The education-funding challenge standing between Vermont lawmakers and adjournment just grew — by roughly $18 million, according to a legislative fiscal officer. Gov. Phil Scott has insisted that there be no property tax increase in 2019. Last week, he proposed using $40 million in one-time funds to offset a projected 5.5 cent increase in the statewide education property tax. But the legislature’s fiscal analysts are now pegging the figure at $58.2 million.
That stems partly from new information, according to Stephen Klein, the legislature's chief fiscal officer: The Agency of Education learned last week that special education costs came in about $6 million higher than expected, and general school spending is also up. That means the projected education property tax increase now stands at 6.8 cents.
In response, the administration revised its estimate to the "mid-$50 million" range late last week, according to Scott's communications director, Rebecca Kelley, who added, "We’ve been accounting for it as we finalize our recommended package for closing the gap."
Klein and fellow analysts said they based their estimate on the assumption that the education reserves will be funded at 5 percent, the maximum allowed under state law. The state dipped into these reserves last year to resolve a standoff between Scott and the legislature over education spending.
Klein said his understanding is that the administration based its estimate on 3.5 percent — the legal minimum. That accounts for a $9.5 million difference between the two estimates, he said.
But Kelley said the administration's estimate has always been based on funding the reserves at 5 percent. She provided multiple budget documents Wednesday night in which the administration makes that assumption.
In an April 20 letter, State Treasurer Beth Pearce urged legislative leaders to replenish the state’s reserves to the legal limit — and warned that failing to do so could hurt Vermont’s credit rating.
“I believe failure to fully fund the reserves would be the most immediate ‘red flag,’ signaling financial distress as rating agencies consistently list this as one of their top criteria,” she wrote.
She expressed particular concern about the education reserves, quoting a report from Fitch Ratings that seemed to assume Scott would restore reserves to 5 percent. The August 2017 report notes that Vermont’s education reserves were expected to drop to 3.6 percent, but states that “the governor also intends to recommend in his fiscal 2019 executive budget that the education fund budget stabilization reserve be restored to its 5 percent statutory maximum.”