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.