Tape No. 98-8, 98-9, 98-10 A only

LEGISLATIVE OVERSIGHT COMMITTEE

ON RESTRUCTURING EDUCATION

MINUTES

Meeting of August 19, 1998

The Legislative Oversight Committee on Restructuring Education met at 9:55 a.m. in Room 10 of the State House, Montpelier, Vermont.

MEMBERS PRESENT: Representatives John S. Freidin, Chair; Martha P. Heath; Karen M. Lafayette; Senators Helen S. Riehle; Cheryl P. Rivers; Jeb Spaulding.

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

Representative Freidin called the meeting to order at 9:55 a.m. He said that after the committee approved the minutes, he would ask John Cushing to testify and the update from the Vermont Economic Progress Council would be rescheduled to 1:00 p.m.

1. REVIEW AND APPROVE MINUTES OF JULY, 16, 1998

After the committee reviewed the minutes, Representative Heath made a motion to approve the minutes as submitted. The motion passed on a unanimous voice vote.

2. ACT 60 TO DATE FROM POINT OF VIEW OF A TOWN CLERK AND

TREASURER

John Cushing, Local Officials Advisory Committee Chair, said that implementation of Act 60 was proceeding well at the local level. He also said that local officials will continue to benefit from education about their responsibilities as well as information on implementation. He said that more general information for local officials on what Act 60 is and how it works would be useful. He suggested that each town could use its annual town report as a way to inform residents. John Cushing concluded his testimony by raising a concern about escrow accounts. He has noticed some confusion among consumers, lenders and escrow companies about whether education property taxes could still be considered a lien. He suggested a dialogue on this issue continue and information be provided by the appropriate state agencies, including the Department of Banking, to consumers, lenders and escrow companies.

Representative Freidin thanked John Cushing for addressing the committee and asked him to continue to bring to the committee's attention any information that the committee may find useful.

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3. UPDATE FROM DEPARTMENT OF TAXES ON PREBATES

Representative Freidin asked Commissioner Ed Haase to first address the question on escrow accounts, which arose during the discussion with John Cushing. Commissioner Haase said that to the best of his knowledge, the issue was appropriately dealt with in the Act, that it was agreed that education taxes would fall outside of being a priority lien, and that banks should not have to escrow education property taxes on declared homesteads.

The Commissioner then distributed and discussed an August 18, 1998, memo entitled,
"Update on Prebate Processing." He said there had been 96,969 prebates issued as of August 18, 1998, totaling $49,527,173.58; that there were 5,216 in which additional information had been requested; and that another approximately 5,000 applications had been received. Representative Freidin said that it appeared the Department had established an ongoing process of sending out prebate checks in response to applications which had been received, enabling Vermonters to apply until the deadline of December 1. Senator Rivers asked if there had been any analysis of the Current Use applications, noting trends and appeals. Commissioner Haase said that he would provide the committee with information on trends.

Senator Spaulding noted that the prebate system was working well and suggested that, perhaps, it should be continued in the future. The committee briefly discussed this matter.

4. UPDATE ON DEPARTMENT OF EDUCATION DATA REFLECTING SCHOOL

SPENDING AND LOCAL SCHOOL TAXES

Bill Talbott, Chief Financial Officer for the Department of Education, distributed and discussed two printouts. The first printout showed for each town, a comparison of school taxes raised and the percent change; the budgeted expenditures and the percent change; as well as prebates as of July 15, 1998, paid. The second printout showed for each town, the amount of money to and from towns prior to and after the July 15, 1998, prebates. He said that the Department had sent out netting sheets to towns, which they need for their cash flow, and that September 1 is the first round of payments to go out to towns, totaling roughly $70,000,000. He said that the Department was preparing and delineating each item in that payment so that towns could do their proper bookkeeping. Bill Talbott concluded his testimony by saying that milestones continue to be passed, with the June 1 budget collection, July 1 tax notices, July 15 prebates, and the September 1 payments to towns.

Before recessing for lunch, Senator Spaulding apologized to the committee for not being able to attend the remainder of the meeting.

5. REPORT FROM VERMONT ECONOMIC PROGRESS COUNCIL AND

DISCUSSION OF COST-BENEFIT MODEL

Representative Freidin invited Chris D'Elia, Vermont Economic Progress Council executive director, to testify. Representative Freidin asked that he address issues relating to "The Vermont

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Guide to Economic Advancement Tax Incentives and Downtown Development Incentives." He said the committee had received a draft sent on August 5, as the committee had requested at its July 16 meeting. Representative Freidin told the committee that Chris D'Elia had told him, this morning (August 19), that the booklet had already been printed. Representative Freidin said the committee had expected to give its suggestions about the substance of the document prior to its being printed.

Chris D'Elia responded that he was still interested in hearing comments. He said that the intent of the document was to be informative to the businesses and municipalities VEPC would be working with; that it was produced in a fashion that would be timely so that there would not be an information gap; that he viewed this as step one in a several step process. He said that individuals would request additional information, which would include interim procedures, application forms, guidelines, and material relating to the cost-benefit model.

Chris D'Elia then addressed the committee's questions. Committee members said they were concerned that the guidelines as outlined in Act 71 were not included. They also said that the "Frequently asked Questions" section of the document addressed issues unrelated to VEPC. Chris D'Elia again stated that it was an introductory piece. He said that the Questions were the most frequently asked and that by including them, VEPC was trying to avoid repeating the issues when meeting with new clients.

After committee discussion, Representative Freidin said that he would recommend the document be improved and not be released until VEPC had considered the views of this committee. He said that it was VEPC's decision on how to proceed. Chris D'Elia said that he would try to adhere to Representative Freidin's request, but that VEPC was very concerned about the informational gap. Representative Freidin said that if VEPC decided to make changes in the document and seek the committee's input, the committee would provide its comments in writing in a timely manner. When asked about the number printed and the cost, Chris D'Elia stated that there were 5,000 guides printed at a cost of $3,500.

Representative Freidin then invited members of VEPC Cost-benefit Model Advisory Committee to join Chris D'Elia at the table. He asked Chris D'Elia to give the committee background on what the group does and how it was constituted. Chris D'Elia introduced Maxine Brandenburg, President of the Vermont Business Roundtable; David O'Brien, Director of the Rutland Economic Development Corporation; Larry Cobb, of Economic Policy Resources; and Paul Toomey, of Gallagher, Flynn and Company.

Chris D'Elia said the committee was organized at the request of the VEPC, to provide support and input on the development of the cost-benefit model. He said they had been meeting on a regular basis, and had focused on the process for development of the cost-benefit model.

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Representative Freidin noted the committee had received the full list of Advisory Council members.

Representative Freidin invited each witness to introduce him/herself and make any opening remarks. He said that the committee had invited the witnesses to make certain that the parameters that the Advisory Council was using for the development of the cost-benefit model were in fact what those who wrote the law envisioned.

After a roundtable discussion among the witnesses and committee members, Representative Freidin said that the program would be viewed as successful if the incentives in Act 71 changed the behavior of businesses and induced behavior, which was needed in the State of Vermont, as defined by the guidelines.

6. REVIEW OF DEPARTMENT OF TAXES DRAFT PROPOSED RULE ON

HOMESTEADS, REG. § 1.5401(7)

Molly Bachman, General Counsel for the Department of Taxes, reviewed a July 23, 1998, memo on Homesteads, together with the draft rule and regulation on Homesteads, which had been mailed to the committee. Molly Bachman reviewed issues which she said the legislature might consider clarifying in 1999: a divorced claimant whose ex-spouse is still on the deed; farmers who benefit from a provision which allows certain relatives of farmers to claim as a homestead a dwelling owned by a farmer; attribution of ownership; the fact that a homestead, currently, does not include the 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% of the floor space of the building. The committee also discussed the definition of "shed." Representative Freidin asked Molly Bachman to review the Tax Department's statutory authority to allocate a portion of a barn as a homestead.

Molly Bachman then updated the committee on Act 60 litigation.

7. UPDATE ON DEPARTMENT OF EDUCATION SUMMER ACTIVITIES

Commissioner Marc Hull and Deputy Commissioner Marge Petit distributed and discussed documents with a cover sheet entitled, "Joint Legislative Oversight Committee, August 19, 1998." They reviewed the Department's legislative tasks, including the issues of governance, public school choice, home schooling and school finance; student performance data; and action planning institutes. Due to a lack of time, Representative Freidin invited the Commissioner and Deputy Commissioner to the September 14 meeting to review the Proposed School Quality Standards.

The Committee adjourned at 3:30 p.m.

Respectfully submitted,

Rachel Levin