Local News
January 18, 2016

Despite spending cap tweak, 106 school districts to be hit with tax penalty

Despite spending cap tweak, 106 school districts to be hit with tax penalty

Photo by Tiffany Danitz Pache/VTDigger

Nicole Mace, executive director of the Vermont School Boards Association, speaks to the House Education Committee on the annual growth percentage component of Act 46.

By Tiffany Danitz Pache, VTDigger.org

The House Education Committee heard disappointing news Wednesday, Jan. 6: a tweak to the spending thresholds will not level the playing field among school districts. Lawmakers hoped to accommodate an unanticipated 7.9 percent increase in health care premiums for teachers, but they were told that a small increase in the spending cap wouldn’t be enough to help schools avoid paying heavy tax penalties under Act 46.

Nicole Mace, executive director of the Vermont School Boards Association, said the allowable growth percentage (AGP) provision is flawed public policy and an “across-the-board bump of 0.9 percent to address health care premiums does not consider local factors and in some cases may inadvertently exacerbate the inequality of the allowable growth mechanism.”

That’s because there are other costs school districts can’t control that are pushing them over the threshold. Now that school boards are in the deepest throes of the budgeting process they have realized that other factors such as special education costs and student enrollment numbers are driving cost increases.

“It is like putting a pauper into jail when they owe money and expecting them to pay for it! We are going to get penalized for something that we aren’t actually responsible for–we have special education and tuition costs from people moving in and out of our town,” said Judy Clifford, a school board member at Walden School in West Danville. “We can’t pay and then you charge us a penalty for it–that is a wonderful idea,” she added sardonically.

Walden’s proposed budget will hike the tax rate by 41 percent. Before the threshold mechanism kicks in, the tax rate goes up from $1.26 per $100 to $1.52 per $100 of assessed property value. A penalty associated with the cap drives taxes up to $1.77 per $100, according to resident Michael Colby.

AGP is a two-year cost-containment mechanism that holds statewide school spending increases to 2 percent. Each school district is assigned an allowable growth rate between 0 percent and 5.5 percent based on the previous year’s equalized per-pupil spending.

When lawmakers learned that health care costs were driving up school budgets by 7.9 percent across the state, they decided to tweak the law.

The House Education Committee has been firm in its commitment to offer tax relief through the allowable growth percentage. The Senate Education Committee and the governor want to repeal or delay implementation of the AGP.

The Joint Fiscal Office says approximately 127 school districts will not meet the allowable growth percentage threshold. The penalty revenue is projected to be around $9.5 million. If the 0.9 percent increase is adopted, 106 communities would still fail to meet AGP, resulting in $7.1 million in tax increases in communities across the state.

Communities like West Danville and Norwich won’t benefit much from the tweak. Norwich residents are looking to cut about $250,000 from the budget to meet the 1.22 percent allowable growth percentage for their district set by the Agency of Education. The cost drivers include health care and contracts, but also a rise in special education costs at the elementary and middle school grades.

At the middle and high school for the Dresden district, an interstate district which includes Norwich, the total budget is up $596,455 and special ed is responsible for $344,169 of that increase. Norwich will be responsible for approximately $215,000 in special ed costs.

Add to that a small decrease in K-12 enrollment–5.6 equalized pupils–and Norwich is another $100,000 in the hole.

The town of Charlotte has had to make up for a $775,000 shortfall to meet an AGP of 1.48 percent. Declining enrollment is also a problem at Charlotte and forced the school board to cut 10 percent of the baseline budget. “Any school that has a shrinking population is going to have problems with AGP,” said Mark McDermott, chair of the school board at Charlotte Central School. “The AGP formula overly penalizes a town with declining enrollment,” McDermott stated.

Cheryl Scarzello, the business manager for the Rutland Central Supervisory Union, calls into question any spending cap with broad mandates that is based on last year’s spending and doesn’t allow for one-off expenses, such as a 7.9 percent increase in health care, previously negotiated salary raises, special education costs, a broken broiler or leaky roof, or a few more tuition students moving in.

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