McClaughry: The annual education finance end game

By John McClaughry

The Vermont General Assembly is in its final weeks of trying to assemble a school finance “reform” bill. Their product so far has become an ever-shifting grab bag of proposals that even veteran legislators must be struggling to follow from day to day.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

The longer this goes on, the more it reminds us of the memorable closing words of Gov. Phil Scott’s explanation of why he signed the gun control bill on April 11: “We choose action, over inaction. Doing something, over doing nothing.”

Admittedly, “doing nothing” about school finances for 2019 will lead to some unwelcome consequences, mainly thanks to unwise actions of the 2017 session. But “doing something” doesn’t ensure any better outcome, unless the doers start thinking creatively about the problem.

Everyone agrees that the problem is steadily rising public school spending, paid for by a mechanism that jacks up school property tax rates on the third of the residential taxpayers who don’t qualify for income sensitivity.

Finding a solution is necessitated by the fact that our K-12 school population has dropped by a thousand a year for twenty years, our pupil to staff ratio (4.8-to-1) is the lowest in the nation, and our per pupil spending ($18,066) is the fourth highest in the nation. And to top it off, dealing with these problems is made much more difficult because of the ongoing state-forced consolidation of schools under Act 46, which, alas, is not likely to produce any lasting cost savings.

The various actors in Montpelier have vastly different views of what do about the problem.

Since at least 2014 (actually, since 1997), the Democrats have vowed to shift education costs to the income tax. This year they’re offering a $59 million opening wedge, in addition to protecting the current income sensitivity option that very generously lets two-thirds of residential property taxpayers pay school taxes based on their household incomes (of up to $147,500).

The Democrats are also committed to defending the interests of the Vermont-NEA teachers union, whose (unspoken) watchword is “public monopoly, more spending, and more people paying union dues.”

The Republicans are commendably resistant to high taxes, runaway spending, and keeping the union-influenced Democrats and Progressives from snuffing out Vermont’s independent school choices. But they don’t exist in numbers sufficient to advance their goals.

Thanks mainly to Rep. Scott Beck, they have pushed for a built-in tax disincentive to spending above a proposed base spending amount of $11,916 per pupil, which is well below every district’s spending. But they have never in the past decade attempted a serious reconsideration of how children are educated – where, by whom, at whose expense.

Then there’s Gov. Scott. In January he sent the Legislature a lengthy list of suggestions for containing education spending, in the nature of “something for you folks to think about.” He left it to the legislative leadership to assemble a compatible “no new taxes” package, which they have been largely unable to do.

The governor wants to see residential school property taxes reduced by $40 million, but he will assuredly veto the $59 million — or any — income tax “surcharge” on “the rich” that the Democrats have seized upon in an attempt to reduce school property taxes, but he has no plan of his own.

A Scott veto will require an override vote. If the Democrats find the votes to override the veto, the income tax surcharge will become law. If they fail to override, there is no education finance bill at all. Unless the legislators can find $40 million in one-time funding to avoid a veto and kick the can down the road for yet another year, school residential property tax rates will increase to cover a $40 million shortfall in the education fund.

During this crucial period, Scott has been hampered by not having an experienced and respected secretary of education like Rebecca Holcombe, who resigned on March 27.

There are plenty of good ideas for improving education and containing its cost. However the governor and the legislators aren’t willing or able to broaden their thinking beyond shifting the tax incidence around and, the governor’s favorite,  imposing more centralized spending controls on the existing public school system. That’s regrettable, because our unthinking focus on feeding the increasingly expensive public school system is itself the problem.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Flickr/401kcalculator.org and John McClaughry

14 thoughts on “McClaughry: The annual education finance end game

  1. It is what it is. The point to keep in mind, however, is in NH, the more one earns, the less the relative State taxation. And the converse is also true in NH, the less one earns, the higher the relative State taxation, because there are fewer low income subsidies.

    In Vermont, on the other hand, the less one earns, because of various subsidies, from general welfare and subsidized housing to property tax prebates, the less tax one pays relative to income. It’s yet another reason Vermont is a magnet for low income people while NH is a magnet for high income people. We reap what we sow.

  2. Education statistics are typically divergent, convoluted and understated.

    For example, a recent Art Wolf article says there are 89,000 students in Vermont’s public-school system. But according to the U.S. Census Bureau, there are fewer than 88,000 children age 6 to 18 in Vermont in in the 1st place. Even if we assume all of them are full time public school students, those enrollment estimates are a stretch, especially given Vermont’s ‘announced’ 2.5% drop-out rate, which translates to more than 2000 high school students dropping out statewide annually. In 2014 the average dropout rate was reported to be 9.6% or nearly 9000 student drop outs each year. So… who knows how these numbers are being calculated and presented today?

    The cost per student, likely based on inflated enrollment figures and partial costs, is reported here as $18,066. But the NEA (the teacher’s union) reports that Vermont K-12 public school ‘expenditures’ are approximately $25,000 per student.

    And while Vermont’s high school graduation rate is approximately 91%, fewer than half of those graduates meet grade level standards, which explains why only 53% of them go on to college and, then, only 65% of those who do go to college, graduate.

    So, while Vermont taxpayers invest nearly a quarter-million dollars to provide a K-12 education to each and every one of their 89,000 children through high school, only 28,000 of them will graduate from college. And then most of those graduates leave the State because there’s no future for them here.

    Does Vermont do better than other states? Are the pots calling the kettles black?

    The problem with education is, in a word, MONOPOLY. If Vermonters could only see to busting the ever-consolidating public school monopoly, controlled by ‘special interests’, all other education problems, from cost to performance, will begin to improve.

    At this point, what do we have to lose?

    • Well taken. Could I interest you in being the state’s next Secretary of Education? The job comes with body armor.

      • Body armor isn’t the issue. It’s getting the chance to wear it. As I mentioned earlier, there’s no stopping this education juggernaut. The Vermont electorate, in general, consists of a dysfunctional and conflict-of-interest ridden majority. From politicians, appointed administrators, public employees, and the special interest lobbyists who keep them in power, to social service recipients and intimidated parents, a democratic solution is mathematically untenable. I’m putting my stock in Plan B.

  3. Totally dysfunctional VT Government:

    Gov Scott: “We choose action, over inaction. Doing something, over doing nothing.”
    Statement–Sen. Jeanette White, D-Windham, said, “I don’t know how we would address this one.”

    Tom Chase response: Really, gov instigated, gov should solve, but with these people in Montpelier, there’s no hope. They don’t have a clue what they are doing and how it all affects the populace.

    Read that 3 people are running for Gov office in Bennington county, only two can be elected. Of that I hope one has common sense and not let that Montpelier air renders them senseless as it has others.

    Link showing Montpelier corruption: Vermont Legislators Admit to Cheating the System
    https://m.sevendaysvt.com/vermont/vermont-legislators-admit-to-cheating-the-system-are-they-justified/Content?oid=2139396

    The only thing they know is to increase spending and raising taxes. Yet in NH they are lowering taxes on dividends and Interest; https://www.watchdog.org/new_hampshire/new-hampshire-senate-considers-interest-and-dividends-tax-exemptions/article_476f9076-2e16-11e8-a891-6345477d55cf.html

    I believe those elected who’s greatest feat is to look at their Legislative license plates and say “wow, that’s me”.

    Looking at that group of Legislators in Montpelier, I’d say they have a sickly overweight problem and can’t care for themselves. And they want to solve school problems which they are problem promoting. Some look dumbfounded as if they didn’t know what’s going on. VT “Leaders”.

    But they know how to tax you off your property.

  4. Why a household making 150k/year needs a property tax subsidy is beyond me. I now save over $5,000/year on my property taxes thanks to moving. That money I can now put to work for saving for my kids higher education.

    On that note recently released:

    https://www.attomdata.com/news/heat-maps/2016-property-tax-analysis/

    “Highest Effective Tax Rates in New Jersey, Illinois, Texas, New Hampshire, Vermont… States with the highest effective property tax rates were New Jersey (2.31 percent), Illinois (2.13 percent); Texas (2.06 percent); New Hampshire (2.03 percent); and Vermont (2.02 percent).”

    OKay we get NH, high property taxes but NO income taxes on earned income and no sales tax. Again Texas no income tax. But Vermont is now in bed with New Jersey and Illinois. Great company you have. Enjoy that folks.

    http://static.realtytrac.com/images/reportimages/infographic_propertytax.png

    • I have many friends in NH. It depends in what town you live for property taxes. In the area below Rt 4, Concord to Portsmouth, it’s relatively high and around Lake Winnipesaukee water front (and other lakes). However inland from the Lake, it’s very low due to the Lake property taxes.

      I lived in Alton NH many years bought in 1978, an old Colonial house, 60 wooded acres, 40×40 3 floor barn, two door garage, workshop and my taxes were $650. When I sold and returned to VT (where born) 26 years later the taxes were $2000. Alton had a huge water from on the Lake.

      North of the Big Lake, property taxes are relatively low, go to the North Country. Littleton is booming and the area is beautiful with a lot of tourism. I’ve researched it out. The north country is more drastic and beautiful than VT. Also the Flatlanders from southern states don’t congregate there, a tax benefit.

      I’ve lived in seven states and VT is the worse and getting worse(r). I know of properties in Windham county, taxes are $9000 and up.

      • Even with high property taxes, a NH household earning $150,000 a year pays $0.00 in NH income tax and $0.00 in Sales Taxes. For those of us living on the border, the difference is distinct.

        7. New Hampshire
        Taxes paid as pct. of income: 7.9%
        Income per capita: $55,954 (7th highest)
        Income tax collections per capita: $72 (9th lowest)
        Property tax collections per capita: $2,861 (2nd highest)
        General sales tax collections per capita: $0 (tied — the lowest)

        40. Vermont
        Taxes paid as pct. of income: 10.3%
        Income per capita: $49,984 (20th highest)
        Income tax collections per capita: $1,133 (19th highest)
        Property tax collections per capita: $2,339 (6th highest)
        General sales tax collections per capita: $586 (11th lowest)

        • I have grave questions about per capita income. From what I’ve seen in VT, buildings in deterioration and the towns, except for Burlington (greater amount of legislators are from). If income is relatively high, doesn’t that reflect to conditions of property, personal or towns? Income isn’t realized in rural areas (Caledonia County) as in cities like around Lake Champlain, St Albans, Rutland, Brattleboro. I’ve seen many destitute people, not from the cities, how is their income counted within the overall figures for the state.

          It’s bogus.

          • It is what it is. The point to keep in mind, however, is in NH, the more one earns, the less the relative State taxation. And the converse is also true in NH, the less one earns, the higher the relative State taxation, because there are fewer low income subsidies.

            In Vermont, on the other hand, the less one earns, because of various subsidies, from general welfare and subsidized housing to property tax prebates, the less tax one pays relative to income. It’s yet another reason Vermont is a magnet for low income people while NH is a magnet for high income people. We reap what we sow.

      • That’s part of the beauty of NH as it offers a choice when it comes to property taxes. For instance if you are young and don’t have kids you can move to a town with lower quality schools , or if you’re older and retired you can do the same. If high quality schools are important to you you can live in those town with higher taxes. Vermont doesn’t offer you that because of the state wide property tax. You stuck with high taxes pretty much anywhere you live. Yes your local taxes can fluctuate to some degree but the bulk of that bill is sent to the state that you have essentially ZERO control over.

    • Here’s a more complete overall tabled tax burden by state, 2018. No. 1 is the worse, declining to 50th. This is the tax burden by state.
      https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494/
      Summarizing:
      1) NY
      2) HI
      3) ME
      4) VT
      46) NH
      If NH is higher in a certain tax area, the overall taxes are less.. I outlined my personal observations, depending where you live in a state. Red states have lower taxes than blue states by almost 1/2.

      • I’m in a red state now and couldn’t be happier.

        I no longer have to walk around with a giant target on my back from the dems and progs looking to extract more of my hard earned dollars from me.

        This is the issue, you have to look at the value of your tax dollars and how they’re spent. Does Vermont provide you a good value for your tax dollars?

        That’s the key question and everyone will have a different answer based on their circumstances. For my family, that didn’t receive property tax subsidies and payed hefty income taxes all while paying off SIGNIFICANT student loans the answer was a clear and resounding NO. We did what any rational person/family would do. Packed our bags with our three school aged kids and moved to a state that provided a good value for our tax dollars.

        I don’t like paying taxes any more then the next person, but I do also realize that the taxes provide good and services for my family. In the case of Vermont the education was average, I had no trash pickup, I had bottle deposits that made me save my bottles and then drive in the cold of winter to get MY money back, there was little in the way of entertainment for a family that didn’t cost a small fortune, the salt/brine ate my cars within 5 years, the inspections for my car was a pain and always required I had to fix something. It just wasn’t worth it to me anymore.

        Then I sat down and looked at what I enjoyed in Vermont: Summer. All two months of it. I’m in my 40’s. So I figure I have 25 years or so of active time to enjoy the two months of the year I like. Hold on, two months out of 12 that I really enjoy. So for every 6 years I get one year of enjoyment. 25/6 is 4 years and change of nice months I enjoy in Vermont. No thanks. Now that I have moved I have 9 months out of the year that I enjoy. Or nearly 19 years of weather vs just over 4 years.

        All comes down to Value.

        Does Vermont provide a Value? If you like a nanny state constantly trying to coerce you into a direction via taxes Vermont’s for you. Otherwise pack or look elsewhere.

  5. They’ve been in Montpelier for the better part of three months screwing around with the feel good stuff while a really serious issue goes neglected until the LAST week???????????????? For shame!!!!!!!!!!!!!!!!!

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