LEGISLATIVE OVERSIGHT COMMITTEE

ON RESTRUCTURING EDUCATION

MINUTES

Meeting of December 9, 1997

The Legislative Oversight Committee on Restructuring Education met at 9:05 a.m. in the Legislative Lounge of the State House, Montpelier, Vermont.

MEMBERS PRESENT: Sens. Cheryl P. Rivers, Chair; Nancy I. Chard; James H. Greenwood; Helen S. Riehle; Peter E. Shumlin; Reps. David C. Hathaway; John S. Freidin; Martha P. Heath; Karen M. Lafayette.

STAFF PRESENT: Bill Russell, Emily Tartter, Anne Winchester and Rachel Levin of the Legislative Council; Catherine Benham of the Joint Fiscal Office.

Senator Rivers called the meeting to order at 9:05 a.m.

1. APPROVAL OF 11/18/97 AND 11/25/97 MINUTES *

Sen. Riehle made a motion to approve the 11/18/97 and 11/25/97 minutes, as submitted. The motion passed unanimously.

Staff distributed a letter dated 10/21/97 from Steve Jeffrey of the Vermont League of Cities and Towns (VLCT). During his testimony, Steve Jeffrey noted that the date should read 11/21/97.

Sen. Rivers then gave an overview of the day's agenda, noting that the Committee would assess at the end of the day the need for another meeting prior to the end of the year.

2. REPORT FROM LOCAL OFFICIALS ADVISORY COMMITTEE CHAIR

Sen. Rivers invited John Cushing of Milton and Chair of the Local Officials Advisory Committee, to testify. She introduced him by expressing appreciation for his and the Committee's work.

John Cushing began by introducing those Committee members in attendance as well as the others who served on the Committee. He gave an overview of how the Committee began its work on preparing the report in early October and said that the goal was to recommend a system

that municipal governments would want to use, rather than one they are required to use. He then used an overhead projector in his presentation and distributed the December 9, 1997 Official Report of the Local Officials' Advisory Committee (LOAC).

John Cushing gave an overview of the Committee's recommendations in the following areas:

necessary, that the legislature expedite the change.

John Cushing concluded his report by thanking the Committee for appointing the Local Officials Advisory Committee members and said that LOAC believes the Committee should be a standing Committee to work with the state and the legislature though the implementation process to assist with making a smooth transition.

Oversight Committee members said they agreed that the Local Officials Advisory Committee had constructive ideas and suggestions and that both Committees learned from the exchange of ideas and said that there was a strong appreciation for the work of the Committee to date.

Sen. Shumlin made a motion for the Oversight Committee to recommend that the Local Officials Advisory Committee continue its work during the 1998 legislative session. Rep. Heath seconded the motion. The motion passed unanimously.

Rep. Freidin made a motion to instruct legislative staff to mail a copy of the December 9, 1997 Official Report of the Local Officials Advisory Committee to every member of the General Assembly. Rep. Hathaway seconded the motion. A friendly amendment was made to instruct legislative staff to attach the Report to the Oversight Committee's final report as an appendix and mail both prior to December 25, 1997. The motion passed unanimously.

3. DR. ALVIN SCHEIN, STOWE, STEVE JEFFREY, VLCT

Dr. Alvin Schein of Stowe distributed his remarks in writing to the Committee and then read his remarks which included that he was a retired dentist who practiced in Burlington for more than thirty years; that as president of the state dental board he helped rewrite portions of the dental practice act and that he has been in the business of recognizing and doing something about meeting the unmet needs of people. He said that he was aware of past attempts at funding education such as other formulas which have been used and as a lay person he had no idea of the complexity of the problem that these attempts were trying to address until H.527 was introduced as a solution. He said that he believes the common denominator in the failure of all the plans that came before the current law is the lack of adequate funding and that the legislature is trying to make up for inadequate funding by selectively taxing those communities whose tax rate is low. He said that towns don't pay taxes, people do.

Senator Rivers asked Dr. Schein what he would recommend as an alternative way to meet the requirements of the Brigham decision. He stated that he had no specific proposal; it is the responsibility of the Legislature to come up with one.

Steve Jeffrey, Executive Director of the Vermont League of Cities and Towns (VLCT), referred to his letter distributed at the beginning of the meeting. He outlined VLCT recommendations from the ACT 60 Implementation Issues Committee addressing the following issues: Grand List administration; education tax bills for declared homesteads; nonresidential education tax payments to school districts; charter changes necessitated by Act 60; and mobile home bill of sale.

Steve Jeffrey also listed the recommendations of the Act 60 Strategic Issues Committee addressing the following issues for the 1998 Legislative Session: economic development; property tax exemptions; local option taxes; payment in lieu of taxes for state-owned lands and buildings; change the equalized yield to a guaranteed yield; local charter questions; determination of municipal expense vs. education expense; transition period funding; statewide voter referendum on Act 60; long-term position on education finance.

Senator Rivers thanked Steve Jeffrey for the proposals. She noted that some of the suggestions looked promising, while others would be problematic in her opinion.

4. TRANSITION ROUNDTABLE DISCUSSION

Sen. Rivers invited the participants to join the Committee at the table. She said that she hoped the discussion would stay focused on ideas on transition which would assist the Committee in its work. She asked Committee members and witnesses to introduce themselves and then asked the witnesses to make brief opening remarks. The following witnesses participated: Mary Barrosse, Dorset; Allen Gilbert, Worcester; Fred Hutchins, Stowe; Ray Schneider, West Dover; Laura Soares, Randolph; Betty Wheeler, Middlebury. The following documents were distributed: a 12/8/97 list of four suggestions on transition presented by Fred Hutchins on behalf of the Stowe Act 60 Action Committee; a 12/5/97 letter presented by Fred Hutchins on behalf of Louis Costanzo on behalf of Winhall School Board on proposed modifications to Act 60; a proposal from Mary Barrosse on behalf of Vermont Parents for Quality Education on mitigating the effects of Act 60.

Fred Hutchins said that the goal is to allow Stowe not to have to destroy its school and to keep all students in excellent schools; that the Bartlett amendment is good and that phase-ins are needed; that each community needs to decide what is sustainable. He said that businesses can absorb changes over a period of time but that quick changes are hard to absorb and that competition is intense locally.

Laura Soares said that the transition is too long; that Act 60 allows for providing the same education for all kids in Vermont.

Mary Barrosse said that a retirement package for teachers needs to be discussed; that spending needs to be reduced so that the burden on small businesses is lowered; that Act 60 needs to be looked at in the long-term; that uncontrollable factors need to be looked at; that the private school issue has to be dealt with. She said it is particularly important that technical assistance from the Department of Education be a part of the transition and that "best practices" should be shared from town-to-town facilitated by the Department of Education. She said Winhall is also

concerned about small school issues and wondered if there could be a weighting system, as well

as for K - 3 students due to added cost.

Allen Gilbert said that it is important to maintain programs at an expense rate which approximates the schools around the state; that an early retirement program for teachers should

be considered for staff in the highest pay scales; and that any extra money put into the system should be spent on correcting longstanding problems; and that cash should be provided to those communities which don't meet basic standards for facilities.

Betty Wheeler said that as an observer from a high tax town, Act 60 needs to be preserved. She said she is not in favor of a referendum and that it would not be a good idea to go back to the old system; that the transition is long enough; that small businesses in Middlebury are thriving even though there is a high tax rate and that they are thriving because of the quality of life.

Ray Schneider had some specific questions for the Committee on school district surpluses. Rep. Health answered his question and he agreed to leave his other questions in writing for the Committee to address.

Rep. Freidin asked if Stowe and Dorset could make the degree of cuts being proposed and protect educational quality. Fred Hutchins said that he did not believe the community would vote to spend above the block grant amount. Mary Barrosse said she was concerned about the cuts of the size that are being discussed in terms of the impact on children. Sen. Rivers said she would be concerned about a proposal that required towns to reduce spending. She said that she was not sure she would support additional funding to soften the transition in low tax towns, but she would prefer a proposal that conditioned any additional transition assistance for low tax towns on their not cutting spending below a certain amount. She asked participants to think about her belief that towns where the tax rate is going up do not need additional incentive to reduce spending. She said if the idea is to protect quality, the proposal should limit cuts, not be conditioned by them.

5. UPDATE FROM ADMINISTRATION

After lunch, Sen. Rivers asked Sean Campbell, Deputy Commissioner of Taxes and Special Assistant to Secretary Hoyt on Act 60, to address the Committee. He said that Secretary Kathy Hoyt apologized for her absence but that she had previously committed to testify before the House Appropriations Committee. Deputy Commissioner Campbell reviewed a 11/26/97 memo from Molly Bachman, General Counsel for the Department of Taxes to the Oversight Committee on pending legal challenges to Act 60. He also distributed and reviewed Bulletin No. 2, How Does Act 60 Affect Local Control of Schools?, produced with the assistance of Marketing Partners and distributed to local officials. He said Bulletin No. 3 was on the way. In response to a question from a Committee member, he said he would try to find out if local papers were using the bulletins as press releases. He noted that the speakers kits were available and he would provide copies to the Committee and that a packet was being developed for town officials for town meeting and school budget presentations.

Deputy Commissioner Campbell also brought up the issue of a town not having voted a budget by June 30 and the situation it creates. Sen. Rivers pointed out that the way Act 60 is structured, if a contributing town hasn't passed a budget before June 30, it will pay based on spending for the previous year.

He said the Tax and Education Departments are continuing to give presentations around the state, that the Tax Department is working with the Legislative Council and the Governor on technical changes and that the Governor would be making his proposals at the end of the week.

Sen. Rivers said that she is not ready to make decisions about how to use a projected budget surplus until more is known about the amount of the actual surpluses. She also expressed

appreciation to all the State employees who are putting in a lot of time giving presentations and said the response to Marketing Partners' materials has been very positive.

Rep. Heath asked when a one page summary sheet on household income and current use would be prepared. Deputy Commissioner Campbell said he would have it by the end of the week.

Ed Haase, Commissioner of Taxes, discussed Tax Department implementation issues including the issue of bank escrow accounts and the provision of funds for computers and software to municipalities. Commissioner Haase reported he had been discussing the escrow issue with bank presidents, the Vermont Bankers Association as well as others and that he is in the process of scheduling a meeting with private mortgage originators and then would be ready to formulate a plan. He said he would be ready to make a presentation the next time the Committee meets.

Commissioner Hasse also discussed the issue of "offsets" and tax delinquency and at the request of Sen. Rivers, said he would provide the Committee with a memo with his understanding and

recommendations.

He concluded by saying that he has been speaking at tax institutes and schools.

Bill Johnson, Director of Property Valuation and Review, reported on meetings he has attended and updated the Committee with a 12/5/97 memo from Charlene Lathrop on town certification for computer reimbursement. He also reported that the Commission on Quality Property Tax Appraisals would be ready to make a report at the next meeting.

Marc Hull, Commissioner of Education, distributed and reviewed a 12/9/97 memo updating the Committee on the Department of Education's activities. He focused his presentation on the "reports" section and said that each report would be written in a uniform format and that if the Committee had any feedback, to please give it to him. He also said that any report a Committee member is particularly interested in would be provided.

Sen. Rivers asked about the small schools study and the timetable for completion. She also asked the Commissioner what his response was to several ideas which arose from the morning's roundtable discussion on transition and asked him to consider how the Department would give

technical assistance to districts in terms of how they can be more efficient as well as facilitating a formalized process of sharing information between schools. Commissioner Hull said he would like to think about both suggestions and prepare a memo addressing them.

Commissioner Hull then asked if Irv Thomae could ask a clarifying question about capital debt and noted that he was from Norwich and under contract with the Department of Education.

Rep. Freidin asked a question relating to separation of school and municipal expenses. Commissioner Hull suggested that it was a question of scale and it needed to be defined, but that no big problems have arisen during the discussions with business managers on this point.

Sen. Rivers asked Bill Russell of the Legislative Council to distribute a 12/9/97 draft 3.4 technical corrections bill as well as the section-by-section summary and asked the Committee to discuss the need for another meeting to review the draft as well as to hear a report from the Commission on Quality Tax Appraisals.

The Committee agreed to set a meeting for December 16, 1997 to begin at 9:30 a.m. and to be held in the Legislative Lounge of the State House.

The Committee then listened to Irv Thomae's questions, one relating to union school districts and the other relating to calculating hold harmless debt aid and agreed that he is interpreting the intent of Act 60 correctly in the way he is conducting the study on capital debt.

6. REVIEW OF TECHNICAL CORRECTIONS

The Committee agreed to have the review and discussion at the next meeting.

7. AGENDA FOR NEXT MEETING; CLOSING REMARKS

The Committee adjourned at 3:30 p.m.

* Please note that the numbers refer to agenda item number.