The 800 Pound Gorilla

by Art Woolf

Our sources tell us that Governor Douglas' State of the State address today (Thursday) will have a heavy emphasis on controlling education costs.  Whatever the governor proposes, a renewed focus on the cost of education, rather than merely its financing, is long overdue.

Education, that is K-12 education, absorbs half of all the taxes that are raised by the state and local Vermont governments.  Hugh Kemper has dug into the details of the $1.5 billion, about $15,000 per student, that Vermont spends each year. 

I've been singing the same tune for a long time.  Nearly two decades ago, in the June, 1991 issue of The Vermont Economy Newsletter, we wrote

Vermont spent...23% above the national average spending per pupil...[and] ranked 8th in the nation...

We identified the cause of the high spending as Vermont having

the third lowest [student to teacher ratio] in the nation.

And we concluded the story

...the debate and discussion over [Vermont's overall level of] taxes should focus on the cost of education.  

What we did not say is something that has become more evident in this painful recession. Vermont's high cost of education is now affecting every other function of state government by being first in line at the tax revenue counter.  The public education sector has essentially been held harmless during the latest rounds of budget cuts, staff layoffs, and salary freezes or cuts. 

The non-education part of Vermont's government is not overly large by the standards of the fifty states.  But the cuts the other functions of government have had to absorb have impacted their ability to provide services to Vermonters.  There is a limit on how much savings you can squeeze out of government through efficiency and eliminating waste.  You have to, as Willie Sutton said, go where the money is. 

It's high time serious attention was paid to the 800 pound gorilla, part of which is sitting in every town in Vermont, as well as in Montpelier.

Where to start?  First, eliminate income sensitivity at least for any family earning over the state median income.  I'd prefer something below the median to make sure that a majority of Vermont families have some skin in the game.  Second, make sure that towns' education spending includes all the costs of education, which means including the town's share of teacher retirement costs.  

Third, have the state's general fund contribution to the education fund absorb some of the cuts that other functions have absorbed.  That will not, contrary to what many are saying, simply mean property taxes will go up.  Voters will be much more cost conscious if they have to vote on higher costs and are more likely to tell their local school boards to sharpen their budgetary pencils.

Comments

[David]

Hi Art,

Right on about income sensitivity. Maybe they could instead offer a modest homestead exemption of say $15K.

I have several other ideas to add.

In calculating per pupil spending, include all spending ie. federal and state categorical grants etc, not just what the state says is "local education spending". Burlington has higher actual spending per pupil than Stowe, yet its property tax rate is lower. This makes no sense.

Get rid of equalized pupils. This is a travesty. Equalized pupils were a way to tilt prior funding formulas due to prior "inequities". Act 60/68 changed all that, yet they kept equalized pupils. It makes no sense at all.

Consolidate supervisory districts. Make each county one supervisory district.

I am sure others can add more.

David Jaqua

[G. Cross]

David, there is a reality you seem to be missing. There is no comparison between the student population in Stowe and the one in Burlington. It is this fact that requires some type of "equalized" pupil count. We know a couple of things about education performance. First students from higher level socio-economic families tend to perform at a higher level than those who are not. Researchers suggest this is the result of more and better opportunites of all types. Second, the stronger the educational background of the parents the better the performance of the student. Thus there is a need for additional resources to ovecome these two knowns in some districts.

Art, I agree that we need to be looking where the money is. Willie Sutton was not stupid! I would urge you and others to look carefully at the following school districts: Chittenden South, Chittenden Central, Essex Town, South Burlington and Addison Central. Where do these districts spend their money and how does that compare to all other districts? How does their set of course offerings and variety of programs match with other districts? How do their salaries and benefits match with others? And so on.

Simply looking at statewide numbers and comparing them to other states fails to get below the surface. To find savings on the expenditure side we need to first understand how the big spenders spend. Then we have to decide how to change those habits. The devil is always in the details.

[Jack McMullen]

Excellent piece, Art.

One further thought on something that hasn't been emphasized in anything I've read recently on education costs (though you highlighted it back in 1991): student to teacher ratio -- and student to total staff ratio.

According to the Kemper analysis, student to teacher ratio in 2008 was 11.1 and student to total staff ratio was only 6.8 -- numbers far below the national average and the product of increasing headcount over the past decade while sudent enrollment was plunging. Clearly indefensible in any rational world.

Moving the student to teacher ratio up to, say, 15 to 1 would save tens of millions of dollars while having little effect on quality of the classroom experience.

Since the state now controls the lion's share of education spending, the state could mandate that any school district sustaining a ratio below 15 would have to pay for the extra staff out of local funds.

And, since extra staff hires are often tied to teacher headcount, reducing the number of teachers could result is lower staff numbers as well.

To my mind, this is the best way to get at the profligacy inherent in such low student to teacher and student to staff ratios.

Sincerely,

Jack McMullen

[Retta Dunlap]

Art - good ideas that could be built upon with more indepth study of the differences between some of the supervisory unions etc. There are some public schools who are doing some interesting things with low income children and succeeding at it. So why are not the rest of Vermont schools not copying this? Why are they so intent on staying stuck in the mud?

What is the history behind why the teacher retirement system was not included on the property tax in the first place? It is part of the cost of education. And I hate to say it but it belongs there....maybe this crisis would have hit sooner when it was not so big.

[Retta Dunlap]

George said, "First students from higher level socio-economic families tend to perform at a higher level than those who are not. Researchers suggest this is the result of more and better opportunites of all types."

I couldn't agree more. ALL students need access to opportunites of all types. They need choices and the ability to make those choices. Part of the problem is that wealthy families have access to these opportunities and they use them.

We are spending more than enough on education. Why not let the kids use that money to attend a school that fits THEIR needs better than limiting less well off students to only one school?

Part of the idea behind transformation (consolidation/regionalization) or what ever it gets called in the end would allow for ALL Vermont students to have more choices and not be limited by one school which may or may not fit their needs.

Having multiple schools (public and approved independents) to choose from from within a region or an education freedom district will be good for kids and good for taxpayers.

It won't and shouldn't cost more to do this and it just might provide a better way of controlling those costs and maintaining a quality education at the same time.

[GreggB]

'Thus there is a need for additional resources to ovecome these two knowns in some districts.' Seems to me VT is doing a good job stilting the smart kids. All in the name of equality of course.

[David]

George,

I categorically disagree with your premise: "Thus there is a need ...". Every student deserves the same opportunities (resources) from our government. Every student should be considered equally according to Brigham.

You seem like an educated type of guy. I am sure you are familiar with Vonnegut's Welcome to the Monkey House - Harrison Bergeron.

Below is a synopsis - not mine.

David Jaqua

+++

In the year 2081, everyone is equal in society, before the law, in mental and physical attributes. The US government achieved this by "handicapping" devices that are worn by all citizens. These devices include weights to make everyone the same speed and strength and for those who are above-average in intelligence, radio transmitters that emit distracting noises every several seconds must be worn.

[Wendy Wilton]

The income senstivity is the dirty little secret of Act 60 and the Educaton Fund, and the fastest growing expense in the Ed Fund. Through this mechanism wealthy people who can demonstrate low incomes pay very little property tax. Thus the burden alls on the rest of us who do not fit the criteria of having a high value home and low income. If the policy were changed it could result in a $20 to $30 million savings in the Ed Fund. Pair that with the estimated $130 million in savings from boosting the student teacher ratio to 15:1 and this will result in 15% savings in the Ed Fund. These changes would provide an opportunity to pay for the teacher's retirement in the Ed Fund and reducing the transfer from the state's General Fund--which needs relief.
While this would seem to make sense, the Education Lobby will not stand for it. Only Vermonters putting pressure on their representatives to make the changes wil change this. The fact that so many people are income sensitized to some degree puts additional pressure on the status quo, including many legislators who benefit themselves from the sensitivity formula.

[T. Shea]

David,

Thanks for the quote from that obvious right wing hate monger. Didn't he work for the Reagan administration?

What? Kurt Vonnegut?

Cue Emily Litella.

[G. Cross]

I suspect there will be significant change, as there should be, in the income sensitivity piece of Act 68. Not sure what is going on around the state, but the news outlets in the Chittenden County area have begun to carry many articles about no-growth school budgets. Over the years the voters have typically figured out how to implement "corrections." Of course, that natural process is slower than some would like.

[Vermont Woodchuck]

With the number of people leaving the state, the Progs are now having to pay their fair share.

The circle truly is never unbroken.

[Chris Campion]

The reason the gorilla is angry is that, essentially, there's not enough money to go around to fund the things the state wants to fund, regardless of what levels of funding any one person might define as "appropriate". The reason the gorilla gets into the fight is because we're allocating resources in the form of dollars, and there is not enough to fill the demand.

The answer is less about re-allocating dollars between and within state budget lines (which seems to suggest trickery or manipulation, if one were cynical), and more about growing tax revenues, which can only come from increased economic growth. The state's long-term problem has been, and continues to be, a shrinking economy - and with that permanent decline, the arguments over how to best manipulate a dwindling revenue pool starts to look like people fighting over life jackets on the Titanic.

Even if VT were somehow transformed, overnight, into a "businessman's paradise", in terms of tax/permitting/infrastructure issues, it would take decades to undo the impression that VT is not open for business. The 10-year job growth rate reflects this reality. We look much more like California than Texas in this respect. Without a tax base we will continue to squabble over an ever-decreasing pool of dollars, and never fix the core problems facing us.

[Vermont Woodchuck]

After the service and college, I opened my photo business in NY. The Feds wanted an EIN; the State used that and issued a sales tax number so I could collect that for them. That's all that was/is required to start and run a Sole Prop. in NY.

I sold the business, came back to Vermont, I figured to start up the photo business here. I had all the equipment.

The first thing Vermont wanted was money, lots of it for fees, taxes on my used equipment, UI and Comp and Insurance for what I don't know. I would have had no employees, I couldn't collect UI. However, I was taxed for every piddling thing that might go bump in the night.

I opened the business back up in NY where,since I had no employees I didn't pay UI, didn't pay Comp. The photos made didn't deal with people so liability wasn't necessary.

What a welcome home that was. I think the M&E tax since has been dropped. Vermont screwed itself out of sales taxes and part of income tax plus local business materials that I purchased.

Not smart thinking, but VERY Progressive!

Vermont isn't open for business; it's open for money!

[G. Cross]

"The Feds wanted an EIN; the State used that and issued a sales tax number so I could collect that for them. That's all that was/is required to start and run a Sole Prop. in NY." Gee, Chuckie, this is eactly what I have done to make a few cribbage boards and other small items from "recycled" materials here in Vermont. Maybe you got bad advice, failed to be assertive enough; or simply could not figure out the forms. I have found nothing complicated about it. Now, of course my sales would be considered minimal at best, but that is the way I want to keep them. Just mailed off my sales tax check to Montpelier so that part of my tiny contribution to the state's economy is all in place. At income tax time will have to pay a bit of that on the few dollars of profits, but hey that's okay with me. I am always willing to do my part.

[Vermont Woodchuck]

Considerably more equipment necessary than what is required to drill holes in cribbage boards.

Since the taxes were paid for this equipment once, I saw no reason to do it twice. Sort of like the SALES tax of cars being registered in Vermont that were bought else where and used. The State had to return that money; even then the state scammed as many people as it could out of that false tax.

..."hey that's okay with me. I am always willing to do my part."
I hope you like the pie; Your piece is getting larger and larger as people leave your paradise.

Socialism is a zero sum game; the state is proving that!

[G. Cross]

But, Chuckie, you have already run away, why are you so inclined to still want to convert Vermont to your model? We Vermonters will do just fine. We will have bumps in the road and muddy seasons to slog through, but we will do just fine.

[Anonymous because I'm afraid of George]

Hey, George, I know small is beautiful, but I'd like to ask you to work a little harder on the cribbage business. Specifically, I'd like to see you employ a few people, I mean the economy needs it, the people need it, and the state budget needs it.

We'll see how long your view of the Vermont business environment remains rosy.

I guess that's what we're really talking about, we want you to send a big whopping ton of money on the profit in your next income tax payment. Not just your currently small 'fair share'.

This state has dug a hole of unimaginable depth, and frankly even 1000 more cribbage board makers aren't going to fill it.

Could be I'm a little biased . . . that day the Vermont Tax Department informed us we owed Sales and Use Tax on the magazines we printed in Gloversville, New York and gave a way for free in Connecticut, Massachusetts, New Jersey, etc; and, in fact, owed it for the prior 7 years, with interest, was the day I decided to never do business in Vermont again.

Well, I suppose we Vermont Tiger readers of a certain ilk can take heart, if trends continue you'll soon be the biggest taxpayer in the State.

[Vermont Woodchuck]

Anonymous, I never did business in Vermont, but had the same nice letter. I sicced my legal shark on the tax dept and the money spent was worth the cost.
The state got not one damn penny!

See the post I put up on
"Vermont in top contention with California for the first ever State Economic Darwin Award."

Maybe Mr. Cross can attend the ceremony.