Vermont Legislature SmartTranscripts:

[Sen. Ann Cummings (Chair)]: We are live. Okay, we are live. This is Senate Finance. This is the ninth Sorry, it's me. And we are going to start with perspective on the Ed Fund, what we may be looking at next year. And then, committee, I have canceled our out of state Zoom witness tomorrow, but I just learned the snow is not starting until 02:00. So I may have been a little too merciful, but I am trying to get you out because I know a couple of you have wrong rides, and thinking it is supposed to be well, we will make up for it. That's okay. Yeah.

[Julia Richter (Joint Fiscal Office)]: Well My my worried husband will thank you. Yes.

[Sen. Ann Cummings (Chair)]: We don't. And this committee all know I'm the only one with a reasonable That's right. So I will stay, greet the students from early college, and anyone that wants to can do that. I'd like to be Yeah. Do one at 01:30, but Okay. Get you home before there's any snow. Okay, Julia. The floor is yours. Thank you. I'm Julie right here with

[Julia Richter (Joint Fiscal Office)]: the Joint Victims Office. There is a slide deck on the committee page under my name. I'll go ahead and share it on my screen. And while I'm pulling it up, I I presented these slides in as well, and they are dovetailing with the some of the charts that Jay Feldman was showing you last week. So okay. Yeah. I'll do that.

[Sen. Thomas Chittenden (Vice Chair)]: I'm gonna go to

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

[Sen. Ann Cummings (Chair)]: Growth. That's a good word. Thank you.

[Sen. Thomas Chittenden (Vice Chair)]: Before you get started, could you clarify a partisan or vampires names that

[Sen. Randy Brock (Member)]: you want?

[Julia Richter (Joint Fiscal Office)]: I appreciate you asking that sometimes. I am nonpartisan, unbiased, and I don't provide policy recommendations. But you just don't Just

[Sen. Thomas Chittenden (Vice Chair)]: want to clarify.

[Sen. Ann Cummings (Chair)]: Had the The councils don't do that.

[Julia Richter (Joint Fiscal Office)]: Okay. Any questions? Alright. So two pieces that we're talking about. One is a review of the education fund over time. This is the alligator chart and how users have grown. And then the second piece is looking forward into the education fund and with a huge number of assumptions and caveats, if all of these things held true, then what would we estimate property tax growth would look like over the coming few years? So this is oftentimes when we're talking about, when you're talking about like the yield bill or the Education Fund outlook, we're only looking into the coming fiscal year, and this is an attempt to look at more where are we within the current twenty years. So the education fund over time, choosing the years of the analysis that we look at the education fund is obviously going to impact the growth rate, right? So uses from the education fund have grown at different rates over time. So if we look at the past twenty years, ten years, five years, of course that will impact the growth rate that we're calculating. And we know that there's many reasons that ed fund uses grow, and this includes cost changes and pressures, inflation, federal decisions, state decisions, and local decisions. We're not trying to explain why education fund uses have grown, but rather just how have they grown. There's a couple of different Well, there's many different ways to look at growth and growth rates. I've looked at two here because they're ones that are often used and often talked about in this building. One is the compound annual growth rate, CAGR, other is average annual growth rate, And they're really just different ways to measure changes over time. So CAGR, compound annual growth rate generally smooths the change between a time period based off of the number of periods within the timeframe that we're looking at, where the average annual growth rate is looking at the average relative change year over year and then taking a simple average of those averages. So that's going to be capturing more volatility with year over year changes, whereas CAGR is going to be capturing a more smooth trend. I know you know this, and I think it's important to keep in mind when looking at percentages changes and just thinking about that is that it's relative to the base that the percentage change is being compared against. I know that's something that we've talked about in this room before, that the more that something grows in one year, the more the following year that a percentage will be increasing by. So if you see an increase of ten percent one year, that's gonna grow the base. In the next year, 5% is going to be higher than if the prior year had been five times. So these are, I didn't adjust anything for inflation in this slide deck. This is the total uses of the Education Fund over time going back to 2005. Of course, there have

[Sen. Ann Cummings (Chair)]: been a number of

[Julia Richter (Joint Fiscal Office)]: policy changes in this timeframe, but we can see sort of how the trend has changed over time, where in recent years education fund uses have been growing at a faster rate than they were in the early 2000s.

[Sen. Ann Cummings (Chair)]: We've removed things from you too. Right? There's been things in and out. In and out of the schools in Vermont, this adult basic and think pensions have been kicked in and out. Yeah.

[Julia Richter (Joint Fiscal Office)]: So there so that's thank you. That's a great point that we're literally just looking at what the education fund has been responsible for covering in aggregate. That's all this is capturing. There have been a number of ins and outs that that have happened over the years that are going to impact this line.

[Sen. Thomas Chittenden (Vice Chair)]: Not adjusted for inflation.

[Julia Richter (Joint Fiscal Office)]: Yeah. Nothing is adjusted for inflation. This chart, I went back and forth whether to include it. I think it's helpful because this is what we're looking at here is the relative percentage change in Ed Fund uses compared to the prior year. And so I think that this helps to illustrate the point that when you're looking at the average change in one single year, it's not telling the whole story of how things are changing. And so we see the relative smooth ish line of the uses over time. But if we plot just the percentage change, we don't see the same smoothness. So this is really just trying to show the importance of keeping these different factors in mind when thinking about taters and

[Sen. Ann Cummings (Chair)]: the anxiety. I think it's more the way people feel it.

[Sen. Thomas Chittenden (Vice Chair)]: So I've definitely this is all familiar to me, but I'm I'm not remembering because I wasn't here. But what happened in 2010 that we had a negative percent increase? The economy dropped. The economy economy. Yeah. And how did that make the end fund go down?

[Sen. Ruth Hardy (Member)]: So a lot of school districts and the state that that had to cut a ton of things. 0% CDA. Yeah. People got laid off. There were people took salary cuts. There was like a

[Sen. Thomas Chittenden (Vice Chair)]: huge Deflation paid these costs. Yeah. Okay. So our school districts felt the impacts of the economic recession is opposition states since that lesson of their own volition. This wasn't state mandated that they come. No. Well,

[Sen. Ruth Hardy (Member)]: was when it was going on.

[Sen. Thomas Chittenden (Vice Chair)]: Job holding going on.

[Sen. Ann Cummings (Chair)]: Wasn't it there?

[Julia Richter (Joint Fiscal Office)]: That was when they reset the base. What was that thing called? The or something g.

[Sen. Randy Brock (Member)]: Oh, wow.

[Sen. Ann Cummings (Chair)]: And was that that I know I'm in the appropriations committee. Yeah. The at that point, we were mandated to make a general fund transfer with an inflation. I don't know exactly what they did, but there was an agreement, which then some people said some people redeemed on, that they re they if they I think they did the increase, but they recalculated the base. They did something because we were doing that. There were several 100 state employees laid off. There were I mean, that is the painful time that many members of the legislature, maybe most, didn't have to go. It was where I think most of his home will never have to go again.

[Sen. Ruth Hardy (Member)]: I I was on a school board during this time. Okay. It was yeah. School boards cut things because there were nobody had money. It was it was a. All the property values declined, and all that stuff happened as well. And there was deflation, though. Deflation. Oh, yeah.

[Sen. Ann Cummings (Chair)]: Yes. I mean, it was it was not a good time. The green recession.

[Sen. Ruth Hardy (Member)]: I was in Middlebury College Budget Office. She cut a lot of stuff.

[Sen. Ann Cummings (Chair)]: Did. So we're back. I keep going.

[Julia Richter (Joint Fiscal Office)]: The other piece I would note on this, what we spoke about a couple of slides ago, is how the base, the percentage change really matters, the base. So in terms of all of these changes that are above zero, the following year's change is gonna be on top of a larger base. So they compound.

[Sen. Ann Cummings (Chair)]: Yeah. We've gone down, but we've never gotten to the prior race. If you look at that last big blip, we're down, but we're not down. No. The next slide. We went down, but not all the way down, so if anything is building up on a higher base over time, we've got the highest base we've had in over a decade, twenty years. So

[Julia Richter (Joint Fiscal Office)]: taking this together, how do we estimate the average like, people ask how much has the education fund grown over time? How much have use has grown over time? And the question is always, well, depends for the answer, it depends. Depends on how you calculate the average and depends on what you mean by over time. So I included a couple of pieces in here. One is looking at the compound annual growth rate CAGR over twenty years, ten years, and five years. So you can see that when narrowing it to more recent times, that rate has been faster, steeper. The same intuition holds true with the average annual growth rate, which you'll recall is calculated by just averaging the average change each year. So that's how education fund uses have grown, right? That's the sum of our education payment, categorical aid, pension costs, the appropriations being paid out the education fund. And we know that there are a number of non property tax revenues that flow to the Education Fund, and those non property tax revenues are growing at a slower clip than the education fund uses. So because the Ed Fund is a self leveling fund and that flexible lever is property taxes, property taxes need to make up an increasingly larger share because they're growing at distinct growth rates. And that's what we see here in this chart. The alligator. Yeah, the alligator chart. So this bottom line here that's orange, that, those are the plotted total non property tax revenues that we were looking at on the prior slide, that's from the consensus revenue forecast for actual collections. And the blue line, this top line, is the same ed fund uses line that we were looking at on the prior slide. I'll note that I limited it to go only back to FY 2018, because that's where there was the revenue change in terms of doing away with the general fund transfer and replacing it with the entirety of sales and use. So I thought I would more apples to apples if we were able go back to 2018. Wait for it,

[Sen. Randy Brock (Member)]: like Around right around that time.

[Sen. Thomas Chittenden (Vice Chair)]: Somewhere in 2018, some of cases. Yeah.

[Julia Richter (Joint Fiscal Office)]: And JFO has a great read that I can share with Charlotte that spells out on average how much more additional money did the Education Fund receive beyond what was forecasted, and I don't remember the numbers off the top of my head, I've left them up, but essentially what it says is that the education fund ended up receiving more funds than were originally projected in the revenue swap because of the

[Sen. Ruth Hardy (Member)]: way current decision. Yeah.

[Sen. Thomas Chittenden (Vice Chair)]: A lot more.

[Sen. Ruth Hardy (Member)]: But that was only that the blip was only one time because then it was built into the like the way fear decision increased revenues once and then they stayed in.

[Julia Richter (Joint Fiscal Office)]: They stayed. And then they stayed increased. Right. Right.

[Sen. Ann Cummings (Chair)]: But they

[Sen. Thomas Chittenden (Vice Chair)]: didn't base.

[Sen. Ruth Hardy (Member)]: It didn't keep going up. That's what I mean. Like, once it happened and it just happened once.

[Sen. Thomas Chittenden (Vice Chair)]: It took a couple of years, but it rebase itself.

[Sen. Ann Cummings (Chair)]: Yeah. Yeah. But I mean, repaved again. So we, yeah, we also got the federal stimulus that year that told you to go out and buy things.

[Sen. Thomas Chittenden (Vice Chair)]: That's what you see in 2020.

[Sen. Ann Cummings (Chair)]: Yeah. Oh, 2020. So when people bought big screen TVs, you had fun made out. But that is probably a reflection of the economy. It's a consumer base. If people were feeling strong about the economy, they'd

[Sen. Thomas Chittenden (Vice Chair)]: more likely to buy things. That money's work as a thesis.

[Sen. Ann Cummings (Chair)]: Yeah, yes. They didn't talk about it this year, but last year the economist said there was still a lot of household savings, that's what went up. A lot of people did bank that revenue or paid off credit card debt and that household wealth, I think, is how they is what they called it. But they didn't talk about that this year. So Can I ask you a question? Julia, on

[Sen. Thomas Chittenden (Vice Chair)]: the note total of the orange line, it looks like there's a decrease from 26 to 27, but that's not reflected on this The $10,000,000 pull from purchase and use.

[Julia Richter (Joint Fiscal Office)]: No. So the the what you're I appreciate the clarification.

[Sen. Thomas Chittenden (Vice Chair)]: Yeah.

[Julia Richter (Joint Fiscal Office)]: So '26 is including in in this line the one time monies that were used from the general fund.

[Sen. Ann Cummings (Chair)]: Okay, okay.

[Julia Richter (Joint Fiscal Office)]: This is assuming that no one time general fund money is transferred to the education fund. And then the next chapter of the slide deck looks at with the one time monies being applied, how would it shake out in future years.

[Sen. Ann Cummings (Chair)]: This

[Sen. Randy Brock (Member)]: is great.

[Sen. Thomas Chittenden (Vice Chair)]: None of these slides though are overlaying the other compounding factor for why we're spending so much valid time on this which is our at the same time our student population is declining. I think those that's the other impression we're feeling is the voters are asking us to be judicious detention in how we spend our education dollars and educate the wealthy regular kids.

[Julia Richter (Joint Fiscal Office)]: Yeah, that's a great point. We're not looking at per pupil spending. And if we did have a student account overlay on this chart with a different axis, we would see it decreasing over time.

[Sen. Thomas Chittenden (Vice Chair)]: This

[Julia Richter (Joint Fiscal Office)]: next chart is the same information that was presented on the prior slide, but I had a feeling someone was gonna ask for the totals on one of those years, so I gave them all to you. This top line again is the blue one. Those are your total uses. And then the green bar, the orange bars are the non property tax revenues. So that's including the general fund transfers, Senator Beck's point. And then the green bars are reflecting that increasingly larger share that property taxes or something else needs to make up, and

[Sen. Thomas Chittenden (Vice Chair)]: this

[Julia Richter (Joint Fiscal Office)]: is why property taxes are growing.

[Sen. Ann Cummings (Chair)]: Cost of revenue, revenue, risk. Also,

[Julia Richter (Joint Fiscal Office)]: not adjusted for inflation.

[Sen. Thomas Chittenden (Vice Chair)]: Revenue that's going up, property taxes.

[Sen. Ann Cummings (Chair)]: I mean, sales taxes goes up. Last revenue forecast, we will pull those forecast. Right?

[Julia Richter (Joint Fiscal Office)]: Yeah. There were It's the latest e board latest the January forecast adopted by the eboard. I did link it here. Was it was the impacts were de minimis to the education to the education fund. Right. In terms of But

[Sen. Ann Cummings (Chair)]: I had was held last But there was a downgrade in July. Yeah. And the last forecast that we did on the actual monthly revenues Yeah. It was down a little bit.

[Julia Richter (Joint Fiscal Office)]: But And how we wanna see it going. Right. And the or the yield bill and the education fund, just like as you know, just like the budget, we assume that consensus revenue forecast. Right.

[Sen. Ann Cummings (Chair)]: So handing over, it transfers the next year. It's excess money

[Julia Richter (Joint Fiscal Office)]: Or a deficit. Mhmm. Yeah. So, that's the education fund over time. Looking forward, another disclaimer. These are illustrative. They're not an official projection or forecast, and that's because forecasting the education fund in particular is so hard because the bulk of it is based off of local school budgets, and we at JFO cannot estimate how school boards are going to build budgets. For the public. Or how the public is going to approve them or not, and how federal changes may or may not impact the education fund. So illustrative, non official forecast, and I also want to note that we're looking at these next charts are looking at the and the prior ones, looking at the Ed Fund at the aggregate level, so we're not looking at how specific groups of taxpayers are who are not impacted. So this is what I just spoke about, we know property taxes are set to ensure that fund is fully funded. So any component associated with the education fund is going to impact property taxes, making it so hard to forecast into the future. And so we really need to approach it with caution because there's a number of significant assumptions that need to be made.

[Sen. Thomas Chittenden (Vice Chair)]: And this is based on our current public formula, right?

[Sen. Ann Cummings (Chair)]: Yeah, thank you. Will, I

[Julia Richter (Joint Fiscal Office)]: think in two slides I'll include all of the assumptions that I'm making. It's based off of current law. And to your point, with with the change to act seven week three, assuming the contingencies are met and the foundation formula rolls out, these projections won't have the same kinds of challenges because no longer will education spending be determined at the local level. It'll be we can forecast forward the education opportunity payment. Okay. So, we'll be able to know better the trajectory of the Fund. Using property using one time money to buy down property taxes in a single year puts upward pressure on the following year's tax changes. And that's because the following year needs to both make up the difference that is forecasted in that year. In addition, it needs to make up the difference that would have been forecasted in the prior year had no one time money's been used. So last year, about 118,000,000 in one time money was used to fight on property taxes for FY '26. And that was the 77, the bit from the general fund in one time and 41,000,000 of Ed fund surplus. So what did I assume? A lot. These are the significant assumptions. So I assumed that the Ed fund uses would grow by 5% because that was kind of the middle point in terms of the twenty and and five year

[Sen. Ann Cummings (Chair)]: CAGR AGR projections. That's just the usage now. That's no money going into school construction or

[Julia Richter (Joint Fiscal Office)]: Yeah. I'm I'm saying, let's just assume it's wrong, but it's as good as we can get. Let's just assume that ed fund uses are gonna grow at an even clip of 5% year over year.

[Sen. Thomas Chittenden (Vice Chair)]: And no new contributions to stabilization? Mhmm. So we're using all monthly available? Mhmm. Okay.

[Julia Richter (Joint Fiscal Office)]: We're gonna assume the non property revenues from the consensus revenue forecast, we're gonna assume no surplus or general fund money in future years unless it's been reserved, which I spelled in the scenarios, assuming no reversions, assuming no contributions to the stabilization reserve, assuming no changes to federal estate policy that would impact funding, assuming no impact from Act 73 in FY '29, and assuming all else equal. I recognize that these are a lot of assumption and that issues can be raised with any number of these assumptions. The idea is to provide intuition and keep it simple enough to people, for people to be able to hold in their heads the multitude of assumptions. So using all of these assumptions, assuming no buy down, what we see is that property taxes would grow by approximately 13% in FY '27, a further 7% on top of that in '28, and then 4% in FY '29. We can see those estimated numbers here

[Sen. Ann Cummings (Chair)]: in this first row and then relative percentage change year over year. So what the buy down has been doing is kind of smoothing out that 18 and then 12% of two very high growth years.

[Julia Richter (Joint Fiscal Office)]: Yeah, I put together some charts which shows how the buy down has been working. I think the image that I've been using or that has existed in my mind as I was putting this together is rather than the buy down smoothing it over a year, it's more pushing it forward. So it's like those increases are coming, and

[Sen. Ann Cummings (Chair)]: rather than feeling that increase in that year, it's being pushed forward another year and another year by using one time monies. Because we're not spending less. That money's being spent. Exactly. Plus. Okay.

[Julia Richter (Joint Fiscal Office)]: So this is what those numbers look like in a chart going back to FY23. Now instead of looking at uses, we're looking at total property taxes or other revenue needed under the current system, it's property taxes or something else. This next chart, I think this is very illustrative of that pushing it forward, where what if a 105,000,000 one time general fund monies were were used to decrease property taxes solely in FY '27? And what we can see here is that would push the total property taxes collected to about 5% increase year over year. But then that would create absent no more one time money, create that a 15% increase in property taxes being collected the following year because it's it's it's pushing it forward. And then going back down to 4%. So it's kind of like catching up to where property taxes would naturally be absent one time monies and then increasing at the natural rate. Again, we're assuming a 5% use growth. I

[Sen. Ann Cummings (Chair)]: heard it in the hall. There's some discussion. I don't remember where I heard it. Maybe it's in the house of using the one time money, one third, one third, one third to smooth out that essential 10% jump.

[Julia Richter (Joint Fiscal Office)]: And that, yes, and that's actually the last two slides of the slide deck, because that's something that's being contemplated. So that's what it would look like if the $1.00 4,900,000.0 at one

[Sen. Ann Cummings (Chair)]: time general fund were used in one year.

[Julia Richter (Joint Fiscal Office)]: And this is the chart that corresponds with it. So again, we see the blue line is the same as what we were looking on the prior chart. That's the amount to be collected from property taxes each year. The gray line represents the total property tax needed after accounting for the buy down. So we can see that the buy down has made it so that less monies have been collected than would have been collected. That that makes sense. Literally what it does. And then by using the entirety of the 105,000,000 in one year, it then needs to make up that difference in FY '28. Madam Chair, this is the idea that you were referencing folks have been talking about of if instead of using the entirety of the 105,000,000 in one time general fund to buy it down in a single year in FY '27, what if that 105,000,000 were used over three years? So a third was used in FY '27, two thirds were set aside to be used in '28 and in '29. And what we see here is this, instead of pushing the entirety of the jump into FY '28, it creates an increase this year and then the further increase the following year and the the further. So it's a little bit more of a slope. Senator Hardy. Just have

[Sen. Ruth Hardy (Member)]: to point out that I proposed something similar to that last year. Truly a good chance for me. I brought them in here.

[Sen. Thomas Chittenden (Vice Chair)]: And they were ignored by most people.

[Sen. Ruth Hardy (Member)]: To to do just that. To smooth it over the years and not do it all at one time. Just makes the medicine harder to swallow when you have to do it.

[Sen. Ann Cummings (Chair)]: Okay. So

[Julia Richter (Joint Fiscal Office)]: here we're seeing the FY '27 buy down amount is higher because we have that Ed Fund surplus in FY '27, whereas we're assuming no Ed Fund surplus of '28 and '29, just because that's what I'm assuming. And the relative change of 10 to eight to five, which of course is is sapping on

[Sen. Ann Cummings (Chair)]: top. Mhmm.

[Julia Richter (Joint Fiscal Office)]: And then this is this is how that chart would look. We see the significant we see the 118,000,000 in buy down that was used in FY '26 here, which is that biggest gap. And then if a third were to be used each year, you see the the gap decreasing each year because it's rather than pushing the entirety of the problem, like pushing it as sandcastle.

[Sen. Ann Cummings (Chair)]: We've this has been what we've done in the past. We've done numerous things to cushion in a lot of cases, it's been local communities that had some huge jump in their or usually it was a huge drop in their grant list probably before we put in the CLA, but we've been we've tried to cushion the local schools from any sharp increase or decline, and we've tended to smooth those bumps. We've smoothed it out like so that it's averaged, like so we don't get that kind of a line, we get more of a smooth up and down line. So this would it was tradition. This does not assume any huge bumps in school spending. Right?

[Julia Richter (Joint Fiscal Office)]: No. But a a flat 5%. Okay. It also doesn't assume cost savings if there were to be policy implemented that that were to decrease users by five per under 5%. That also wouldn't be captured here. Okay. That's everything that oh, there's the considerations. I think we talked about all of this. That buying down a property tax in the one year puts upward pressure on the following year's changes. The more that's used in one year, the bigger the difference to make up the following year. We're looking at aggregate tax growth. So we're not looking at the differentiation between property tax classes from our income groups. Ultimately, the Ed Fund continues to grow, if uses continue to grow faster than non property tax revenues, the Alligator chart will continue. Property taxes or something else will continue to increase to make up a larger and larger share of the fund.

[Sen. Ann Cummings (Chair)]: And that is everything I've heard. Okay. Committing. Senator Ben.

[Sen. Thomas Chittenden (Vice Chair)]: I would just say that whether dumping revenue over one year or three years or five years doesn't matter because that's not the problem. The problem is 5%. Until we deal with 5%, we're gonna have the revenue side problem.

[Sen. Ann Cummings (Chair)]: What's that what's that mean?

[Sen. Scott Beck (Member)]: Means we have to control spending. We can't let it we can't let it grow at 5% every year. We don't have enough money to make that up.

[Sen. Ann Cummings (Chair)]: Yeah, it's growing faster than inflation. It's growing faster.

[Sen. Scott Beck (Member)]: Economic growth, everything.

[Sen. Ann Cummings (Chair)]: And economic growth is growing faster than the sales tax, is a reflection of economy and economic competence. But how we use the revenue we do have exacerbates the problem. Well, it can exacerbate

[Sen. Ruth Hardy (Member)]: the problem. That's what happened last year and made it worse this year.

[Sen. Scott Beck (Member)]: You got money in before the yield letter comes out. It just makes it easier to spend up. Does it just singles to them? Yes. It singles to them that

[Sen. Ruth Hardy (Member)]: Well, that's what happened last year

[Julia Richter (Joint Fiscal Office)]: is it was at the beginning of the session.

[Sen. Ruth Hardy (Member)]: Everybody was like, oh, we're gonna put a bunch of money in and make it better for you. That's what happened. Nobody No. But what

[Sen. Ann Cummings (Chair)]: backed off on that.

[Sen. Scott Beck (Member)]: If you dump that money in before the tax letter and that tax letter goes out and it assumes in that yield number that you're going to dump in whatever is a third of $100,000,000 that you're going to show every school district a high yield and they're going to they're they're going to spend to it.

[Sen. Ruth Hardy (Member)]: That's that's fair. But dumping in a whole bunch of money like we did last year exacerbates the things in the next year. And then we don't have we don't have reserves to help us if we need it.

[Sen. Scott Beck (Member)]: I know. But that's because we did make a decision to also control the spending side.

[Sen. Ruth Hardy (Member)]: That's fair. But my point is is that you can make that spending side stuff even worse by the choices you make about with the how to spend revenue you have. Okay.

[Sen. Randy Brock (Member)]: See. The signal you send is extremely important in determining what actually happens at the end. The signal you send to the public.

[Sen. Ruth Hardy (Member)]: Yeah. And the signal we sent last year was, don't worry, we'll call you out.

[Sen. Randy Brock (Member)]: So, you know, if you wanna say how how do we solve the problem, it's very easy. Stop spending. Now, how you do that is what's hard. But the assumption that we're going to continue to have some revenue growth that's ultimately going to make this up, I don't think makes sense.

[Sen. Ann Cummings (Chair)]: Yeah. That's that much.

[Sen. Thomas Chittenden (Vice Chair)]: You can also argue this year we've sent that same signal because that numbers have floated by the governor and others that we're going to buy it down again this year on contingency and do these other things but I I think in that 5% as I've had to explain to constituents to write it forums, I would pass it, hang it on the following items. One, we did pass universal meals which is $20,000,000 and that we never funded it. So, that's an additional 1% out of that 5% that's compounded in there, just acknowledging that was something that we did. I also think that these school districts hired a lot of people with one time monies, and so they're working to right size from Esser, and you can't ignore healthcare costs. I mean, we're all, I'm feeling it as a UPM employee, what I'm paying this year is a huge pay cut, and the school districts are covering that too. So, and you can dissect that with, I'm not going to say they're generous, but with negotiated contracts with teachers. So those are the other cost drivers that I keep hearing about that we don't have in the current configuration ability in Montpelier to reach in and change those things, but for the universal meals. So one thing I did float with the universal meals, and I still support it, but I doubt this guy I'm going to, which is the sugary sweet beverage tax to put some money into the Ed Fund to cover those foods for kids. But I don't know. Can we get senator Mattos to support an extra penny on each ounce of sweet soda beverage that's sold in Vermont? I guess. I don't know it is. Well, this way, this It's got sugar. Yeah. Yeah. Okay. That's it. It's about you next time.

[Sen. Ann Cummings (Chair)]: Diet. But this. It says no added cane sugar, but it's got 55 calories Yeah. Sugar in there somewhere.

[Sen. Thomas Chittenden (Vice Chair)]: That would fund universal meals, and that would rectify what I think was the fault of the legislature by attacking something on the ed fund without funding it and putting it on the taxpayers. I will say that

[Sen. Ann Cummings (Chair)]: I have never had such a high pressure lobbying job from citizens as we had on universal school meals. I didn't say I asked them where the money came from, and they said they had very generous donors. There was I will bet there were hundreds of thousands of dollars spent on that campaign by somebody. I mean, mass emails, mass lobbying activity in this building. It And I will say

[Sen. Ruth Hardy (Member)]: that if you if kids don't eat eat well at school, they can't learn, and it is a benefit to our economy because so much of the food is bought and produced locally and we we pay for books for kids. We should be paying for their food while they're at school. It is it is there's so much science and and sociology behind why universal school meals are important. And I don't disagree, you know. Was an added cost. It was an added cost to the education fund at a not a great time.

[Sen. Ann Cummings (Chair)]: But many of our schools, maybe not in Chittenden County, but around here, there were so many kids on free and reduced lunch. It was cheaper to just say everybody's getting free lunch as to go through the collection and pay people to collect and harass kids. And my grandsons were getting free lunch.

[Sen. Ruth Hardy (Member)]: And also have we have drawn down more federal funds until the federal government started including, but we've we've drew we've drawn down more federal funds that through you versus school meals because.

[Sen. Ann Cummings (Chair)]: Okay. Our our team next witness is doing in about two minutes. She's in the waiting room. Okay. Rather than rearguing past decisions, we will come to those decisions perhaps again this year. I can assure you this room will be full.

[Sen. Thomas Chittenden (Vice Chair)]: It's a very nonpartisan presentation.

[Sen. Ann Cummings (Chair)]: Oh, Julie? Yeah. Well, the school meals will not be a nonpartisan presentation. Nonpartisan for me?

[Julia Richter (Joint Fiscal Office)]: Not from you. Worked, I never brought

[Sen. Thomas Chittenden (Vice Chair)]: it Wouldn't mind overlay the student population Yeah. Over That'd be curious. 80, mean, not weighted, just 80.

[Julia Richter (Joint Fiscal Office)]: I can

[Sen. Ann Cummings (Chair)]: follow-up with that. Yeah. Yeah, it would be good to see the, but I think as the students go down, since the schools get paid per student, that in, and, you know, when it first started, they said, well, you lose one kid in a class of 10, you can't cut the teacher. Right. But at what point, when you lost five kids in a class of 10 and you still don't cut the teacher, that's I think that may be where where we are now because this has been going on. We've been declining for twenty years. Yeah. Lots of schools have half the kids instead

[Sen. Thomas Chittenden (Vice Chair)]: of the same number of employees. Yeah.

[Sen. Randy Brock (Member)]: I still come back to that same question I keep asking, what are they going to cost to educate a kid in Vermont when there are no kids in school at all? That? Is it going to continue to rise?

[Sen. Ann Cummings (Chair)]: Well, will be private tutoring.

[Sen. Ruth Hardy (Member)]: Operations and maintenance. I'll bring it up again. $204,893,023.80 in 2024. Right. Bob Donkey is gonna send me the 25 numbers. What was that? That 200 or 4,000,000?

[Sen. Ann Cummings (Chair)]: But, actually 205,000,000. It's different agent. Of doing business. It's something you were supposed to do a sinking fund for. Or, I mean, I know my roof's gonna need to be replaced for the next couple of years. It's 30 years old.

[Sen. Thomas Chittenden (Vice Chair)]: That was some trouble I had when we had a couple years ago, you got a pin on that. It's not wrong.

[Julia Richter (Joint Fiscal Office)]: People vote on the budget.

[Sen. Ann Cummings (Chair)]: Okay, Samantha.

[Sen. Thomas Chittenden (Vice Chair)]: Crack, buddy. I wanted to

[Sen. Ann Cummings (Chair)]: Welcome. We are just trying to see if anyone is tracking as property taxes rise, are we seeing a rise in delinquencies? Apparently there's been some news coverage in at least one town that has a very small tax base, so one or two delinquencies is a big deal. But overall, what are we seeing? I guess the question is who is keeping numbers, if anybody?

[Samantha Sheehan (Vermont League of Cities and Towns)]: Thank you, Madam Chair. For the record, my name is Samantha Sheehan, the municipal policy and advocacy specialist for the Vermont League of Cities and Towns, and thank you for asking this question and for having the league in to talk about it. This has been a concern of our organization for a long time and it is a rising concern amongst our members. I'll remind the committee that all two fifty one municipalities in Vermont are members of VLCT by choice and we represent all municipal officials. So, elected, appointed, and professional staff. The short answer is no one is tracking an aggregate number of delinquent property taxes. However, every town does know this information for the purpose of their annual report and annual audit. So I've prepared some information and testimony today, then I'm happy to have a discussion and answer any questions about it. I think where I want to start is that for many years, VLCT has had an adopted policy position and it is on our adopted list of legislative priorities for action this legislative session to alleviate local tax burdens by holding municipalities harmless for uncollected state property taxes. We've heard recent and increasing anecdotal complaints and rising concern at the municipal level that reporting to us that the rate of delinquency on property taxes is increasing under the increasing burden of the state education tax. So, I did get to hear some of the end of your most recent discussion. I know you're aware that the state property tax has increased over 40% in five years. That's an average. Some municipalities, including one we'll talk about today, Granville. Granville experienced 38% increase in one year in 2024. So as the

[Sen. Ann Cummings (Chair)]: refresh my memory before you go forward. The town collects the taxes. Yes. Remits everything that the school has budgeted for to the school or to the state to send for the school, and then the municipality is left to swallow the entirety of the delinquent taxes, even though arguably if it's still a two third, one third split between municipal and school taxes, two thirds of that delinquency should go to the schools. But the schools are getting all if it's enough. They're they so it is the municipality that is left holding the bag for the entirety of the delinquencies.

[Samantha Sheehan (Vermont League of Cities and Towns)]: That's correct. So the municipality collects the full property tax bill and then remits the portion that's owed to the state. And so in this way, delinquent taxes drive a local tax burden really in three ways. So the first is the one you've identified, which is they have to pay the state education tax even if it's uncollected. So that's the biggest way. The second way is that they're carrying their own deferred municipal tax revenue. So they're not collecting their municipal tax revenue on that property tax bill that has fallen delinquent. And then the third way is that if necessary, towns will take out short term debt often in the form of a tax anticipation note. And so they may be paying interest on the short term debt that they're using to manage the failure to develop the cash flow necessary, both to meet the obligations of their municipal budget and the obligations of the state Ed fund. In these three ways, delinquent taxes create new property tax burden inside of the municipal budget on the other payers. And so we're sensitive, of course, our members are sensitive to the delinquent payers and their inability to pay or to pay on time or in full. But we're also very sensitive to the fact that there are other low and moderate and fixed income property taxpayers in our towns who are then carrying that financial burden in the next year's fiscal budget. There's a fresher concern too or a complicating factor, which is that two years ago in 2024, the legislature, you may remember reform to the property tax sale law. Many of those reforms were good and necessary. VLCT had some particular concerns at the time. But a result of that reform is that now the property, so one way that a municipality can recover those costs is through the tax sale process. And now under the new law, that process really takes at least three years from the beginning of the delinquency until the redemption period is over and the taxes and fees are collected through the completed tax sale. So even in situations where the town can restore those deferred tax sale revenues. Sorry, deferred delinquent revenues through a tax sale process for that entire period of time, which is a minimum of three years, but often much longer because they're working on abatement or a payment plan or other ways to help the payer become whole without going all the way through with a tax sale. For all those years, the town budget is carrying this delinquent burden and that is adding costs to other folks property taxes through the municipal tax rate. You ask who's keeping track of and I think I'll go there next if that's okay.

[Sen. Ann Cummings (Chair)]: So we have a question before you go on. Sure.

[Sen. Ruth Hardy (Member)]: Samantha, were you you gonna go on to show data? Because A little bit. Oh, that would be helpful because what I mean, right now, it's just speculative what you're saying because unless you have data to show it, it's not I'd like to go ahead. I'd like to see data. Okay.

[Samantha Sheehan (Vermont League of Cities and Towns)]: Back to the chair's first question, which is like who is keeping track of this, if anyone? There are two ways basically voters or Vermonters have access to this information on delinquency. One way is in the annual report. So, every town has to produce and publish an annual report. It typically goes out along with the meeting warning for town meeting. Every town has a delinquent tax collector. Oftentimes that person serves another municipal position such as clerk or clerk treasurer. Sometimes not. Sometimes it's just a volunteer who serves as the delinquent tax collector and they're not otherwise involved in town government. The delinquent tax collector provides a report annually that shows all of the taxes for that year by quarter. And it shows the delinquent taxes collected. It also accounts for associated fees and other expenses. And then it provides an aggregate number of what revenues are outstanding. And so typically, although

[Sen. Ann Cummings (Chair)]: I'm

[Samantha Sheehan (Vermont League of Cities and Towns)]: sure not with a 100% success rate, that the delinquent tax collector provides that annual report to the select board. And then the select board includes that in the annual report of the town to voters. The second way that we have access to this data is through the annual town audit. Every town must complete an audit. It doesn't have to be done by a CPA. Many town audits are done by a board of auditors who volunteers. But still that audit is completed and the audit information is published as well in the town report. The delinquent taxes sometimes are reported in the audit as deferred revenue. Sometimes they're reported as a liability, but basically they're included and considered in the audit of the closed prior fiscal year. That said, each town knows what its own delinquency is at any given time. It certainly knows what its delinquencies were at the close of the last fiscal year. So right now, as we talk about this topic today, every town is preparing and finalizing these reports for fiscal year twenty five and making them available. No one is aggregating this information for the purpose of the statewide education grant list. We don't know the statewide number or trend. I should also say towns are not really reporting trends. These are just one off annual reports they make available to voters. I pulled a couple today. And so Cambridge is reporting 250,000 in delinquent taxes for FY '25. They have about a $4,500,000 town budget. Barry, I think is a good counter example. Barry has about 500,000 in delinquent taxes, but their budget is more than 50,000,000. So it's

[Julia Richter (Joint Fiscal Office)]: a bigger number, but it's

[Sen. Ann Cummings (Chair)]: Those are dollar numbers. I think it would be helpful if we knew statewide last year there were a thousand people that went delinquent and this year, there were a 10, and next year, there were 3,000. Because it's the trend line that we're trying to see because there's some people that don't think property taxes are too high. People are still paying them. And trying to get data that would either confirm or deny that, that doesn't pick up the folks that are not eating well in order to pay the property taxes, but it's the one thing we've got. And I don't know that there's any state agency that has access to all town reports. So we're kind of trying to find a way to track what may or may not be a trend. And Senator Hardy has another Yeah.

[Julia Richter (Joint Fiscal Office)]: Was I mean, I

[Sen. Ruth Hardy (Member)]: think you're right, madam chair. Unless we have aggregate data, it's just, it's, like I said before, it's basically speculative and anecdotal rather than actual data to make policy off of. And towns have a lot of, towns have several mechanisms to collect delinquent taxes including tax sales as you mentioned and what some of the changes that we made a couple of years ago on the tax sale was actually to prevent people from losing their homes if they're delinquent on their taxes. So, that was actually to benefit people who were having

[Sen. Ann Cummings (Chair)]: a But harder it does cost their taxes.

[Sen. Ruth Hardy (Member)]: It does. It does. But then also tax can create payment plans and things like that with with taxpayers. So and and then when there's a sale of property, the property the delinquent property taxes are paid. So in some cases, if there's not sales for many years, then it becomes more delinquent. But it doesn't sound like there's necessarily a trend. And also, I mean, I would cross walking it with the number of taxpayers who are eligible to put property tax credit, or the potential future property tax exemption too, because there are lower income property owners who qualify for those tax credits that are helping them pay the taxes or that or they pay on income versus Yes. Versus property value.

[Samantha Sheehan (Vermont League of Cities and Towns)]: Yeah, that that information is not provided in a typical municipal delinquent tax report. The, the number of parcels would be. That is information that is and sort of always has been published at the town by town level. So like the parcel list, the amount delinquent, what was paid or collected in fees and the total. That's the type of information that municipalities report on individually. And we agree basically. VLCT has had over the years different policy positions related to this problem. The problem being the ongoing burden to the municipal budget created by the duty to pay the state education tax, or not it's collected. That's the problem. We've offered and held policy positions to alleviate that burden to the payers in the past. But it's really difficult to guide that policy discussion without knowing the scale or the trend of the problem statewide. I do want to mention Granville and then we have a recommendation because Granville illustrates why this is where the urgency is to understand this better and to resolve it. Granville's municipal budget for FY27 will be $400,000 roughly. Of course, it hasn't been approved by voters yet, but a less than $05,000,000 town budget and their current delinquency is over a $100,000 delinquent. So that's fully a quarter of their town budget. So when you have a community that has few taxable parcels, which doesn't relate to the size as much as it's a result of conserved or civic or nonprofit minus the total grand list. You have a municipality with a small number of total taxable parcels, and then really any rate of delinquency in that town causes a financial burden on everyone else. When that community is both small and low or moderate income as Granville is, and has experienced escalating state property tax increases, that extra burden on the municipal rate becomes a serious problem really quickly for the people in that community. It's not really anecdotal. We know and the towns have been reporting it at the individual level for several years that we have a good number of towns in this position like Granville. Our recommendation, we think it's pretty simple. Hopefully, the committee would support it, be to task the Department of Taxes with an aggregate report. This is data that exists in different forms. Literally sometimes it's in a Word document table and sometimes it's in an Excel sheet depending on how the town produces its report. But it's factual information that's available and is public. So we just need someone within the appropriate state agency. We're assuming it's a Department of Taxes, but I think that probably makes sense that could collect and then aggregate that report in a way that would be useful to guide future policy conversations about it.

[Sen. Ann Cummings (Chair)]: I think we agree it would be useful and helpful to have that information. We're already asking the Department of Taxes to do a lot, and I think we were thinking, since you want to convince us that we shouldn't ask you to admit the school funds, that you might be the logical organization to collect that information, because it would know, an example like Grenville, yeah, they're the exception that proves the rule, and until somebody can come in and say a 100 out of your 300 and some or 200 and some towns are seeing this problem that you can't make a policy decision based on two towns. Yeah. We've we've which are health liners. I mean, they're they're very, very small. I don't know why they're not a Gore, and my niece lives there. Oh, wow. So but they are small.

[Sen. Randy Brock (Member)]: That's just the one thing that that I I would worry about, particularly when we consider how towns deal with delinquent taxes very differently. Whether or not we should have a conversation with the auditor's office regarding consistency of reporting standards. Because it's great to add a bunch of numbers, we're adding numbers that mean different things to different people, and that are not done in a consistent manner, then the end result is frankly going to be worthless. And so my suggestion is have a conversation with the auditor's office regarding that subject of consistency before we go

[Sen. Ann Cummings (Chair)]: ask anyone. The auditor's office to come in and maybe they would like to. Yes, they might.

[Samantha Sheehan (Vermont League of Cities and Towns)]: Yeah. I just the the information that's reported is is consistent. Like, the form that it takes as like a physical document is not because the town can just sort of choose. It could be in a PowerPoint. It could be like But the fact of the delinquent taxes is consistent. We know the parcel holder, title property owner, the parcel ID, the amount owed, the amount collected, and the fees associated. Every town knows that set of facts relating to delinquency. As to if VLCT would produce this, I'm not the executive director or the board of VLCT. I certainly can't direct us to do anything. Also, the legislature cannot. I mean, how we've partnered in the past is through an appropriation to an agency. VLCT may or may not sort of bid on the work.

[Sen. Ruth Hardy (Member)]: I also think there's some value in having it in a public agency. I understand tax permit, but having the auditor or tax permit, just because then it's seen as more neutral or whatever, because even though you're often, me or you have a role to play, you'd lobby us. So, having having a state entity do it, it's potentially more neutral. I

[Sen. Thomas Chittenden (Vice Chair)]: definitely agree. This seems like a great project for a college intern for.

[Julia Richter (Joint Fiscal Office)]: Yeah. I could get some of those. Yeah. Yeah.

[Sen. Ruth Hardy (Member)]: And and and Samantha, I'd love to talk to you more about Granville because that is a huge percentage and they are tiny. There's a lot of national forest there. It's a beautiful drive through Grantville but they have beautiful drive. Very. Yeah. It's in my district.

[Sen. Ann Cummings (Chair)]: Worn and keep I grew

[Sen. Ruth Hardy (Member)]: it in the snow a lot. Washington County. Yeah, seriously next time you're in the building if you have ideas let me know.

[Samantha Sheehan (Vermont League of Cities and Towns)]: Yeah, I would just like like to agree. I mean our yes, I'm a registered lobbyist. Happy to always be invited to speak with you, but we are a non profit organization and we are an interest group and I think those are fair points about VLCT's role here. But what we would also say is these are delinquent state property taxes. This is the tax rate that the state has assessed on the property owners. The municipality was obligated to collect and remit those payments and is now carrying the burden when they go unpaid. But it's the state's revenue ultimately and it's the state's tax rate that is where this problem originates. So we think it's appropriate and useful for the department that facilitates that to have more information about it.

[Sen. Ann Cummings (Chair)]: Okay. I mean, if the system is working the way it should and the taxes are all getting remitted, then there's no problem. You collect them. I believe the clerk gets paid something for doing that, if I remember act 60 negotiations, and you send them in. It only becomes a problem when there are delinquencies because then the town budget is left with the hole. It's one of the ways we have traditionally sheltered education from the ups and downs of the economy. And whether or not that's wise, I think, may be being discussed, but at this point, if delinquencies are going up, then we're gonna see more and more towns left with holes in their budget. So it's something we do need to to look at. Okay. Anything else we should hear?

[Samantha Sheehan (Vermont League of Cities and Towns)]: I'm checking my notes.

[Sen. Ann Cummings (Chair)]: Okay.

[Samantha Sheehan (Vermont League of Cities and Towns)]: No. I think that covered I think that really covers Yeah.

[Sen. Ann Cummings (Chair)]: Okay. Thank you.

[Samantha Sheehan (Vermont League of Cities and Towns)]: Thank you so much.

[Sen. Ann Cummings (Chair)]: Thanks, Ann. Okay, committee, we've got 15 until Jill Briggs Campbell comes in to talk about the literacy program in the DAA. And then I have moved Patrick from tomorrow over to today to talk to about S282, well, the proceeds tax, and see if we can do a little kind of committee discussion with him. And then tomorrow we should have a very short session with the idea that the snows will be starting and people Thank you, ma'am. Would like to get together. Ma'am. Thank you. Okay.