January 18 - Issue #2

Public Strategies Group Report Released; Education “Challenged”

The pervasive topic in the early days of the legislative session has been the Challenges for Change report, and an accompanying draft of legislation that has been fast-tracked by legislative leadership. Challenges is the result of a joint effort by the Legislature and the executive branch to examine how Vermont state government can continue to effectively provide services to Vermonters with diminished state tax revenue. The report is being received very seriously, as key policymakers have repeatedly stated that, to balance the budget, state government must reduce its expenditures by approximately $150 million for fiscal year 2011, and $100 million more for 2012. Although raising new revenues would also offset the deficit, at this time it appears there is more political will to reduce spending.

The Public Strategies Group, headquartered in St. Paul, Minnesota, was retained by the state to assist the legislative and executive branches in developing a budget reduction strategy. The Challenges report reflects PSG’s methodology for achieving savings. Simply put, state policymakers announce necessary budget reductions for each state agency or function, and also decide on desired outcomes for each given agency. Then executive branch managers are expected to achieve these outcomes with their reduced resources. Nonessential functions not supported by the desired outcomes are to be diminished or eliminated, and managers are expected to achieve the desired outcomes with a high standard of efficiency.

Naturally, the “redesign” process outlined in Challenges is worrying some affected parties and public officials. Asking policymakers to identify key priorities for state agencies, presumably leaving large swaths of prior priorities by the wayside, is a challenging task. Some legislators are also concerned about the expected timeline: these outcomes are to be identified by committees in the next two weeks. The governor and legislative leadership have declared that this process should result in $38 million in state general fund savings for fiscal year 2011.

Challenges for Change in Public Education

Because public education is a state-local partnership and not a solely state function, it may be the most complicated public activity with which to apply the principles of Challenges. Pages 29 through 32 of the report outline the expectations for education. Regular education’s “challenge” is to reduce “administrative” savings by 5 percent in fiscal year 2011 and 15 percent

in 2012, while reinvesting 25 percent of the savings into “instructional activities” in the second year. Special education is challenged to improve student graduation rates while reducing expenditure by 5 percent in fiscal year 2011 and 7.5 percent in 2012. The accrued savings that result, $58 million over two years according to the report, are to be shared between reduced general fund support for education (35 percent) and reduced property taxes (65 percent).

To date, our Associations have been disappointed by the lack of specificity and thorough analysis in the Challenges report as it pertains to education. We also sympathize with the senate and house education committee members, who are being asked to distill the state’s educational priorities into a few pithy statements. The report identifies “system-wide administrative spending” in Vermont as $266.6 million annually. That figure is significantly more than double the total reported administrative spending from superintendent and principal offices. Using deductive reasoning, our Associations have identified “other support services” as a third category of spending the report categorizes as administration. “Other support services” includes school expenditure on fuel, electricity, custodians, plant maintenance, supplies, materials, and interest payments, among other non-administrative costs.

On Thursday afternoon, the two education committees jointly took testimony on the report from PSG consultant Cynthia Eisenhauer. We expected to hear detailed explanation of the education system’s redesign, but were disappointed. Eisenhauer was unable to answer two key questions posed by committee members: (1) how was the $266.6 million administrative figure arrived at and, (2) what persons affiliated with public education in Vermont did PSG consult with in developing the report? Some legislators were clearly frustrated by the responses. At this date, many school budgets have been approved by school boards and budget votes are rapidly approaching; it is unclear how the state legislature can effectively “challenge” schools in the spirit of the report in time for fiscal year 2011.

The problem of applying the Challenges for Change assumption—that a state agency can, if given flexibility and clear outcome targets, reinvent itself—to the public education system is perhaps best illustrated by the preliminary draft bill released on Wednesday. The bill presents a simple fill-in-the-blanks template for each of the governmental activities addressed in the “challenge.”

In each case, the bill begins with a section explaining the challenge. In the case of Corrections, for example, the challenge is to “…improve the recidivism rate and community safety while spending 8% less in FY11 and FY12 by not incarcerating offenders who do not need to incarcerated…” The next subsection of the corrections section is devoted to “outcomes,” and is left blank in the draft with the expectation that the appropriate legislative committees will list measurable outcomes within the next week or two. The third Corrections subsection is titled “Design and Implementation,” and it simply directs the administration to develop an implementation plan “…that meets the outcomes specified.” Finally, the draft bill directs that the Department of Corrections will have its fiscal year 2011 and 2012 appropriations reduced by a specific amount.

The draft bill’s sections on education follow this template, until the appropriation question is addressed. Here is the exact language on education appropriations used in the draft bill:

We want a mechanism that allows the ed payment (?) to be ….less than it otherwise would have been…(where? how?)…and for GF transfer to be $3.97 million(less) than it otherwise would have been and for $7.37 million to remain on the bottom line of the EF to be used to make the statewide property tax lower not sucked up in higher spending—HOW DO WE DO THIS?????”

We will continue to monitor the development of legislation resulting from the Challenges initiative, and report on developments in future Education Legislative Reports.

Governor Proposes Cost Containment, District Consolidation, More

Governor Douglas devoted approximately one-third of his 45 minute State of the State speech to the Legislature last Thursday to address public education policy. Some of his proposals were familiar from years past, and he also included new proposals designed to curb state education costs. The governor cited the state’s fiscal crisis, declining student enrollment, and increasing school staff and costs as rationales for new cost containment mechanisms.

Douglas asserts that his proposals would reduce property taxes by $33 million in total for the upcoming fiscal year. He also cites projections from the Tax Department that forecast significant increases in education property taxes over the next several years. Nevertheless, several of his proposals would shift costs onto the Education Fund and property taxes, a cost shift that the Governor has repeatedly supported in the past. The following briefly describes his education-related proposals.

· Reduce statewide education property tax rates by 2 cents from their fiscal year 2010 amounts.

· Shift the cost of state aid for school construction projects from the state General Fund to the Education Fund.

· Require that all new teachers’ contracts establish a minimum 20 percent co-pay for employee health insurance costs.

· Increase statewide student-teacher ratios from 11:1 to 13:1 over a four-year period. This would be achieved by a yet-undefined mechanism that would limit school districts authority to hire replacements for retiring teachers, such as allowing districts to replace two retirees with only one new teacher.

· Eliminate the student enrollment limited-decline provision of law over three years. This law limits the number of equalized pupils a municipality can lose in a single year to 3.5 percent. Without this provision, taxpayers in municipalities with rapidly declining school enrollment could see very sharp increases in property tax obligations.

· Eliminate the Small Schools Grants over three years. These grants provide revenue to districts with very small schools, allowing these schools to operate at a reasonable cost to residents. In FY2011, the Small Schools Grants are expected to total about $7 million statewide.

· Douglas explicitly notes that eliminating assistance to districts with rapidly declining enrollments or very small schools will result in school consolidation. He also cites a finding of the Transformation Policy Commission by endorsing the concept that fewer schools and administrative units would be good for taxpayers and students.

· Restrict the income sensitivity program (wherein eligible taxpayers pay some or all of their education property tax obligation based on household income, not property value). Douglas proposes restricting income sensitivity to the first $400,000 of homestead value. He also proposes three tiers for benefits: households with less than $60,000 in income would be unaffected; those with income between $60,000 and $75,000 and again between $75,000 and $90,000 would have reduced benefit levels.

We expect some or all of the Governor’s education proposals to be considered by legislative committees. The Governor may outline additional proposals and flesh out his concepts described above in his budget address on January 19.

Bill Introduced on Average Class Size Policies

Rep. Janet Ancel of Calais has introduced H.471, a bill that would require supervisory unions to adopt and implement a policy stating the minimum, maximum, and optimal average class sizes. The adopted policy would apply across the supervisory union but it may reflect differences for certain grade levels or school districts. Ancel served on the Education Financing and Effectiveness Committee; that committee’s report recommends an action similar to H.471. The bill was referred to the House Education Committee, and we expect the committee will consider it thoroughly.

Gubernatorial Candidates to Participate in Panel Discussion on Education

Castleton State College, St. Michael’s College, and the University of Vermont are collaborating to host a panel discussion for candidates for the 2010 gubernatorial race to present and discuss their ideas regarding education issues facing Vermonters. The panel discussion will be held on January 25^th at 7 p.m. in the Davis Center on the University of Vermont campus. At 8:30 p.m., a reception will follow the discussion at which point members of the public will have an opportunity to engage the candidates with their questions and thoughts.

Editor’s Note: There is no update on this panel discussion since the last Report. We reprinted the notice as a reminder to our readers.

New Bills Introduced

The following education-related bills have been introduced by one or more members of the Legislature since December 29^th through January 14^th. To read any bill’s full text or see its current status in the legislative process, go to http://www.leg.state.vt.us/database/status/status.cfm.

H.471 AN ACT RELATING TO SUPERVISORY UNION POLICIES REGARDING CLASS SIZE

Introduced by: Rep. Ancel of Calais

Statement of purpose: This bill proposes to require all supervisory unions to work with district school boards to develop supervisory union-wide policies regarding minimum, maximum, and optimal average class sizes.

H.505 AN ACT RELATING TO THE CALCULATION OF AVERAGE DAILY MEMBERSHIP IN REGIONAL SCHOOL CHOICE AGREEMENTS

Introduced by: Representatives Pugh, Audette, Frank and Head

Statement of purpose: This bill proposes to permit a school district that enrolls a nonresident student through a regional school choice agreement to consider the student a resident for purposes of calculating its average daily membership. The district in which the student actually resides would not include the student within its average daily membership.

H.511 AN ACT RELATING TO INCLUDING SECONDARY STUDENTS IN SENIOR YEAR ACTIVITIES AND CEREMONIES

Introduced by: Representatives McDonald, Peltz, Waite-Simpson, and Zenie

Statement of Purpose: This bill proposes to ensure that each district adopt a policy to allow a secondary student to join his or her age-appropriate peers in all senior year activities and ceremonies, and receive a provisional diploma, even if the student’s individualized education plan (IEP) or 504 plan, or both, anticipate that the student will need more than four years in which to complete all graduation requirements, unless the student’s IEP or 504 team determines that participation is not in the student’s best interest. A parent who disagrees with the team’s determination may authorize participation.

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