Shumlin unconvinced on school funding changes, upbeat on single-payer health care

MIDDLEBURY — Gov. Peter Shumlin on Monday warned about the potential legal consequences of overhauling the state’s education finance system and expressed his priorities for a single-payer health care system that could be in place as soon as 2017.
Shumlin made his comments during an interview at the Addison Independent. The governor also appeared on Monday at a legislative luncheon at the Middlebury Legion (see related story on Page 1A) at which he was challenged on his support for the Addison-Rutland Natural Gas Project.
Shumlin said he is open to listening to suggestions on how to ease Vermonters’ school taxes, but those who want to repeal the current education funding law — Act 68 — must make sure that it passes constitutional muster. The law and its predecessor, Act 60, were passed in response to the Vermont Supreme Court’s 1997 Brigham v. State ruling that declared the state’s education funding system unconstitutional because property wealthy communities had a greater capacity to raise education property tax dollars than poorer communities. Act 68 equalizes school districts’ ability to pay through an income sensitivity provision.
“The difference between this debate and the last debates we’ve had about school funding formula reform is that there is no one walking around with a plan in their pocket that meets the Brigham decision that works better than (Act 68),” Shumlin said. “So I’m suspicious of calls for ‘repeal’ or ‘replace’ when there isn’t a constitutional alternative that would work better than what we have.”
He acknowledged 35 Vermont school budget proposals failed this past Town Meeting Day, including two in Addison County (Ferrisburgh Central and Vergennes Union High schools). But Shumlin noted 33 of those 35 failed budgets called for per-pupil spending hikes of 8 percent or more.
“Our challenge is we are educating 20,000 fewer students than we were a short time ago — and that trend is going to continue — with the same infrastructure that has served us for the past 150 years,” Shumlin said.
The governor added that local grand lists have been on the decline, meaning it has been more financially painful to raise education property taxes in communities than prior to the most recent recession.
“You need to have a higher tax rate now to raise the same amount of money,” he said.
And to make matters worse, according to Shumlin, rising health care premiums have been taking their toll on school budgets, which are steeped in personnel costs.
“If you live in a community that has double-digit increases (in education costs), scrutinize your school budget carefully,” he warned taxpayers. “You decide how much you spend.”
But beyond that, Shumlin acknowledged part of the answer must come from Montpelier.
“The message is loud and clear,” Shumlin said. “You’d have to be living in a cave somewhere not to get that Vermonters feel strongly that their property taxes are too high, that they are growing beyond the rate of their incomes, and they want change.”
Part of the answer, the governor believes, lies in “right-sizing” the state’s education delivery system “so that we’re actually maintaining the quality of our schools, but beginning the conversation of how do we have an infrastructure that meets the needs of fewer students and taxpayers.”
With that in mind, he believes school districts must continue to look at cost cutting — including teaching positions in cases where classroom sizes justify it.
“It doesn’t meet our educational excellence threshold to have three or four kids sitting in a classroom,” he said. “There is a size in classes that gets so small that it not only breaks the taxpayers’ backs, but more important it is a disservice to the students in the classroom. There is a critical mass.”
Shumlin believes it’s unrealistic to expect the Legislature to reform education funding this session. In the short term, he has asked lawmakers to find a way to limit the statewide property tax rate increase to 4-5 cents, as opposed to the 7 cents that has been forecasted for fiscal year 2015.
The governor acknowledged a growing concern and curiosity among Vermonters about how the state is going to pay for its impending (2017) conversion to a single-payer health insurance system. Shumlin said he is confident in the team of officials he has assembled to prepare a financing plan, which he expects to be completed this year.
Shumlin placed the cost of the single-payer system at between $1.6 billion and $2.2 billion. He blasted critics who he said continue to focus on tax hikes that the new system will demand while not acknowledging the cost of the current system that continues to become increasingly expensive.
“What we sometimes forget is, we are spending that ($1.6 billion-$2.2 billion) right now,” Shumlin said.
“My argument has been there is not enough money in Vermont to support the kind of health care increases we’ve had over the past decade,” he added. “If you talk to our providers, they say this system is not sustainable.”
Leaving the current health care financing system unchecked is not an option, according to Shumlin.
“We are right now on a trajectory to disaster,” he said. “The question is, how do we right the ship?”
Shumlin believes the answer lies in two areas.
“First, we have the Green Mountain Care Board work with our providers to move to a delivery system that gets better outcomes by spending less money than we otherwise would, because the premium-based system can’t support the level of growth that’s going on,” he said. “We also need to reform the way we pay for health care.”
The governor is particularly adamant about purging “stranded costs” out of the current health care system. Stranded costs represent the medical expenses that the uninsured and under-insured cannot pay and are therefore passed along to people with good health care coverage, thereby boosting their premiums. Shumlin also believes that health care premiums should better reflect a consumer’s ability to pay.
“This is hard stuff,” Shumlin said in reaction to questions of why a single-payer financing plan has not yet been unveiled. “We want a plan that works. We have a great team working on it. Getting this right really matters.”
The governor said he is looking forward to seeing health care in Vermont transition from a “quantity-based reimbursement system to a quality-based reimbursement system. We want to move from rewarding treating sickness to a system that rewards treating good health. Right now, the system rewards quantity of care, and we want to move to a system that rewards quality.”
Shumlin said he is generally pleased with the manner in which the 2014 legislative session is unfolding.
“I think the Legislature has done a great job trying to balance the budget without raising broad-based taxes, which I feel strongly about, and passing the critical legislation that we need to grow jobs and economic opportunity,” he said. “I think they’re on track.”
He reiterated his hope that the Legislature agree to his proposal that the minimum wage bill be increased to $10.10 by 2017.
Reporter John Flowers is at [email protected].

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