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NO. 60. AN ACT RELATING TO EQUAL EDUCATIONAL OPPORTUNITY.

(H.527)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. SHORT TITLE

This act shall be known and may be cited as the Equal Educational Opportunity Act of 1997.

PART I

* * * EQUAL EDUCATION FOR ALL STUDENTS * * *

Sec. 2. 16 V.S.A. 1 is added to read:

1. RIGHT TO EQUAL EDUCATIONAL OPPORTUNITY

The right to public education is integral to Vermont's constitutional form of government and its guarantees of political and civil rights. Further, the right to education is fundamental for the success of Vermont's children in a rapidly-changing society and global marketplace as well as for the state's own economic and social prosperity. To keep Vermont's democracy competitive and thriving, Vermont students must be afforded substantially equal access to a quality basic education. However, one of the strengths of Vermont’s education system lies in its rich diversity and the ability for each local school district to adapt its educational program to local needs and desires. Therefore, it is the policy of the state that all Vermont children will be afforded educational opportunities which are substantially equal although educational programs may vary from district to district.

Sec. 3. 16 V.S.A. 164 is amended to read:

164. STATE BOARD, GENERAL POWERS AND DUTIES

The state board shall have supervision over, and management of the department of education and the public school system, except as otherwise provided; and shall:

* * *

(9) Implement and continually update standards for student performance in appropriate content areas and at appropriate intervals in the continuum from kindergarten to grade 12 and methods of assessment to determine attainment of the standards for student performance. The standards shall be rigorous, challenging and designed to preparestudents to participate in and contribute to the democratic process and to compete in the global marketplace. The standards shall include a standard for reading level proficiency for students completing grade three.

(10) Establish an information clearinghouse and accessible database to help districts share information about educational programs and practices which improve student performance.

* * *

*[(12) Constitute the state board for the technical rehabilitation program and perform all the duties and powers prescribed by law pertaining to technical rehabilitation and to act as the state approval agency for educational institutions conducting technical rehabilitation programs.]*

* * *

(14) Adopt rules for *[approved]* approval of independent schools *[which offer education other than or in addition to kindergarten, separate rules for approved independent schools which offer only kindergarten education, and separate rules for public schools, relating to instruction, faculty, curriculum, libraries, educational materials and physical facilities, which are necessary to provide an acceptable educational opportunity for pupils in those schools]*.

* * *

(16) In cooperation with the commissioner, ensure that information, plans and assistance are developed by the department to aid in making technology and telecommunications available and coordinated in all school districts. The board shall develop guidelines for distribution of federal, state or private funds designated for the development or expansion of distance learning technologies. The guidelines shall encourage, consistent with any terms or conditions established by the funding source, collaboration between schools and school districts to realize economic and educational efficiencies.

(17) Report annually on the condition of education statewide and on a school by school basis. The report shall include information on attainment of standards for studentperformance adopted under subdivision 164(9) of this section, financial resources and expenditures, and community social indicators. The report shall be organized and presented in a way that is easily understandable by the general public and that enables each school to determine its strengths and weaknesses. The commissioner shall use the information in the report in determining whether students in each school are provided educational opportunities substantially equal to those provided in other schools pursuant to subsection 165(b) of this title.

(18) Ensure that Vermont’s children have access to a substantially equal educational opportunity by developing a system to evaluate the equalizing effects of Vermont’s education finance system and school quality standards under section 165 of this title. Beginning in school year 2000 and every five years thereafter, or more often if requested by the general assembly, the state board shall report to the general assembly concerning the results of this evaluation and recommendations for change if needed.

(19) Develop, in consultation with the secretary of state, and make available to school boards, sample ballot language for items which may be voted on by Australian ballot and for which no statutory language exists.

Sec. 4. 16 V.S.A. 165 is amended to read:

165. *[APPROVAL OF PUBLIC SCHOOLS]* STANDARDS OF QUALITY FOR

PUBLIC SCHOOLS; EQUAL EDUCATIONAL OPPORTUNITIES

*[(a) On application, the state board shall approve a public school if it finds, after opportunity for hearing, that the school provides a minimum course of study and that it substantially complies with the board's rules of approved public schools.]*

*[(b) Approvals under this section shall be for a term established by rule of the board.]*

*[(c) The state board may revoke or suspend the approval of a public school, after opportunity for hearing, for substantial failure to comply with a minimum course of study or with the rules for approved public schools. Upon revocation or suspension, students enrolled in that school shall become truant unless absent with legal excuse or they enroll in another approved public school, approved or recognized independent school or home study program.]*

(a) In order to carry out Vermont’s policy that all Vermont children will be afforded educational opportunities which are substantially equal in quality, each Vermont public school shall meet the following school quality standards:

(1) The school shall, through a process including parents, teachers and community members, develop and implement a comprehensive action plan to improve student performance within the school. The plan shall include goals and objectives for improved student learning and educational strategies and activities to achieve their goals. The school shall assess student performance under the plan using a method or methods or assessment developed under subdivision 164(9) of this title.

(2) The school, at least annually, reports student performance results to community members in a format selected by the school board. The school report shall include:

(A) information indicating progress toward meeting standards from the most recent measure taken,

(B) information about the health and social well-being status of children in the school district,

(C) information indicating progress toward meeting the goals of an annual action plan,

(D) any other statistical information about the school or community that the school board deems necessary to place student performance results in context,

(E) information about early reading instruction provided under subsection 2903(c) of this title,

(F) early care and education opportunities available to children, and

(G) community support available to families.

(3) The school substantially meets standards adopted by rule of the state board regarding conditions, practices and resources of schools. The standards shall address those aspects of the following which are most closely associated with improving student performance:

(A) school leadership, staffing and support services;

(B) instructional practices and curriculum leadership, content and coordination;

(C) educational materials and school facilities;

(D) access to current technology.

(4) The school shall provide for and the staff shall use needs-based professional development designed to improve the quality of education provided to the students and directly connected to standards for student performance established by the state board and any other educational performance goals established by the school board.

(5) The school uses staff evaluation to advance educational performance objectives.

(6) The school, if it is a secondary school, offers a genuine opportunity to access technical education programs.

(7) The school ensures that students are furnished educational services in accordance with any state or federal entitlements and in a nondiscriminatory manner.

(b) Every two years, the commissioner shall determine whether students in each Vermont public school are provided educational opportunities substantially equal to those provided in other public schools. If the commissioner determines that a school is not meeting the quality standards listed in subsection (a) of this section or that the school is making insufficient progress in improving student performance in relation to the standards for student performance set forth in subdivision 164(9) of this title, he or she shall describe in writing actions that a district must take in order to meet either or both sets of standards and shall provide technical assistance to the school. If the school fails to meet the standards or make sufficient progress by the end of the next two-year period, the commissioner shall recommend to the state board one or more of the following actions:

(1) continue technical assistance,

(2) adjust supervisory union boundaries or responsibilities of the superintendency,

(3) assume administrative control only to the extent necessary to correct deficiencies, or

(4) close the school and require that the school district pay tuition to another public school or an approved independent school pursuant to chapter 21 of this title.

(c) The state board, after offering the school board an opportunity for a hearing, shall either dismiss the commissioner's recommendation or order that one or more of the actionslisted in subsection (b) of this section be taken. The action ordered by the state board shall be the least intrusive consistent with the need to provide students attending the school substantially equal educational opportunities. A school board aggrieved by an order of the state board may appeal the order in accordance with the rules of civil procedure.

(d) Nothing herein shall be construed to entitle any student to educational programs or services identical to those received by students in the same or any other school district. Further, nothing herein shall create a private right of action.

Sec. 5. 16 V.S.A. 166(g) is added to read:

(g) An approved independent school which accepts students for whom the district of residence pays tuition under chapter 21 of this title shall use the assessment or assessments required under subdivision 164(9) of this title to measure attainment of standards for student performance of those pupils. In addition the school shall provide data related to the assessment or assessments as required by the commissioner.

Sec. 6. 16 V.S.A. 180 is added to read:

180. STATEWIDE STRATEGIC EDUCATION PLAN

By July 1, 1998, the state board of education shall adopt through a public process a statewide strategic education plan to describe how the agency will help school boards to improve student performance. Every five years thereafter, the state board shall update and readopt the plan. The goals of the plan shall be to strengthen coherence and consistency among state and local education goals, standards for student performance, assessments, professional development opportunities and action plans, and to provide support for local curriculum development. The plan shall include information as to the economic costs of implementation and the education benefits to be derived.

Sec. 7. 16 V.S.A. 215 is added to read:

215. CHALLENGE TO EXCELLENCE GRANTS

(a) Purpose. It is a goal of the general assembly to promote quality education for every Vermont child and to create an opportunity for every Vermont student to achieve his or her personal best, while respecting divergent student goals and personal learning styles and abilities. The general assembly further finds that a school’s climate for learningis improved when parents, community members and business leaders actively participate in promoting educational opportunities for every student. Further, it is the compassion and innovation of individual teachers and school personnel that often create the impetus for students to achieve excellence in education.

(b) The commissioner shall establish and implement a challenge to excellence grant program for the purpose of promoting quality education for Vermont students. Eligible applicants include Vermont public elementary, middle, secondary and vocational schools, and Vermont supervisory unions on behalf of a school or schools. All proposals shall be to develop or carry out a comprehensive plan, which may be an action plan pursuant to subdivision 165(a)(1) of this title, to create educational opportunities for each student within the school. Any such plan must be or must have been developed with the involvement of parents and other community members, staff and business representatives, and shall be designed to assist students in meeting state board and school board standards. Grants shall be for up to $50,000.00 and shall include a 1-1 match from other sources of funding including grants from businesses, foundations or other federal or local funding. Priority shall be given to schools which the commissioner finds are having difficulty meeting the quality standards listed in subsection 165(a) of this title or are making insufficient progress in improving student performance in relation to the standards set forth in subdivision 164(9) of this title. Eligible activities include:

(1) A comprehensive planning and goal-setting process to promote a quality education for all students within the school.

(2) Activities to carry out a comprehensive plan to promote quality education for students within the school.

(3) Innovative methods to create educational opportunities for students according to a comprehensive plan, including but not limited to special classes and activities; mentorship; summer institutes on math, science, reading and language arts, social studies, service, the arts or technology; partnerships for learning with businesses, post-secondary institutions and community organizations; tutorials; programs for at-risk or gifted students; guidance, peer counseling and career planning activities.

Sec. 8. 16 V.S.A. 824(c) is amended to read:

(c) *[The]* For students in grades 7 and 8, the district shall pay an amount not to exceed the average announced tuition of Vermont union high schools for students in grades 7 and 8 for the year of attendance for its pupils enrolled in an approved independent school not functioning as a Vermont area technical center, or any higher amount approved by the electorate at an annual or special meeting warned for that purpose. For students in grades 9-12, the district shall pay an amount not to exceed the average announced tuition of Vermont union high schools for students in grades 9-12 for the year of attendance for its pupils enrolled in an approved independent school not functioning as a Vermont area technical center, or any higher amount approved by the electorate at an annual or special meeting warned for that purpose. However, any increased amount approved by the electorate may not be included as a current expenditure of the district for the purposes of aid paid under chapter 123 of this title.

Sec. 9. 16 V.S.A. 2903 is added to read:

2903. PREVENTING EARLY SCHOOL FAILURE; READING INSTRUCTION

(a) Statement of policy. The ability to read is critical to success in learning. Children who fail to read by the end of the first grade will likely fall further behind in school. The personal and economic costs of reading failure are enormous both while the student remains in school and long afterward. All students need to receive systematic reading instruction in the early grades from a teacher who is skilled in teaching reading through a variety of instructional strategies that take into account the different learning styles and language backgrounds of the students. Some students may require intensive supplemental instruction tailored to the unique difficulties encountered.

(b) Foundation for literacy. The state board of education, in collaboration with the agency of human services, higher education, literacy organizations and others, shall develop a plan for establishing a comprehensive system of services for early education in the first three grades to ensure that all students learn to read by the end of the third grade. The plan shall be submitted to the general assembly by January 15, 1998 and shall be updated at least once every five years.

(c) Reading instruction. A public school which offers instruction in grades one, two or three shall provide highly effective, research-based reading instruction to all students. In addition, for any student whose reading performance falls below the level expected in order to achieve third grade reading proficiency, as defined under subdivision 164(9) of this title, the school shall work to improve the student’s reading skills by providing additional research-based reading instruction to the student, and by providing support and information to parents and other family members.

Sec. 10. 16 V.S.A. 2944(f) is added to read:

(f) The state board of education shall, by rule, require that whenever an individual education plan requires related services, the plan shall include a statement that the team has made the determination that the services are necessary consistent with the requirements of 34 CFR 300.16 as amended from time to time.

Sec. 11. 16 V.S.A. 2950(c) is added to read:

(c) Out-of-state placement: For a state-placed student who is placed outside of Vermont and who is attending a public school outside of Vermont, the commissioner of education shall pay the education costs for the student.

Sec. 12. HUMAN SERVICES AND EDUCATION PROVIDERS; INCENTIVES FOR

REGIONAL COLLABORATIVES FOR EARLY INTERVENTION SERVICES;

UNIFIED BUDGET

(a) The general assembly believes that human services and education providers should:

(1) examine existing models of collaboration in the state of Vermont to identify best practice for collaboration; examine practices in other states that show improved gains for children;

(2) find ways to remove barriers to collaboration, promote better outcomes, and maximize available resources;

(3) collaborate for provision of services to children with emotional behavioral disabilities in a way that is effective and fair to both the children receiving the services and other children in the school district; and

(4) identify uses of technology which will increase access to the services andinformation available through the department of education and the agency of human services, while maintaining personal and family privacy.

(b) The commissioner of education shall request, in the state board of education budget and the budget request submitted to the governor for fiscal year 1999, funds for provision of incentives for up to three regional collaboratives providing services to help children prepare for and succeed in school. Collaboratives are combinations of the resources of two or more school districts, supervisory unions and/or human services agencies. The general assembly shall permit and encourage the commissioner of education and the secretary of the agency of human services to employ currently existing mechanisms to promote and expand the quality and availability of early care and education. Should federal changes expand the options for collaboration, the general assembly directs the commissioner of education and the secretary of the agency to take advantage of such opportunities.

(c) In order to maximize resources, the general assembly requests that the secretary of human services and the commissioner of education jointly present portions of their budgets devoted to provision of services to children and secondary students under the age of 22 and their families. The secretary and commissioner shall also prepare, in their budget presentations to the appropriation committees, a presentation which shows how money is spent in each of the two agencies to provide early childhood education programs, family services and other appropriate programs and services provided to the same populations, as well as proposals for joint funding of programs that serve children and families.

Sec. 13. PUBLIC SCHOOL APPROVAL COMPLETION AND TRANSITION

(a) It is the intent of the General Assembly to finish the public school approval process begun in 1981. Therefore, the Vermont State Board of Education shall conduct a survey of schools yet to be approved under the existing public school approval standards on efforts remaining before approval can be granted and the cost of such efforts. In addition, the state board shall survey the schools in Vermont which have received public school approval to determine whether they continue to be in compliance with approval standards and, if not, reasons for noncompliance. On or before December 15, 1997, the state board shall report in writing on its survey results to the house and senate committees on education.

(b) Upon completion of the existing public school approval process, all rules adopted under 16 V.S.A. 165 prior to July 1, 1998 are repealed. It is the intent of the General Assembly that the State Board of Education shall adopt rules delineating new standards of quality for schools pursuant to 16 V.S.A. 165 no later than September 1, 1998. The General Assembly intends that the new standards shall retain those elements of the public school approval standards which are important to provide a quality education. It is the intent that the new standards be focused, to the greatest extent possible, on school and student performance.

(c) In order to ensure that the transition to the new system of education finance established in this act is accomplished in a way that enables all students to receive a quality education while adjustments to the new system are being made, the state board of education shall, by rule, adopt a system for determining which schools may be having trouble providing a quality education during the school years which begin in 1998 and 1999. The commissioner shall review those schools under 16 V.S.A. 165 during the school years beginning 1998 and 1999 and shall immediately provide technical assistance to any that are not providing their students with a quality education. In addition the commissioner shall review under 16 V.S.A. 165 during the school years beginning in 1998 and 1999, those schools whose per pupil spending was substantially above statewide average per pupil spending immediately prior to passage of this act and shall, if necessary, provide technical assistance to help provide a quality education if such a district chooses to reduce its spending level.

Sec. 14. STATE BOARD OF EDUCATION PLANS; EDUCATOR PREPARATION

AND PROFESSIONAL DEVELOPMENT

(a) It is the intent of the General Assembly to promote a statewide system of educator preparation and professional development that:

(1) will ensure that all Vermont educators have a thorough knowledge and understanding of how to teach students to achieve the standards for student performance developed by the State Board under 16 V.S.A. 164(9);

(2) will enable all Vermont public school educators, including those currentlyemployed and future educators to provide students with a quality education that is connected to Vermont student performance objectives;

(3) involves higher education;

(4) is tied to educator evaluation;

(5) teaches techniques, such as involvement of parents in a student’s education, that have been proven to improve student performance; and

(6) promotes economic efficiencies through the use of regional resources.

(b) The Vermont State Board of Education in collaboration with the Vermont Standards Board for Professional Educators and the Vermont Higher Education Council is directed to:

(1) work with the Vermont Council of Teacher Educators to develop a plan that will ensure that recipients of a Vermont initial educator license can meet the intent of subdivision (a)(1) of this section;

(2) work with the Vermont Council of the Teacher Educators, the Vermont School Boards Association, the Vermont Superintendents Association, The Vermont National Education Association and the Vermont Principals Association to develop a plan that will ensure that recipients of Vermont relicensure can meet the intent of subdivision (a)(1) of this section; and

(3) make findings regarding how to promote a statewide system of educator preparation and development that will meet all the intents.

(c) The State Board shall present the plans, findings and recommendations for legislative action, to the House and Senate Committees on Education by January 15, 1998. The plans shall include recommendations for ensuring that the intent of this section is carried out in the future.

Sec. 15. COMMISSIONER OF EDUCATION REPORT; PAYMENT RATES FOR

SPECIAL EDUCATION SERVICES

The Commissioner of Education shall develop a list of special education services that are provided and paid for by school districts and shall recommend reasonable rates that school districts should pay for each service. The Commissioner of Education with theSecretary of Human Services will explore and implement methods and policies that will permit Medicaid funds to pay for some or all of the services. On or before January 15, 1998, the commissioner shall present the list of services and rates to the Senate and House Committees on Education.

Sec. 16. STATE BOARD OF EDUCATION; PLAN FOR ORGANIZATION OF PUBLIC

EDUCATION

(a) It is the intent of the General Assembly to ensure that public education is organized to:

(1) afford substantially equal access to a quality basic education for all Vermont students in accordance with the Vermont supreme court decision of February 5, 1997, Brigham v. State of Vermont;

(2) support improved learning for children;

(3) increase efficiencies through streamlining and avoidance of duplication of effort in order to enable a district to direct the maximum amount of its resources toward provision of quality services to students;

(4) build local school capacity for effective leadership, development and use of high standards, engagement in ongoing staff development and collaboration, focusing of resources for improved learning, responding to local needs, and other practices that will improve the quality of educational services;

(5) result in involvement of the community in governance of the school;

(6) result in active involvement of parents and other members of the community in the life of the school; and

(7) ensure that those governing the Vermont education system are accountable for the quality of the education provided.

(b) Therefore, the State Board of Education, after considering previous proposals for restructuring of Vermont’s public education system, shall develop one or more plans using a process which involves broad inclusion of the public, the business community, professional education organizations, parent groups and local government. Each plan shall include:

(1) suggestions for statutory changes required for implementation;

(2) a schedule for implementation which includes specific deadlines for completion of each step required to make the change;

(3) if a plan combines districts, either explicit criteria for redrawing the boundaries or proposed boundaries with explanations for each;

(4) identification of those administrative functions that are important to control at the school site and those which may be carried out at other levels;

(5) an explanation as to how it achieves the goals of subsection (a) of this section;

(6) recommended incentives for encouraging governing units to work collaboratively;

(7) provisions that support pre-kindergarten through grade 12 curriculum coordination;

(8) provisions for coordination with other ongoing efforts to build an excellent education system including the Joint Human Resources Investment Council and State Board of Education study to develop a plan for a workforce education system and efforts to build strong community support systems for child care and early education;

(9) techniques for ensuring that those governing the Vermont education system are accountable to the public for the quality of the education and administrative services provided; and

(10) structures that enable maximum access to the services provided by other agencies providing services to children and families.

(c) In developing the plan or plans, the State Board shall consider reduction in the number of school districts in order to create fewer, more efficient administrative units and for the purpose of meeting the goals described in subsection (a) of this section.

(d) The State Board shall include in its plan recommendations for increased opportunities for school choice.

(e) The State Board of Education shall present the plan or plans to the Senate and House Committees on Education by January 15, 1998.

Sec. 17. TRANSITIONAL PROVISIONS

(a) A school district whose school year 1999 budget will be considerably more or considerably less than its school year 1998 budget, shall, in its 1999 action plan required by rule of the State Board of Education, address how it will use the resources available to improve student performance.

(b) 16 V.S.A. 3441(1)(A) is amended to read:

(A) the full-time equivalent enrollment of pupils who are legal residents of the district attending a school owned and operated by the district, attending a public school outside the district under an interdistrict agreement, or for whom the district pays union school assessment or tuition to one or more approved independent schools or public schools outside the district during the annual census period. The census period consists of the first 40 days of the school year in which school is actually in session, and

PART II

* * * FINANCING EDUCATION: BASIC EDUCATION FUNDING * * *

Sec. 18. 16 V.S.A. chapter 133 is added to read:

CHAPTER 133. STATE AND LOCAL FUNDING OF PUBLIC EDUCATION

Subchapter 1. General Provisions

4000. STATEMENT OF POLICY

(a) The intent of this chapter is to make educational opportunity available to each pupil in each town on substantially equal terms, in accordance with the Vermont Constitution and the Vermont supreme court decision of February 5, 1997, Brigham v. State of Vermont.

(b) Substantially equal access to similar revenues per pupil will be provided by a combination of state block grants and local education spending. This local education spending will be substantially equalized so that each school district will have substantially equal capacity to raise and provide the same amount per pupil on the local tax base.

4001. DEFINITIONS

For the purpose of this chapter:

(1) "Average daily membership" of a school district in any year means:

(A) the full-time equivalent enrollment of pupils, as defined by the state board by rule, who are legal residents of the district attending a school owned and operated by the district, attending a public school outside the district under an interdistrict agreement, or for whom the district pays union school assessment or tuition to one or more approved independent schools or public schools outside the district during the annual census period. The census period consists of the first 40 days of the school year in which school is actually in session; and

(B) the full-time equivalent enrollment in the year between the end of the last census period and the end of the current census period, of any state-placed students as defined in subdivision 11(a)(28) of this title. The full-time equivalent enrollment of state-placed students attending a union school shall be divided among the member districts in the same proportions that the members divide assessment. A school district which provides for the education of its students by paying tuition to an approved independent school or public school outside the district shall not count a state-placed student for whom it is paying tuition for purposes of determining average daily membership. A school district which is receiving the full amount, as defined by the state board by rule, of the student’s education costs under subsection 2950(a) of this title, shall not count the student for purposes of determining average daily membership. A state-placed student who is counted in average daily membership shall be counted as a student for the purposes of determining weighted student count.

(2) "Equalized grand list" has the same meaning that equalized education property tax grand list has in chapter 135 of Title 32.

(3) "Equalized pupils" means the long-term weighted average daily membership multiplied by the ratio of the statewide long-term average daily membership to the statewide long-term weighted average daily membership.

(4) "Equalized yield amount" means the amount per equalized pupil for local education spending above the general state support grant, per percent applied to the education property tax liability under section 5402 of Title 32.

(5) "General state support grant" means the per pupil aid grant distributed undersection 4011 of this title.

(6) "Local education spending" means the amount of the school budget which is paid for from the general state support grant and from local share property tax revenues. Local education spending does not include any portion of the school budget paid for by any other sources such as endowments, parental fund raising, federal funds, nongovernmental grants or other state funds such as special education funds paid under chapter 101 of this title.

(7) "Long-term membership" of a school district in any school year means the mean average of the district's average daily membership, excluding full-time equivalent enrollment of state-placed students, over two school years, plus full-time equivalent enrollment of state-placed students for the most recent of the two years.

(8) "Poverty ratio" means the number of persons in the school district who are aged six through 17 and who are from economically deprived backgrounds, divided by the long-term membership of the school district. A person from an economically deprived background means a person who resides with a family unit receiving Food Stamps. A person who does not reside with a family unit receiving Food Stamps but for whom English is not the primary language shall also be counted in the numerator of the ratio. The commissioner shall use a method of measuring the Food Stamp population which produces data reasonably representative of long-term trends. Persons for whom English is not the primary language shall be identified pursuant to subsection 4010(e) of this title.

(9) "Public school" means an elementary school or secondary school for which the governing board is publicly elected. A public school may maintain evening or summer school for its pupils and it shall be considered a public school.

(10) "School district" means a town school district, city school district, incorporated school district, interstate school district, joint contract school district, the member towns of a unified union district or an unorganized town or gore.

(11) "School year" means a year beginning on July 1 and ending on the following June 30.

(12) "Weighted long-term membership" of a school district in any school yearmeans the long-term membership adjusted pursuant to section 4010 of this title.

4002. PAYMENT; ALLOCATION

(a) State and federal funds appropriated for services delivered by the supervisory union and payable through the department of education shall be paid to the order of the supervisory union and administered in accordance with the plan adopted under subdivision 261a(4) of this title. Funding for special education services under section 2969 of this title shall be paid to the districts in accordance with that section.

(b) The commissioner shall notify the superintendent or chief executive officer of each supervisory union in writing of federal or state funds disbursed to member school districts.

4003. CONDITIONS

(a) No school district shall receive any aid under this chapter unless that school district complies with the provisions of law relative to teachers' salaries, appointment of superintendents, detailed financial reports to the state department of education, and any other requirements of law.

(b) Aid to any district shall not be denied unless such district unreasonably refuses to comply with such requirements of law. Any school district denied aid by reason of the provisions of this section shall have the right within 60 days from the date of such denial to appeal to the superior court in the county where such district is situated.

Subchapter 2. General State Support of Public Education

4010. DETERMINATION OF WEIGHTED MEMBERSHIP

(a) On or before the first day of December during each school year, the commissioner shall determine the average daily membership of each school district for the current school year. The determination shall list separately:

(1) resident pupils being provided elementary education; and

(2) resident pupils being provided secondary education.

(b) The commissioner shall determine the long-term membership for each school district for each student group described in subsection (a) of this section. The commissioner shall use the actual average daily membership over two consecutive years, the latter of which is the current school year.

(c) The commissioner shall determine the weighted long-term membership for each school district using the long-term membership from subsection (b) of this section and the following weights for each class:

Grade Level Weight

Elementary 1.0

Secondary 1.25

(d) The weighted long-term membership calculated under subsection (c) of this section shall be increased for each school district to compensate for additional costs imposed by students from economically deprived backgrounds. The adjustment shall be equal to the total from subsection (c), multiplied by 25 percent, and further multiplied by the poverty ratio of the district.

(e) The weighted long-term membership calculated under subsection (c) of this section shall be further increased by 0.2 for each pupil in average daily membership for whom English is not the pupil’s primary language. The state board of education shall adopt rules which will enable clear and consistent identification of pupils to be counted under this subsection.

4011. GENERAL STATE SUPPORT GRANTS

(a) Annually, the general assembly shall appropriate funds to pay for a general state support grant for each equalized pupil.

(b) Annually, each school district shall receive a general state support grant for support of basic education costs. Funds distributed under this section shall be allocated on the basis of the equalized pupils in each school district.

(c) If a school district provides for the education of its students by paying tuition, the district shall receive the lesser of the tuition paid or the general state support grant amount.

(d) Funds received under this section which are attributable to an increase in student count due to the poverty ratio of the district shall be used by the district to provide learning readiness experiences for preschool age children or early reading and math experiences for school age children. These services shall be provided to children who areat risk of not succeeding in the general education environment. School districts are authorized to work collaboratively to share resources or otherwise find ways to maximize use of funds received under this section.

4012. STATE-PLACED STUDENTS

A district which provides for the education of its students by paying tuition to an approved independent school or a public school outside the district, shall receive from the commissioner an amount equal to the calculated net cost per pupil in the receiving school, as defined in section 825 of this title, prorated for the percentage of annual tuition billed for a state-placed student. If the calculated net cost per pupil in a receiving independent school or school located outside Vermont is not available, the commissioner shall pay the tuition charged. A district shall not receive funds under this section if all the student’s education costs are fully paid under subsection 2950(a) of this title.

Subchapter 3. Local Funding of Education

4025. EDUCATION FUND

(a) An education fund is established to be comprised of the following:

(1) All revenue paid to the state from the education property tax under chapter 135 of Title 32.

(2) Local share property tax revenues from those school districts which adopt budgets with local education spending in excess of the general state support grant and which are able to raise more than the equalized yield amount.

(3) General funds appropriated by the general assembly.

(4) Revenues from state lotteries under chapter 14 of Title 31.

(b) Moneys in the education fund shall be paid to school districts for the support of education in accordance with the provisions of section 4028 of this title, other provisions of this chapter, and the provisions of chapter 135 of Title 32. The state treasurer shall withdraw funds from the education fund upon warrants issued by the commissioner of finance and management based on information supplied by the commissioner of taxes. The commissioner of finance and management may draw warrants for disbursements from the fund in anticipation of receipts. All balances in the fund at the end of any fiscal year shallbe carried forward and remain a part of the fund. Interest accruing from the fund shall remain in the fund.

(c) An equalization and reappraisal account is established within the education fund. Moneys from this account are to be used by the division of property valuation and review for staff, equipment, lister training and administration of the equalization studies pursuant to section 5405 of Title 32, and to assist towns with maintenance or reappraisal on a case-by-case basis; and for reappraisal payments pursuant to section 4041a of Title 32, and equalization studies pursuant to section 5405 of Title 32 and for reappraisal payments pursuant to section 4041a of Title 32.

(d) Upon withdrawal of funds from the education fund for any purpose other than those authorized by this section, chapter 135 of Title 32 (education property tax) is repealed.

4026. EDUCATION FUND BUDGET STABILIZATION RESERVE; CREATION

AND PURPOSE

(a) It is the purpose of this section to reduce the effects of annual variations in state revenues upon the education fund budget of the state by reserving certain surpluses in education fund revenues that may accrue for the purpose of offsetting deficits.

(b) There is hereby created an education fund budget stabilization reserve determined on a budgetary basis and administered by the commissioner of finance and management. Any budgetary basis undesignated education fund surplus occurring at the close of a fiscal year shall be reserved within the education fund budget stabilization reserve, provided that the balance reserved shall not exceed five percent of the appropriations from the education fund for the prior fiscal year, and any additional amounts as may be authorized by the general assembly. Any undesignated education fund surplus and accrued interest remaining after the education fund budget stabilization reserve has been brought to the maximum authorized level shall remain in the education fund. When the general assembly next meets, it may specifically appropriate the use of the undesignated education fund surplus for increased support for education.

(c) In any fiscal year, if the education fund is found to have an undesignated funddeficit, the education fund budget stabilization reserve shall be used by the commissioner of finance and management to the extent necessary to offset the undesignated fund deficit as determined by generally accepted accounting principles.

(d) Determination of the amount of the undesignated education fund surplus or fund deficit in any fiscal year for the purposes of this section shall be made by the commissioner of finance and management. Adjustments shall be made to the amounts authorized in subsections (b) and (c) of this section upon receipt of the final audited annual report of the commissioner of finance and management.

(e) The enactment of this chapter and other provisions of the Equal Educational Opportunity Act of which it is a part have been premised upon estimates of balances of revenues to be raised and expenditures to be made under the act for such purposes as general state support grants for education, categorical state support grants, provisions for property tax income sensitivity, payments in lieu of taxes, current use value appraisals, tax stabilization agreements, the stabilization reserve established by this section and for other purposes. If the stabilization reserve established under this section should in any fiscal year be less than 3.5 percent of the prior fiscal year’s appropriations from the education fund established by section 4025 of this title, the joint fiscal committee, in consultation with the joint legislative oversight committee on educational restructuring, shall provide the general assembly its recommendations for change necessary to restore the stabilization reserve to the statutory level provided in subsection (a) of this section.

4027. DETERMINATION OF EQUALIZED YIELD AMOUNT AND AMOUNTS

DUE TO OR FROM THE EDUCATION FUND

(a) Annually, on or before June 30, the commissioner of taxes shall determine the equalized yield amount which will be used to determine:

(1) the local share property tax percentage a school district which adopts a budget with local education spending in excess of the general state support grant shall collect on properties in the district; and

(2) how much the district shall pay into or receive from the education fund.

(b) For purposes of this calculation, if, by June 1, any school district has failed toadopt a budget for the school year beginning the next July 1, the commissioner shall use the school district’s most recently adopted budget. If a school district subsequently adopts a budget in a different amount,

(1) a district which is due money from the fund shall receive the lesser of the amount due based on the former year’s budget or the amount due based on the actual budget voted; and

(2) a district which is required to pay money into the fund shall pay the greater of the amount due based on the former year’s budget or the amount due based on the actual budget voted.

(c) The commissioner of education shall calculate the equalized yield amount so that the amount due into the education fund under this section equals the amount due out of the fund under this section.

(d) On or before, June 30, the commissioner of education shall inform each school district which has voted a budget with local education spending in excess of the general state support grant, how much it will owe to the education fund or how much it will receive from the fund.

4028. FUND PAYMENTS TO SCHOOL DISTRICTS

(a) On or before September 1, January 2 and March 30 of each school year, each school district shall receive funds equal to one-third of:

(1) the general state support grants due under section 4011 of this title;

(2) the amount due to a district which adopts a budget with local education spending in excess of the general state support grant and which is able to raise less than the equalized yield amount.

(b) Payments made for special education under chapter 101 of this title and for technical education under chapter 37 of this title shall also be from the education fund.

(c) The commissioner of education shall determine a school district's net payment amount due the fund, which is the amount due under subsection 5402(b) of Title 32 in excess of the payments due the district under subdivision (a)(1) of this section and the net payment due the state under section 4027 of this title. If a school district fails to depositthe net amount due under section 5402 of Title 32, or fails to deposit the amount due under section 4027 of this title, on or before the due date therefor, then in addition to any other penalties prescribed by law, payments to be made under this section shall be reduced by a percentage equal to the unpaid portion of the amount due. However, in no case shall payments to the school district equal more than 80 percent of the payments due the school district under this section until the municipality has paid in full.

4029. USE OF FUNDS FOR LOCAL EDUCATION SPENDING

(a) Funds for local education spending may be used by a school district only for legitimate items of current education expense and shall not be used for municipal services.

(b) Funds raised under section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 shall be used only for municipal services and shall not be used for educational expenses.

(c) If the commissioner of education determines that a school district has spent funds paid under section 4028 of this title for an item that is not a legitimate item of current education expense, the treasurer of the municipality shall, within 90 days, remit the amount of the expenditure to the education fund. The treasurer shall use funds raised pursuant to section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 for this purpose. If the commissioner of education determines that a municipality has spent funds raised under section 2664 of Title 17, section 2601 of Title 20 or section 1309 of Title 24 for an item that is a legitimate item of current education expense, the treasurer of the municipality shall transfer the amount of the expenditure from the local education fund to the municipal fund.

(d) The legislative body of a school district or other municipality may appeal a decision of the commissioner of education under this section to the state board of education, which shall hear the appeal de novo in the manner provided by chapter 25 of Title 3 for the hearing of contested cases. A legislative body of a school district or other municipality may appeal a decision of the state board of education to the superior court of the district in which the municipality is located. The superior court shall hear the matter de novo in the manner provided by Rule 74 of the Vermont Rules of Civil Procedure. An appealfrom the decision of the superior court shall be to the supreme court under the Vermont Rules of Appellate Procedure.

Sec. 19. 32 V.S.A. 305a is amended to read:

305a. OFFICIAL STATE REVENUE ESTIMATE

On January 15 and on July 15 of each year, and at such other times as the emergency board or the governor deems proper, the joint fiscal office and the secretary of administration shall provide to the emergency board their respective estimates of state revenues in the general, transportation, education, and federal funds for the current and next succeeding fiscal years. Within 10 days of receipt of such estimates, the board shall determine an official state revenue estimate for deposit in the general fund, the transportation fund, education fund, and federal funds for the current and next succeeding fiscal years. For the purpose of revising an official revenue estimate only, a majority of the legislative members of the emergency board may convene a meeting of the board.

Sec. 20. 32 V.S.A. 586(b) is amended to read:

(b) The provisions of this subchapter shall not apply to:

* * *

(5) the Vermont housing and conservation trust fund created by 312 of Title 10; *[or]*

(6) the low-level radioactive waste fund created by 7013 of Title 10; or

(7) the education fund created by section 4025 of Title 16.

Sec. 21. REDESIGNATION

16 V.S.A. 3487, relating to grants for early education programs, is redesignated to be 16 V.S.A. 4014.

Sec. 22. REIMBURSEMENT FOR TRANSPORTATION EXPENDITURES

(a) This section shall apply in fiscal year 1999 and each year thereafter until the general assembly adopts a formula for providing a per pupil weight for transportation costs.

(b) Each school district which incurs allowable transportation expenditures shall receive a transportation reimbursement grant each year. The grant shall be equal to 50 percent of allowable transportation expenditures; provided, however that in any year thetotal amount of grants under this subsection shall not exceed the total amount of adjusted base year transportation grant expenditures. The total amount of base year transportation grant expenditures shall be $10,000,000.00 for fiscal year 1997 increased each year thereafter by the annual price index for state and local government purchases of goods and services. If in any year the total amount of the grants under this subsection exceed the adjusted base year transportation grant expenditures, the amount of each grant awarded shall be reduced proportionately.

(c) For the purpose of this section, "allowable transportation expenditures" means the costs of transporting students to and from school for regular classroom services and shall not include expenditures for transporting students participating in curricular activities that take place off the school grounds nor for transporting students participating in cocurricular activities. The state board of education shall further define allowable transportation expenditures by rule.

(d) A district may apply, and the commissioner may pay, for extraordinary transportation expenditures incurred due to geographic or other conditions such as the need to transport students out of the school district to attend another school because the district does not maintain a public school. The state board of education shall define extraordinary transportation expenditures by rule.

(e) The superintendent of each supervisory union in consultation with the regional planning commissions of the respective regions, shall develop a comprehensive, integrated, region-wide transportation plan for transportation of pupils in all school districts within each region. The plans shall be submitted to the Secretary of Transportation, the Commissioner of Education, and the Legislative Oversight Committee on Education Restructuring on or before January 1, 1998.

Sec. 23. TRANSITIONAL PROVISIONS; CAPITAL DEBT SERVICE; REPEAL

(a) In fiscal year 1999, a school district which in fiscal year 1998 paid capital debt service for a debt eligible for reimbursement under 16 V.S.A. 3497(c) prior to its repeal, shall receive reimbursement for those expenditures at the same percentage rate that it was or would have been reimbursed in fiscal year 1998. Also, in fiscal year 1999, a schooldistrict which in fiscal year 1998 incurred capital debt service expenditures eligible for reimbursement under Sec. 13 of Act No. 84 of the Acts of 1987, as amended by Sec. 10 of Act. No. 128 of the Acts of 1988, prior to its repeal, shall receive aid in the amount it would have received if that section had not been repealed. Beginning in fiscal year 1999 and each year thereafter until the debt is paid, a school district which issued debt prior to passage of this act to pay for construction costs approved by the state board, shall receive capital debt service aid in an amount which will ensure that the school district will pay the debt by levying a tax on its equalized grand list which is no greater than that it would have had to levy on its 1998 equalized grand list. Beginning in fiscal year 2000, debt service aid paid under this subsection for capital costs of a union school shall be paid directly to the union school district. A school district which issues or has issued bonded debt to pay for capital construction costs approved by the state board is authorized under the provisions of this act to levy ad valorem taxes on the grand list to pay for debt service therefore as it becomes due and payable, and shall do so unless otherwise payable from other sources, and such school district shall apply any amounts so raised to pay such debt service prior to making payments of any net amounts due to the education fund under this act.

(b) Sec. 13 of Act No. 84 of the Acts of 1987, as amended by Sec. 10 of Act No. 128 of the 1987 Adjourned Session, relating to aid for capital debt service, is repealed on June 30, 1998.

Sec. 24. TRANSITIONAL PROVISIONS; STATE SUPPORT GRANTS AND

SPENDING ABOVE THE GRANTS

(a) Education grants. In fiscal year 1999 the total amount of the general state support grant paid under 16 V.S.A. 4011, the standard mainstream block grant paid under 16 V.S.A. 2961 and the essential early education grant paid under 16 V.S.A. 2948(c) shall be for each equalized pupil, $5,000.00 adjusted upward from the fiscal year 1997 level based on the appropriate annual index for state and local government purchases of goods and services. The amount of the general state support grant shall be the amount per equalized pupil remaining after payment of the standard mainstream block grants and the essential early education grants. Each year thereafter, the per equalized pupil amount ofthe education grants of the previous year shall be increased by the most recent price index for state and local government purchases of goods and services.

(b) School district spending in excess of the general state support grant.

(1) In fiscal year 1999, notwithstanding provisions of chapter 135 of Title 32 and section 4027 of Title 16, for purposes of local education spending in excess of the general state support grant amount, each school district, shall adopt a budget and set a tax rate pursuant to law. However, school districts shall contribute to or receive from the education fund as follows:

(A) a school district with an equalized grand list in excess of $15,000.00 per equalized pupil shall pay 50 percent of the revenues raised from its nonresidential property for local education spending,

(B) a school district with an equalized grand list of between statewide average and $15,000.00 per equalized pupil shall pay up to 50 percent of the revenues raised from its nonresidential property for local education spending, as defined in subdivision 5401(10) of Title 32, according to a sliding scale developed by the commissioner of education by rule, and

(C) a school district with an equalized grand list per equalized pupil which is equal to the statewide average or less than the statewide average shall receive a payment equal to up to 75 percent of the revenues raised from all property taxed for local education spending, according to a sliding scale developed by the commissioner of education by rule.

(2) In fiscal year 2000, for purposes of local education spending in excess of the general state support grant amount, each school district shall adopt a budget and set a tax rate pursuant to law. However, notwithstanding the provisions of chapter 135 of Title 32 and section 4027 of Title 16, the general assembly which meets in 1998 shall determine the equalized yield amount and the education property tax rate in order to provide maximum equality of access to educational revenues as required by the Supreme Court decision Brigham v. Vermont, while easing the transition for districts which will see a substantial increase in tax rates.

(3) In fiscal year 2001 and each fiscal year thereafter, the education property tax rate and equalized yield amount shall be determined according to the provisions of chapter 135 of Title 32 and section 4027 of Title 16.

(c) The director of property valuation and review may redetermine any classification of property as nonresidential property, if the director finds that the district's classification is in error. A district aggrieved by the action of the director may within 30 days of the director's reclassification appeal to the superior court.

* * * Technical Education * * *

Sec. 25. TRANSITIONAL PROVISIONS; TECHNICAL EDUCATION

16 V.S.A. chapter 37, subchapter 5 ( 1561-1567), relating to financial aid for technical education is repealed on July 1, 1998. Pursuant to recommendation number 1 of the Report of the Joint Legislative Committee on Technical Center Construction of January 1997, it is the intent of the general assembly to defer decisions about a state aid for technical education system until the Joint Human Resources Investment Council and State Board of Education subcommittee has completed its work. The subcommittee is in the process of developing a plan for a technical education system for Vermont and will make its recommendations for governance and financing of technical centers to the General Assembly in January 1998.

Sec. 25a. HUMAN RESOURCES INVESTMENT COUNCIL

(a) The general assembly finds that the Human Resources Investment Council has been effective in accomplishing its responsibilities under 10 V.S.A. 541(h), particularly in coordinating planning and services for Vermont’s workforce education and training system and in establishing a statewide network of workforce investment boards. In partnership with the state board of education the council shall develop and submit to the governor and the general assembly, by December 15, 1997, the specifications for a world-class technical education system. These specifications shall include requirements for education goals, a system of financing, and a plan for state and regional governance, the latter with particular reference to the role of the workforce investment boards in coordinating and consolidating workforce education and training activities, includingadvisory boards, at the local level. The general assembly finds that in order to continue the council’s operations and to complete the technical planning, including implementation strategies and performance measurements, an appropriation of funds is warranted.

(b) The sum of $85,000.00 is appropriated to the department of employment and training from the general fund for the operations of the human resources investment council in fiscal year 1998.

(c) 10 V.S.A. 541(a) is amended to read:

(a) The human resources investment council is created as the successor to and the continuation of the governor’s human resources investment council. The council shall consist of the following members: the commissioner of employment and training, the chancellor of Vermont state colleges, the secretary of human services, the commissioner of agriculture,food and markets the secretary of commerce and community development, the commissioner of education, the commissioner of labor and industry, three representatives of business appointed by the governor and representing as much as possible the diversity of business interests within the state, three representatives of labor appointed by the governor, at least one of which shall be from names submitted by labor organizations, one representative of the low income community appointed by the governor, one member of the senate appointed by the senate committee on committees, one member of the house appointed by the speaker, and one representative of the office of the governor appointed by the governor.

PART III

* * * LOCAL SHARE PROPERTY TAX * * *

Sec. 26. 16 V.S.A. 428 is amended to read:

428. AMOUNT OF MONEY TO BE VOTED AND COLLECTED

(a) At each annual town school district meeting, the electorate shall vote such sums of money as it deems necessary for the support of schools and shall express in its vote the specific amounts voted for deficit, if any, for current expenses, capital improvements or other lawful purposes. If such sums are not approved or acted upon at the annual meeting, the electorate shall vote such questions at a duly warned special school districtmeeting. *[After the grand list book has been completed and lodged in the office of the town clerk, the selectmen shall set the tax rate necessary to raise the specific amounts voted.]* A district may vote money necessary for the support of schools therein to the end of the full school year next ensuing.

(b) Following adoption of a budget by the electorate and calculation of the equalized yield amount pursuant to section 4027 of this title, if the district has voted a budget with local education spending in excess of the general state support grant amount, the commissioner of education shall determine the district’s local share property tax percentage. The selectboard shall then bill each property taxpayer for the local share property tax amount, using tax classifications if authorized; but homesteads shall be billed without regard to the income sensitivity calculation under chapter 154 of Title 32.

(c) Local share property tax amount is the education property tax liability due under section 5402 of Title 32, times the local share property tax percentage, minus any amount of education property tax assessed for that year on an electric generating plant subject to tax under chapter 213 of Title 32. Local share property tax percentage means the percentage of the liability under chapter 135 of Title 32 necessary to raise per equalized pupil local education spending in excess of general state support amount, divided by the equalized yield amount. Local education spending shall have the same meaning that it has in subdivision 4001(6) of this title.

(d) The treasurer of each school district which has voted a budget with local education spending in excess of the general state support grant and which can raise more than the equalized yield amount shall, on December 1 in the year in which the tax is levied and on June 1 of the following year, pay to the state treasurer for deposit into the education fund one-half of the municipality’s education property tax liability net payment, as determined by the commissioner of education. Payment shall be accompanied by a return prescribed by the state treasurer in consultation with the commissioner of education. Any portion of local share property tax liability due to the treasurer and paid before the due date shall be discounted on a per diem basis at an annual rate of six percent.

(e) The payment provisions of section 5403 of Title 32, and the administrativeprovisions of section 5409 of Title 32 shall apply to the local share property tax.

(f) If the electorate of a school district votes for its budget by Australian ballot, it shall do so using ballot language jointly developed by the commissioner and secretary of state and adopted by the commissioner by rule.

Sec. 27. 16 V.S.A. 511 is amended to read:

511. *[ASSESSMENT AND COLLECTION]* BUDGET

(a) At a meeting legally warned for that purpose, an incorporated school district *[may vote a tax upon the polls and taxable estate within the territorial limits of such district for the lawful purposes of the corporation. The prudential committee shall make out and deliver to the district collector a tax bill with a warrant for its collection, and he shall have the same powers to collect such tax bill as a collector of town taxes.]* shall vote such sums of money as it deems necessary for the support of schools and shall express in its vote the specific amounts voted for deficit, if any, for current expenses, capital improvements or other lawful purposes. If such sums are not approved or acted upon at the annual meeting, the electorate shall vote such questions at a duly warned special school district meeting. A district may vote money necessary for the support of schools therein to the end of the full school year next ensuing.

(b) Following adoption of a budget by the electorate and calculation of the equalized yield amount pursuant to section 4027 of this title, if the incorporated district has voted a budget with local education spending in excess of the general state support grant amount, the commissioner of education shall determine the district’s local share property tax percentage. The prudential committee shall then bill each property taxpayer for the local share property tax amount, using tax classifications if authorized; but homesteads shall be billed without regard to the income sensitivity calculation under chapter 154 of Title 32. The prudential committee shall have the same authority to enforce collection and payment of this tax, including the collection of interest on overdue taxes, as selectmen have in enforcing collection and payment of town taxes.

(c) Local share property tax amount is the education property tax liability due under section 5402 of Title 32, times the local share property tax percentage, minus any amountof education property tax assessed for that year on an electric generating plant subject to tax under chapter 213 of Title 32. Local share property tax percentage means the percentage of the liability under chapter 135 of Title 32 necessary to raise per equalized pupil local education spending in excess of general state support amount, divided by the equalized yield amount. Local education spending shall have the same meaning that it has in subdivision 4001(6) of this title.

(d) The treasurer of an incorporated district which has voted a budget with local education spending in excess of the general state support grant and which can raise more than the equalized yield amount shall, on December 1 in the year in which the tax is levied and on June 1 of the following year, pay to the state treasurer for deposit into the education fund one-half of the municipality’s education property tax liability net payment, as determined by the commissioner of education. Payment shall be accompanied by a return prescribed by the state treasurer in consultation with the commissioner of education. Any portion of local share property tax liability due to the treasurer and paid before the due date shall be discounted on a per diem basis at an annual rate of six percent.

(e) The payment provisions of section 5403 of Title 32, and the administrative provisions of section 5409 of Title 32 shall apply to the local share property tax.

(f) If the electorate of an incorporated school district votes for its budget by Australian ballot, it shall do so using ballot language jointly developed by the commissioner and secretary of state and adopted by the commissioner by rule.

Sec. 28. 24 V.S.A. 1521 is amended to read:

1521. TAX BILLS AND WARRANTS

The *[selectmen]* selectboard shall seasonably make out and deliver to the proper collector, or to the town treasurer, if the town has voted to collect its taxes by that officer, tax bills for state, county, town, town school district and highways, with the name of each person taxed and the amount of *[his]* the tax. They shall annex proper warrants thereto for collection and may include all of such taxes or a part thereof in one tax bill, provided, however, that a tax bill that includes an assessment of tax on a homestead shall separately state the amount of tax imposed on the homestead for municipal services and the amountof tax imposed on the homestead for local share property tax and statewide education property tax. One warrant only shall be required for the collection of taxes on such tax bill. The *[selectmen]* selectboard shall certify on a tax bill, so made out what taxes are included therein and the rate percent of each tax so included.

PART IV

* * * SPECIAL EDUCATION * * *

Sec. 29. REPEAL

16 V.S.A. 2961 through 2969, relating to state aid for special education, are repealed on July 1, 1999.

Sec. 29a. 16 V.S.A. 2941 is amended to read:

2941. POLICY AND PURPOSE

It is the policy of the state to ensure equal educational opportunities for all children in Vermont. As applied to children with disabilities, this means that such children are entitled to receive a free appropriate public education. It is further the policy of the state to *[match locally raised revenues, on an equal basis statewide,]* pay 60 percent of the statewide costs expended by districts in providing a free appropriate public education to children with disabilities. The purpose of this chapter is to enable the state department of education to ensure the provision of the special educational facilities and instruction which are necessary to meet the needs of children with disabilities.

Sec. 30. 16 V.S.A. 2961(c)(2) is amended to read:

(2) "Full-time equivalent staffing" means *[5.25]* 9.75 special education teaching positions per 1,000 average daily membership.

Sec. 30a. 16 V.S.A. 2961(d) is added to read:

(d) If in any fiscal year, a district which maintains a school does not expend an amount equal to its mainstream salary standard on special education expenditures, the district may expend the balance, including the matching funds, to provide support and remedial services pursuant to section 2902 or 2903 of this title. A district choosing to expend funds in this way shall submit a report describing the services provided and their costs with the final financial report submitted under section 2968 of this title.

Sec. 30b. 16 V.S.A. 2962 is amended to read:

2962. EXTRAORDINARY SERVICES REIMBURSEMENT

(a) Except as otherwise provided in this subchapter, extraordinary services reimbursement shall be payable to each town school district, unified union school district and incorporated district.

(b) The amount of extraordinary services reimbursement provided to each district shall be equal to 90 percent of its extraordinary special education expenditures *[for all children with disabilities three years of age or older in the current school year]*.

(c) As used in this subchapter, "extraordinary special education expenditures" means a school district’s allowable expenditures *[for special education, as defined by rule of the state board, that for any one child exceed three and one-half times the foundation cost per pupil established in accordance with 16 V.S.A. 3493 for the school year in which the aid is distributed]* which for any one child exceed $50,000.00 for a fiscal year. In this subsection, child means a pupil with disabilities who is three years of age or older in the current school year. The state board shall define allowable expenditures *[under this subsection. Allowable expenditures]* which shall include any expenditures required under federal law, and any costs of mediation conducted by a mediator who is approved by the commissioner.

Sec. 30c. 16 V.S.A. 2963 is amended to read:

2963. *[INTENSIVE SERVICES REIMBURSEMENT]* SPECIAL EDUCATION

EXPENDITURES REIMBURSEMENT

(a) *[Except as otherwise provided in this subchapter, each]* Each school district shall receive *[an intensive services]* a special education expenditures reimbursement grant each school year.

(b) The amount of a school district's *[intensive services]* special education expenditures*[ ]*reimbursement shall be equal to the total of its *[intensive services]* special education expenditures multiplied by *[its intensive services]* the reimbursement rate for that year.

(c) As used in this subchapter:

(1) *["Intensive services expenditures" mean all]* Special education expenditures areallowable expenditures for special education, as defined by rule of the state board, less the following:

(A) revenue from federal aid for special education *[under Public Law 101-476, or similar laws on related subjects]*;

(B) mainstream service costs, as defined in section 2961(c)(1) of this title;

(C) extraordinary special education expenditures, as defined in section 2962 of this title any transportation expenses already reimbursed; and

(D) other state funds used for special education costs as defined by the state board by rule.

(2) The state board shall define allowable expenditures under this subsection. Allowable expenditures shall include any expenditures required under federal law.

(3) *["Intensive services]* "Special education expenditures reimbursement rate" means a percentage *[for each district derived from that district's ratio in the preceding fiscal year of foundation aid under 16 V.S.A. 3441 to foundation cost under 16 V.S.A. 3494, and calculated as follows:]*

*[(A) each district's ratio is divided by the highest ratio for any district in the state;]*

*[(B) the resulting quotient is multiplied by 0.4; and]*

*[(C) the resulting product is adjusted by adding to it a constant that is calculated to achieve the 50 percent share required by section 2967(b) of this title. However, if the constant is calculated to be less than 0.015, then the multiplier in subdivision (B) shall be reduced in 0.01 increments until the constant 0.015 or greater]* of special education expenditures that is calculated to achieve the 60 percent share required by section 2967(b) of this title.

Sec. 30d. 16 V.S.A. 2967 is amended to read:

2967. AID PROJECTION; STATE SHARE

(a) On or before December 15, the commissioner shall publish an estimate, by town school district, unified union school district and incorporated school district, of the amount of state assistance necessary to fully fund sections 2961 through 2963 of this title in the ensuing school year.

(b) After June 30, 1991, the total expenditures made by the state pursuant to this chapter in any fiscal year for:

(1) grants and reimbursements under sections 2961 through 2963 of this title,

(2) services for the visually handicapped and hearing impaired,

(3) the interdisciplinary team program, *[and]*

(4) regional multi-handicapped specialists,

(5) funds expended for training and programs to meet the needs of students with emotional behavioral problems under subsection 2969(c) of this title, and

(6) funds expended for training under subsection 2969(d) of this title

shall be *[no less than 50 percent]* 60 percent of the total expenditures of funds, not derived from federal sources of school districts and supervisory unions for special education *[under this subchapter and of the state for the purposes listed in this subsection]*.

Sec. 30e. 16 V.S.A. 2969(a) is amended to read:

(a) On or before August 15, December 15 and April 15 of each school year, the *[commissioner]* education fund, based on warrant of the commissioner of finance and management, shall forward to each school district the amount of state assistance estimated in accordance with state board rules to be necessary to fund sections 2961 through 2963 of this title in the current fiscal period. The state board shall by rule ensure that the amount of such assistance shall be adjusted to compensate for any overpayments or underpayments determined, after review and acceptance of the reports submitted under section 2968 of this title, to have been made in previous periods. Notwithstanding the above, failure to submit the reports within the timelines established by subsection 2968(a) of this title shall result in the withholding of any payments until the report is filed.

Sec. 31. 16 V.S.A. 2974 is added to read:

2974. SPECIAL EDUCATION PROGRAM AND FISCAL REVIEW

(a) Annually, the commissioner shall report on special education expenditures by school districts.

(b) The commissioner shall review high spending districts to determine whether:

(1) costs could be decreased while still providing needed special education services;

(2) the district made reasonable efforts to provide, purchase or contract for goods or services that are the most reasonably priced yet appropriate for its students;

(3) the district reported special education expenditures appropriately; and

(4) all expenditures identified as special education expenditures were properly attributed to eligible students and the services for which the expenditures were made were included in the students’ individualized education plans.

(c) The commissioner shall review low spending districts to determine the reasons for their spending patterns and whether those districts used cost-effective strategies appropriate to replicate in other districts.

(d) For the purposes of this section, a "high spending district" is a school district that, in the previous school year, spent at least 20 percent more than the statewide average of special education eligible costs per average daily membership. Also for the purposes of this section, a "low spending district" is a school district that, in the previous school year, spent no more than 80 percent of the statewide average of special education eligible costs per average daily membership.

Sec. 32. STUDY; SPECIAL EDUCATION COSTS AND FUNDING

The State Board of Education shall study special education costs in Vermont and the mechanisms for funding those costs at the state and local level. On or before January 15, 1998, the State Board shall recommend to the General Assembly any adjustments to present funding mechanisms that will:

(1) result in Vermont students having equal access to education revenues as required by the Supreme Court decision in Brigham v. State of Vermont and result in no individual school district bearing an unfair burden due to the unequally distributed costs of special education entitlements;

(2) provide strong cost-containment features and create disincentives for high spending;

(3) decrease inappropriate spending differentials between school districts; and

(4) decrease administrative costs at both the state and local levels.

Sec. 33. POSITION CREATED; APPROPRIATION

(a) The position of Fiscal Reviewer is created in the Department of Education in fiscal year 1998 for the purpose of reviewing special education spending in school districts under section 2974 of Title 16.

(b) In fiscal year 1998, the amount of $50,000.00 is appropriated from the general fund to the Commissioner of Education to pay the salary and expenses of the Fiscal Reviewer.

PART V

* * * FINANCING EDUCATION: CAPITAL CONSTRUCTION AID * * *

Sec. 34. REDESIGNATION

16 V.S.A. chapter 123 is redesignated to read:

CHAPTER 123. STATE AID FOR CAPITAL CONSTRUCTION COSTS

Sec. 35. REPEAL

The following sections of 16 V.S.A. chapter 123 are repealed:

Sections 3441, 3443, 3444, 3445, 3458a, 3460a, 3461a, 3461b, 3472, 3475, 3480, 3481, 3491, 3492, 3493, 3494, 3495, 3496, 3497, 3498 and 3499.

Sec. 36. 16 V.S.A. 3448(a)(6) and (7) are amended to read:

(6) Approval of final application.

* * *

(C) A school district shall not begin construction before the state board of education approves the final application.

(7) Award of construction aid. *[For purposes of this subdivision, the foundation levy to cost ratio shall be calculated as of the date the preliminary application was approved and shall be an average of the ratios of foundation levy to foundation cost for the most recent three fiscal years. A district shall receive an award equal to the total of approved costs multiplied by its capital construction aid reimbursement rate, rounded to the nearest one one-hundredth of a percent, as follows:]*

*[(A) A district whose foundation levy exceeds 2.00 times its foundation cost shall have a capital construction aid reimbursement rate of zero.]*

*[(B) A district whose foundation levy exceeds 1.50 but does not exceed 2.00times its foundation cost shall have a capital construction aid reimbursement rate calculated as follows:]*

*[(i) 1.5 is subtracted from the district levy to cost ratio.]*

*[(ii) The result is multiplied by .2.]*

*[(iii) The resultant product is subtracted from .20.]*

*[(C) A district whose foundation levy exceeds one but does not exceed 1.50 times its foundation cost shall have a capital construction aid reimbursement rate calculated as follows:]*

*[(i) Subtract one from the district levy to cost ratio.]*

*[(ii) The result is multiplied by .098.]*

*[(iii) The resultant product is subtracted from .299.]*

*[(D) A district whose foundation levy is less than or equal to its foundation cost shall have a capital construction aid reimbursement rate of .30.]*

*[(E) A union school district, joint contract district or an independent school serving more than one municipality pursuant to subdivision (5)(B) of this subsection, shall receive school construction aid equal to the sum of: the percentage of approved construction cost for each member district determined in accordance with the provisions of this subdivision, multiplied by the district’s percentage of the school membership in the year in which the preliminary application for the project was approved.]* The amount of an award shall be 30 percent of the approved cost of the project.

Sec. 37. TRANSITIONAL PROVISIONS; SCHOOL CONSTRUCTION AID

(a) Sec. 81(b) of Act No. 185 of the Acts of 1996 (Adjourned Session) is amended to read:

(b) This subsection applies to a school district which, following March 1, 1996 and prior to March 15, 1996, held an unsuccessful vote for funds to construct or purchase a new school plant, or to make extensive additions or alterations to its existing school plant and, following March 15, 1996 and prior to July 1, 1997, voted funds in the same amount or less for the purpose of constructing or purchasing a new school plant, or making extensive additions or alterations to its existing school plant, and which receives approvalfor the project from the state board of education. A school district to which this section applies shall be eligible to receive school construction aid pursuant to subdivision 3448(7) of Title 16 as adopted in this act. However, these school districts shall be reviewed and approved pursuant to provisions of Title 16 school construction aid statutes and rules repealed on March 15, 1996 which are hereby reenacted for that purpose. The foundation levy to cost ratio for these districts shall be calculated as of the date the project was approved. These school districts may engage in short term borrowing in anticipation of state school construction aid, pursuant to subdivision 563(21) of Title 16. *[Costs incurred for short term borrowing under this subsection shall not be reimbursed.]* A district which borrows funds in anticipation of aid is eligible for 100 percent reimbursement for costs of borrowing, up to a five percent interest rate, however, the district shall be reimbursed for costs incurred only after it has expended all funds borrowed under its bonding authority and other available funds. Notwithstanding changes in this act to subsection 3497(d) of Title 16, these districts shall receive capital debt service reimbursement aid under the system in effect prior to passage of this act.

(b) Sec. 81(d) of Act No. 185 of the Acts of 1996 is amended to read:

(d) Following passage of this act and before *[January 1, 1998 or adoption of rules under this act, whichever occurs first]* July 1, 1998, the state board shall approve and provide construction aid only to projects subject to subsections (a) and (b) of this section, and voter approved projects which the commissioner deems emergency projects pursuant to subdivision 3448(a)(3)(A) of Title 16, subsection 3448(d) of Title 16 or subsection (a) of Sec. 61 of Act No. 62 of the Acts of 1995. All emergency projects considered under this section shall be reviewed and approved pursuant to provisions of Title 16 school construction aid statutes and rules repealed on March 15, 1996 which are hereby reenacted for that purpose.

(c) Any state construction aid due to any state approved school construction project for which local funds were authorized prior to March 15, 1996; or had been authorized following March 1, 1996 and prior to March 15, 1996, but subsequently reconsidered and again received local authorization, shall be paid under provisions of law in effect prior toMarch 15, 1996 (a grant for 30, 40 or 50 percent of eligible costs), subject to Sec. 81(a) of Act No.185 of the Acts of 1996 including a short-term borrowing reimbursement provision).

(d) Project review and approval and short-term borrowing reimbursement shall be subject to the provisions of Sec. 81(b) of Act No. 185 of the Acts of 1996 for any state approved school construction project for which a local vote for funds was held unsuccessfully after March 1, 1996 and prior to March 15, 1996, but following March 15, 1996 and prior to July 1, 1997, a local vote for project funds in the same or a lesser amount was successful. A project receiving a grant award under this subsection shall receive 30 percent of the approved cost of the project.

(e) Any school construction project receiving state approval on or after July 1, 1998 shall receive construction aid under provisions of section 3448 of Title 16.

(f) Pursuant to recommendation number 2 of the Report of the Joint Legislative Committee on Technical Center Construction of January, 1997, it is the intent of the General Assembly to defer decisions about state aid for technical center construction until the Joint Human Resources Investment Council and State Board of Education Subcommittee has completed its work. The subcommittee is in the process of developing a plan for a technical education system for Vermont and will make its recommendations for financing and governance of technical centers to the General Assembly in January of 1998. Therefore, it is the intent of the General Assembly to fund needed technical center capital projects at 100 percent of approved costs for now and develop a permanent system when a new technical center governance and finance system is in place.

(There are no Secs. 38 through 44)

PART VI

* * * EDUCATION REVENUES * * *

Sec. 45. 32 V.S.A. chapter 135 is added to read:

CHAPTER 135. EDUCATION PROPERTY TAX

5401. DEFINITIONS

As used in this chapter:

(1) "Coefficient of dispersion" for a municipality in any school year shall be computed by the director of property valuation and review as follows:

(A) determine the ratio of assessment to the selling price of each fair market sale of real estate;

(B) determine the mean assessment ratio of all fair market sales of real estate;

(C) determine the absolute deviation of each assessment ratio from the mean;

(D) determine the mean absolute deviation.

The coefficient of dispersion is the mean absolute deviation expressed as a percentage of the mean assessment ratio.

(2) "Commissioner" means the commissioner of taxes.

(3) "Common level of appraisal" means the ratio of the aggregate value of local education property tax grand list to the aggregate value of the equalized education property tax grand list.

(4) "Director" means the director of the division of property valuation and review.

(5) "Education property tax grand list" means the list of property determined pursuant to section 5404 of this title. When the listed value of real property for school tax purposes is adjusted by a board of civil authority or a court, that board or court shall make a corresponding adjustment to the listed value for purposes of taxation under this chapter.

(6) "Equalized education property tax grand list" means one percent of the aggregate fair market value of all nonresidential and homestead real property that is required to be listed at fair market value as certified during that year by the director of property valuation and review under section 5406 of this title, plus one percent of the aggregate value of property required to be listed at a value established under a stabilization agreement described under section 5404a of this title, plus one percent of the aggregate use value established under chapter 124 of this title of all nonresidential real property that is enrolled in the use value appraisal program.

(7) "Homestead" means the principal dwelling owned and occupied by a resident individual or part-year resident individual, as defined in section 5811 of this title, in which the individual claims residence for purposes of income tax liability and rights andprivileges of residency. A homestead also includes a dwelling owned by a farmer as defined under section 3752 of this title, and occupied as the permanent residence by a parent, sibling, child, grandchild or shareholder of the farmer-owner, provided that the shareholder owns more than 50 percent of a corporate farmer-owner, including attribution of stock ownership of a parent, sibling, child or grandchild. A homestead includes as much of the land surrounding the dwelling as is reasonably necessary for use of the dwelling as a home, but in no event more than two acres per dwelling unit, up to a maximum of 10 acres per parcel. A homestead may consist of a part of a multi-dwelling or multi-purpose building and a part of the land upon which it is built. A mobile home may constitute a principal dwelling for purposes of this chapter. A homestead does not include buildings or improvements detached from the home except for a building used as a garage for personal passenger vehicles. A homestead does not include that portion of a principal dwelling used for business purposes if the portion used for business purposes includes either two or more rooms or more than 25 percent of the floor space of the building.

(8) "Local education spending" means "local education spending" as defined in subdivision 4001(6) of Title 16.

(9) "Municipality" means a city, town, unorganized town, village, grant or gore; or, in the case of property located within the territorial limits of an incorporated school district, "municipality" means an incorporated school district.

(10) "Nonresidential real property" means all real property except:

(A) Property which is exempt from the municipal property tax by law and not by vote of the municipality.

(B) Property which is subject to the tax on railroads imposed by subchapter 2 of chapter 211 of this title, the tax on steamboat, car and transportation companies imposed by subchapter 3 of chapter 211 of this title, the tax on telephone companies imposed by subchapter 6 of chapter 211 of this title, or, in 2001 and after, the tax on electric generating plants imposed by chapter 213 of this title.

(C) Homesteads declared in accordance with section 5410 of this title.

(D) Personal property, machinery, inventory and equipment.

(E) The excess valuation of property subject to tax increment financing in a tax increment financing district established under subchapter 5 of chapter 53 of Title 24 prior to June 10, 1997 to the extent that the taxes generated on the excess property valuation are pledged and appropriated for interest and principal repayment on bonded debt or prefunding future tax increment financing district debt.

5402. EDUCATION PROPERTY TAX LIABILITY

(a) A statewide education property tax is imposed on all nonresidential and homestead property at a rate of $1.10 per $100.00 of equalized education property tax grand list value as most recently determined under section 5405 of this title; but the homestead property tax liability for eligible claimants under chapter 154 of this title shall not exceed the lesser of two percent of household income for the calendar year in which the tax is assessed or the amount of statewide education property tax the municipality would have assessed on the homestead if its equalized value had been reduced by $15,000.00.

(b) The commissioner of taxes shall determine the education property tax liability for each municipality for the following school year by multiplying the tax rate adopted under subsection (a) of this section by the municipality's equalized education tax grand list for the previous year. On or before June 30 each year, the commissioner of taxes shall inform each municipality of its education property tax liability. The legislative body in each municipality shall then assess the education property tax on the education property tax grand list, using tax classifications if authorized, to raise that amount. Taxes assessed under this section shall be assessed in the same manner as taxes assessed under chapter 133 of this title. Taxes assessed on nonresidential property shall be collected in accord with the provisions of chapter 133 of this title; taxes assessed on homesteads shall be assessed without regard to the adjustment for eligible claimants under chapter 154 of this title, and shall be collected as provided in section 5403 of this title.

(c) Notwithstanding section 426 of Title 16, the treasurer of each municipality shall December 1 of the year in which the tax is levied and on June 1 of the following year pay to the state treasurer for deposit in the education fund one-half of the municipality'seducation property tax liability net payment, as determined by the commissioner of taxes. Payment shall be accompanied by a return prescribed by the director in consultation with the commissioner of education. The municipality may also retain one-half of one percent of the net payment amount to the state, as determined by the director of property valuation and review. Any remaining balance shall be paid to the school district.

5403. ADJUSTMENT AND PAYMENT OF HOMESTEAD EDUCATION

PROPERTY TAX

(a) Taxes assessed on homesteads under this chapter, adjusted in accord with chapter 154 of this title if applicable, shall be paid to the commissioner of taxes on or before April 15 following assessment of the tax. Subchapters 6 through 10 of Title 32, as amended, but not section 5861a, shall apply to this tax in the same manner as to income tax.

(b) A taxpayer may elect to pay all or a part of the tax imposed on the homestead under this chapter in advance, through income withholding or quarterly installment payments, in the same manner as an income tax under chapter 151 of this title. An election under this subsection is voluntary, and failure to pay in advance through withholding or quarterly installments shall not result in a penalty. An election shall be made on a worksheet prescribed by the commissioner.

(c) In any case in which a taxpayer is required under a mortgage contract to make escrow payments of property tax to the mortgagee, the mortgagee shall pay to the commissioner the taxes assessed under this chapter, in quarterly installments in the same manner as an income tax under chapter 151 of Title 32.

(d) Notwithstanding section 435 of this title, the commissioner shall deposit the revenue from the tax imposed under this chapter in the education fund, credited to the account of the municipality for which is was received.

5404. DETERMINATION OF EDUCATION PROPERTY TAX GRAND LIST

Municipalities shall determine the education property tax grand list by calculating one percent of the listed value of nonresidential and homestead real property as provided in this section. The listed value of all nonresidential and homestead real property in a municipality shall be its fair market value, its value established under a stabilizationagreement described in section 5404a of this title, or the use value of property enrolled in a use value program under chapter 124 of this title. If a homestead is located on a parcel of greater than two acres, the entire parcel shall be appraised at fair market value; the homestead shall then be appraised as if it were situated on a separate parcel and the value of the homestead shall be subtracted from the value of the total parcel to determine the value of the remainder of the parcel.

5404a. TAX STABILIZATION AGREEMENTS

(a) Tax stabilization agreements shall affect the education property tax grand list of the municipality in which the property subject to the agreement is located if the agreement is:

(1) a prior agreement, meaning that it was:

(A) an agreement under 24 V.S.A. 2741 or comparable municipal charter provisions entered into or proposed and voted by the municipality before July 1, 1997, or an exemption adopted by vote pursuant to chapter 125 of Title 32 or comparable municipal charter provisions before July 1, 1997; or

(B) an agreement relating to property sold or transferred by the New England Power Company of its Connecticut River system and its facilities along the Deerfield River which was warned before September 1, 1997; or

(2) an agreement entered into under 24 V.S.A. 2741,or comparable municipal charter provisions or an exemption adopted by vote under chapter 125 of Title 32 or comparable municipal charter provisions after June 30, 1997 if subsequently approved by the general assembly pursuant to this subsection. A tax stabilization agreement may be approved by the general assembly if it is entered into or voted for the purpose of promoting economic development, affordable housing, land conservation, or other public purposes. An agreement may be approved by the general assembly only if it has first been approved by the municipality in which the property is located with respect to the municipal tax liability of the property in that municipality. Any agreement approved by the general assembly may not affect the education tax liability of the property in a greater proportion than the agreement affects the municipal tax liability of the property. A municipality’s approval of an agreement under this subsection may be made conditional upon approval ofthe agreement by the general assembly under this subsection. The legislative body of the municipality in which the property subject to the agreement is located may request the secretary of administration to recommend to the general assembly to approve an agreement if the secretary finds that the agreement promotes economic, land conservation or other public purposes. The secretary shall also report to the general assembly on the terms of the agreement, and the effect of the agreement on the education property tax grand list of the municipality and of the state. An agreement may be approved by act of the general assembly, and if so approved shall be effective to reduce the property tax liability of the municipality under this chapter beginning April 1 of the year following approval.

(3) an agreement relating to affordable housing approved by the commissioner of taxes upon recommendation by the commissioner of housing and community affairs provided the agreement provides for substantial amounts of rehabilitated housing and secures federal financial participation.

(b) A prior tax stabilization agreement, a tax stabilization agreement subsequently approved by the general assembly, or an agreement relating to affordable housing approved by the commissioner of taxes shall reduce the municipality’s education property tax liability under this chapter for the duration of the agreement or exemption without extension or renewal, and for a maximum of ten years. A municipality’s property tax liability under this chapter shall be reduced by any difference between the amount of the education property taxes collected on the subject property and the amount of education property taxes that would have been collected on such property if its fair market value were taxed at the equalized nonresidential rate for the tax year.

(c) Municipalities which have existing tax increment financing districts under subchapter 5 of chapter 53 of Title 24 shall have the authority to expand those districts by June 30, 1997, but not thereafter, and to collect all state and local property taxes on properties within the tax increment financing district and apply those revenues to repayment of debt issued to finance improvements within the tax increment financing district.

5404b. HYDRO-ELECTRIC PROPERTY; CONSERVATION EASEMENTS;

TRANSFERS

Notwithstanding any other provision of law, including the provisions of 32 V.S.A. 3481(1), and the provisions of 32 V.S.A. 3802(1):

(1) any real property subject to conservation easements granted pursuant to the terms of any agreement executed on or after January 1, 1997 between companies owning real property used for hydro-electric generation in this state and the state of Vermont shall continue to be assessed and property taxes collected as if such property were not subject to such easements; and

(2) any real property purchased by the state pursuant to the terms of any agreement executed on or after January 1, 1997 between companies owning real property used for hydro-electric generation in this state and the state of Vermont, which property continues to be owned by the state, or by some successor owner which would otherwise be exempt from property taxes, shall continue to be assessed and property taxes collected as if such property were not so purchased by the state.

5405. DETERMINATION OF EQUALIZED EDUCATION PROPERTY TAX

GRAND LIST AND COEFFICIENT OF DISPERSION

(a) Annually, on or before April 1, the commissioner shall determine the equalized education property tax grand list and coefficient of dispersion for each municipality in the state.

(b) The sum of all municipal equalized education property tax grand lists shall be the equalized education property tax grand list for the state.

(c) In determining the fair market value of property which is required to be listed at fair market value, the commissioner shall take into consideration those factors required by section 3481 of this title. The commissioner shall value property as of January 1 preceding the determination.

(d) Any determination of fair market value made by the commissioner under this section shall be based upon such methods, as in the judgment of the commissioner, and in view of the resources available for that purpose, shall be appropriate to support thatdetermination.

(e) Individual appraisals performed by the division of property valuation and review may be used to supplement actual sales when necessary to obtain a representative sample.

(f) Within the limits of the resources available for that purpose, the commissioner may employ such individuals, whether on a permanent, temporary, or contractual basis, as shall be necessary, in the judgment of the commissioner, to aid in the performance of duties under this section. The commissioner shall pay each municipality the sum of $1.00 per grand list parcel in the municipality, for services provided to the commissioner in connection with his or her duties under this section. Such payment shall be made from the equalization and reappraisal account within the education fund.

5406. NOTICE OF FAIR MARKET VALUE AND COEFFICIENT OF DISPERSION

(a) Not later than January 1 of each year, the director of the division of property valuation and review shall notify the town clerk and chair of the board of listers of each municipality of the fair market value and the coefficient of dispersion of that town for that year, and of the manner by which fair market value and coefficient of dispersion were determined by the director.

(b) Not later than April 1 of each year, the director shall certify to the commissioner of education the fair market value and coefficient of dispersion of every municipality of the state.

5407. VALUATION APPEAL BOARD

(a) There is established a valuation appeal board to consist of five members. The members shall be appointed by the governor with the advice and consent of the senate, for three-year terms beginning February 1 of the year in which the appointment is made, except that one of the initial appointments shall be for a term of one year and two of the initial appointments shall be for a term of two years. A vacancy in the board shall be filled in the same manner as the original appointment for the unexpired portion of the term vacated.

(b) Persons serving on the appeal board shall be knowledgeable and experienced in at least one of the following fields: agriculture, business management, law, taxation,appraisal and valuation techniques, municipal affairs or related areas. No member of the valuation appeal board shall be otherwise employed by the state or be a lister. In making appointments, attention shall be given to the desirability of providing geographical balance to the degree reasonably practical.

(c) A chair shall be designated biennially by the governor from among the members of the board and any vacancy in the office of the chair shall be filled by designation of the governor.

(d) Members of the valuation appeal board shall receive reasonable compensation for services and reimbursement for expenses for each day of official duties of the board together with reimbursement of reasonable expenses incurred in the performance of their duties, as determined by the director of property valuation and review.

(e) The board shall be attached for administrative purposes to the division of property valuation and review of the department of taxes of the agency of administration.

5408. PETITION FOR REDETERMINATION

(a) Not later than 30 days after the receipt by its clerk of a notice under section 5406 of this title, a municipality may petition the director of the division of property valuation and review for a redetermination of the municipality's fair market value or coefficient of dispersion. Such petition shall be in writing and shall be signed by the chair of the legislative body of the municipality or its designee.

(b) Upon receipt of a petition for redetermination under subsection (a) of this section, the director shall, after written notice, grant a hearing upon the petition to the aggrieved town. The director shall thereafter notify the town and the commissioner of education of his or her redetermination of the fair market value or coefficient of dispersion of the town or district, in the manner provided for notices of original determinations under section 5406 of this title.

(c) A municipality, within 30 days of the director's redetermination, may appeal the redetermination to the valuation appeal board. The board shall notify the appellee of the filing of the appeal. The appeal shall be heard de novo in the manner provided by chapter 25 of Title 3 for the hearing of contested cases.

(d) A municipality may appeal from a decision of the valuation appeal board to the superior court of the superior court district in which the municipality is located. The superior court shall hear the matter de novo in the manner provided by Rule 74 of the Vermont Rules of Civil Procedure. An appeal from the decision of the superior court shall be to the supreme court under the Vermont Rules of Appellate Procedure.

5409. ADMINISTRATION AND DUTIES OF MUNICIPALITIES

The following shall apply to municipalities with regard to the tax imposed under this chapter and to the local share tax imposed under section 428 or 511 of Title 16:

(1) Late payments of the tax by a municipality to the state shall be assessed interest at a per diem rate of eight percent per annum of the amount due. If a payment is more than 90 days overdue, any state funds due the municipality shall be withheld.

(2) If by August 1 a municipality has failed to issue notices of assessment of the statewide property or local share property tax; or if the municipality fails for more than 90 days after the due date for any installment payment of either tax to enforce the tax in the municipality; then the commissioner of taxes shall either issue notices of assessment or collect the tax or both, or bring appropriate court action to require the municipal officials to issue notices and collect the tax, as the commissioner deems necessary.

(3) In any case of administration under subdivision (3) of this section by the commissioner of taxes of local share property tax:

(A) Sections 5868, 5869, 5873, 5875, 5881, 5882, 5883, 5884, 5885, 5886, 5887, 5891, 5892, 5893, 5894 and 5895 of Title 32, as amended, shall apply in the same manner as to income tax.

(B) Persons aggrieved by decisions of the listers may appeal in the manner provided for property tax appeals in chapter 131 of Title 32; and sections 5226 and 5227, and Articles 5 and 6 of chapter 133 of Title 32, shall apply in the same manner to the local share property tax, and the commissioner of taxes shall have all the powers described in those sections.

(C) The commissioner may abate in whole or in part the statewide or local share property taxes of a taxpayer who has been granted an abatement of municipal taxes undersection 1535 of Title 24.

(D) The commissioner of taxes shall deposit all revenues collected in accord with this chapter into the education fund.

(4) In case of insufficient payment by a taxpayer of taxes to be collected by the commissioner, payments shall be allocated first to municipal property tax, next to local share property tax and last to statewide education property tax.

(5) Annually by October 1 each municipality shall notify the commissioner of the tax imposed under this chapter and the local share tax imposed under sections 428 and 511 of Title 16 on each homestead parcel, and shall include a description of the parcel and parcel number, the names of owners of record, the assessed value, the municipal tax rate for the statewide and local share taxes, the local share municipal percentage rate determined under section 4027 of Title 16, and other information in a form as the commissioner shall require. Municipalities shall use, whenever possible, an electronic format prescribed by the commissioner for transmitting the information. Where possible notification and communication under this section shall be by electronic format specified by the commissioner.

5410. DECLARATION OF HOMESTEAD

(a) A resident or part-year resident may declare one homestead for purposes of this chapter.

(b) Annually by April 15, each resident individual or part-year resident individual may, on a form prescribed by the commissioner, which shall be verified under the pains and penalties of perjury, declare his or her homestead, if any, as of, or expected to be as of, April 1 of the year in which the declaration is made.

(c) The commissioner shall provide a list of homesteads in each town to the town clerk by May 15. The listers shall separately identify homesteads in the grand list. The clerks shall notify the commissioner by June 1 of any residences on the commissioner's list which do not qualify as homesteads.

(d) The commissioner shall adopt rules governing late filing of a residency claim and the eligibility requirements for declaring a homestead.

(e) Intention to establish a permanent residence is a factual determination to be made in the first instance by the commissioner. No one factor is conclusive of whether a dwelling is a permanent residence; the following are relevant factors that may be considered by the commissioner: formal and informal statements of the declarant; the declarant's place of employment, place of voter registration, place of issuance of automobile registration and driver's license; previous permanent residency of the declarant; and address listed on federal and state income tax returns filed by the declarant.

(f) If the property identified in a declaration under subsection (b) of this section is not the taxpayer's homestead, the commissioner shall assess the taxpayer a tax in an amount equal to 110 percent of the property tax reduction granted on account of the homestead declaration, plus interest from the original due date of the property tax on the property, at the applicable rate established in section 3108 of this title. Any tax imposed under this subsection may be recovered by assessment and enforcement and with appeal rights in the same manner as an income tax under chapter 151 of this title. Amounts collected under this subsection shall be credited to the education fund.

5411. RULES

The commissioner of taxes and the director of property valuation and review may each adopt formal or informal rules in order to carry out the provisions of this chapter.

Sec. 46. 32 V.S.A. 4041a is added to read:

4041a. REAPPRAISAL

(a) A municipality shall be paid $6.00 per grand list parcel per year from the equalization and reappraisal account within the education fund, to be used only for reappraisal and costs related to reappraisal of its grand list properties and for maintenance of the grand list.

(b) If the director of the division of property valuation and review determines that a municipality's education grand list is at a common level of appraisal below 80 percent or has a coefficient of dispersion greater than 20, the municipality shall reappraise its education grand list properties. If the director orders a reappraisal, the director shall send the municipality written notice of the decision. The municipality shall be given 30 days tocontest the finding under procedural rules adopted by the director, to develop a compliance plan, or both. If the director accepts a proposed compliance plan submitted by the municipality, the director shall not order commencement of the reappraisal until the municipality has had one year to carry out that plan.

(c) If a municipality fails to submit an acceptable plan or fails to carry out the plan, pursuant to subsection (b) of this section, the state shall withhold the education, transportation and other funds from the municipality until the director certifies that the town has carried out that plan.

(d) The director shall adopt rules necessary for administration of this section.

Sec. 47. 32 V.S.A. 4152(a)(9) is added to read:

(9) Separate columns which will show the listed valuations of homesteads.

Sec. 48. COMPARABLE SALES

If the director of property valuation and review determines that there are insufficient sales within a town to determine fair market value for purposes of chapter 135 of Title 32, the director may allow use of sales in other towns with similar characteristics.

Sec. 49. COMMISSIONER'S NOTICE OF NEW LAW

The commissioner of taxes shall include with the state income tax booklets issued in December 1997, a notice and explanation of the property tax law regarding filing, payment and appeal.

Sec. 50. TRANSITION FOR FISCAL YEARS 1999 AND 2000

(a) For fiscal year 1999: Any municipality having a 1997 equalized education property tax rate of $0.20 or less shall be subject to the statewide property tax under chapter 135 of Title 32 at a rate of the 1997 rate plus one-third the difference between that rate and $1.10. Any other municipality having a 1997 equalized education property tax rate less than $1.10 shall be subject to the statewide property tax under chapter 135 of Title 32 at a rate of the lesser of $1.10 or the municipality's 1997 equalized education property tax rate plus $0.30. Any municipality having a 1997 equalized education property tax rate of more than $1.10 and less than $1.15, shall be subject to the statewide property tax under chapter 135 of Title 32 at a rate of $1.10. Any municipality having a 1997 equalizededucation property tax rate of more than $1.15, shall be subject to the statewide property tax under chapter 135 of Title 32 at a rate of $1.15. No municipality shall be required to set a combined municipal, school district and statewide property tax rate which is more than 40 percent higher than its combined fiscal year 1998 municipal and school property tax rate, provided that any growth in the municipal budget of more than 10 percent in that year shall not be included in the calculation of the combined municipal, school district and statewide property tax rate for that year.

(b) For fiscal year 2000: A municipality shall be subject to the tax rate determined under Sec. 24(b)(2) of this act.

Sec. 50a. LIMITATION ON EDUCATION PROPERTY TAXATION OF CERTAIN

ELECTRIC GENERATING PLANTS

Notwithstanding any provisions of this act or local law to the contrary, in 1998 and after, a municipality may assess upon any electric generating plant subject to the tax under chapter 213 of Title 32 an education property tax. The tax rate shall not exceed the education property tax rate assessed on such property in fiscal year 1997. The tax shall be assessed on the municipal grand list value of such property, but in no event shall the education property tax assessment exceed the education property tax assessed on such property in fiscal year 1997. The revenue from this tax shall be deposited into the education fund established by this act; and in fiscal years 1999 and 2000 shall be credited to the account of the municipality that collected the tax, first to its local share property tax liability and then to its statewide property tax liability.

Sec. 50b. INCONSISTENT PROVISIONS OF MUNICIPAL CHARTERS; INTERSTATE

SCHOOL DISTRICTS

(a) In the event of a conflict relating to generation of revenues for education funding between the provisions of this act and the provisions of any municipal charter, the provisions of this act shall control.

(b) Nothing in this act is intended to interfere in any way with the legal existence or organization of any existing interstate school district. If there is a conflict between the terms of this act and those of an interstate compact relating to the organization or legalexistence of such a district, the latter shall take precedence.

PART VII

* * * HOMESTEAD PROPERTY TAX INCOME

SENSITIVITY ADJUSTMENT * * *

Sec. 51. 32 V.S.A. chapter 154 is added to read:

CHAPTER 154. HOMESTEAD PROPERTY TAX INCOME

SENSITIVITY ADJUSTMENT

6061. DEFINITIONS

The following definitions shall apply throughout this chapter unless the context requires otherwise:

(1) "Adjustment" means an adjustment of statewide or local share property tax liability or a homestead owner or renter credit, as authorized under section 6066 of this title, as the context requires.

(2) "Homestead" means a dwelling as defined in section 5401(7) of this title, which is owned or rented by the claimant as the principal residence.

(3) "Household" means, for any individual and for any taxable year, the individual and such other persons as resided with the individual in the homestead at any time during the taxable year. A person residing in a household who is hired as a bona fide employee to provide personal care to a member of the household and who is not related to the person for whom the care is provided shall not be considered to be a member of the household.

(4) "Household income" means modified adjusted gross income received in a calendar year by

(A) all persons of a household while members of that household; and

(B) the spouse of the claimant who is not a member of that household and who is not legally separated from the claimant.

(5) "Modified adjusted gross income" means the sum of "adjusted gross income" as defined in section 5811 of this title (but before the deduction of any trade or business loss, loss from a partnership, loss from a small business or "subchapter S" corporation, loss from a rental property, or capital loss), alimony, support money, cash public assistance andrelief (not including relief granted under this subchapter), cost of living allowances paid to federal employees, allowances received by dependents of servicemen and women, the gross amount of any pension or annuity (including railroad retirement benefits, all payments received under the federal Social Security Act, and all benefits under Veterans’ Acts), nontaxable interest received from the state or federal government or any of its instrumentalities, workers' compensation, the gross amount of "loss of time" insurance, and the amount of capital gains excluded from adjusted gross income, less the net employment and self-employment taxes withheld from or paid by the individual (exclusive of any amounts deducted to arrive at adjusted gross income or deducted on account of excess payment of employment taxes) on account of income included under this section, less any amounts paid as child support money if substantiated by receipts or other evidence that the commissioner may require. It does not include gifts from nongovernmental sources, surplus food or other relief in kind supplied by a governmental agency, or the first $4,000.00 of income earned by a full-time student who qualifies as a dependent of the claimant under the federal Internal Revenue Code, or the first $4,000.00 of income received by a parent who qualifies as a dependent of the claimant under the Internal Revenue Code, or payments made by the state for foster care or to a family for the support of an eligible person with a developmental disability as defined in subdivision 8722(2) of Title 18. If the commissioner determines, upon application by the claimant, that a person resides with a claimant who is disabled or was at least 62 years of age as of the end of the year preceding the claim, for the primary purpose of providing attendant care services (as defined in section 6321 of Title 33) or homemaker or companionship services, with or without compensation, which allow the claimant to remain in his or her home or avoid institutionalization, the commissioner shall exclude that person's modified adjusted gross income from the claimant's household income. The commissioner may require that a certificate in a form satisfactory to the commissioner be submitted which supports the claim.

(6) "Property tax" means the amount assessed for payment on the homestead during the taxable year for ad valorem taxes, exclusive of special assessments, interest,penalties, and charges for service, assessed for payment in the taxable year on real property in this state used as the claimant's homestead.

(A) "Statewide property tax" means the tax assessed under chapter 135 of this title for payment in the taxable year on real property in this state used as the claimant's homestead.

(B) "Local share property tax" means the tax assessed under section 428 or 511 of Title 16 for payment in the taxable year on real property in this state used as the claimant's homestead.

Taxes that normally would have been due in the taxable year but because of special circumstances were billed by the town to be due after the taxable year shall be considered as having been assessed for payment in the taxable year, and not assessed for payment in the succeeding year.

(7) "Rent constituting property taxes" means for any homestead and for any taxable year, at the claimant's option, (A) 21 percent of the gross rent or (B) that portion of the gross rent which equals the property tax allocable to the claimant's rental unit for the period rented by the claimant. "Gross rent" means the rent actually paid during the taxable year by the individual or other members of the household solely for the right of occupancy of the homestead during the taxable year. If a claimant’s rent is government-subsidized, the property tax allocable to the claimant’s rental unit shall be reduced in the same proportion as the rent is reduced by the subsidy. "Rent constituting property taxes" shall not include payments for a room in a nursing home in any month for which Medicaid payments have been made on behalf of the claimant to the nursing home for room charges.

(8) "Annual tax levy" means the property taxes levied on property taxable on April 1, and without regard to the year in which those taxes are due or paid.

(9) "Taxable year" means the calendar year preceding the year in which the claim is filed.

6062. NUMBER AND IDENTITY OF CLAIMANTS; APPORTIONMENT

(a) In the case of a renter credit claim based solely on rent constituting property taxes, the claimant shall have rented property during the entire taxable year. If two or moreindividuals of a household are able to meet the qualifications for a claimant hereunder, they may determine among them who the claimant shall be. Any disagreement under this subsection shall be referred to the commissioner and his or her decision shall be final.

(b) Only one claimant per household per year shall be entitled to relief under this chapter.

(c) When a homestead is owned by two or more persons as joint tenants, tenants by the entirety, or tenants in common and one or more of these persons are not members of the claimant's household, the property tax is the same proportion of the property tax levied on that homestead as the proportion of ownership of the homestead by the claimant and members of the claimant's household; provided, however, that

(1) the property tax of a claimant who is 62 years of age or older is the same proportion of the property tax levied on that homestead as the proportion of ownership of the homestead by the claimant, members of the claimant's household, and the claimant's descendants; and the claimant's siblings or spouse who have moved on an indefinite basis from the homestead to a residential care or nursing home and who claim no rebate or credit for such year under this chapter; and

(2) the property tax of a claimant who is a joint tenant or tenant by the entirety with, and legally separated from, a spouse who is not a member of the household, is the actual tax paid by the claimant spouse on the homestead pursuant to a court-approved settlement agreement.

(d) When a claimant owns the homestead for part of the preceding calendar year and rents it or a different homestead for a part of that year, property tax means the property tax on the homestead owned by the claimant, multiplied by the percentage of the taxable year that the property was owned and occupied by the claimant as his or her homestead; plus the rent constituting property taxes paid by the claimant for the remaining percentage of the taxable year.

(e) Whenever a homestead is an integral part of a larger unit such as a farm, or a multi-purpose or multi-dwelling building, property taxes paid shall be that percentage of the total property tax as the value of the homestead is to the total value. Upon aclaimant's request, the listers shall certify to the claimant the value of his or her homestead.

6063. CLAIM AS PERSONAL; ESCHEAT

The right to file a claim under this chapter is personal to the claimant and shall not survive his or her death, but the right may be exercised on behalf of a claimant by his or her legal guardian or attorney-in-fact. When a claimant dies after having filed a timely claim, the reduction payment may be issued to another member of the household as determined by the commissioner. In the case of a renter property tax credit, if the claimant was the only member of the household, the claim shall be paid to the executor or administrator, but if neither is appointed within two years of the filing of the claim, the amount thereof shall escheat to the state.

6064. CLAIM APPLIED AGAINST OUTSTANDING LIABILITIES

The amount of any claim otherwise payable or refund resulting under this chapter may be applied by the commissioner against any state tax liability outstanding against the claimant.

6065. FORMS; TABLES; NOTICES

(a) In administering this chapter, the commissioner shall make available suitable claim forms with tables of allowable claims, instructions, worksheets for estimating a statewide property tax homestead adjustment, withholding and quarterly installments.

(b) Prior to June 1, the commissioner shall also prepare and supply to each town in the state notices describing the homestead property tax adjustment, for inclusion in property tax bills. A town shall include such notice in each tax bill and notice of delinquent taxes which it mails to taxpayers who own a primary residence in that town.

(c) Notwithstanding the provisions of subsection (b) of this section, towns which use envelopes or mailers not able to accommodate notices describing the homestead tax adjustment may distribute such notices in an alternative manner.

6066. COMPUTATION OF ADJUSTMENT

(a) The property tax of an eligible claimant who owned the homestead on the last day of the taxable year shall be adjusted as follows:

(1) the claimant's statewide property tax liability shall be the lesser of 2.0 percentof household income, or the amount of statewide education property tax the municipality would have assessed on the homestead if its equalized value had been reduced by $15,000.00;

(2) the claimant's local share property tax liability shall be the local share percentage rate established under section 4027 of Title 16 for the municipality in which the homestead is located, multiplied by the statewide property tax liability determined under subdivision (1) of this subsection; and

(3) a claimant whose household income does not exceed $47,000.00 shall also be entitled to a credit against the claimant's tax liability under chapter 151 of this title equal to the amount by which the property taxes upon the claimant's homestead exceeds a percentage of the claimant's household income for the taxable year as follows:

If household income (rounded to then the tax payer is entitled to

the nearest dollar) is: credit for property tax paid in excess

of this percent of that income

$0 - 4,999.00 3.5

$5,000.00 - 9,999.00 4.0

$10,000.00 - 24,999.00 4.5

$25,000.00 - 47,000.00 5.0

In no event shall the credit exceed the amount of the property tax.

(b) An eligible claimant who rented the homestead on the last day of the taxable year and who submits a certificate of rent or rent constituting property taxes shall be entitled to a credit against the claimant's tax liability under chapter 151 of this title equal to the amount by which the rent constituting property taxes upon the claimant's homestead exceeds a percentage of the claimant's household income for the taxable year as follows:

If household income (rounded to then the tax payer is entitled to

the nearest dollar) is: credit for property tax paid in excess

of this percent of that income

$0 - 4,999.00 3.5

$5,000.00 - 9,999.00 4.0

$10,000.00 - 24,999.00 4.5

$25,000.00 - 47,000.00 5.0

In no event shall the credit exceed the amount of the property tax.

(c) To be eligible for a property tax adjustment under this chapter the claimant:

(1) must have been domiciled in this state during the entire taxable year; and

(2) may not be a person claimed as a dependent by any taxpayer under the federal Internal Revenue Code during the taxable year.

6067. CREDIT LIMITATIONS

(a) Only one individual per household per taxable year shall be entitled to a benefit under this chapter.

(b) No benefits shall be available to a taxpayer under this chapter whose household income is $75,000.00 or more.

6068. APPLICATION AND TIME FOR FILING

(a) A tax adjustment claim shall be filed with the commissioner and shall describe the school district in which the homestead property is located and shall particularly describe the homestead property for which the adjustment is sought, including a parcel identification number if the town has assigned one.

(b) No benefit shall be allowed unless the claim is filed with the commissioner on or before the due date for filing the Vermont income tax return, without extension.

(c) The commissioner shall, upon request of a claimant, extend the claim filing date to June 1.

6069. LANDLORD CERTIFICATE

(a) Upon written request by a tenant before January 1, the owner of the rental unit shall provide to that tenant, by January 31, a certificate of rent constituting property tax for the preceding calendar year, which shall include a certificate of property tax allocable to the rental unit indicating the proportion of total property tax on that unit or parcel which was assessed for municipal property tax, for local share property tax and for statewide property tax.

(b) By January 31 of each year, the owner of land rented as a portion of a homestead in the prior calendar year shall furnish a certificate of rent to each claimant who owned a portion of the homestead and rented that land as a portion of a homestead in the priorcalendar year. The certificate shall indicate the proportion of total property tax on that parcel which was assessed for municipal property tax, for local share property tax and for statewide property tax.

(c) The owner of each rental property consisting of more than four rented homestead shall, not later than January 31 of each year, furnish a certificate of rent to each person who rented a homestead from the owner at any time during the preceding calendar year. All other owners of rented homestead units shall furnish such certificate upon request of the renter. If a renter moves prior to December 31, the owner may either provide the certificate to the renter at the time of moving or mail the certificate to the forwarding address if one has been provided by the renter or in the absence of a forwarding address, to the last known address. An owner is not required to furnish a certificate under this section to a tenant who, at the time he or she entered into the rental agreement, or any later date, signed a waiver of the right to receive the certificate. The waiver shall not be a part of any written lease, but shall be a separate document. The tenant may revoke the written waiver at any time by providing the owner with written notice of the revocation. An owner shall not demand or require a tenant to sign a waiver as a condition of entering into or continuing a rental agreement. An owner shall not charge a higher rent, change any other condition of a rental agreement, or terminate a rental agreement because a tenant has failed or refused to sign a waiver or has revoked a waiver previously signed.

(d) A certificate under this section shall be in a form prescribed by the commissioner and shall include the name of the renter, the address and any property tax parcel identification number of the homestead, notice of the requirements for eligibility for the property tax adjustment provided by this chapter, and any additional information which the commissioner determines is appropriate.

(e) An owner who knowingly fails to furnish a certificate to a renter as required by this section shall be liable to the commissioner for a penalty of $100.00 for each failure to act. An owner shall be liable to the commissioner for a penalty equal to the greater of $100.00 or the excess amount reported who:

(1) willfully furnishes a certificate that reports total rent constituting property taxesin excess of the actual amount paid; or

(2) reports a total amount of rent constituting property taxes that exceeds by ten percent or more the actual amount paid.

Penalties under this subsection shall be assessed and collected in the manner provided in chapter 151 for the assessment and collection of the income tax.

(f) Failure to receive a rent certificate shall not disqualify a renter from the benefits provided by this chapter.

6070. DISALLOWED CLAIMS

A claim shall be disallowed if the claimant received title to his or her homestead primarily for the purpose of receiving benefits under this chapter.

6071. EXCESSIVE AND FRAUDULENT CLAIMS

(a) In any case in which it is determined under the provisions of this title that a claim is or was excessive and was filed with fraudulent intent, the claim shall be disallowed in full, and the commissioner may impose a penalty equal to the amount claimed. A disallowed claim may be recovered by assessment as income taxes are assessed. The assessment, including assessment of penalty, shall bear interest from the date the claim was credited against property tax or income tax or paid by the state until repaid by the claimant, at the rate per annum established from time to time by the commissioner pursuant to section 3108 of this title. The claimant in that case, and any person who assisted in the preparation of filing of such excessive claim or supplied information upon which the excessive claim was prepared, with fraudulent intent, shall be fined not more than $1,000.00 or be imprisoned not more than one year, or both.

(b) In any case in which it is determined that a claim is or was excessive, the commissioner may impose a ten percent penalty on such excess and if the claim has been paid or credited against property tax or income tax otherwise payable, the credit shall be reduced or canceled, and the proper portion of any amount paid shall be similarly recovered by assessment as income taxes are assessed and such assessment shall bear interest at the rate per annum established from time to time by the commissioner pursuant to section 3108 of this title from the date of payment until refunded or paid.

(c) In any case in which a homestead is rented by a person from another person under circumstances deemed by the commissioner to be not at arms-length, the commissioner may determine the rent constituting property tax for purposes of this chapter.

6072. APPEALS

Any person aggrieved by the denial, in whole or in part, of relief claimed under this chapter, except when the denial is based upon late filing of claim for relief, may appeal to the commissioner by filing a petition of appeal within 60 days after the denial.

6073. REGULATIONS OF THE COMMISSIONER

The commissioner may, from time to time, issue, amend and withdraw regulations interpreting and implementing this chapter.

Sec. 52. LOCAL SHARE AND STATEWIDE PROPERTY TAX PAYMENT AND

ADJUSTMENT TRANSITION RULES

Notwithstanding sections 428 and 511 of Title 16, and section 5403 of Title 32, local share and statewide property taxes assessed on homesteads in 1998 shall be paid to municipalities in the same manner as the municipal property tax. Notwithstanding section 6066 of Title 32, the amount of property tax adjustment available to claimants in fiscal year 1998 shall not affect the local share or statewide property tax liability of the claimant, but instead shall be paid as a credit against the claimant's income tax liability under chapter 151 of Title 32. In determining property tax adjustment claims made in 1998 for taxes paid in 1997, the commissioner of education shall determine a factor, rounded to the nearest whole percentage point, which the claimants in each municipality shall apply to the 1997 actual school tax liability to determine an estimated statewide property tax liability amount to use in calculating the claim; and the commissioner of education shall also determine a percentage factor for each municipality, rounded to the nearest whole percentage point, to be used in the calculation of local share tax in subdivision 6066(a)(2). The factors shall be based on 1997 school district education spending and the provisions of statewide property tax, local share property tax and the transition rules in Sec. 24(b) of this act.

Sec. 52a. PROPERTY TAX REBATE TRANSITION RULE

Notwithstanding chapter 153 of Title 32, payments for timely rebate claims filed by persons under age 62, for 1997 property taxes, shall be paid in the same manner and in the same fiscal year as claims of persons age 62 and over.

Sec. 52b. REPEAL

Chapter 153 of Title 32 (property tax rebates) is repealed effective January 1, 1999.

Sec. 52c. 32 V.S.A. 9606(b) is amended to read:

(b) The property transfer return required by this section shall be in such form as the commissioner, by regulation, shall prescribe, and shall be signed, under oath or affirmation, by each of the parties or their legal representatives, to the transfer of title to property with respect to which the return is filed. If the return is filed with respect to a transfer which is claimed to be exempt from the tax imposed by this chapter, the return shall set forth the basis for such exemption. If the return is filed with respect to a transfer subject to such tax, the return shall truly disclose the value of the property transferred, together with such other information as the commissioner may reasonably require for the proper administration of this chapter. If the transfer is of a residence which is the homestead, as defined in section 5401 of this title, of the purchaser, then the return shall include a declaration of homestead as described in section 5410 of this title and the town clerk shall submit a copy of the return to the commissioner within three business days of the filing of the return.

PART VIII

* * * PAYMENTS IN LIEU OF TAXES * * *

Sec. 53. 32 V.S.A. chapter 123, subchapter 4 is added to read:

Subchapter 4. State Payment in Lieu of Property Taxes

3701. DEFINITIONS

For the purposes of this subchapter:

(1) "State-owned property" means

(A) state-owned buildings, including buildings of the Vermont state colleges and buildings of the University of Vermont and State Agricultural College used for educationaland not commercial purposes; buildings of the agency of transportation and the department of the military; but excluding the value of land on which the buildings are located, and excluding all highways and bridges and any land pertaining thereto; and

(B) state-owned lands held by the agency of natural resources, and lands which pertain to state correctional facilities.

(2) "Assessed value of state buildings" means the estimation of the current cost of replacing a building, maintained for insurance purposes by the state agency responsible for insuring the building, depreciated by the age and condition of the building.

(3) "Assessed value of state lands" means the fair market value of lands held by the agency of natural resources and lands which pertain to state correctional facilities, as determined by the division of property valuation and review, subject to the provision of subsection 3704(b) of this title.

(4) "Adjusted municipal grand list" means the total assessed value of any state-owned property located in a municipality, multiplied by the common level of appraisal for the municipality as determined by the division of property valuation and review, multiplied by one percent, and added to the grand list of the municipality as determined pursuant to chapter 129 of this title.

(5) "Adjusted municipal tax rate" means the total sum of money voted by a municipality for all noneducational expenses pursuant to section 2664 of Title 17, divided by the adjusted municipal grand list of the municipality.

(6) "Municipality" means an incorporated city, town, village, or unorganized town, grant or gore which assesses property taxes for noneducational purposes.

3702. PAYMENT OF GRANTS AUTHORIZED

The secretary of administration shall determine annually the amount of payment due, as a state grant in lieu of property taxes, to each municipality in the state in which is located any state-owned property, in accordance with the provisions of this subchapter.

3703. GRANT FORMULA

(a) The amount of a grant to a municipality authorized by this subchapter shall be based on the total assessed value of any state-owned property located in the municipality,multiplied by the common level of appraisal for the municipality as determined by the division of property valuation and review, multiplied by one percent, and multiplied by the adjusted municipal tax rate for the municipality in which the property is located.

(b) All elements of the formula shall be for the same tax year.

(c) The total of any grants under subsection (a) of this section for buildings owned by the University of Vermont and State Agricultural College shall be limited to a maximum of $750,000.00.

(d) Notwithstanding subsection (a) of this section, no municipality which during fiscal year 1997 received a property tax payment from the state on state-owned lands held by the agency of natural resources, pursuant to section 3660 of this title, shall receive a payment in lieu of taxes on such lands in any taxable year that is in an amount less than it received during fiscal year 1997.

(e) The secretary of administration shall have authority to reduce any payments under this subchapter to avoid multiple payments to a municipality in the same year in lieu of taxes with respect to the same property.

3704. DETERMINATION OF ASSESSED VALUES; APPEAL

(a) Prior to August 1, 1997, and to May 1 of each taxable year thereafter, the secretary of administration shall provide assessed values of state buildings and lands, as defined under this subchapter, to every municipality to which a grant is payable under this subchapter.

(b) Any municipality aggrieved by the action of the secretary under this section may, within 30 days of receipt of the assessed values, appeal to the superior court of the district in which the municipality is located.

3705. ADJUSTED MUNICIPAL GRAND LIST AND ADJUSTED MUNICIPAL

TAX RATE

(a) Prior to October 1 in each taxable year, the division of property valuation and review shall provide the secretary of administration with the following:

(1) the adjusted municipal grand list for the current assessment year, with the assessed values of all state-owned property shown separately, together with a statement ofthe common level of appraisal used to weight the assessed values of state-owned property;

(2) the adjusted municipal tax rate to be used in assessing taxes on the current adjusted municipal grand list; and

(3) the total sum of money voted by the municipality for all noneducational expenses, pursuant to subsection 2664(a) of Title 17.

(b) Prior to issuing a grant under this subchapter, the secretary of administration may substitute his or her calculations of the adjusted municipal grand list or the adjusted municipal tax rate for a municipality if the secretary finds that those calculations provided by the municipality under this section are in error or are inconsistent with assessed values as determined pursuant to section 3704 of this title.

3706. PAYMENT TO MUNICIPALITIES

Grants under this subchapter shall be made annually by the secretary of administration to each eligible municipality on or before December 1, 1997, and on or before October 31 in years thereafter. Nothing in this subchapter shall be construed or permitted to affect the tax exempt status of the University of Vermont and State Agricultural College, as provided by statute and guaranteed by that institution's charter.

3707. RULES

The secretary of administration may adopt rules under chapter 25 of Title 3 to carry out the provisions of this subchapter.

Sec. 54. 32 V.S.A. 3660 is amended to read:

3660. STATE LANDS LOCATED IN GORES AND UNORGANIZED TOWNS

(a) Notwithstanding any other provisions of law to the contrary, all state lands held by the agency of natural resources, but not the buildings or other improvements thereon, located in a gore or an unorganized town shall be assessed at fair market value by the division of property valuation and review and listed separately in the grand list of the gore or unorganized town in which they are located. State land so listed shall be subject to a property tax payable to the gore or unorganized town in which it is located in an amount which is *[the lesser of]* one percent of its assessed value, or of one percent of its use value if the land qualifies for and is subject to a use value appraisal under chapter 124 of this title. *[However, no municipality shall receive from the state for property taxes in any taxable year an amount less than it received in the year 1980.]*

(b) The *[selectmen]* supervisors of a gore or an unorganized town aggrieved by the appraisal of property by the division of property valuation and review under this section within 21 days after *[the]* receipt *[by the town listers]* of notice of the appraisal of its property by the division of property valuation and review, may appeal from that appraisal to the superior court of the district in which the property is situated.

Sec. 55. REPEAL

32 V.S.A. 3656 (taxation of state land) is repealed.

Sec. 56. APPLICATION OF PAYMENTS

Any payment made as a state payment in lieu of property taxes to any municipality under subchapter 4 of chapter 123 of Title 32 shall be used by the municipality solely for the purpose of reducing municipal property tax assessments in that year, unless in adopting its budget for that year the municipality has or shall have anticipated that type of payment from the state.

Sec. 57. 32 V.S.A. 4961(b) is amended to read:

(b) Annually, on or before June 1, the supervisor of Buel's Gore shall call a meeting of the residents of the Gore for the purpose of presenting the proposed budget and tax rates for the Gore for the ensuing year and inviting discussion thereon. Notice of the meeting shall be sent by first class mail to all residents of the Gore at least 14 days before the meeting. The meeting shall be held at a place within the Gore or within a town that adjoins the Gore. Included with the notice shall be an itemized proposed budget which shall, in the judgment of the supervisor, cover the education, road maintenance and general government costs within the Gore. Also included with the notice shall be *[a]* proposed tax *[rate]* rates consistent with the budget. Annually, on or before July 10, the supervisor shall adopt a budget and tax rates and notify the residents and appraisers for the Gore.

(There is no Sec. 58)

PART IX

* * * USE VALUE APPRAISAL * * *

Sec. 59. REPEAL

Notwithstanding Sec. 292c of Act No. 178 of the Acts of 1996, Secs. 285 through 292a of Act No. 178 are not repealed effective June 30, 1997.

Sec. 60. 32 V.S.A. 3752(12) is amended to read:

(12) "Use value appraisal" means, with respect to land, the price per acre which the land would command if it were required to remain henceforth in agriculture or forest use, as determined in accordance with the terms and provisions of this subchapter. With respect to farm buildings, "use value appraisal" means *[50]* 30 percent of fair market value. The director shall annually provide the assessing officials with a list of farm sales, including the town in which the farm is located, the acreage, sales price and date of sale.

Sec. 61. 32 V.S.A. 3757(a) is amended to read:

(a) Land which has been classified as agricultural land or managed forest land pursuant to this chapter shall be subject to a land use change tax upon the development of that land, as defined in section 3752 of this chapter. Said tax shall be at the rate of *[ten]* 20 percent of the full fair market value of the changed land determined without regard to the use value appraisal. If changed land is a portion of a parcel, the fair market value of the changed land shall be the fair market value of the changed land prorated on the basis of acreage, divided by the common level of appraisal. Such fair market value shall be determined as of the date the land is no longer eligible for use value appraisal. This tax shall be in addition to the annual property tax imposed upon such property. Nothing in this section shall be construed to require payment of an additional land use change tax upon the subsequent development of the same land, nor shall it be construed to require payment of a land use change tax merely because previously eligible land becomes ineligible, provided no development of the land has occurred.

Sec. 62. WITHDRAWAL FROM USE VALUE APPRAISAL

An owner of property enrolled in use value appraisal under chapter 124 of Title 32 on July 15, 1997, may elect to discontinue enrollment and be relieved of any obligation to paya use change tax under section 3757 of that title or any other obligation entailed under that subchapter, provided that, if the property owner does elect to discontinue enrollment and be relieved of those obligations, the owner shall pay the full property tax, based upon the property’s full fair market value, for the 1997 assessment as well as future years, and no state reimbursement shall be paid for that land. An election to discontinue enrollment under this provision is effective only if made in writing to the director of property valuation and review on or before September 1, 1997.

Sec. 63. 32 V.S.A. 3760 is amended to read:

3760. PAYMENT TO *[QUALIFIED]* MUNICIPALITIES

*[(a)]* Annually the state shall pay to each *[qualified]* town the amount necessary to limit its tax rate increase in the prior year due to the loss of municipal property tax revenue for that year based on use value *[appraisal in the prior year]* of enrolled property as compared to municipal property tax revenue for that year based on fair market value of enrolled property, to zero *[a maximum of $0.018 per $1.00 of equalized grand list value for the prior year . In calculating the reimbursement for the town, the director of property valuation and review shall take into account the loss in grand list due to use value appraisal for that year offset by the effect upon state aid under Title 16 due to use value appraisal for that year when the loss in grand list divided by the common level of appraisal for that town is subtracted from the equalized grand list for that year]*. The director of property valuation and review shall determine the amount of the available funds under this section to be paid to each *[qualified]* town, and a town may appeal the director’s decision in the same manner and under the same procedures as an appeal from a decision of a board of civil authority, as set forth in subchapter 2 of chapter 131 of this title. On November 1 of each year, the director of property valuation and review shall pay to each *[qualified]* municipality the amount calculated as described above. If the appropriation for the year is insufficient to pay the full amount due to every *[qualified]* town under this subsection, payments in that year shall be made to such towns proportionately. The director’s calculation of payment amounts to municipalities shall be based on grand list values and total tax appropriations as submitted to the director for the prior year.

*[(b) For purposes of subsection (a) of this section, "qualified municipality" shall mean a municipality whose most recent foundation levy does not exceed 1.50 times its most recent total foundation cost, determined in accord with Title 16.]*

*[(c) The department of education shall calculate the difference for each town between state aid under Title 16 calculated using the equalized grand list of each town with current use property at current use value and at fair market value, and shall provide this information to the director of property valuation and review on or before September 1 of each year.]*

*[(d) The November 1996 reimbursement under section 3760 of title 32 and fiscal year 1997 state aid under Title 16 shall be calculated as if current use appraisal applied to grand lists for 1995.]*

Sec. 63a. FISCAL YEAR 1998 CURRENT USE REIMBURSEMENT

Notwithstanding section 3760 of Title 32, in fiscal year 1998, the state shall pay to each town the amount necessary to limit its tax rate increase in the prior year due to the loss of property tax revenue for that year based on use value of enrolled property as compared to property tax revenue for that year based on fair market value of enrolled property, to a maximum of $0.00 per $1.00 of equalized grand list value for that year. The director of property valuation and review shall determine the amount of the available funds under this section to be paid to each town, and a town may appeal the director’s decision in the same manner and under the same procedures as an appeal from a decision of a board of civil authority, as set forth in subchapter 2 of chapter 131 of Title 32. On November 1, 1997, the director of property valuation and review shall pay to each municipality the amount calculated as described above. If the appropriation for the year is insufficient to pay the full amount due to every town under this section, payments shall be made to such towns proportionately. The director’s calculation of payment amounts to municipalities shall be based on grand list values and total tax appropriations as submitted to the director for the prior year.

Sec. 64. 32 V.S.A. 3481(1) is amended to read:

(1) "Appraisal value" shall mean, with respect to property enrolled in a use valueappraisal program, the use value appraisal as defined in section 3752(12) of this title, multiplied by the common level of appraisal, and with respect to all other property, the estimated fair market value. The estimated fair market value of a property is the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value. Those elements shall include a consideration of a decrease in value due to a housing subsidy covenant as defined in section 610 of Title 27, or the effect of any state or local law or regulation affecting the use of land, including but not limited to chapter 151 of Title 10 or any land capability plan established in furtherance or implementation thereof, rules adopted by the state board of health and any local or regional zoning ordinances or development plans.

Sec. 65. CURRENT USE ENROLLMENT

Notwithstanding the provisions of Sec. 292 of Act No. 178 of the Acts of 1996, an owner of property discontinued from the use value appraisal program because of the owner’s failure to transfer from the repealed Farmland Program or Working Farm Tax Abatement Program to the new use value appraisal program by the extended deadline of September 20, 1996, may enroll that property in the use value appraisal program for 1996 and 1997, provided:

(1) all other requirements for enrollment are met; and

(2) the owner files an application and supporting documents with the director of property valuation and review within 30 days after the director mails notice of this enrollment opportunity. The director’s notice must be mailed by certified mail to the owner’s last known address.

Sec. 66. EFFECT OF RETROACTIVE ENROLLMENT FOR 1996

Upon notification by the director that an owner has been retroactively enrolled in the agricultural and managed forest land use value program for 1996 pursuant to this act, the listers shall make such changes in the grand list and make a certificate thereon of the fact. The proper officials in the town, within ten days of such a change in the grand list shallmake out and deliver to the treasurer thereof a corrected tax bill. Any 1996 property taxes paid in excess of the corrected tax bill shall within 30 days of the delivery of the corrected tax bill be refunded by the town; or at the taxpayer’s option shall be credited against 1997 property taxes and any remaining balance refunded. The town shall abate any 1996 property tax liability assessed on that property in excess of the liability shown on the corrected bill and shall also abate any penalties and interest arising out of that portion of the original assessment.

Sec. 67. 32 V.S.A. 3753 is amended to read:

3753. CURRENT USE ADVISORY BOARD; MEMBERS; CHAIRMAN

(a) There is hereby established a current use advisory board.

(b) The membership of the board shall consist of:

(1) The following persons or their designees:

(A) Commissioner of the department of taxes;

(B) Director of the division of property valuation and review;

(C) Commissioner of the department of agriculture, food and markets;

(D) Commissioner of the department of forests, parks and recreation;

(E) Dean of the college of natural resources, agriculture and life sciences of the University of Vermont; and

(F) *[Dean of the school of natural resources of the University of Vermont.]*

(2) *[Five]* Eight additional members to be appointed by the governor with the advice and consent of the senate. Two of these members shall represent the private agricultural sector; two shall represent the private forestry sector; *[and]* one shall be experienced in agricultural and forestry property appraisal and valuation techniques; one shall be a representative of local government; one shall be a selectboard member; and one shall be a lister. Fifty-one percent or more of the board membership shall be persons who do not own enrolled land, and have no spouse, child or parent who owns enrolled land. These members shall be appointed for three-year terms, beginning February first of the year in which the appointment is made, except that the initial appointment of three of the members shall be for a two-year term. Vacancies shall be filled in the same manner as theoriginal appointment for the unexpired portion of the term vacated.

(c) A chair shall be designated biennially by the governor from among the members of the board and any vacancy in the office of chair shall be filled by designation of the governor.

(d) Members of the board who are not state employees shall be paid $50.00 a day, each, for each day that they are actually engaged in the work of the board. All members shall be paid their actual expenses incurred as a result of that work.

(e) The board shall be attached for administrative purposes to the division of property valuation and review of the department of taxes of the agency of administration.

Sec. 68. 32 V.S.A. 3776 is added to read:

3776. FEE HUNTING PROHIBITION

(a) As of September 1, 1997, no person may charge or receive a fee, consideration or other thing of value in exchange for the right to hunt or fish on land enrolled in a use value appraisal program under this chapter.

(b) Upon a finding by the secretary that there has been a violation of the provisions of this section, the land in question shall be removed from the use value appraisal program. Upon development, the land shall be subject to the land use change tax.

Sec. 68a. LEGISLATIVE REVIEW

By January 15, 2000, the commissioner of fish and wildlife shall report to the Senate Committee on Natural Resources and Energy, and the House Committee on Fish, Wildlife and Water Resources with respect to the implementation of the fee hunting prohibition established under Sec. 68 of this act. The committees shall consider the matter, take testimony from the general public, and recommend any appropriate action to the general assembly.

Sec. 68b. MANAGED FOREST LAND USE VALUE APPRAISAL

The current use advisory board shall develop a formula that will incorporate capitalized income value for forest land and shall report on its findings to the legislature by January 15, 1999. The formula shall acknowledge regional differences.

Sec. 68c. 10 V.S.A. 6306(b) is amended to read:

(b) The commissioner of the department of taxes may certify that real property acquired by a qualified organization under this chapter is being held and maintained for the purposes expressed in section 6301 of this title. As a condition of that certification, the commissioner may require that the qualified organization provide adequate assurances that the property is being so held and maintained, including but not limited to written agreements with the department of taxes, deeds, covenants or other conveyances. Property which is so certified:

(1) if in the nature of an interest in fee simple, shall be assessed on the basis of its actual use, *[if in the nature of an interest in fee simple; and]* or may be enrolled by the qualifying organization in a current use program under chapter 124 of Title 32; or

(2) shall be exempt from assessment and taxation, if in the nature of an interest other than fee simple.

For purposes of this section, where a qualified organization holds a lease in the property for a term greater than ten years, including renewal terms, or holds such other interests as the commissioner shall determine to be substantially equivalent to an interest in fee simple, the organization shall be deemed to hold an interest in fee simple.

Sec. 68d. 32 V.S.A. 3752(5) and (9) are amended to read:

(5) "Development" means, for the purposes of determining whether a land use change tax is to be assessed under section 3757 of this chapter, the construction of any building, road or other structure, or any mining, excavation or landfill activity. "Development" also means the subdivision of a parcel of land into two or more parcels, regardless of whether a change in use actually occurs, where one or more of the resulting parcels contains less than 25 acres each. "Development" also means the cutting of timber on property appraised under this chapter at use value in a manner contrary to a forest or conservation management plan as provided for in section 3755(b) of this title, or contrary to the minimum acceptable standards for forest management; or a change in the parcel or use of the parcel in violation of the conservation management standards established by the commissioner of forests, parks and recreation. The term "development" shall not include the construction, reconstruction, structural alteration, relocation or enlargement of anybuilding, road or other structure for farming, logging *[or]*, forestry or conservation purposes, but shall include the subsequent commencement of a use of that building, road or structure for other than farming, logging or forestry purposes;

(9) "Managed forest land" means:

(A) any land, exclusive of any house site, which is at least 25 acres in size and which is under active long-term forest management for the purpose of growing and harvesting repeated forest crops in accordance with minimum acceptable standards for forest management; or

(B) any land, exclusive of any house site, which is certified under subsection 6306(b) of Title 10, is owned by an organization that for the preceding five years has been established as a qualified organization as defined in 10 V.S.A. 6301a, and is under active conservation management in accord with standards established by the commissioner of forests, parks and recreation;

Sec. 68e. 32 V.S.A. 3755 is amended to read:

3755. ELIGIBILITY FOR USE VALUE APPRAISALS

(a) Except as modified by subsection (b) of this section, any agricultural land and managed forest land, which meets the criteria contained in this subchapter and in the regulations adopted by the board shall be eligible for use value appraisal.

(b) Managed forest land shall be eligible for use value appraisal under this subchapter only if:

(1) the land is subject to a forest management plan, or subject to a conservation management plan in the case of lands certified under 10 V.S.A. 6306(b), signed by the owner of a tract which complies with section 3752(9) of this title, filed with and approved by the department of forests, parks and recreation by October 1, which provides for continued conservation management or forest crop production on the tract for at least ten years. During a period of use value appraisal under this subchapter, a conservation or forest management plan for at least ten years, including the 12-month period beginning April 1 of the year for which use value appraisal is sought, signed by the owner, shall be on file with the department in such a manner and in such form as is prescribed by thedepartment. Upon the expiration of a ten year plan, the owner shall file a new plan for at least the next succeeding ten years to remain in the program.

(A) The department may approve a forest management plan which provides for the maintenance and enhancement of the tract's wildlife habitat where clearly consistent with timber production and with minimum acceptable standards for forest management as established by the commissioner of forests, parks and recreation*[;]* .

(B) The department, upon giving due consideration to resource inventories submitted by applicants, may approve a conservation management plan, consistent with conservation management standards, so as to include appropriate provisions designed to preserve: areas with special ecological values; fragile areas; rare or endangered species; significant habitat for wildlife; significant wetlands; outstanding resource waters; rare and irreplaceable natural areas; areas with significant historical value; public water supply protection areas; areas that provide public access to public waters; open or natural areas located near population centers, or historically frequented by the public. In approving a plan, the department shall give due consideration to: the need for restricted public access where required to protect the fragile nature of the resource; public accessibility where restricted access is not required; facilitation of appropriate, traditional public usage; opportunities for traditional or expanded use for educational purposes and for research.

(2) an annual report of conformance with *[the]* any conservation or forest management plan, signed by the owner, has been filed with the department by February 1 of each tax year; and

(3) there has not been filed with the director an adverse inspection report by the department stating that the management of the tract is contrary to the forest or conservation management plan, or contrary to the minimum acceptable standards for forest or conservation management. The report of conformance with *[the forest]* any management plan shall be on a form prescribed by the commissioner of forests, parks and recreation in consultation with the commissioner of taxes and shall include a detachable section signed by all the owners that shall contain the federal tax identification numbers of all the owners. The section containing federal tax identification numbers shall not be madeavailable to the general public, but shall be forwarded to the commissioner of taxes within 30 days after receipt and used for tax administration purposes. If any owner shall satisfy the department that he or she was prevented by accident, mistake or misfortune from filing a management plan which is required to be filed on or before October 1 or an annual conformance report which is required to be filed on or before February 1, the department may receive that management plan or annual conformance report at a later date, provided, however, that no management plan shall be received later than December 31 and no annual conformance report shall be received later than March 1.

(c) At intervals not to exceed five years, the department of forests, parks and recreation shall audit the management plans and the conformance reports for each parcel of managed forest land qualified for use value appraisal. Likewise, at intervals not to exceed five years, that department shall inspect each tract to verify that the terms of the management plan have been carried out in a timely fashion. If that department finds that the management of the tract is contrary to the conservation or forest management plan, or contrary to the minimum acceptable standards for conservation or forest management, it shall file with the owner, the assessing officials and the director an adverse inspection report within 30 days of the inspection.

(d) After a parcel of managed forest land has been removed from use value appraisal due to an adverse inspection report, a new application for use value appraisal will not be considered for a period of five years, and then shall be approved by the department of forests, parks and recreation only if a compliance report has been filed with the new application certifying that appropriate measures have been taken to bring the parcel into compliance with minimum acceptable standards for forest or conservation management.

PART X

* * * GENERAL FUND TAXES * * *

* * * Meals and Rooms Tax * * *

Sec. 69. 32 V.S.A. 9241(a) and (b) are amended to read:

(a) An operator shall collect a tax of *[seven]* nine percent of the rent of each occupancy.

(b) An operator shall collect a tax on the sale of each taxable meal at the rate of *[seven]*nine percent of each full dollar of the total charge and on each sale for less than one dollar and on each part of a dollar in excess of a full dollar in accordance with the following formula:

*[$0.01-0.14]* *[$ .01]*

*[0.15-0.28]* *[02]*

*[0.29-0.43]* *[03]*

*[0.44-0.57]* *[04]*

*[0.58-0.71]* *[05]*

*[0.72-0.85]* *[06]*

*[0.86-1.00]* *[07]*

$0.01-0.11 $0.01

0.12-0.22 0.02

0.23-0.33 0.03

0.34-0.44 0.04

0.45-0.55 0.05

0.56-0.66 0.06

0.67-0.77 0.07

0.78-0.88 0.08

0.89-1.00 0.09

Sec. 70. 32 V.S.A. 9242(c) is amended to read:

(c) A tax of *[seven]* nine percent of the gross receipts from meals and occupancies and ten percent of the gross receipts from alcoholic beverages, exclusive of taxes collected pursuant to section 9241 of this title, received from occupancy rentals, taxable meals and alcoholic beverages by an operator, is hereby levied and imposed and shall be paid to the state by the operator as herein provided. Every person required to file a return under this chapter shall, at the time of filing the return, pay the commissioner the taxes imposed by this chapter as well as all other monies collected by him or her under this chapter; provided, however, that every person who collects the taxes on taxable meals and alcoholic beverages according to the tax bracket schedules of section 9241 of this titleshall be allowed to retain any amount lawfully collected by the person in excess of the tax imposed by this chapter as compensation for the keeping of prescribed records and the proper account and remitting of taxes.

Sec. 70a. REIMBURSEMENT FOR CASH REGISTER REPROGRAMMING

Notwithstanding any other provisions of law, an operator in good standing shall be entitled to claim reimbursement of all or a portion of its expenditure for reprogramming for the new meals and rooms tax rate of cash registers which were in use at the place of business on and after July 1, 1997. Applications must be filed with the Department of Taxes on or before November 1, 1997. The amount of reimbursement shall be equal to $50,000.00 divided by the number of qualified applicants, but in no event shall it exceed the actual cost to the operator of reprogramming its cash registers. Provisions of section 3108 of Title 32 shall not apply to reimbursement payments under this section.

* * * Motor Fuels Tax on Gasoline * * *

Sec. 71. 23 V.S.A. 3106(a) is amended to read:

(a) Except for sales of motor fuels between distributors licensed in this state, which sales shall be exempt from the tax, in all cases not exempt from the tax under the laws of the United States at the time of filing the report required by section 3108 of this title, each distributor shall pay to the commissioner a tax of *[15]* 19 cents per gallon upon each gallon of motor fuel sold by the distributor. The distributor shall also pay to the commissioner a tax in the same amount upon each gallon of motor fuel used within the state by him or her.

Sec. 71a. GASOLINE TAX REDUCTION

In the event that the Emergency Board certifies to the Joint Fiscal Committee that the January 15, 1998 official revenue estimates for fiscal years 1998 and 1999 for general funds and transportation funds have increased an annual net amount of over $3.3 million from the level of official estimates in place in June 1997, the gasoline tax imposed under section 3106 of Title 23 shall be reduced to 18 cents per gallon, effective June 30, 1998.

* * * Sales Tax * * *

Sec. 72. EXTENSION OF SALES AND USE TAX RATE

Notwithstanding Sec. 292b of Act No. 178 of the Acts of 1996, the sales and use taxrate shall not revert to four percent on July 1, 1997, but shall remain at five percent until further amended by the General Assembly.

Sec. 72a. 32 V.S.A. 9741(38) and (39) are added to read:

9741. SALES NOT COVERED

Receipts for the following shall be exempt from the tax on retail sales imposed under section 9771 of this title and the use tax imposed under section 9773 of this title.

* * *

(38) Sales of building materials within any three consecutive calendar years in excess of one million dollars in purchase value, used in the construction or expansion of facilities which are used exclusively, except for isolated or occasional uses, for the manufacture of tangible personal property for sale.

(39) Sales of building materials within any three consecutive calendar years, in excess of one million dollars in purchase value, incorporated into a downtown redevelopment project as defined by rule by the commissioner.

* * * Corporate Income Tax * * *

Sec. 73. 32 V.S.A. 5832 is amended to read:

5832. TAX ON INCOME OF CORPORATIONS

A tax is imposed for each calendar year, or fiscal year ending during that calendar year, upon the income earned or received in that taxable year by every taxable corporation, such tax being the greater of

(1) an amount determined in accordance with the following schedule:

Vermont net income of the

corporation for the taxable year

allocated or apportioned to

Vermont under section 5833

of this title Tax

$ 0-10,000.00 *[5.50%]* 7.00%

10,001.00-25,000.00 *[$550.00]* $700.00 plus *[6.60%]* 8.10% of the

excess over $10,000.00

25,001.00-250,000.00 *[$1,540.00]* $1,915.00 plus *[7.70%]* 9.20% of

excess over $25,000.00

250,001.00 and over *[$18,865.00]* $22,615.00 plus *[8.25%]* 9.75% of

the excess over $250,000.00

or

(2)(A) $75.00 for small farm corporations. "Small farm corporation" means any corporation organized for the purpose of farming, which during the taxable year is owned solely by active participants in that farm business and receives less than $100,000.00 gross receipts from that farm operation, exclusive of any income from forest crops; or

(B) *[$150.00]* $250.00 for all other corporations.

* * * Purchase and Use Tax * * *

Sec. 74. AMENDMENT OF SEC. 292b OF ACT NO. 178 OF THE ACTS OF 1996

Notwithstanding Sec. 292b of Act No. 178 of the Acts of 1996, the purchase and use tax rate shall not revert to four percent on July 1, 1997, but shall remain at five percent effective July 1, 1997, and shall be six percent effective August 1, 1997 and until further amended by the legislature.

* * * Bank Franchise Taxes * * *

Sec. 75. 32 V.S.A. 5836(b) is amended to read:

(b) The tax imposed by this section for each taxable month shall be equal to *[0.000040]* 0.000096 of the average monthly deposit for such taxable month held by the corporation. As used in this section the word "deposit" shall have the same meaning as the word "deposit" as defined in Title 12, Part 204, section 204.2(a)(1) of the code of federal regulations. The average monthly deposit for any taxable month shall be determined by the deposits held by the corporation on the last business day of each of the 12 months directly preceding the taxable month for which the average monthly deposit is to be determined. The said 12 deposits for the preceding 12 months shall be added together and divided by 12 to produce the average monthly deposit for the taxable month in question. In the event a corporation has not been doing business for 12 consecutive months prior to any taxable month for which an average monthly deposit is to be determined, the averagemonthly deposit for such taxable months shall be based upon the number of months (less than 12) that the bank has been doing business prior to the taxable month in question.

* * * Telecommunications Services Charge * * *

Sec. 76. 32 V.S.A. 9701(4), (5) and (9) are amended to read:

(4) Receipt: means the amount of the sales price of any property and the charge for any amusement taxable under this chapter valued in money, whether received as money or otherwise, without any deduction for expenses or early payment discount, but excluding any amount for which credit is allowed by the vendor to the purchaser, and excluding any allowance in cash or by credit made upon the return of merchandise pursuant to warranty or the price of property returned by customers when the full price thereof is refunded either in cash or by credit, and excluding the price received for labor or services used in installing or applying to repairing the property sold, if separately charged or stated, and the cost of transportation from the retailer's place of business or other point from which shipment is made directly to the purchaser provided those charges are separately stated and provided the transportation occurs by means of common carrier, contract carrier or the United States mails. Beverage container deposits required to be paid by chapter 53 of Title 10 on beverages subject to tax under this chapter shall constitute receipts for the purposes of this chapter. Receipt shall also mean the charge for any telecommunications service excluding any amounts added to a purchaser's bill for federal excise taxes applicable to said services and excluding the surcharge imposed under 30 V.S.A. 7521.

(5) Retail sale or sold at retail: means the sale of tangible personal property or telecommunications service to any person for any purpose, other than for resale (except resale as a casual sale). Sales of tangible personal property to all contractors, subcontractors or repairmen of materials and supplies for use by them in erecting structures for others, or building on, or otherwise improving, altering, or repairing real property of others are deemed to be retail sales. Sales of tangible personal property to an advertising agency for its use in providing advertising services or creating advertising materials for transfer in conjunction with the delivery of advertising services are also deemed to be retail sales.

(9) Vendor: includes

* * *

(H) a telecommunications service provider as defined in 30 V.S.A. 7501.

Sec. 77. 32 V.S.A. 9701(19) and (20) are added to read:

(19) Telecommunications service: means intrastate and interstate telecommunications service as defined in 30 V.S.A. 7501.

(20) Vermont service address: means the location in Vermont of communications services equipment from which the telecommunications services are originated or at which communications services are received by a purchaser. In the event this may not be a defined location, as in the case of mobile telephone service, maritime systems, air-to-ground systems and the like, Vermont service address shall mean the location in Vermont of a taxpayer's primary use of the communications services equipment as defined by telephone number authorization code, or location in this state where bills are sent.

Sec. 78. 32 V.S.A. 9703 is amended to read:

9703. LIABILITY FOR TAX

Every person required to collect any tax imposed by this chapter shall be personally liable for the tax imposed, collected or required to be collected under this chapter. That person shall have the same rights in collecting the tax from his purchaser or regarding nonpayment of the tax by the purchaser as if the tax were a part of the purchase price of the property, telecommunications service or amusement charge, as the case may be, and payable at the same time; provided, however, if the person required to collect the tax has failed to remit any portion of the tax to the commissioner, that the commissioner shall be notified of any action or proceeding brought by such person to collect the tax and shall have the right to intervene in such action or proceeding.

Sec. 79. 32 V.S.A. 9741(38) and (39) are added to read:

(38) Charges for wholesale transactions between telecommunications service providers where the service is a component part of a service provided to an end user. This exemption includes, but is not limited to, network access charges and interconnection charges paid to a local exchange carrier.

(39) Charges paid by inserting coins in coin-operated telecommunications service devices.

Sec. 80. 32 V.S.A. 9742(10) is added to read:

(10) The sale of telecommunications service to an affiliate of the telecommunications provider.

Sec. 81. 32 V.S.A. 9771(2) is amended to read:

(2) The sale at retail of public utility services including gas and electricity, but excluding water*[, telephone]* and transportation.

Sec. 82. 32 V.S.A. 9771(5) is added to read:

(5) The sale at retail of telecommunications service provided to a Vermont service address, except that the rate of the tax on telecommunications services, shall be 4.36 percent.

Sec. 83. 32 V.S.A. 9771a is added to read:

9771a. TELECOMMUNICATIONS SERVICES; CREDITS AND LIMITATIONS

(a) The amount subject to tax under subdivision 9771(5) of this title shall be reduced by the amount of $20.00 per month per line for each residential purchaser or user of local exchange services.

(b) No purchaser or user shall be subject to tax under subdivision 9771(5) of this title in excess of $10,000.00 in any one calendar year. A purchaser or user may annually, on or after January 1, apply to the commissioner for a refund of taxes paid in the prior calendar year in excess of $10,000.00 on telecommunications services, and upon proof sufficient to the commissioner, the commissioner shall refund the excess to the purchaser or user, without interest.

Sec. 84. 32 V.S.A. 9775(a) is amended to read:

(a) Every person required to collect or pay tax under this chapter shall, where the sales and use tax liability under this chapter for the immediately preceding calendar year has been (or would have been in cases when the business was not operating for the entire year) $1,000.00 or less, pay the tax imposed by this chapter in quarterly installments on or before the 25th day of the calendar month succeeding the quarter ending on the last day ofMarch, June, September and December of each year. In all other cases, the tax imposed by this chapter shall be due and payable monthly on or before the 25th (23rd of February) day of the month following the month for which the tax is due. The return of a vendor of tangible personal property shall show his receipts from sales and also the aggregate value of tangible personal property sold by him, the use of which is subject to tax under this chapter. The return of a recipient of amusement charges shall show all those charges and the amount of tax thereon. The return of a telecommunications service provider shall show all receipts on which a tax must be paid by a purchaser and the amount of tax thereon.

* * * Brokerage Fees * * *

Sec. 85. 9 V.S.A. 4208 is amended to read:

4208. REGISTRATION BY QUALIFICATION

All securities required by this chapter to be registered before being sold in this state, and not entitled to registration by notification shall be registered only by qualification in the manner provided by this section.

* * *

(7) State fees; effective period. At the time of filing the information prescribed in this section, the applicant shall pay to the commissioner a fee of $1.00 for each $1,000.00 of the aggregate amount of the offering of the securities to be sold in this state for which the applicant is seeking registration, but in no case shall such fee be less than *[$250.00]* $400.00 nor more than *[$1,000.00]* $1,250.00. When a registration statement is withdrawn before the effective date or the registration is terminated, the commissioner shall retain the fee. The registration statement shall be effective for one year from the date of registration or effectiveness with the United States Securities and Exchange Commission, whichever is later, provided that effectiveness with the Securities and Exchange Commission occurs no later than one year from the date of registration. Open-end investment companies may register an indefinite amount of securities in each portfolio for $1,000.00. Open-end investment companies shall pay an annual registration fee for each portfolio as long as the registration of those securities remains in effect. At the time of filing a request forexemption from registration, the applicant shall pay a fee of $200.00.

Sec. 85a. 9 V.S.A. 4209a is added to read:

4209a. NOTICE OF FILING OF FEDERAL COVERED SECURITIES

(a) The commissioner may require the filing of any or all of the following documents with respect to a federal covered security under section 18(b)(2) of the Securities Act of 1933:

(1) Prior to the initial offer of such federal covered security in this state, all documents that are part of a current federal registration statement and such other documents as may be deemed filed with the Securities and Exchange Commission together with a consent to service of process which is duly executed by the issuer and complies with the provision of section 4236 of this title.

(2) After the initial offer of such federal covered security in this state, all documents that are part of an amendment to a current federal registration statement and such other documents as may be deemed filed with the Securities and Exchange Commission under the Securities Act of 1933, which shall be filed concurrently with the commissioner.

(3) A report of the value of such federal covered securities offered or sold in this state in such form and at such time as the commissioner may prescribe.

(b) With respect to any security that is a federal covered security under section 18(b)(4)(D) of the Securities Act of 1933, the commissioner may require the issuer to file a notice on SEC Form D and any information furnished to offerees in this state together with a consent to service of process which is duly executed by the issuer and complies with the provisions of section 4236 of this title no later than 15 days after the first sale of such federal covered security in this state.

(c) With respect to any security that is a federal covered security under section 18(b)(3) or (4) of the Securities Act of 1933, the commissioner may require the issuer to file any document filed with the Securities and Exchange Commission under the Securities Exchange Act of 1933 with respect to such federal covered securities together with a consent to service of process which is duly executed by the issuer and complies with the provisions of section 4236 of this title prior to the initial offer of such federal coveredsecurities in this state.

(d) At the time of the filing of the information prescribed in subsections (a)(1), (b) or (c) of this section, the issuer shall pay to the commissioner a fee of $1.00 for each $1,000.00 of the aggregate amount of the offering of the securities to be sold in this state for which the insurer is seeking to perfect a notice filing under this section, but in no case shall such fee be less than $400.00 nor more than $1,250.00. If the notice filing is withdrawn or otherwise terminated, the commissioner shall retain the fee paid. The notice filing shall be effective for one year from the date of filing with the office of the commissioner. Open-end investment companies subject to the Investment Company Act of 1940 shall pay an annual fee for each portfolio or class of investment company securities for which a notice filing submitted.

(e) The commissioner may issue a stop order suspending the offer and sale of any federal covered security, except a federal covered security under section 18(b)(1) of the Securities Act of 1933, if he or she finds that there is a failure to comply with any requirement established under this section.

* * * Dedication of Lottery Revenues * * *

Sec. 86. 31 V.S.A. 654(11)(D) is amended to read;

(D) the transfer of moneys to the *[general fund]* education fund established by section 4025 of Title 16, to be used solely for *[capital expenditures or debt service]* the purposes of state and local funding of public education.

Sec. 87. 31 V.S.A. 677 is amended to read:

677. ALLOCATION OF PROFITS

The profits received by the state of Vermont through the sale of the Tri-State Lotto tickets shall be deposited in the *[general fund]* education fund established by section 4025 of Title 16 and used solely for the purposes of state and local funding of public education.

PART XI

* * * LOCAL OPTION TAXING AUTHORITY * * *

Sec. 88. 24 V.S.A. 138 is added to read:

138. LOCAL OPTION TAXES (a) Local option taxes are authorized under this section for the purpose of affording municipalities an alternative method of raising municipal revenues to facilitate the transition and reduce the dislocations in those municipalities that may be caused by reforms to the method of financing public education under the Equal Educational Opportunity Act of 1997. Accordingly,

(1) the local option taxes authorized under this section may be imposed by a municipality only during fiscal years 1999, 2000 and 2001, the transitional years preceding full implementation of that act;

(2) a municipality opting to impose a local option tax shall do so no later than July 1, 1998, and all authority to impose or collect a local option tax under this section shall terminate July 1, 2001; and

(3) a local option tax may only be adopted by a municipality in which the education property tax rate in 1997 was less than $1.10 per $100.00 of equalized education property tax grand list.

(b) If the legislative body of a municipality by a majority vote recommends, the voters of a municipality may, at an annual or special meeting warned for that purpose, by a majority vote of those present and voting, assess any or all of the following:

(1) a one percent sales and use tax excluding tax on telecommunications,

(2) a one percent meals and alcoholic beverages tax,

(3) a one percent rooms tax.

(c) Any tax imposed under the authority of this section shall be collected and administered by the municipality, in accordance with state law governing such state tax or taxes. All costs of administration and collection shall be borne by the municipality.

(d) Of the taxes collected under this section, 60 percent shall be retained by the municipality in which they were collected, and may be expended by the municipality for municipal services only and not for educational expenditures. The remaining 40 percent of the taxes collected shall be remitted monthly to the state treasurer for deposit in the PILOT special fund.

(e) As used in this section, "municipality" means a city, town or incorporated village.

(f) Nothing in this section shall affect the validity of any existing provision of law or municipal charter authorizing a municipality to impose a tax similar to the local option taxes authorized in this section.

Sec. 89. PILOT SPECIAL FUND

(a) There is established a PILOT special fund, to be managed by the commissioner of taxes, pursuant to subchapter 5 of chapter 7 of Title 32. The commissioner of finance and management may draw warrants for disbursements from this fund in anticipation of receipts.

(b) If after payment of the amounts required by subsection 3703(d) of Title 32, insufficient funds exist to pay the full amount of all remaining payments in lieu of taxes, then the remaining payments, after application of the cap in subsection 3703(c) of Title 32, shall be reduced proportionately.

PART XII

* * * STUDIES AND REPORTS * * *

Sec. 90. LEGISLATIVE OVERSIGHT COMMITTEE ON RESTRUCTURING

EDUCATION

(a) There is created a Joint Legislative Oversight Committee on Restructuring Education to monitor the implementation of the reforms in financing education and educational quality directed by this act. The Joint Committee shall be composed of ten members of the General Assembly. The Committee on Committees of the Senate shall appoint five members of the Senate, not all from the same political party; and the Speaker of the House shall appoint five members of the House, not all from the same political party.

(b) The Joint Committee shall conduct a continuing review of the actions and policies of the Department of Education, Department of Taxes, school districts and other entities of educational governance in the state in the implementation of the provisions of this act and other provisions of law relating to quality and funding public education.

(c) The state treasurer, in conjunction with the secretary of administration, shall report to the Joint Committee on or before January 18, 1998 on whether statutory distributiondates for moneys due to local school districts from the education fund and moneys due to the education fund from local school districts meet the cash flow needs of the state and local school districts. The state treasurer, in conjunction with the secretary of administration, shall make recommendations, if necessary, to best meet the cash flow needs of the state and local school districts.

(d) The Joint Committee shall receive periodic reports at such times as it deems necessary from the Commissioner of Education, the Commissioner of Taxes, and the Secretary of Administration on revenues to and expenditures from the education fund, and other expenditures for state and local support of public education.

(1) Annually, on or before October 1, the Commissioner of Education shall report to the Joint Committee his or her recommendation of an appropriate level of general state support grants provided under section 4011 of Title 16 to school districts for the next ensuing school year. The Joint Committee shall review the commissioner’s recommendation and annually, on or before December 1, shall report its recommendation for the amount of general state support grants to the General Assembly.

(2) The Commissioner of Education shall study the potential effects of the new education finance system regarding capital debt service payments and shall consider whether the state should establish a reimbursement system for partial payments of debt service if the equalized yield falls below a certain level. The commissioner shall report his or her recommendations to the joint committee on or before December 15, 1997.

(e) The Joint Committee shall also review and advise on agency and departmental rules and policies relating to quality and funding of public education and the implementation of the provisions of this act. An agency of the state shall submit any initial proposed rule relating to the implementation of this act to the committee at the time the agency publishes the proposed rule for public comment under chapter 25 of Title 3. The committee may hold such hearings on the proposed rule as it deems necessary, may review any proposed rule under the criteria established for review of administrative rules by section 842 of Title 3, and may submit its recommendations thereon to the Joint Legislative Committee on Administrative Rules for consideration by that committee under the AdministrativeProcedure Act.

(f) The Joint Committee shall review the following specific features of current property taxation statutes and practices, and include recommendations thereon to the General Assembly in its December 1997 report:

(1) Whether exemptions currently provided by statute to the property tax by chapter 125 of Title 32 continue to be equitable and appropriate within a system of educational property taxes as provided in this act.

(2) The manner in which mobile home park tenants are affected by property taxation of a mobile home and the lot on which it is situated, and whether the benefits of this act adequately accrue to such taxpayers and the manner in which it may be more equitably apportioned.

(3) The effects of the provisions of this act on economic development in the state and whether financing public education through the statewide education property tax and any local share property tax based on equalized tax rates encourages or discourages orderly economic growth and the creation of jobs.

(4) The effects of this act upon town tax collection procedures, town treasurers, and other local tax collection officials, and for this purpose the oversight committee shall seek the advice and recommendations of a representative group of town treasurers and town tax collection officials.

(5) Whether payment of the part of the property tax imposed on homesteads under subsection 5403(b) of Title 32 should be through income withholding, and the effect of such payment methods on cash flow and delinquency collections.

(g) The Joint Committee may meet during the adjournment of the General Assembly at such times as it deems necessary. For attendance at meetings during adjournment of the General Assembly, members of the committee shall be entitled to compensation and reimbursement for expenses as provided in 2 V.S.A. 406.

(h) The Joint Committee shall have the assistance of the staff of the Legislative Council, the Joint Fiscal Office, the Department of Taxes, the Department of Education, and any other state agency.

(i) The Joint Committee shall provide a report on or before December 1 each year to the General Assembly on the implementation of this act and the achievement of its goals together with any recommendations for legislative action. The committee shall cease to exist on December 1, 2001 unless further extended by act of the General Assembly.

Sec. 91. COMMISSION ON QUALITY PROPERTY TAX APPRAISALS AND

EQUALIZATION

(a) There is created a Commission on Quality Property Tax Appraisals and Equalization. The commission shall be composed of eleven members; one member of the House appointed by the Speaker and one member of the Senate appointed by the Committee on Committees; and nine other members appointed by the governor, and shall include:

(1) two municipal listers;

(2) one professional property appraiser;

(3) one representative of the Vermont League of Cities and Towns;

(4) one employee of the Division of Property Valuation and Review;

(5) one real estate broker licensed in the state;

(6) three other citizens of the state.

(b) The commission shall review the practices and methods of real estate appraisal in the state, the methods used to equalize appraisal values uniformly throughout the state; the needs for quality appraisals and the requirements for comprehensive statewide equalization as directed by this act. The commission shall consider revisions to the real estate appraisal practices and requirements, particularly as they may relate to improvements in methods for equalizing educational finance burdens and property taxes, and make its recommendations thereon to the General Assembly on or before January 15, 1998.

(c) For attendance at meetings or official duties of the commission, members who are not employees of the state shall be entitled to receive compensation and reimbursement for expenses as provided to members of boards in section 1010 of Title 32. Members of the Commission who are members of the General Assembly shall be entitled to compensation and reimbursement for expenses under the provisions of section 406 of Title 2. Thecommission shall elect its chair from among its members. The commission shall have the assistance of the Division of Property Valuation and Review of the Department of Taxes.

Sec. 92. GROSS RECEIPTS AND EXCISE TAX STUDY

(a) The Commissioner of Taxes shall conduct or contract for a study of the feasibility of the establishment of a gross receipts tax, general excise tax, or other form of business excise tax in the state. The study shall address the structure of a gross receipts tax, general excise tax, and its variations; the methods and costs of administration, enforcement and collection; the transactions subject to the tax and any appropriate exclusions; the requirements and responsibilities of businesses and other entities affected by the tax; revenue projections of receipts from the tax at uniform or various rates imposed on separate categories or tax classifications such as agricultural, manufacturing and services businesses; and recommendations for effective implementation and administration.

(b) For the purposes of this study, there is appropriated to the commissioner from the general fund in fiscal year 1998 the amount of $100,000.00.

(c) The report of the commissioner or his or her contractor shall be submitted to the General Assembly no later than November 15, 1998.

Sec. 93. SMALL SCHOOLS SUPPORT; STUDY

(a) For fiscal years 1999 and 2000, the Commissioner of Education shall pay a small schools support grant to any public school with less than a 100 long-term membership. The amount of the grant shall be determined by multiplying the long-term membership of the school by $500.00 and subtracting the product from $50,000.00 except, that no grant shall exceed $2,500.00 per long-term membership.

(b) The commissioner shall study Vermont public schools with an enrollment of less than 100 students, and analyze their contribution to the strength and cohesiveness of small communities as well as their needs in the following areas:

(1) physical facilities,

(2) construction,

(3) transportation,

(4) capacity of surrounding schools,

(5) capacity for providing a quality education to their students, and

(6) other unique educational and economic challenges.

(c) On or before January 15, 1998, the commissioner shall report to the Legislative Oversight Committee on Restructuring Education on:

(1) those "necessarily" small schools which, based on the above considerations, should continue to receive a small schools grant in some form,

(2) recommendations for alternative physical arrangements for those small schools that should not continue to receive small school grants.

Sec. 94. STUDY ON TUITION FOR PUBLIC AND INDEPENDENT SCHOOLS

(a) There is established a Study Committee on Tuition for Public and Independent Schools. The committee shall be composed of a member of the Senate appointed by the Committee on Committees, a member of the House appointed by the Speaker, the Commissioner of Education or designee, a member of the State Board of Education appointed by the board, and a representative of each of the following organizations appointed by the organization: the Vermont School Boards Association, the Vermont Independent Schools Association and the Vermont Council of Independent Schools.

(b) The committee shall study the effect of this act on school districts that do not maintain a secondary school, and shall report to the Legislative Oversight Committee on Education on or before January 15, 1998 the following:

(1) The spending patterns and tuition rates paid by these school districts,

(2) Recommendations for changes to laws, including this act, that will encourage cost containment for these school districts while maintaining a quality education for the students in the district.

Sec. 95. CONSOLIDATED BALANCE SHEET FOR AID TO LOCALITIES

The Secretary of Administration shall develop a system for consolidated net payments to municipalities and school districts of all state aid to be paid and charges to be assessed on a town by town basis beginning in fiscal year 1999. The Secretary shall work with the assistance of the Commissioner of Education, the Commissioner of Taxes, the Secretaryof Transportation and any other state official, and in consultation with representatives of municipalities and school districts to develop a balance sheet approach where all revenues and receipts from all state aid sources to be paid and charges to be assessed to each municipality and school district in the state for each fiscal year, including all estimated charges and receipts for education aid and expenditures, transportation and highway aid and expenditures, capital debt service and construction aid and expenditures, and all charges and receipts from any other program providing state assistance to or charges made against municipalities and school districts. The balance sheet shall be developed so as to provide specific information for each municipality and school district and consolidated information on each program for the state as a whole. The information shall be updated periodically and made available without charge to all municipalities, school districts, and the public in print and electronic format. Said system shall be developed with a design for implementation in fiscal year 1999 and be submitted by the secretary for legislative consideration by January 15, l998.

Sec. 96. BLACK TURN BROOK STATE FOREST; ECO-TOURISM STUDY

(a) The department of travel and tourism shall create a committee to study land use and management of the Black Turn Brook State Forest, previously known as Earth People’s Park, in Norton, and eco-tourism. Study topics shall include:

(1) Eco-tourism.

(2) The feasibility of and expected demand for a conservation camp for youths or adults on this property, including proposed educational programs and camp operations.

(3) The development and operation of such a camp, including proposed capital and operating budgets with recommendations for financing by state and nonstate sources.

(4) The establishment of one or more governing entities regarding educational programs and camp operation, whose membership may include state agencies and representatives of fish and wildlife clubs, the Vermont Natural Resources Council, the Green Mountain Club, the Youth Conservation Corps and other interested clubs and organizations.

(b) The committee shall be comprised of: the commissioners of the departments offorest, parks and recreation, of fish and wildlife and of tourism and marketing, or their designees, one representative each of the Town of Norton, the Vermont Natural Resources Council, the Vermont Leadership Center, the Youth Conservation Corps, the Vermont Fish and Wildlife Group, the Vermont Federation of Sportsmen Clubs, the Derby Fish and Game Club, the Orleans County Rod and Gun Club, the Vermont Association of Snow Travelers, the Island Pond Chamber of Commerce, and the Vermont State Chamber of Commerce, and the chairs, or designees, of the House and Senate Committees on Institutions.

(c) Committee meetings shall be held in Essex County. Staff support shall be provided by the department of forests, parks and recreation.

Sec. 97. UNDERGROUND RAILROAD STUDY

The division of historic preservation is directed to do a follow-up study to the 1996 Underground Railroad in Vermont report by the division, which pursues research through sources in Canada. The study shall be directed and contracted by the division with the assistance of a steering committee consisting of: two members of the Senate appointed by the committee on committees; two members of the House appointed by the house speaker; a representative of the division of historic preservation appointed by the secretary of commerce and community development; the director of the Rokeby Museum in Ferrisburgh; three historians, each representing a different Vermont college or university appointed by the governor; and three Vermont residents appointed by the governor. The representative of the division of historic preservation shall convene the first meeting. The division of historic preservation shall provide staff support to the committee. The committee shall report study findings and recommendations to the house and senate committees on institutions by January 15, 1998.

PART XIII

* * * APPROPRIATIONS; TRANSITION COSTS;

EFFECTIVE DATES * * *

Sec. 98. APPROPRIATIONS

(a) Municipalities for administration of education property tax. There is appropriatedfrom the general fund for fiscal year 1998 to the director of property valuation and review the sum of $100,000.00 to be paid to each municipality at the rate of $1.00 for each R1, R2 and MHL parcel with more than two acres and for each farm, to assist in compensating the town officials who determine the listed value of the homestead and the nonresidential portion of the parcel.

(b) Tourism and marketing. There is appropriated from the general fund for fiscal year 1998 to the Department of Tourism and Marketing the sum of $1,560,000.00, which shall be used by the department for marketing, and of which $100,000.00 shall be expended for the "Market Vermont" program and $40,000.00 shall be expended for the Vermont film commission.

(c) Payments in lieu of taxes. There is appropriated from the general fund for fiscal year 1998 to the secretary of administration the sum of $1,000,000.00, for payments in lieu of taxes under section 3706 of Title 32. This sum shall be used to supplement other appropriations for this purpose appropriated in H.526 of 1997, the fiscal year 1998 General Appropriations Act, and shall be distributed pursuant to subchapter 4 of chapter 123 of Title 32.

(d) Current use program. There is appropriated from the general fund for fiscal year 1998 the amount of $5,519,234.00 to the director of property valuation and review for state payments to municipalities for reimbursements for enrolled property in the current use program as required by 32 V.S.A. 3760 as added by this act.

(e) Capital construction aid for schools. There is appropriated from the general fund for fiscal year 1998 the amount of $9,675,000.00 to the Commissioner of Education for state aid for capital construction costs as required by section 3448 of Title 16.

(f) Municipal and public implementation costs. There is appropriated from the general fund for fiscal year 1998 the amount of $300,000.00 to the Commissioner of Education and the Commissioner of Taxes, to be allocated to each in amounts determined by the Secretary of Administration, for the purpose of informing the public of the obligations, requirements, and benefits of this act, and for providing information and training to state and local officials necessary for the effective implementation of this act.

(g) Tax department implementation costs. There is appropriated from the general fund for fiscal year 1998 the amount of $4,634,100.00 to the Commissioner of Taxes for the effective implementation of this act of which $1,670,000.00 shall be used for statewide property tax implementation. The Agency of Administration is authorized to transfer or convert up to twenty-four positions from state government to the tax department for implementation and administration of this act.

(h) Education department costs. There is appropriated from the general fund for fiscal year 1998 the amount of $325,000.00 to the Department of Education for the implementation of this act.

(i) Legislative Oversight Committee on Educational Restructuring. There is appropriated to the Legislature from the general fund the amount of $50,000.00 for fiscal year 1998 for support of the Legislative Oversight Committee on Education Restructuring, and there is appropriated from the general fund for fiscal year 1998 to the Joint Fiscal Office the amount of $30,000.00 for the support of the Legislative Oversight Committee on Education Restructuring.

(j) Study on organization of public education. There is appropriated to the Department of Education from the general fund, the amount of $40,000.00 for fiscal year 1998 for the purpose of developing plans for restructuring Vermont’s public education system using a broad inclusionary public process.

(k) Property Tax Rebates. In addition to any other appropriation for this purpose, there is appropriated from the general fund in fiscal year 1998 the amount of $20,500,000.00 to the property tax rebate trust fund for the purpose of paying all claims under the property tax rebate program in fiscal year 1998.

(l) The amount of $175,000.00 is appropriated from the general fund to the commissioner of education for awarding challenge to excellence grants in school year 1998.

(m) In fiscal year 1998 there is appropriated from the general fund to the Commissioner of Education the amount of $2,500,000.00 which shall be used for special education formula grants, and the amount of $750,000.00 which shall be used for generalstate aid grants for local school districts. Such amounts shall be in addition to funds otherwise appropriated for these purposes in fiscal year 1998.

(n) Reappraisal costs to municipalities. There is appropriated to the Department of Taxes from the general fund for fiscal year 1998 the amount of $2,000,000.00 to implement 32 V.S.A. 4041a, relating to payments to municipalities for reappraisal costs.

Sec. 99. REVENUE COLLECTION AND EXPENDITURE

Revenues under this act shall be collected and expenditures distributed in a manner that will minimize the state's short-term borrowing needs.

Sec. 100. EFFECTIVE DATES

(a) Secs. 1, 2, 3, and 5 through 17, relating to education quality, shall take effect on passage.

(b) Sec. 4, relating to repeal of public school approval standards, shall take effect on July 1, 1998.

(c) Secs. 18 through 24 and 26 through 28, establishing the new system of education finance, shall take effect on July 1, 1998. Sec. 25, relating to transitional funding of technical education centers, shall take effect on passage.

(d) Secs. 29 through 30e, relating to special education, shall take effect July 1, 1998.

(e) Secs. 31 through 33, relating to special education and school construction aid, shall take effect on passage.

(f) Secs. 34 through 36, relating to capital construction aid, shall take effect on July 1, 1998. Sec. 37, relating to capital construction aid, shall take effect on passage.

(g) Secs. 45 through 48, relating to the statewide property tax, shall take effect January 1, 1998, except that 32 V.S.A. 5410, relating to homestead declaration, shall take effect January 1, 1999. For purposes of the fiscal year 1999 transition, nonresidential property and homestead property shall be determined by the Director of Property Valuation and Review based on the grand list information as reported to the Director for April 1, 1996. Secs. 49 through 50b shall take effect from passage.

(h) Secs. 51, 52, 52a, and 52c, relating to homestead property tax adjustment, shall take effect January 1, 1998. Sec. 52b, relating to repeal of the property tax rebateprogram, shall take effect January 1, 1999.

(i) Secs. 53 through 57, relating to payments in lieu of taxes, shall take effect July 1, 1997.

(j) Secs. 59 through 68, relating to current use, shall take effect upon passage, except Sec. 60, relating to valuation of buildings at 30 percent of fair market value, shall take effect January 1, 1998.

(k) General Fund Taxes:

(l) Meals and Rooms. Secs. 69, 70 and 70a, relating to meals and rooms tax, shall apply to sales of meals and rentals of rooms on and after October 1, 1997, provided however, that receipts from occupancies and meals reserved pursuant to a written contract entered into prior to May 15, 1997, and occurring prior to April 1, 1998, shall be taxed at the rate of seven percent.

(2) Gasoline Tax. Sec. 71, relating to the tax on gasoline, shall apply to sales and uses on and after August 1, 1997.

(3) Sales Taxes. Sec. 72, extending the rate of the sales and use tax, shall take effect from passage, and Sec. 72a, relating to a sales tax exemption for building materials, shall apply to sales and uses on and after July 1, 1997.

(4) Corporate Income Tax. Sec. 73, relating to the minimum amount of the corporate income tax, shall take effect from passage and apply to tax years beginning on and after January 1, 1997.

(5) Purchase and Use Tax. Sec. 74 shall take effect from passage, and the provisions relating to the 6 percent purchase and use tax shall apply to purchases and uses on and after August 1,1997.

(6) Bank Franchise Taxes. Sec. 75, relating to bank franchise taxes, shall apply beginning August 1, 1997.

(7) Telecommunications Service Taxes. Secs. 76 through 84, relating to the tax on telecommunications services, shall apply to services that are provided on or after September 1, 1997, and are billed in the regular course of the provider's business on or after October 1, 1997.

(8) Brokerage Fees. Secs. 85 and 85a, relating to fees on brokerage services, shall take effect July 1, 1997.

(9) Dedication of Lottery Revenues. Sec 86 and 87, directing that all lottery revenues be deposited in the education fund, shall take effect July 1, 1998.

(l) Secs. 88 and 89, relating to local option taxes and a PILOT Special Fund, shall take effect July 1, 1997.

(m) Secs. 90 through 97, relating to studies and reports, shall take effect from passage.

(n) Sec. 98, relating to fiscal year 1998 appropriations, shall take effect on July 1, 1997.

(o) This section, relating to effective dates, shall take effect from passage.

Approved: June 26, 1997