H. 480 Education Funding
Summary of the Report of the Committee of Conference
Prepared by Legislative Council May 30, 2003
Major Conference Differences From House Bill Are Shown in Bold Type
Purpose of the act:
It is the purpose of this act to meet the Vermont Supreme Court’s Brigham decision requirements to provide substantially equal education opportunity for all Vermont children.
The act reduces reliance on the property tax for education funding, and creates an education funding law that eliminates the need or incentive for towns to engage in private fundraising to avoid education tax obligations. It is the purpose of the act to manage growth in education spending at a sustainable level.
Section-by-section summary:
Sec. Page (references to House Calendar – May 30, 2003):
1, 2. 1851 Deletes references to local share tax.
3. 1854 Definitions:
“Homestead” includes entire parcel
“Excess spending” is education spending minus capital construction in excess of
125% of statewide average.
“District spending adjustment” is greater of 1 or ratio of spending-per-pupil to
base education payment.
4. 1855 Education tax rates: $1.10 homestead (adjusted by spending); $1.59 nonresidential.
Tax bills to show equalized tax, not equalized tax rate.
Towns retain 1/8% of tax collected.
Rent-controlled units receive up to 10% tax reduction. [-$400,000]*
5. 1857 Education tax annual rate adjustments; to be recommended by commissioner of taxes. Conference formulas slightly different, but retain the House requirement that nonresidential tax raise 34% of education spending.
6. 1858 Declaration of homestead; penalties.
7. 1860 Income sensitivity: Homeshare person is not a member of household for
determining household income;
“Housesite” is defined as house and 2 acres.
8. 1861 Income sensitivity: Excluded income of a student-dependent or parent-dependent
is increased from $4000 to $6500.
9. 1861 “Claim year” definition; technical.
10. 1861 Income sensitivity adjustment calculation:
$75,000 or more: adjust only tax on first $160,000 of housesite; by percentage of household income
$47-75,000: adjust tax on housesite; by percentage of household income
$0-47,000 adjust tax on housesite; by percentage of household income or deduction of $15,000 of listed value.
1. Conf allows sensitivity only on housesite (house + 2 acres); House allowed sensitivity on entire homestead (house + all acres).
2. Conf removed the House cap of $5000 on benefit.
3. Conf allows $15,000 deduction for under $47,000 HH income; House had removed the $15,000 deduction altogether.
Conf added additional payment of $10 per acre, for up to 5 acres in excess of housesite. [-$1.15m]
11. 1864 Conf added intent to extend $10 per acre program up to 25 acres, if sufficient funds in future.
12. 1864 Drafting instruction; technical.
13, 14. 1864 Amendment of Vernon education tax calculation; technical.
15. 1865 Definitions: “Base education payment” is $6800 per equalized pupil; adjusted annually.
“Adjusted education payment” is district’s spending per equalized pupil.
16. 1865 Technical changes to current law:
FY05 and FY06 payments to low-spending towns of 40% of difference between district spending and base education payment. Conf ends this 40% payment after 2 years (FY05 and FY06 only.
Technical center payments for non-enrolled (e.g. home-schooled) students.
House did not have equivalent language. [-$ ]
17. 1867 Codifies law pertaining to education tax in unorganized towns and gores (the rules are currently in session law); technical change, except that the $1.59 rate will apply to nonresidential property in unorg towns and gores.
House did not have equivalent language.
18. 1867 Maintains current level of payment for technical education.
Changes method of payment, to clarify that cost is in the district’s budget.
19. 1868 Eliminates calculation of yield; updates terminology.
20 1869 Updates terminology and eliminates language now covered by 32 VSA 5402.
21 1860 Updates terminology.
22. 1871 Updates terminology.
23. 1872 Maintains current level of small school grants.
Creates a transition rule for a diminishing grant over 3 years, if a small school consolidates into a larger school.
24, 25. 1873 Technical changes in Title 16 and 32.
26. 1873 Updates terminology.
27. 1874 Updates terminology.
Requires school district to report to commissioner a change in data, not just an error in data as under current law.
28. 1875 Updates terminology.
29. 1875 Updates terminology.
30. 1875 Legislative intent regarding sales tax:
reduce reliance on property tax;
move to greater funding from sales and use tax;
conform to Streamlined Sales Tax Agreement;
use additional revenues gained from Streamlined to reduce sales and use tax rate when feasible.
31. 1875 Raises sales tax to 6% (begins October 1, 2003). House began 1/1/04.
[FY04 $27.8m; FY05 $43.2m]
Taxes telecommunications services at same 6% rate (begins October 1, 2003).
House began 1/1/04.
[FY04 $3.7m; FY05 $5.8m]
32. 1876 New table for determining 6% tax on each item sold.
33. 1877 Raises use tax to 6% (begins October 1, 2003). House began 1/1/04.
34. 1877 Replaces reference to 5% sales tax rate with reference to new rate; technical.
35. 1877 Allows taxpayers to report on income tax return either:
(a) actual use tax or
(b) estimated use tax at 0.4% of adjusted gross income, plus 6% of each item priced over $1000 on which no sales tax was paid.
Requires commissioner to publish tables showing 0.4% of AGI.
House did not have equivalent language.
[$0.5m in FY04 and FY05]
36-38. 1878 Simplifies education fund revenue sources.
Requires general fund transfer to grow at same rate as general fund spending.
39. 1880 Calculation of long-term membership for rapidly-growing districts.
Conf modified slightly; changed effective date from 7/03 to 7/04.
[-$ ]
40. 1880 Clarifies law governing Winooski tax increment financing district; technical.
41. 1880 Provides that in annual equalization study, extreme values (“outliers”) should be ignored if they would create undue distortion of the common level of appraisal.
42. 1881 Extends special education spending target until new funding formula enacted.
43. 1881 Directs School Boards Assoc to develop list of burdensome mandates; then Commissioner of Education to take action to remove or revise, if possible.
44. 1881 Requires local school district economic impact statement for all agency rules.
45. 1882 Directs Commissioner of Ed and Secy of AHS to establish cost-effective system for special ed services.
House had directed DOE and AHS to enter into interagency agreement re:sharing of special education costs.
46. 1882 Annual school reports shall include data provided by Commissioner of Ed to enable comparison of cost effectiveness in school spending.
47. 1883 Provides grants to encourage supervisory union members to negotiate jointly on teacher contracts.
48 . 1884 Directs school boards to show in annual budget proposals assessments for union schools and supervisory unions as separate items.
House did not include spending per equalized pupil or union school assessment per member district and per equalized pupil.
49. 1884 Encourages consolidation by increasing construction aid from 30% to 50% for consolidation projects.
50. 1885 Allows districts which voted to exclude capital construction from education spending to rescind the vote.
House did not have equivalent language.
51-67. 1886 Conforms Vermont sales tax law to Streamlined Sales Tax Agreement, including:
Sec. 58, page 1895, imposes sales tax on beer
Sec. 58, page 1895, makes all clothing exempt (not just under $110)
Sec. 61, page 1898, removes the $20/month telecommunications credit
Sec. 66, page 1900, requires local option to tax telecommunications
Sec. 66, page 1900, requires local option to use destination-basis for tax
Sec. 67, page 1901, requires local option to exempt all clothing.
[beer: $
clothing exemption -$
$20 telecom credit -$ ]
68. 1901 Extends local option for sales tax and meals and rooms tax to 2008.
69. 1902 Education quality study. $50,000 to contract for study; report due December 15, 2003. House had $100,000 for contract.
70. 1903 Creates a Joint Legislative Education Cost Containment Study Committee.
71. 1904 Creates a Council on Education Governance. Conf removed $50K appropriation.
72. 1906 Directs the Legislative Council and the Joint Fiscal Office to conduct a grand list issues study.
73. 1906 Directs the Joint Fiscal Office to study possible simplification of property tax adjustment system.
74. 1906 Directs the Department of Taxes to study possibility of replacing income sensitivity system with income-sensitized property tax bills.
75. 1907 Transition rule for determining split grand list.
76,77 1908 FY04 provisions:
statewide rate at $1.10;
yield at $45.20;
general state support grant at $5,810.00.
House had $1.07 rate; $45.20 yield; $5651 gssg.
78. 1908 FY 05 and FY 06 general fund transfers to the education fund:
FY 05 transfer at $249,300,000.00;
FY 06 appropriates the FY05 amount, adjusted by the change in the general fund base spending in the current fiscal year.
79. 1908 Appropriates $734,472 from the Education Fund in FY04 to the Tax Dept for implementation of the new law.
80. 1908 Planning grants of $4,000.00 to districts to study creating consolidation of districts.
[Conf deleted the provision for $300,000 contract with outside special ed attorneys.]
81. 1909 Changes law governing payment of interest on tax refunds: instead of interest from date tax was paid, interest will run from date amended return is filed.
House did not have equivalent language.
[save payments of $1m annually]
82. 1910 Dividend income: blocks pass-through of new Federal reduction of tax on dividend income.
House did not have equivalent language.
[saves loss of $ ]
83. 1910 Establishes equalized pupil count for union school districts.
House did not have equivalent language.
84. 1910 4-year transition to new $1.59 tax rate for manufacturing business with 1000+ employees and current low tax rate.
House did not have equivalent language.
[-$ ]
85. 1911 Current law gives education tax relief if grand list drops 15% or more; this section applies the 15% drop test to each part of the split grand list.
House did not have equivalent language.
86. 1911 Land use change tax reverts to general fund from municipalities.
House did not have equivalent language.
[$0.6m to general fund instead of to municipalities]
87. 1913 Effective dates.
*Fiscal estimates are from the Joint Fiscal Office.