By JOHN FLOWERS
MONTPELIER — State and local lawmakers had some harsh words for Gov. James Douglas’s priorities for 2009, an agenda that includes scrapping the state’s current education funding law, level funding public schools and revamping Vermont’s environmental permitting system.
Douglas, a Middlebury Republican, made these and other recommendations Thursday during an inaugural address with an overriding theme — pulling the state out of a financial mess that could amount to more than $40 million in red ink for the balance of this fiscal year and another $150 million fiscal year 2010.
“On factory floors, in small businesses and around kitchen tables, and even in this very hall, we share the anxiety of a nation on edge,” Douglas told a packed crowd in the House Chambers. “As moms and dads, friends and neighbors, we feel the painful effects of recession sweeping across our country and around the world.”
Douglas acknowledged Vermont, like other states, could soon be in line for substantial federal stimulus money to help jump-start the economy. But he cautioned that such an infusion of funds alone would not solve the state’s financial crisis.
“Although we are preparing for an influx of federal money, we must remember that any help is only temporary,” Douglas said. “If we do not get our fiscal house in order today, we will find ourselves on a cliff’s edge when the money runs out — forced to make more drastic decisions tomorrow.”
The governor stressed he will not support raising taxes or tapping Vermont’s “rainy day fund” that is set aside for financial emergencies.
“There is no doubt it’s raining, but no one knows just how long this storm will last,” Douglas said. “To use the rainy day funds now is to ignore the severity of this recession in hopes the danger passes.”
Douglas instead proposed that Vermont make some dramatic, systemic changes in the way it does business — largely within the field of public education financing. He said spending from the state’s education fund has increased by nearly $283 million (23 percent) since fiscal 2006. Over the same period, statewide school enrollment has dropped over 4,300 students, or 4.4 percent. He added that since 1997, student enrollment has fallen by almost 10,000 children (10 percent), but school staffs have increased by 3,500 positions (22 percent).
“Put another way, for every three students who left the rolls, schools have added one staff position,” Douglas said.
“Expansion like this is unsustainable in any season, and especially when our economy is facing such severe retrenchment.”
With that in mind, Douglas proposed that:
• Act 68 — the state’s education funding law — be scrapped in favor of a new system, “one that is fair and equitable and that respects the voice of the voters, the pocketbooks of taxpayers and the potential of our students.”
The governor did not offer specifics for an alternative system.
“I will seek your suggestions on the best minds for this high priority,” Douglas said. “I understand the magnitude of this proposal, but with so much at stake and inaction threatening the economic security of countless Vermonters, we must work together to take this important step.”
• Per-pupil spending be frozen next year while a new education funding system is being developed.
“During this bridge year, if a school wants to raise additional money above level-funding, it can ask voters to fund the increase entirely through its residential tax rate, up to a level that respects the Brigham decision,” Douglas said, referring to the Vermont Supreme Court decision that led to the drafting of Act 60, which was followed by Act 68.
He estimated the state, in taking the steps he outlines, would be able to reduce property tax rates next year by 4 cents per $100 of assessed value, for a total of $44 million.
Douglas acknowledged his education financing suggestions will probably received a harsh reception from school budget planners. But he said current financial times call for a sweeping change of ideas.
“I acknowledge that my plan represents a departure from usual practice — but we are in unusual times,” Douglas said. “That is why I am committed to working closely with school districts to give them the flexibility they need to consider budgets that are level-funded.”
• Vermonters earning more than $75,000 per year be barred from receiving property tax subsidies. The current limit is $90,000.
• Contributions to the teachers’ retirement system be made from the state education fund, and not the general fund, from which those contributions are currently made.
“This $40 million would leverage $97 million in state and federal Global Commitment money and reduce the need to cut critical programs for vulnerable Vermonters,” Douglas said. “I also propose linking the general fund transfer to the education fund to changes in the level of general government spending. This is a reasonable approach that respects the capacity of taxpayers.”
• Early and higher education programs receive a 20-percent increase in funding, “to address spending disparities and prepare Vermonters, young and old, for future success.”
Douglas, during a speech interrupted 10 times by applause, also proposed “finding academic and administrative efficiencies” by consolidating Vermont’s university and state college systems; asking the Agency of Human Services to more diligently track those who illegally obtain state benefits, including health care and prescription drug assistance; broadening Act 250 “so proposals are not only judged on impacts, but also on the positive economic, social, or cultural benefits that may flow from a project into a community or region”; and creating a “Vermont Economic Response Team to marshal all available public and private resources to assist companies at risk.”
Most Addison County lawmakers said they were displeased with the bulk of Douglas’s ideas, which they said were short on details and could actually result in property taxpayers assuming more of the burden for public education and other services.
“I heard a lot about what he won’t do,” said freshman Rep. Diane Lanpher, D-Vergennes.
“I felt a lot of negatives ... there was almost an attack on public education,” Lanpher said.
She was also concerned that Douglas said very little in his speech about fixing the state’s roads and bridges. Lanpher was appointed to the House Transportation Committee.
Rep. Michael Fisher, D-Lincoln, said he looks forward to hearing more details from Douglas on his proposals. But he believes the governor has had a history, during his time in office, of describing the parameters of a problem and telling the Legislature to solve it.
“I’m getting really tired of half-baked ideas,” said Fisher, vice chairman of the House Human Services Committee.
He also bristled at Douglas’s suggestion that the state may have a sizeable number of “welfare cheats.”
“We have a less than 1 percent instance of fraud,” Fisher said. “We have a very good record, yet it’s popular to say poor people are cheating the system. I think it’s not productive and it’s not where we’re going to save any money. I think it’s a way of distracting us from the main issues.”
Fisher said he was concerned Douglas did not talk about closing “giant loopholes” in the state’s capital gains law that permitted “the wealthiest Vermonters” to earn $300 million tax-free last year.
“That’s not sharing the burden,” Fisher said.
As a member of the House Ways and Means Committee, Rep. David Sharpe, D-Bristol, would be very much involved with any attempt to devise a new education funding system. It would be a tall task, and Sharpe said he was disappointed Douglas did not give lawmakers any clues as to what he might support.
“(He proposed) scrapping the system and is proposing a bridge to nowhere,” Sharpe said. “He didn’t propose what this new system was going to look like. He didn’t draw, even in broad strokes, what this education reform is going to look like. Are we talking about vouchers? Are we talking charter schools? What are we talking about?”
Sharpe maintains the state could make strides in clearing up its financial problem by adopting a single-payer, universal health care system.
“It would help education, it would help factories; nearly every businessman or school board member I talk to talks about the burden of health insurance,” Sharpe said.
Rep. Betty Nuovo, D-Middlebury, is a member of the House Natural Resources Committee, and was therefore very interested in Douglas’s remarks about revamping Act 250. But Nuovo believes Douglas could have, during the past six years, directed his agency heads to help make the law more user-friendly for businesses.
“He can’t really come up to us and say, ‘We have to do something about permits’ when it’s his job to run his agencies, and he hasn’t done it in six years,” Nuovo said.
Rep. Willem Jewett, D-Ripton, disputed Douglas’s contention that education spending has increased beyond other sectors of government. He said that according to his research, the state’s general spending has increased by an average of 6.5 percent annually between fiscal years 2003 and 2007, while the education fund has increased by an average of 5.4 percent during that same period.
“I agree with him that the system has to adjust to a lower number of students, but as we educate our children, that obligation we have can’t adjust with the same speed as we are seeing with this downturn in the economy,” Jewett said. “We can’t say to the kids, you’re only going to school four days per week during this coming year.”
Rep. Steve Maier, D-Middlebury, agreed that it may be too much to ask public schools to level fund their budgets for next year. Many school districts have already set their proposed 2009-2010 spending plans for Town Meeting Day.
“He’s talking about Draconian steps, in terms of freezing spending, ” Maier said.
He contended, as did other House and Senate Democrats, that Douglas’s proposal to freeze per pupil spending and use the education fund for the teachers’ retirement contribution would simply shift more of the burden onto local property taxpayers.
“I’m trying to square how the state can level fund education and then say, ‘Gee, I support the work of the local school boards and I support the concept of local control,’” said Rep. Will Stevens, I-Shoreham. “I can’t square that.”
Sen. Claire Ayer, D-Weybridge, said she had hoped to hear some new ideas from Douglas on the issue of education financing.
“I didn’t hear anything new,” said Ayer, Senate majority whip and vice chairwoman of the Senate Finance Committee. “What I heard was the same old story; everything is blamed on education spending.”
Sen. Harold Giard, D-Bridport, broke ranks from most of his Addison County colleague in giving high marks to Douglas for his speech. Giard, a member of the Senate Education Committee, said Douglas’s call for scrapping Act 68 and level funding schools next year could help bring about the wholesale changes he believes are needed within Vermont’s education system.
“I think it was one of his better inaugural addresses,” Giard said. “I thought his comment about building a new educational system was extremely bold and I agree with that.”
He also agreed with Douglas’s call to put the state’s (public) higher education institutions under one management system.