________________________________________  THE VERMONT EDUCATION REPORT May 17, 2004 Vol. 4, No. 21 ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯  Covering education news in Vermont and beyond... Informative, provocative, unique... Published by Vermonters for Better Education  VBE is a nonprofit, nonpartisan organization whose mission is to enlist parents and the public at large in achieving quality educational opportunities for all the children of Vermont by monitoring the state of education in Vermont; promoting the value of educational freedoms for all parents; and giving parents the evaluative tools with which to identify excellence. Libby Sternberg, executive director: VTBetterEd@aol.com NEWS & ANALYSIS... Act 68: BAD NEWS, GOOD NEWS, AND MORE BAD NEWS By Dick Heaps Reprinted with permission from THE VERMONT ECONOMY NEWSLETTER, May 2004 Vermont's latest version of its education financing law, called Act 68, is poised to go into effect on July 1, 2004. Most school budgets easily passed this spring largely because of the promised drop in property tax rates and tax bills financed by the one-cent increase in Vermont's sales tax. But what is the near term outlook for Act 68? Will property tax bills for schools resume increasing as before or has something fundamental changed? We believe the future offers some bad news, some good news, and some more bad news. FUTURE ACT 68 TAX BILLS - SOME BAD NEWS Act 68 raises school funds largely through statewide property taxes, now levied on a split grand list of homesteads and non-residential property. The legislated tax rates are $1.10 on homesteads (adjusted upward proportionately for spending above $6,800 per pupil) and $1.59 on non-residential property. The rates are essentially fixed (with one exception discussed below). If property values increase, the state gets more money. That's the bad news for taxpayers. In recent years home values have been appreciating at very high rates. Based on Department of Taxes reports, we show the average sales price of residential properties with less than six acres below: HOUSING PRICES IN VERMONT YEAR      PRICE        CHANGE  1999      $118,705         xx  2000      $126,704         6.7%  2001      $137,082         8.2%  2002      $150,296         9.6%  2003      $166,711       10.9% This rapid house appreciation means that, everything else remaining the same, your tax bill is going to rise. And given that the Tax Department determines the value of properties in Vermont using a three year moving average, this steady appreciation means that property appreciation as calculated by the state is guaranteed to increase at a high rate for at least a couple of years, even if home values cease rising. SOME GOOD NEWS Property values have been rising for a while. This will cause Act 68 to raise more revenues for the coming school year (FY05) than previously anticipated. In fact, enough revenues will flow into the Education Fund from property taxes to more than fund the cost of education and fill up the rainy day fund. Act 68 spelled out what should be done if this situation continues as it did for the coming year. In 2003 the Tax Commissioner reported to the legislature the impending surplus and recommended as required by law a reduction, for the following fiscal year only, in the statewide education tax rates which will retain the projected education fund budget stabilization reserve at the five percent minimum level authorized and raise at least 34 percent of projected education spending from the tax on non residential property: This year the legislature responded to the recommendation by cutting both the homestead and non-residential tax rates by five cents to $1.05 and $1.54, respectively. In spite of that, the Joint Fiscal Office projects that the Education Fund will still end FY05 with a Rainy Day Fund filled to the top and an extra $12.0 million. Next year, with the tax rates automatically reverting to $1.10 and $1.59, the JFO projects the Education Fund will run a surplus of nearly $40 million above its requirements, primarily due to housing value appreciation. The legislature could cut tax rates by seven or eight cents. The good news is that if this happens, our tax bills will not rise automatically because of the home value appreciation. The drop in the tax rates will keep school property tax bills in line. MORE BAD NEWS But there's more bad news. Surpluses have a way of attracting crowds. We see two crowds already forming. One crowd is the backers of the Early Education Initiative that want to create a government-paid pre-school program for the state. The price tag is estimated to be about $30 million. The second crowd is the rest of the legislature itself. The state is facing a large Medicaid deficit which is going to have to be addressed soon. If the General Fund is in deficit and the Education Fund is flush, legislators could just cut the required transfers from the General Fund to the Education Fund. Would they? We need only look at the history of the Transportation Fund. Richard W. Heaps Northern Economic Consulting, Inc. 669 Cambridge Road Westford, Vermont 05494 802-879-7774 rheaps@vteconomy.com SCHOOL CHOICE: NOW MORE THAN EVER The 2004 Vermont S.O.S. (Student Opportunity Scholarship Fund) lottery drawing was on April 7. Approximately 500 families applied for 25 new School Choice scholarships for the 2004-05 school year. Each year the number of applications greatly exceeds the number of scholarships. The Vermont S.O.S. is a privately funded school scholarship program for Vermont elementary-school aged children. Families eligible for the Federal free and reduced lunch program are also eligible for these scholarships which are for 50 percent of school tuition, up to $2,000 and, once awarded, are continued for three years.  *   *   * ELSEWHERE  FROM THE EDUCATION INTELLIGENCE AGENCY "EIA COMMUNIQUE" On the Web at: http://www.www.eiaonline.com POCKETBOOK CONCERNS DOMINATE STATE UNION ASSEMBLIES Most of NEA's state affiliates hold their representative assemblies in the spring, and their activities often provide a glimpse of what to expect at the NEA convention each July. This year, the major external issue will continue to be the federal No Child Left Behind Act, and the major internal issue is certainly money. The question is whether the union will directly address the latter in an open public forum like the NEA convention. In past years, delegates have chosen sides on issues such as merger, performance pay, and social policies. But it has been a very long time since NEA has had to confront such widespread financial hurdles. Without having seen it happen before, EIA doesn't know how - or if - NEA delegates will discuss such sensitive matters. It is even possible that most delegates are unaware of just how financially interdependent their state affiliates are on NEA and each other. For example, NEA pays the salaries of 23 state executive directors. These are mostly states in the bottom half of the membership rankings, and some of them would have difficulty paying the compensation out of their own dues. Here are the figures for 2002-03: Alaska - Tom Harvey, $111,252 Colorado - Philip Moeckli, $130,079 Connecticut - John Yrchik, $145,345 Delaware - Howard Weinberg, $121,065 Federal - H.T. Nguyen, $131,176 Hawaii - Joan Husted, $100,499 Idaho - James Shackelford, $104,338 Minnesota - Larry Wicks, $128,548 Mississippi - Frank Yates, $92,762 Missouri - Peggy Cochran, $127,279 Montana - David Smith, $98,027 New Hampshire - Edward Shumaker, $81,500, and Dennis Murphy, $51,738 New Mexico - Kay Brilliant, $125,354 North Carolina - Colleen Borst, $105,737 North Dakota - Joseph Westby, $92,501 Oklahoma - David Duvall, $95,377 Oregon - Joann Waller, $136,142 Rhode Island -- Robert Walsh, $118,276 South Carolina - Richard Miller, $128,607 South Dakota - Lona Lewis, $121,973 Texas - E.C. Walker, $128,358 Vermont - Joel Cook, $114,519 Virginia - Jerry Caruthers, $121,832 Additionally, NEA financially supports special organizing projects in the states, and provides grants for state political and media programs through its ballot initiative/legislative crisis/PR fund, which affiliates have been draining steadily this year. The timely transmittal of national dues makes this and other aspects of NEA's affiliation system possible. So much so, that deadlines for the transmission of national dues are established in the union's bylaws. At least 40 percent of NEA dues must be sent to national headquarters by each March 15, and at least 70 percent by June 1, with the remainder due before the start of the next fiscal year on September 1. Recently NEA has allowed some state affiliates to retain national dues past these deadlines for temporary relief to financial difficulties. In the 2002-03 fiscal year, NEA allowed the Florida Education Association ($406,925), the Washington Education Association ($1.1 million) and the Michigan Education Association ($8.95 million) to hold onto national dues past deadline. Additionally, NEA had provided the Texas State Teachers Association (TSTA) with a $3 million loan, which TSTA repaid in full last year with money it received from a bank loan. TSTA did so because it got a better interest rate from the bank than it did from NEA. Finally, NEA made a $250,000 loan to the struggling Mississippi Association of Educators in 2001-02, which still needs to make $210,547 in payments. Large, strong NEA affiliates in collective bargaining states have long been subsidizing operations in small, weak NEA affiliates in right-to-work states. But now, NEA's "haves" are running into money woes, and the number of NEA "have nots" is growing. There have been various responses, but most of them have been below the radar. The South Dakota Education Association (SDEA) had NEA finance experts evaluate their budget and then acted on their recommendations. "We have implemented sometimes harsh decisions, but needed ones," reported SDEA President Donna DeKraai. The Delaware State Education Association went to a two-year budget cycle. The New Jersey Education Association brought in actuaries to address delegates before they approved a transfer of funds to cover staff pension shortfalls. And the Michigan Education Association approved a dues hike of $13.40, followed by a revolutionary plan to base dues on a percentage of each individual member's salary, as opposed to a flat rate, beginning in 2005-06. This means that teachers and support employees at the top of the scale and in high-salary districts will pay more dues than new teachers or lower-paid workers. More dramatically, each year delegates to the union's spring representative assembly will set the dues percentage after they "establish the amount of revenue necessary to fund the annual MEA budget." These are all unusual events, dictated by generally unhappy circumstances for NEA. But the convention is traditionally the time to show the organization's positive face. Will sobering news and discussions intrude on the happy atmosphere? We'll see. ALMOST HALF OF NEA EMPLOYEES MAKE SIX FIGURES NEA may have had to institute some last-minute budget cuts this year, but if the organization's latest financial disclosure report is any indication, no one is starving at NEA headquarters. The national union's $59.4 million payroll for the school year 2002-03 included salary for some 565 regular employees plus payments to about 170 others who were either part-time or temporary employees, or who either retired, were let go, or moved on during that year. Of the regular employees, 260 received salaries of $100,000 or more. That figure is for salaries alone; it does not include other taxable allowances, benefits or expenses. Nor does it include payments to NEA's elected officers or state affiliate executive directors (see above). The money list was led by NEA Executive Director John Wilson, who made $244,423 last year. And though he retired in November 2000, Wilson's predecessor, Don Cameron, still received $101,466 in deferred salary from NEA last year.  *   *   * "AMERICA LEARNS" GETS A NAME CHANGE On March 29, EIA reported on NEA's establishment of a new 501(c)(4) group called "America Learns." Last week, Education Week revealed the organization will now be called "Communities for Quality Education." No reason for the change was given, but EIA suspects these folks might have had something to say about it (http://www.americalearns.net/). NEA has asked its state affiliates to contribute $1 per member to the organization. Some have complied, others have sent lesser amounts, but so far the Delaware State Education Association is unique in that it raised its dues by $1 specifically to donate to Communities for Quality Education. The increase was not without opposition at the union's representative assembly, but delegates succumbed to the wishes of the union's executive board, who stated the donation "is necessary since the so-called No Child Left Behind Act does threaten what we care most about - a strong public education system for every child."  *   *   * QUOTE OF THE WEEK "I support the teachers, but I don't support what the teachers' union is doing. It is highlighting how little they have to do under the contract." - Susan Tsantes, a middle school parent in Framingham, Massachusetts, commenting on the Framingham Teachers Association's work-to-rule job action during contract negotiations. For uttering the above remark to a reporter, Ms. Tsantes received irate calls and e-mails, and saw her quote copied and distributed in the school her children attend. The name of her employer, a realtor, was added in the margin, and Ms. Tsantes' supervisor received a call from a Framingham teacher declaring that "no Framingham teacher will ever buy a house listed by your company, ever." Asked whether this last reaction went over the line, a union official replied, "That's a hard question to answer." (April 29 and May 6 Metrowest Daily News) The Education Intelligence Agency conducts public education research, analysis and investigations. Director: Mike Antonucci. PO Box 580007, Elk Grove, CA 95758. Ph: 916-422-4373. Fax: 916-392-1482. E-Mail: EducationIntel@aol.com *   *   * SCHOOL CHOICE ADS COMING! Thanks to those who've sent in their ideas for school choice radio scripts. We'll be printing samples in the near future! Those who want to send in their ideas still have time. Email them to: VTBetterEd@aol.com.  *   *   * The VERMONT EDUCATION REPORT is published by Vermonters for Better Education 170 Church Street, Rutland, VT 05701, 802.773.5240 Contact VTBetterEd@aol.com for more information.   Subscribe Here SubscribeRemove

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