I have begun this Legislative Update several times hoping to have final news to report, but the negotiations in Montpelier are ongoing. The crux of the dispute is how to allocate $34 million in one-time money. Here is my best effort to distill it:
The amount of money needed for education funding is not determined by the legislature; rather
each school district passes their own budgets which are then added together; that number
equals Education Funding. Simple math. The legislature sets the property tax rates needed to
raise that money, supplemented by other dedicated sources. So any “funding gap” is not due to
Montpelier overspending but rather under-collecting revenues.
Besides property taxes there are a number of revenue streams for education, including
(traditionally) a large transfer from the General Fund to the Education Fund. This year the
legislature passed a bill to simplify that complex process, which instead dedicated 100% of
sales tax revenue and 25% of Rooms and Meals taxes to the Education Fund. It also created a
small income tax surcharge on higher incomes, and reduced property taxes across the board.
The Governor vetoed that as a “new tax” even though the amount of money raised remained the
same, just from different sources.
The legislature passed a very good budget package this year which restored some of the
governor’s proposed cuts to services for the most vulnerable Vermonters, provides state college
tuition to national guard members, boosts addiction outreach and treatment, eliminates most
taxes on social security benefits, and increases school security. The budget passed in both
chambers with a combined vote of 146-14. The governor vetoed the $5.8 billion budget and has
warned of a government shutdown unless we reallocate the aforementioned $34 million.
The legislature allocated those dollars toward the teacher’s pension fund (chronically
underfunded) which would save over $100 million in additional interest by 2038. This is
responsible financial planning. The governor wants to prevent a property tax increase,
essentially borrowing that one-time money to bridge the funding gap. This is to keep a popular
To avoid the possibility of a government shutdown and prevent disruption of services, ongoing
road projects, and our credit rating, the House has approved a new budget with that $34 million
taken out and placed into a separate fund. We can then fight about that small amount without
risking a shutdown. The governor has indicated that he will veto this budget as well, because
removing that money also removes his negotiating leverage, according to his spokesperson.
The essential problem with ongoing negotiations is that the governor can’t compromise because
he has locked himself into an “all or nothing” position. So all movement toward resolution has
been on the part of the legislature. Part of the reason we have this gap is that last year, after the
budget veto, the gap was filled with one-time money (an action I opposed). To insist on fixing the
problem with the same wrong solution doesn’t make sense.
The governor has proposed various education reforms which could save money in the future,
but it would be irresponsible to spend speculative money now.
This view is reinforced in this commentary from John McClaughry of the Ethan Allen Institute:
What are your thoughts? Contact me.