ADDISON COUNTY — Lawmakers huddled in the wee hours of Saturday morning and, after weeks of discussions, agreed on a measure to soften Act 46 provisions that penalized school districts — and their taxpayers — for excessive spending.
Locally, school officials in the Addison Central and Addison Northeast supervisory unions said the changes would have little impact.
However, officials believe they will bring relief in the Addison Northwest Supervisory Union, where Vergennes Union High School is being hit by declines in enrollment and in state revenue, both of which drive up per-pupil costs, and is also retiring a big deficit created by previous administrations’ failure to budget enough for special education.
School leaders throughout the state this past fall began appealing to lawmakers to soften the financial penalties of Act 46, a new law that encourages consolidation of school governance and imposes a financial penalty for schools that spend over a specific per-pupil threshold. Once they got into budgeting last fall, many school leaders argued that the expected 8 percent hike in health care premiums for Vermont schools alone would push many districts into what was originally a dollar-for-dollar tax penalty.
A majority of legislators agreed, and shortly after midnight on Saturday the House voted to reduce the penalty to 40 cents for each dollar spent above Act 46’s defined per-pupil spending guideline. They also agreed to up, by 0.9 percent, the allowable per-pupil spending increase for each district to reflect the rising costs of health care.
Lawmakers also decided to forgo imposing any per-pupil spending restrictions or penalties for fiscal year 2018, according Rep. Dave Sharpe, D-Bristol. Sharpe helped design Act 46 as chairman of the House Education Committee.
The Legislature will revisit ways of containing school costs in the upcoming months, Sharpe said, after this past weekend’s compromise between those who wanted to retain Act 46’s cost-control measures, and those who believed they were too harsh for many of the state’s schools.  
“We had to thread the needle, is the way I describe it, between those that wanted full repeal and those that felt the threshold was important to retain,” Sharpe said. “What we’ll have to do now as a part of the rest of the year is figure out how to do cost containment in a better fashion than the thresholds in Act 46.”
This past weekend’s new legislation also allows school districts to calculate the spending penalty threshold one of two ways — under assumptions lawmakers had used while writing the law, or in the manner the Agency of Education had planned to calculate, but had not communicated to the Legislature until recently.
That difference had changed the game for many school districts in the middle of budget deliberations — in Sharpe’s words, “It put a whole different set of schools in jeopardy.” Lawmakers decided it was unfair to penalize local school and taxpayers for the confusion.
Budget circumstances are stable enough in the Addison Central Supervisory Union that regardless of how lawmakers tweaked Act 46 or which threshold the Agency of Education applied, taxpayers would not see a difference.
“We are all set and are under the cap in both instances,” said ACSU Superintendent Peter Burrows (see story on Page 1A).
Addison Northeast Interim Superintendent Armando Vilaseca, who signed on this past fall during the budget process, said ANeSU boards worked hard to avoid triggering Act 46 thresholds with or without help from the Legislature.  
“I believe they had minimal impact,” Vilaseca said in an email about this past weekend’s changes.
ADDISON NORTHWEST
The story is different in Addison Northwest, and probably in other districts around Vermont that lobbied against Act 46’s dollar-for-dollar penalties over the per-pupil spending threshold.
Clearly, the new law will help ANwSU taxpayers, but it came too late for officials there to present accurate tax estimates in Town Meeting Day warnings. Those estimates are based on penalties for hundreds of thousands of dollars for excess spending in a $10 million VUHS budget, penalties that will now be reduced by more than half.
ANwSU Superintendent JoAn Canning said the challenge now becomes making sure residents know that the tax impact will not be as dramatic as the district itself is advertising.
“We’re going to have to figure, all right, how are we going to get all this information corrected in the communities?” Canning said.
Canning said ANwSU should have good tax estimates by early next week, and then will start shouting them from the rooftops as loudly as possible.
“I need some clear numbers before I talk about that publicly, and do a really good job of communicating,” she said.
Despite the hassle, the late news is not unwelcome. In creating a spending plan, the VUHS board would have had to cut $1.2 million in spending — spending that would pay for its sports teams, alternative education and choral music programs, and annual musical — to get under the threshold. But the board refused to make all those reductions after making other deep cuts this year and having already cut 11 full-time equivalencies in the past few years.
Now, the possibility of a lower tax increase if the VUHS budget passes could have a ripple effect on the Vergennes Union Elementary, Addison Central and Ferrisburgh Central school budget votes on Town Meeting Day, Canning said.
“The boards are breathing a sigh of relief from at least the catastrophic impact it could have had,” she said.  
The Legislature’s decision helps in other ways, too. Ferrisburgh Central School warned a spending plan that would have warranted a small penalty but now it won’t. The FCS board last month approved $28,000 of over-threshold spending, betting that lawmakers would at least back the 0.9-percent threshold hike, and won that gamble.
“Ferrisburgh will be in good shape,” Canning said.
Meanwhile, both the VUES and Addison Central boards plan to apply projected cash balances at the end of this fiscal year in June as revenue to avoid the Act 46 penalties. The new wrinkles could give them some wiggle room to use those fund balances for other purposes, Canning said — for example, VUES needs some roof repair.
BIG PICTURE
Sharpe acknowledged that the struggles of school districts like ANwSU helped convince lawmakers that the cost containment provisions of Act 46 were not ideal, even if they will still seek ways to control the state’s school spending.
“There was pretty widespread belief they didn’t work very well. You look at Vergennes. If they’re being punished for past sins, so to speak, of trying to pay for special education and a business office that didn’t keep books as good as they should have, should we punish them for that?” Sharpe said. “So I think there was pretty widespread belief that we shouldn’t punish school districts for spending what they have to spend in order to provide a decent education for students.”
In the meantime, Sharpe said, Montpelier’s weeks-long debate on whether to tweak, abandon or delay Act 46’s threshold penalties has drawn attention from the real value of Act 46 — promotion of school district mergers as way to better educate students and control costs.
Sharpe noted there are about a dozen unification votes scheduled for before June 30, including three that touch Addison County, one of which has already been held — Rutland Northeast Supervisory Union towns OK’d a unification plan on Jan. 19, and ANwSU and ACSU both will vote on their respective unification plans on March 1.
“In the rest of Act 46, really exciting things are happening. You see it in Addison Northwest. You see it in Addison Central. You see it in Rutland Northeast and in other areas of the state where these larger school districts are being formed, and they’re really going to be able to deliver better education to kids, and they’re going to be able to control costs better,” Sharpe said. “And that’s really exciting, and that’s really the purpose of Act 46.”
Certainly, after the Legislature finally acted this past weekend, Canning said, she and other ANwSU officials are ready to spend more time promoting the district’s March 1 vote on whether to unify its governance under one 12-member board.
“Now I hope we can focus on some of the benefits of unification, now that this is done,” she said.
Andy Kirkaldy may be reached at [email protected].