VSA / VPA / VSBA Legislative Bulletin:
Revenue Shortfalls May Result in Major
Cost-shifts to Education Fund
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Legislative leaders are committed
to adjourning the 2009 session on May 8th. If that goal is to be
met, the last two weeks of the session will require reaching agreement on how
to balance the state’s budget, and will necessarily include consideration of
tax increases, spending reductions, and cost-shifts to the Education Fund.
We anticipate that shifting some or all of the employer obligation for the
teachers’ retirement system from the State General Fund to the Education Fund,
and thereby to property tax payers, will be a major component of the
negotiations between the House, the Senate, and the Administration.
We strongly encourage you to contact your local Senators and
Representatives and remind them that shifting any teacher retirement obligations
from the General Fund to the Education Fund will increase property taxes.
Both the Senate and the
House have approved appropriations bills that include all three of these options
. Moreover, significantly decreased
revenue projections released on Friday by state economists mean that all three
options must now be reconsidered, and an additional $14.6 million must be found in either
spending reductions or revenue increases in order to balance the General Fund
budget in fiscal year 2009, and another $34 million in fiscal year 2010.
Additional
Information
The following information details the revenue projections,
teachers’ retirement fiscal facts, the education provisions in the
appropriations bills, and lists the ideas the conference committee negotiators have been directed to consider when
attempting to balance the FY’09 and FY ‘10 budgets. (Naturally, the negotiations may include
concepts that are not listed).
As this chart indicates, the State is facing severe
projected General Fund budget gaps this year and next year. Fiscal year 2011 is projected to be an even
larger gap than fiscal year 2010. These
gaps must be closed, either through spending reductions, revenue increases or a
combination of the two. The Legislature
and the Administration will be negotiating between now and the end
of the legislative session on solutions to balance the budget.
Employer
obligation to the State Teachers’ Retirement System:
fiscal year 2010
|
Current liability
|
$19.8 million
|
|
Accrued liability
|
$21.7 million
|
|
Retiree health care
|
$19.5 million
|
|
Total:
|
$61 million
|
Since the inception of the teachers’
retirement system, the law has required the State to fund the total amount
listed above through the General Fund.
We anticipate negotiations between the Senate, the House, and the
Administration to consider shifting any or all of the three listed components
of the teachers’ retirement system to the Education Fund. (Note: “Accrued liability” is the amount of
the FY ’10 obligation that is the result of the State having not fully funded
teachers’ retirement at actuarially-required amounts in past years.)
House- and
Senate-Approved Appropriations Bill and Tax Bill: Education Provisions
Comparison
House: H.441 (appropriations bill) and H.442 (tax bill).
Senate: H.441 (strike-all, combined bill).
Glossary: ARRA: The
American Recovery and Reinvestment Act (i.e., the federal stimulus package);
EF: Education Fund; SFSF: State Fiscal Stabilization Fund, part of the ARRA.
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Subject
|
House
|
Senate
|
|
Education tax
rates
|
85¢ for
homesteads, $1.34 for non-homestead (this is the same rate that was
recommended by the Tax Commissioner last winter and is a 2¢ reduction from
fiscal year 2009 rates).
|
|
State Fiscal
Stabilization Funds (part of the ARRA)
|
The House
committed $38.6 million of SFSF revenue as follows: $23 million for the
General Fund transfer (see below), $6.7 million for the teachers’ retirement
system (see below), and $9 million for higher education (UVM and VSCs).
|
The Senate
committed $38.6 million of SFSF revenue to direct payments to districts as
part of their regular education payments from the state (see below). The General Fund transfer is smaller in the
Senate bill than in the House bill.
The Senate appropriated General Fund monies in place of the SFSF
revenue that the House directed towards teachers’ retirement and higher
education.
|
|
Education
payment
|
$1.136 billion;
all from the EF.
|
$1.136 billion;
$38.6 million from the SFSF, remainder from the EF.
|
|
General Fund
Transfer to EF
|
$297 million;
$23 million from the SFSF, remainder from the General Fund.
|
$259 million;
all from the General Fund.
|
|
Special
education: state aid
|
Reduce
allocation for state aid for SpEd by $5.3 million; districts expected to use
ARRA SpEd revenue to address the reduction.
|
|
State-placed
students: state aid
|
Reduce
allocation for state aid for SPS by $500,000; districts expected to use ARRA
revenue to address the reduction.
|
|
Teachers’
retirement system contributions: employer share
|
$33.5 million
General Fund contribution, $6.7 million from the SFSF, $1.2 million from
Medicare Part D reimbursement funds.
|
$40.3 million
General Fund contribution, and a $1.2 million from Medicare Part D
reimbursement funds. Senate also
authorizes a commission to study retirement contributions.
|
|
School-based
Medicaid reimbursement transfer
|
For fiscal years
2009 and 2010, notwithstanding 16 V.S.A. § 2959a(g), reimbursements to be
retained in the state’s Medicaid fund and not transferred to the EF (i.e.,
reduction in EF revenue of $10 million total over two years).
|
|
Community High
School of Vermont: state aid
|
$3 million of
the education payment (appropriated from the EF) is directed to the Community
High School of Vermont. In prior years, the General Fund appropriated funds
for this purpose.
|
|
DOE Employees
(permanent)
|
One new
permanent classified position is authorized to comply with Act 1 of 2009
(Child Sexual Abuse Prevention, formerly S.13).
|
N/A
|
|
DOE Employees
(limited service)
|
Five
limited-service positions are authorized to implement ARRA in Vermont, with
$325,000 appropriated to pay the employees from the state’s share of
school-based Medicaid reimbursements (16 V.S.A. 2959a(f).
|
|
Early education
initiative grants (EEI)
|
$1.1 million is
appropriated from the EF to families with at-risk preschoolers (the EEI
program). In prior years, the General
Fund appropriated funds for this purpose.
|
|
Technical
education equipment replacement fund
|
This special
fund (16 V.S.A. § 1564) is repealed.
State aid for technical education equipment will be awarded as part of
the total state appropriation for technical education ($12.8 million in
fiscal year 2010).
|
|
Dual enrollment
programs
|
$285,000
appropriation from the General Fund to the Vermont State Colleges.
|
|
School Quality
Standards Waiver
|
N/A
|
Authorizes
Commissioner of Education to provide waivers for SQS rules, or “any other
rule that might be authorized by Title 16” when the Commissioner can
demonstrate that the rule is “duplicative or impedes the efficient operation
of the district or SU...”
|
|
School Nutrition
Pilot Project
|
N/A
|
Senate
authorizes DOE to apply for a federal pilot project to simplify a family’s
application to the State Nutrition Assistance Program.
|
|
VISION Computer
system
|
N/A
|
The following
will allow for a cost-shift from the General Fund to the EF for the DOE’s
VISION computer system: 16 V.S.A. § 4025(b)(2) is amended to read:
(2) To cover the cost of fund auditing,
accounting and of short term borrowing to meet fund cash flow
requirements.
|
List of Items Negotiators Will Consider to Balance the Budget
When the Senate was constructing its version of the
appropriations bill earlier this month, it was already anticipated that revenue
projections released on Friday, April 24th would necessitate
additional tax increases, spending decreases, or cost-shifts to the Education
Fund and other sources. Therefore, in
the Senate-passed version of H.441, specific ideas were included in the bill as
items for the negotiators to consider.
|
The Legislative Conferees
(negotiators)
|
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Sen. Susan Bartlett (D) Lamoille
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Rep. Martha Heath (D) Westford
|
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Sen. Richard Sears (D) Bennington
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Rep. Mark Larson (D) Burlington
|
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Sen. Diane Snelling (R) Chittenden
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Rep. John Morley (R) Orleans
|
The following is the list of ideas
that were included in the Senate-approved version of H.441. Note that items #1 and #2 both require cost-shifts
to the Education Fund.
Sec.
E.1104 APRIL 24, 2009 REVENUE REVISION
(a) The senate recognizes
this fiscal year 2010 budget proposal is being developed and approved just
prior to the April 24, 2009 official revenue forecast revision. It is extremely
likely that this revision will result in a general fund and transportation fund
revenue downgrade for fiscal years 2009 and 2010.
(b) To the extent that a
general fund downgrade does result, the budget conference committee is directed
to look to the following among options to address the general fund shortfall:
(1)
Potential reduction in the general fund transfer to the education fund not to
exceed the administration’s $23,000,000 cost shift.
(2)
Potential K-12 expense reallocations to the education fund and a limited
version of the administration’s proposed cost shift of the teachers’ retirement
obligation to the education fund, including a potential transfer of current
liabilities and current retiree or new employee health care obligations, and
limitations to the base education payment.
(3) Further reductions to
health care provider payments, including Medicaid reimbursement for cross-over
claims.
(4) Possible Medicaid or
Medicaid waiver program benefit changes or elimination of any eligibility
expansions to Catamount health assistance.
(5) To the extent that no
agreement is reached on state employee reductions in accordance with the
legislative intent under section E.1103 of this act, further position
reductions.
(6) Addition of agency of
natural resources’ costs to the pilot special
fund.
(7) Elimination of tax
expenditures.
(8) Reductions of other
state programmatic support.
(c) To the extent that a
transportation fund downgrade does result, the
transportation conference
committee is directed to consider the following principles in addressing the
transportation fund shortfall.
Expenditure reductions:
(1) Shall not disproportionately
impact town highway aid.
(2) Shall preserve
Vermont’s ability to maximize the draw down of federal funds.
(3) Shall be consistent
with the legislature priority setting and transportation planning process.
End