Tape No. 98-6, 98-7 A only

LEGISLATIVE OVERSIGHT COMMITTEE

ON RESTRUCTURING EDUCATION

MINUTES

Meeting of July 16, 1998

The Legislative Oversight Committee on Restructuring Education met at 9:40 a.m. in Room 10 of the State House, Montpelier, Vermont.

MEMBERS PRESENT: Representatives John S. Freidin, Chair; Paul A. Cillo; Martha P. Heath; Karen M. Lafayette; Senators Nancy I. Chard; Cheryl P. Rivers.

STAFF PRESENT AT VARIOUS TIMES: Emily Tartter, Anne Winchester and Rachel Levin of the Legislative Council; Steve Klein and Mark Perrault of the Joint Fiscal Office.

Representative Freidin called the meeting to order at 9:40 a.m. He noted that he would be attending a meeting in his district that afternoon and that the committee would try to have its work finished prior to lunch.

1. REVIEW AND APPROVE 6/24/98 MINUTES

Representative Freidin asked if there was any discussion on the minutes. Senator Rivers made a motion to approve the 6/24/98 minutes. The motion was seconded by Representative Heath and passed unanimously on a voice vote. Representative Freidin acknowledged Chris D'Elia's verification of the accuracy of the details relating to the Vermont Economic Progress Council.

2. REPORT FROM VERMONT ECONOMIC PROGRESS COUNCIL

Representative Freidin invited Chris D'Elia, Executive Director of the Vermont Economic Progress Council (EPC), to respond to questions the committee had raised at its last meeting. Representative Freidin told the committee that David Coates, the EPC board chair, had been invited as well, but had been unable to attend the meeting. Representative Freidin reported that he had then extended the invitation to the vice chair or any other board member. David Coates declined, saying the vice chair would be on vacation and other EPC members had only just begun their service on the board.

Chris D'Elia said that he would begin by responding to the questions committee members had asked at the previous meeting:

- a contract had been signed for development of the cost-benefit model and work on it

had begun

- the advisory committee for the development of the cost-benefit model would be meeting on July 22 and every other Wednesday through August

Page 2

7/16/98

- a third party review process for assessing the cost-benefit model was being investigated

and any suggestions would be welcome

- the Joint Fiscal Committee had been kept up to date on the Request for Proposal

process relating to contracting for the development of the cost-benefit model

- eighteen of twenty-four appointments of the non-voting regional members had been

made; July 30 would be the first meeting of this group and ways to allow regional

representatives to interact with the applicants would be considered; the greatest concerns

were of confidentiality of information in the applications

- the Oversight Committee had been provided with drafts of the application form as well

as interim procedures

Representative Freidin asked if there were any questions. The committee provided feedback on the draft application for economic incentives. Chris D'Elia clarified that Tom Kavet, an economist, was part of the contract for the development of the cost-benefit model. Representative Freidin requested that Chris D'Elia provide the committee with a list of the non-voting members of the EPC as well as a draft brochure for potential applicants for economic incentives.

Chris D'Elia concluded his testimony by outlining the time line for the EPC for the remainder of the year:

- 60-day process for developing the economic model

- August 1, applications for economic incentives would be available, if finalized

by the EPC

- in August, Sales and Use Exemptions could be filed, if applications were finalized

- September 1, applications for economic incentives would start being accepted,

dependent on finalization of the cost-benefit model

- the 4th Thursday in October, a decision on the September 1 applications would be made,

if the cost-benefit model was finalized and applications had been accepted

The committee agreed to invite Chris D'Elia to its August 19 meeting.

3. REPORT ON PREBATE CHECKS

Kathy Hoyt, Secretary of Administration, said that she was proud of the work of state employees in meeting the challenge of mailing the checks out on time and that this signaled the beginning of a new way to pay for education in the state. She said that over 90,000 households would receive prebate checks, with a statewide total of over $47,000,000. She said the Tax Department would encourage people to file if they had missed out. Representative Heath asked about the Administration's plans for acknowledging the good work of state employees. Secretary Hoyt said that there would be visits by the Governor in the Tax and Education Departments. Representative Heath made a motion for the committee to send letters of commendation on behalf of the committee, the General Assembly and constituents, to Tax and Education Department staff. The motion passed unanimously on a voice vote. Representative Freidin said he would draft a

Page 3

7/16/98

letter and consult with Commissioner Hull and Deputy Tax Commissioner Campbell to compile a list of staff who should receive the letter.

Sean Campbell, Deputy Tax Commissioner, commended the work of the entire staff of the Tax Department. Representative Freidin thanked Deputy Commissioner Campbell, Commissioner Ed Haase and Bob Gross for their good work. Bob Gross, a Tax Policy Analyst, answered some of the committee's questions. Deputy Commissioner Campbell also distributed and reviewed a printout entitled, "Vermont Department of Taxes 1998 School Property Tax Reduction Payment Report: Claims paid as of July 15, 1998," displayed by county and by town, and which listed school districts, the number of prebate applications and the totals of the tax reduction payments. In response to a request for further information on the number and type of parcels in each town, Deputy Commissioner Campbell provided a printout prepared by Property Valuation and Review showing parcel data.

Representative Freidin asked Deputy Commissioner Campbell how frequently the prebate reports would be updated. Deputy Commissioner Campbell said that these were preliminary reports and that a final report would be published at the end of the year. Representative Freidin requested that a summary page of statewide prebate information, displayed in a similar format to the first page of the booklet, be provided to the committee periodically. Deputy Commissioner Campbell said that there had not been time for additional data analysis yet, but that he would provide more detailed information to the committee at a subsequent meeting.

After committee discussion, members agreed that the prebate information should be distributed to all members of the General Assembly It was decided that one mailing to the General Assembly would be carried out by the end of the week and contain the summary page of statewide prebate information from the "Vermont Department of Taxes 1998 School Property Tax Reduction Payment Report: Claims paid as of July 15, 1998," as well as a summary of the prebate checks by county. A second mailing would be carried out by the end of the following week when the Tax Department could provide sufficient copies of the "Vermont Department of Taxes 1998 School Property Tax Reduction Payment Report: Claims paid as of July 15, 1998." Representative Freidin invited Deputy Commissioner Campbell and Bob Gross to include a glossary of terms, address confidentiality protection, as well as caveats and any other information which would help to explain the report.

4. REVENUES AND UPDATED ACT 60 BALANCE SHEET

Steven Klein and Mark Perrault of the Joint Fiscal Office distributed and discussed an updated education fund balance sheet as well as information comparing the new revenue forecast to the actual revenue.

They reported that since adjournment, several factors have combined to improve the education fund's bottom line for FY99 by more than $5 million. The largest adjustment is due to a $7 million downward revision of the estimated cost of the property tax "prebate" based on property

Page 4

7/16/98

tax relief applications processed to date. As of July 15, the JFO estimated that the education fund

would run a small operating deficit of $1.66 million this fiscal year. That deficit would be fully covered by the education fund stabilization reserve.

They also reported that the education fund stabilization reserve was expected to be more than $32 million at the close of FY99. Almost $28 million of that stabilization reserve was due to the "waterfall" provision in the FY99 Appropriations Act which required that certain surplus general fund revenues at the close of FY98 be transferred to the education fund stabilization reserve.

Finally, they reported that the education fund was projected to maintain positive net reserves through FY03. These updated net reserve projections reflected changes made to FY99 estimates only; but they would be revised later this year. They also said it appeared that the rate of inflation and the number of students may be higher than previously anticipated. However, the rate of growth in the education grand list may be higher and the cost of income-sensitivity (reflected in lower statewide property tax collections) may be lower than previously anticipated.

Senator Rivers reminded Steven Klein that she had requested data on towns' transportation.

They also distributed the July 1998 revenue forecast update prepared by Thomas E. Kavet.

5. MEMBERS' CONCERNS AND OTHER BUSINESS

Representative Freidin said Joel Cook, Counsel for the VT NEA, had requested a few minutes to testify. Joel Cook said that the VT NEA may want to testify at the August meeting regarding concerns about the short time frame for the comment period for an Education Department proposed rule.

The committee discussed the agenda for the August 19 meeting as well as the meeting schedule.

The committee agreed to meet on September 14, beginning at 9:30 a.m., in Room 10 at the State House.

The Committee adjourned at 11:45 a.m.

Respectfully submitted,

Rachel Levin