Committee Member]: Do we do tennis last year? No,

[Senator Ann Cummings (Chair)]: only when they're appointed. We can't show maybe we did do show gossip. Yeah. Yeah. We do that. That's right. Okay. So I suggest Chittenden over to you at Garth.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Well, new to that. New again. New again.

[Unidentified Committee Member]: Again. I meant new again. Not

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: old in age.

[Senator Ann Cummings (Chair)]: I think his first day on the job, this committee, mostly the chair, between he and Rebecca Holcomb were in here on the proposal to make school budgets start all over again and reduce 2%. That I think was the governor's first year. They were both on school boards. I was a little rough on them. I didn't apologize in the home. So did I tell you how my reaction was to any proposal to start caps on the sheer school budget? Okay. We are ready to go. Know what, you're gonna make us feel really up to you.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: You got it. Thanks, Molly.

[Senator Ann Cummings (Chair)]: The healthcare provider tax. Yes, the record, no

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: line will direct fiscal office.

[Senator Ann Cummings (Chair)]: And you might tell us what the provider is.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: That's the reason I'm here. Okay. Jen is here to answer questions which will absolutely come up. Not if they come up, it's when they come up. So let me share, while it's breathing. This is the very upbeat presentation I've given today, various subjects. This committee has a very strong stomach, so I don't worry.

[Senator Ann Cummings (Chair)]: This is probably the most, this is the only committee where both the issues of health insurance, the cost of the insurance, the cost of the healthcare is down the hall. Two of us deal with that in the morning, but the cost, the the impact on health insurance and education funding, the two big heavy issues hit this So one we are going to have a very difficult and depending on your definition of fun here, but these are there's some major impacts headed that way.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Absolutely. I just did a fun presentation on health insurance solvency upstairs before I got here. Digress. Today we're going talk about the provider tasks. So, chair's question, what are provider taxes? They are healthcare related taxes. We call them provider taxes, they're state assessments on healthcare providers. Who those providers are, I will get to that in a future slide. But Medicaid, as a step back, Medicaid is financed through a state federal partnership. Provider taxes are a revenue source that can be used to generate funds for the state's share, but there are rules about how much you can raise. In terms of federal law, they must collide with federal laws. Just to give you a sense of the breadth of the scope of how big provider taxes are, in fiscal year twenty five, first of all, provider taxes are deposited into the general fund. They used to be deposited into a special fund called the State Healthcare Resources Fund years ago. They, for the last five or six years, they go into the general fund. In fiscal year twenty five, provider taxes accounted for approximately 88% of the state dollars that are used for the Medicaid program. Pie chart one are the state share only. So you can see of the state dollars right there, 88% are general fund, 12% are other funds, tobacco and other special funds. 28% of that general fund shares, 28% of the 88% are provider taxes. To give you a sense of how that is in the bigger scope of the Medicaid budget, I'm not talking about total budget, I'm talking about the Medicaid budget. If you add in the federal funds, all Medicaid funds, provider taxes account for 9% of the total funds that we use, both state and federal. Just to give you a sense of the breadth, the scope, how much, how big it is. Why is it a big deal? So when we talk about state dollars, that's because we get what's called federal medical assistance percentage. I think everyone here knows what it is, but I will do a quick talk about it. Have multiple We actually have four different FMAPs, but there's only three listed here. We have our regular match, so it's currently at 58.81 federal, 41.2% of state. So what does that translate to? Every dollar we spend on Medicaid under the regular match, we get $1.43 in federal match for a gross of $2.43 So for every $1 we spend on Medicaid, we get $2.43 of product, of services provided. By the way, it goes the other way. You cut a dollar out of Medicaid, you lose $2.43 So go with both of these. The majority of our Medicaid program is that regular match. We have a small sliver, it's 4,400 kids that are in the children's health insurance program, they have a roughly seventythirty match, And then we have this childless new adult, don't let the name change it, basically this is the Affordable Care Act expansion population. It's about 41,000 people, these are childless adults, most of these folks were either on rehab, catamount, or uninsured prior to the Affordable Care Act going through, and this is forty one thousand people and we get a ninetyten match on this population.

[Senator Ann Cummings (Chair)]: And that was the Affordable Act, right?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: That was the Affordable Care Yes.

[Senator Ann Cummings (Chair)]: We did catamount originally over twenty years ago, I think. It wasn't that way. No,

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: it started the year before Jen, actually close actually. Jen and I started the year after it passed.

[Senator Ann Cummings (Chair)]: Was when I was first in here. The thing was, Medicaid covered you if you had children, but if you were young or old working adult and you didn't have minor children and you weren't making enough money to pay for your health care, you were in trouble. And so we expanded. We did had a much help, which I don't even remember how we funded it.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: We did it through general funds. We did it through the employer assessments. That's right. And some of the and I think it was a percentage of the tobacco dollars.

[Senator Ann Cummings (Chair)]: So we set that up. When the Affordable Care Act came in, they did this bottom one, which it's called expanded Medicaid. Some states haven't expanded Medicaid, but there's obviously sizable incentive to expand, and we had done it, so catamount went away.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: There's two pieces of this too. There is a group of adults with children that are in the same FPL, and it's around the same number, maybe a little bit less, and they get the regular match, And then these are childless adults, and they get ninetyten match. And then the last FMAP that's actually not on here is administrative, that's fiftyfifty. So administrative cost at AHS and EUA, can get fiftyfifty matchup. This is the fiscal year 'twenty six, the current fiscal year FMAP rates. I actually added the fiscal year 'twenty seven, so we did the budget, this is the rates we're going to use. It actually went down if you look, federal share was 58.81, the federal share went down by a little bit, 5.807. Translated, that means for every dollar we spend, we have to put more, we get less match.

[Senator Ann Cummings (Chair)]: And that's based on? So

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: what it is, it's a calculation done by the federal government. It's three year average, it's based on a three year average of per capita income relative to other states, but no state can have a match of lower than 50% or higher than the 83 or something. So there's some parameters, but like California and New York, those big states that have high per capita, they're at 50%. States like Mississippi are in the 70s. We're kind of in that middle, we're more towards the 50%. Move up to penny here. Yeah. The way I describe it to people is that when our FMAP goes down, which means the federal government gives us a little bit less math, it stinks for the state budget. Because 1% is $20,000,000 It might be $20,000,000 just to maintain the same level of services. However, if our FMAP is going down, it means that our per capita income relative to other states is actually going up. It means our economy is getting a little bit better, but we're paying for it another way. From a budgetary standpoint, we're like, dang, our FFAS going down, but oh good, our economy's getting better. Just one way

[Unidentified Committee Member]: to look Yeah,

[Senator Ann Cummings (Chair)]: it goes up, gee, our people are getting poorer. So

[Unidentified Committee Member]: that's just states around us?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: So that's per capita national, all 50 states. Oh, okay, gotcha. And it's more complicated than that, this is the easiest way to describe it. There are, as I've mentioned, there's federal parameters, and I'll do my best to describe them, but if you have questions, general, absolutely pipe in. Provider taxes, otherwise if there's no parameters, we would just tax providers and then use that for a until the Feds caught on. So the Feds basically have a parameter saying, okay, we're going to let you do this, but there are rules about how you do this. So one is it must be broad based, which means it must apply across the class of healthcare item services providers, and I'll show you those list of providers in a minute. It must be uniformly applied, same licensing fees across the class, same bed, you know, for bed licensing, etc. So you can't say UBM, you pay this, copy, you pay that. Everybody is taxed the same. There can be a hold harmless for providers. You cannot guarantee directly or indirectly that the tax paid will be returned to the provider. So it can't say to you properly, Hey, you're paying a million dollars in the provider tech, wink, wink, don't worry, you'll get it back. That's illegal, you can't do that. The way they get it back, all of them do, is in their Medicaid utilization. So if you have a high Medicaid group, you will get more Medicaid reimbursement. If you have low, you'll get less Medicaid. There's not a relationship where, don't worry, you're going get it back, and that's illegal.

[Senator Ann Cummings (Chair)]: There are two, as there were, nursing facilities in the state that do not accept Medicaid. They get charged, but that's their choice. If they're in your district, you might hear from them.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Several years ago, fire tax, I'll get to this, maxed out at 6%, but years ago, we had it at 5.9%. But we increased it to 6%. And what we said to the providers at the time was, that money we make from the increase, we're gonna put back into rates. But we're gonna say that you, since you're paying a million dollars more, getting a million dollars back. We said, no, no, we're just gonna put that in the rates. So some of them got that back for rates and some of them didn't, but it went into rate increases for Medicare.

[Senator Ann Cummings (Chair)]: For hospitals that has more Medicaid.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Yes, and so the cap is 6%. It's called the safe harbor because we call it the cap, but there are rules. If you go over 6%, then there's, they might audit you. Anyway, we just don't go above 6%. And this is going to get into what's an HR1, which we'll get to at the end. This provision, to talk about HR1, will change in fiscal year twenty twenty eight. My last slide is all about HR1 and what that was. So these are the provider classes. These are all the classes that you can tax under the provider tax regulations. The red ones are the ones that we in Vermont actually tax. So we have inpatient, outpatient, it's actually combined, that is the hospital provider tax. So it's those two combined. Nursing facilities, we have the intermediate care facilities, which by the way, they're technically on the books, but we don't actually have any more intermediate care facilities anymore, so we're not getting any revenue from them, but the law itself is still on the

[Senator Ann Cummings (Chair)]: state So the outpatient, what are the

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: urgent care? Care, independent urgent cares, they don't get taxed.

[Senator Ann Cummings (Chair)]: Okay, but the hospital has one out here in the Barrymont Bay Area.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: If it's part of the hospital, it gets taxed as part of the hospital. Okay. It's part of their inpatient rather.

[Senator Ann Cummings (Chair)]: An independent Five ones don't get taxed?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: They're not They're on not not on platform we can't actually They

[Senator Ann Cummings (Chair)]: are not an outpatient, right? They're not hospital services. Okay.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Yeah, we have all of these, again, inpatientoutpatients combined, the intermediate care facilities, they're on the books, but we don't actually tax them. Home health used to be taxed, we actually took that away several years ago. We do prescription drugs and we do EMS services, and to that point I'll show you what we actually

[Senator Ann Cummings (Chair)]: said. Just

[Unidentified Committee Member]: a quick one on that one, Nolan. Like normally So on your bill you have a facility fee

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: and a professional fee. It wouldn't show up. Provider attachment does show up on your bill. But

[Unidentified Committee Member]: in that bill, developing that bill, you only get charged on the facility fee, not the physicians, the professional part, physician service. You're getting into

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: a subject, don't know, to a hospital billing?

[Unidentified Committee Member]: Well, like how the tax, the tax of the physician services, I would say the way the tax

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: is a professional charge. I would say it's just similar to a business, right? When you're trying to figure out how much my product costs, you're going to build that into your cost. Right? So my widget costs $100 in there, it's the cost of development, it's the cost of to build it, and taxes that I have to pay, right? It's not gonna show up on a

[Unidentified Committee Member]: No, no, but like an easier way to think of it, I go get a CT scan, provider chart, the provider taxes on the CT scan itself, the radiologist read

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: the Jen package Carvey, legislative counsel. So the tax applies to the net patient revenue that comes into the hospital. So basically all the revenue, less their expenses that the hospital gets, is what the tax is on. The patient directly experience the provider tax.

[Unidentified Committee Member]: Right, but it says right there that physician services

[Jennifer Carbee (Legislative Counsel)]: Physician services is a permissible class of services. Vermont does not apply provider tax to physician services. We apply them to inpatient and outpatient hospital services, which is a sort of larger category that includes all the physicians at the hospital.

[Senator Ann Cummings (Chair)]: Okay, so the primary care office at my local hospital, they're owned and affiliated with VMC. Yep, their revenues part of the all goes to these VMC.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: That net patient revenue from any service provided in a hospital gets counted. So for instance, physician services, as Jen said, is not actually, we don't actually tax it, but physician services provided within the hospital are

[Jennifer Carbee (Legislative Counsel)]: out there. So we capture hospital physician services basically by doing the hospital provider taxes. So I think in what you're asking about with the professional fees and the facility fees, think both of those go into the revenue that is taxed for the hospitals.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Okay. Even though a fractional fee is Maybe exempt not defined up.

[Jennifer Carbee (Legislative Counsel)]: Not under that definition. So that would be like if we were to impose the tax directly on, I think directly on each licensed physician in the state. We don't do that. We go to their, the ones who are at the hospital and we tax the hospital. We don't

[Senator Ann Cummings (Chair)]: go there. If you're an independent physician.

[Jennifer Carbee (Legislative Counsel)]: If you're an independent physician practicing in the community, you do not pay provider tax.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: If you're a private practice. Yeah. If you're a private practice that is Independent.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Not so. Right.

[Unidentified Committee Member]: What if you're an independent physician that works in the hospital?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: If you're an independent physician, any service you provide in the hospital would be part of the provider test because it goes to the hospital's revenue, not your individual revenue, versus in your private practice, the revenue to your private practice without a problem.

[Senator Ann Cummings (Chair)]: Where the revenue goes.

[Senator Randy Brock (Member)]: Where you take outpatient prescription drugs if you were provided a prescription drug by the hospital's prescription drug facility, each one of them has it.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: The hospital's making money on it. They're paying it. But that same prescription There drug There you we go.

[Senator Ann Cummings (Chair)]: But I think the question is if

[Jennifer Carbee (Legislative Counsel)]: you fill your prescription from your doctor downstairs at the pharmacy before you leave the hospital grounds, does that go under outpatient hospital services or outpatient prescription drugs? I think it's under the outpatient prescription drugs. It would be an inpatient prescription drug that would go, if you were in inpatient status, then you would

[Senator Randy Brock (Member)]: Right, have to is an outpatient.

[Jennifer Carbee (Legislative Counsel)]: The outpatient prescription drugs are sold at a pharmacy, I think if that's, whether that's a hospital owned pharmacy or a private pharmacy, the money would still be coming from the hospital, but the rate may be at the outpatient prescription drug rate as opposed to the net patient revenue rate.

[Senator Randy Brock (Member)]: So essentially, you're getting the same prescription, but you are getting it at pharmacy outside the hospital.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: You're not

[Senator Randy Brock (Member)]: paying it. If it's a pharmacy inside the hospital, you are.

[Jennifer Carbee (Legislative Counsel)]: No, outpatient prescription drugs is any prescription drug that is not given to a patient who is in inpatient status.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Yeah, but the prescription

[Senator Randy Brock (Member)]: is this, by outpatient prescription drug, you don't mean every drug that goes to a pharmacy?

[Senator Ann Cummings (Chair)]: I think we do. Anywhere.

[Senator Randy Brock (Member)]: So if you go to your local Walgreens or whatever and you get a prescription, that's treated as a provider perhaps. Yeah,

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: actually it's a good segue into 10 the next

[Senator Ann Cummings (Chair)]: cents per

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: 10¢ per script. Okay. So the and the pharmacies pay it. So these are the current rates, these are who we tax and these are the current rates and the current revenue. So you can see the biggest by far is hospital provider taxes. We tax them at 6% of net patient revenue, the 25 actuals that we got was $212,000,000 this all went to the general fund, were forecasted to raise $225,100,000 Nursing homes, now this one's a little weird because when this went into effect, when nursing homes were negotiating with the state, they were like, hey, this is what I was told, it's a lot easier for us to calculate if you just do it on a per bed basis. It still doesn't come to 6% of that patient revenue, that's why we do it because we know it doesn't do that, but it's easier for them to pay it this way. And that one hasn't actually increased in a long time. And the revenue has been pretty flat on that, it's been about 14,400,000.0 per year give or take, you know, $1,020,000.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Is that an

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: annual number? It's an annual number. 4,919. Oh, yes, that's per bed per Not every time it switches.

[Jennifer Carbee (Legislative Counsel)]: Right, it's based on the size of the facility, how many beds they have in the facility. Yeah.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Then we have an Ann Cummings Provider Tax, this is the newest of them, think this one's been in effect probably six or seven years. That's 3.3%, it brings in about 1,400,000.0. Then we have the Intermediate Care Facilities, it's at 5.9, we don't have any, and finally as we talked about we have the pharmacies. And then we had home health at sunset in 2023. So then we raised $229,000,000 in total provider taxes, most of it was from hospitals in '25, and then we expect $242,000,000 in fiscal year twenty six. But you can see hospitals accounted for roughly 93%. Just to give you a sense of context, provider tax has long been associated with Medicaid funding. In 2004, this is according to Kaiser, from 2004 thirty five states had at least one provider tax, but twenty years later 49 states, NDC, had at least one healthcare provider tax. Ironically the most common was nursing homes. 46 states had nursing home provider tax, 45 had hospital provider tax, and then you have approximately 13 states including Vermont had provider taxes above 5.5% for hospitals, and approximately 20 states had provider taxes that were below 3.5%. So you can see different states are doing it in different ways, they're taxing different classes, some have They

[Senator Ann Cummings (Chair)]: have more nursing homes than Vermont. More hospitals.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Just for my general knowledge,

[Unidentified Committee Member]: what's an intermediate care facility?

[Jennifer Carbee (Legislative Counsel)]: The full name was Intermediate Care Facility for Individuals with Developmental Disabilities. It was a particular type of

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Say a

[Senator Ann Cummings (Chair)]: group home. Yeah, That we no longer like some category. Now

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: the slide that we'll bring you right. So HR one included a phase down of the provider tax rate that expansion states could charge from 6.6% to 3.5% by 2032.

[Senator Ann Cummings (Chair)]: I think we did at the after this.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: So in Vermont, it only impacts the hospital provider tax, and that's because the law specifically excludes nursing homes, and that our ambulance one is below 3.3, it's below 3.5. So really in short, the one that we only want to affect is the hospital provider tax. That said, that's 93% of the provider tax money we spent. So it will begin on tenonetwenty seven, which is fiscal year twenty eight, and then the law also prohibits this from enacting any new provider taxes. So we can't decide, hey, let's do physicians, let's do dentists. We can't sweep

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: something else in.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: We can't sweep something else. Or can we say, we're going to go from 3.3 to 3.5, or 3.7 or 4% for ambulances, but we can't do anything. This is it, it's frozen. This is frozen. So this is the estimated impact, and these numbers will continue to change. If you have AHS in here, the numbers are slightly different, but we're all sort of on the same page of our thinking. And so the preliminary estimate is that in fiscal year twenty eight when it starts stepping down, the first year will be 15,000,000, then it'll be 35,000,000, then it's 57,000,000, and by the end, when it's fully implemented, the last change is in fiscal year thirty two, but since federal fiscal year and state fiscal year, it will actually fully be implemented by fiscal year 'thirty three. On today's dollars, it's about $113,000,000 revenue loss. So again, if you look before when I talked about Provider Tech on Aetna, so when you have $113,000,000 less in general fund, if you were to just say, okay, that's all the general fund that's gonna be spent on Medicaid, that's upwards of $300,000,000 lost in service. Now of course, how you address it is up to you guys. You have multiple levers. You can increase revenues, you can cut services, you can find efficiencies, you can take it from elsewhere. Those are all the levers that you will have to look into, but the reality of this situation is that you will have $113,000,000 less of general fund coming to the state, whether it's Medicaid managed or not.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: It's your job to answer this, Nolan.

[Senator Randy Brock (Member)]: What problem were they trying to solve here?

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Do we have this discussion this morning?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: What I will say is that I can't tell you I'll tell you exactly what did it and I'll also tell you that the I remember the Obama administration was looking at this too. I won't tell you what their motivations are, but I will tell you that when this bill happened, the bill booked lots of savings to the federal government. A big chunk of that is from this, the assumption that states will cut back on the Medicaid program, and when they cut back on their Medicaid programs, they're going to draw a less federal match.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Okay.

[Senator Martine Larocque Gulick (Member)]: Because it will mostly impact Yeah.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: The states that have done Medicaid expansion and that have had a less Medicaid program. And what they can

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: say here is we're not cutting Medicaid. We're just cutting your money. You're the most. They have a lot of children.

[Senator Ann Cummings (Chair)]: They won't hate us. Much, if they already hate us, emerging school districts, how much more can they hate us? Who are they? They looked

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: at it.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: Remember reading in the New York Times or something about how they were looking at savings. They eventually didn't do it because they said, Don't. And they said, oh, we get it. Soak. Okay.

[Unidentified Committee Member]: Is the thinking theoretically that now

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: you can then lower rates?

[Unidentified Committee Member]: Because you don't have to spend that pro hydro tax, like of your net patient revenue?

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: So you're reimbursed, doesn't have to be This is a great question. Some people on the surface say, great, hospitals are saving $113,000,000 but if we have to cut Medicaid rates, they're gonna lose it in other ways. We start cutting our Medicaid rates in hospitals, they save $113,000,000 They're not. Especially if we're matching all that, that's now $200 to $300,000,000 less in spending. They may actually come out behind.

[Gilbert Campbell (Deputy Secretary and Chief Operations Officer, Vermont Agency of Education)]: Yeah, well, it's really happens in care, people Right, are lot

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: yeah, more than getting it's literally how you service it. Yeah, actually to Jen's point, if we cut services, if we cut access, we cut Medicaid, people are not gonna see their services, and you're gonna see an increase in uncompensated care, also they have to eat that. So there are other avenues which they'll save that on that end, and they're gonna have it on the other end. So I don't

[Senator Ann Cummings (Chair)]: Our small rural hospitals that in poor areas, a bulk of their payments come from Medicaid, this is definitely going to impact their survivability. I mean, most of them right now are pink or red. I think most countries are the blue at the moment.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: What I would say is hospitals, not to put money and food and toys in their mouth, they never like the, they don't like the provider's access, but they understand it. Yeah.

[Senator Ann Cummings (Chair)]: Right. They don't come in and well, home health did, but they were really suffering because they had exclusive rights and that was fought in court to provide home health services and we let the for profits in and they let off people that were paying full freight with private insurance, went to those things that are advertised on TV, and the home health got left with predominantly Medicaid payments and were I think they still are, but they were struggling even more as that change happened. Okay. Thank you, Nolan. It's been a little of.

[Senator Randy Brock (Member)]: It certainly has gone for me, know.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Yeah. Thank you, Nolan. Appreciate it.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: I can't end you with a joke.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: Okay, here's

[Senator Ann Cummings (Chair)]: we go. Gonna get this really Brattleboro. These are the one, two, three, Ruth Hardy of Gravel Barrow. We're closer than Randy. The person Right. Kjellberg.

[Senator Randy Brock (Member)]: Who's that?

[Senator Ann Cummings (Chair)]: Mike Donahue. Don't like it. Is the one economic progress council.

[Ted Gates (Senior Fiscal Analyst, Vermont Agency of Education)]: I don't like it.

[Kelly Murphy (Education Finance Director, Vermont Agency of Education)]: I'm happy to Hi, guys. Have a nice weekend. Hi.

[Senator Ann Cummings (Chair)]: And Sarah Fernan from Rutland. Okay. It's my dear. Brooklyn. Southern

[Senator Randy Brock (Member)]: you're a Southern person in

[Senator Ann Cummings (Chair)]: this The chair only does.

[Nolan Langfeldt (Joint Fiscal Office, Fiscal Analyst)]: I think that was great.

[Senator Ann Cummings (Chair)]: Or anybody else that know him.