Gov. Peter Shumlin had little choice in his third-term budget address last Thursday but to propose significant cuts in spending and propose some increases in the state’s revenue stream. The state is facing a $94 million shortfall in fiscal year 2016, and he did what no politician likes to do: propose cuts in spending and tax increases.
Nonetheless, he did that, as well as outline several bold initiatives that go beyond just balancing a tough budget, challenging legislators to keep an open mind on his proposals and counter with measures of their own if they didn’t like his suggestions on cuts or proposed tax increases.
Primary among those challenges is addressing the changing demographics, costs and outcomes of the state’s educational system. After a decade of talking about declining enrollment and beating around the bush on the rising cost of education, the governor put the onus of rising cost where it should be: the state’s low teacher-per-pupil ratio and the high cost of teacher salaries within the Vermont system. To reduce school costs, the governor suggested, the state must consolidate schools and reduce the number of teachers to a teacher-per-pupil level that is closer to the national average.
The facts are well known:
•  Student enrollment is down 20 percent since 1998, with some communities losing as much as 50 percent of their student population in those two decades, with a statewide average of 4.7 to 1 staff-to-student ratio.
•  Vermont has the lowest class sizes in the country with 20 percent of our elementary classrooms having between two and nine students.
•  The demographic trend points to further decline in the state’s student population for the next several years.
•  Meanwhile, property values have stagnated in many areas of the state, as have middle-class family incomes.
Noting that Vermont raises education taxes via several areas in addition to the property tax, Shumlin was clear that the answer wasn’t in shifting costs to another method of revenue, but rather reducing overall spending. “Vermonters understand that we have a spending problem and we have to fix it,” he told the Legislature. “They expect better outcomes for our students at lower costs. That should be our goal … (But) let’s not return to a pre-Act 60/68 system where the quality of our kid’s education depends upon the wealth of the community they happen to live in.”
To accomplish that goal, Shumlin set out seven proposals, ranging from educating citizens to “a moratorium on new mandates from Montpelier that add costs to districts,” to cutting contradictory incentives like the small schools grant and phantom student provision, to capital incentives for those schools trying to right-size through a merger, to a proposal to prohibit “both teacher strikes and board-imposed contracts.”
Beyond that the governor proposed an “enhanced review system” by which evaluation teams would visit schools to help them become more cost-effective as well as improve outcomes. If schools didn’t participate or continue to produce poor results, the governor suggested the state “find ways to exercise authority to close schools.”
“I know my proposals will not be welcome by everyone,” he said, “but I hope you will … review them with an open mind, realizing that even more drastic solutions may be demanded by Vermonters if we fail to act.”
That’s tough talk that touches on two sensitive issues: local control and cuts to teacher ranks. It’s a stiff challenge to the Legislature to either follow through with his proposals, or make some equally bold measures that accomplish as much.
But the governor also talked about new ideas to build a better tomorrow for students. He proposed a program in which the state would partner with businesses and Vermont Technical College to create a free Associates Degree in Engineering Technology. The program, Shumlin said, is “a four way win: Vermont Tech increases enrollment; our students get degrees; our businesses get the trained employees they need; and our young people stay in Vermont.”
It was a good start on the discussion that will hopefully spur significant change from the status quo.
On the issue of health care, the governor surprised many by proposing a 0.7 percent payroll tax to help raise $86 million a year, of which the governor wants to use $55 million to supplement Medicaid payments, which would put downward pressure on health care premiums by reducing the cost shift. It’s a well considered initiative in that it raises a significant federal match ($41.4 million in state taxes in the first six months of the fiscal year 2016 budget will raise $44.5 million in federal funding), but it’s controversial because it raises tax on income, which many say is taxed high enough. Options are available: the sugar tax is one, as are other niche taxes that don’t whack a person’s income.
But whatever revenue stream is chosen, the governor’s bold proposal is in the Legislature’s court to either stand behind it or come up with one of their own if they are to contain health care costs.
The governor’s proposal to improve water quality in Lake Champlain was bold in its directive to farmers (threatening to use the Current Use designation as a lever to demand compliance), but there is some concern that the proposals may not go far enough to fix the problems in the South Lake or several bays in the northern end of the lake. While several environmental groups supported the governor’s plan, the Legislature will have to take a close look to ensure it makes the progress demanded by the EPA, so we avoid any federal impositions that would cost the state more in the long-run.
Overall, the governor used the address effectively to set an ambitious agenda in one of the toughest budget years the state has seen in a couple of decades. Now the work begins.
— Angelo S. Lynn