Vermont's next governor?

At Statehouse, the doors are wide open

By Jesse Roman

Published:

Thursday, February 11, 2010 12:11 PM EST

Many Americans have soured on politics, viewing bickering and dogmatic politicians as more eager to win a political battle than to offer a useful idea.

But things are different in Vermont, whose Statehouse has no metal detectors, has an open door policy, and provides more access to lawmakers than any general assembly in the nation.

Vermont politics is less a knock-down, drag-out brawl than a careful dance. With great energy, constituents, lobbyists, policy experts and elected officials dart through the capitol’s halls, in and out of little conference rooms, exchanging ideas and handshakes.

As chairwoman of the Senate Appropriations Committee for the last 10 years, and the lone senator from Lamoille County for 18, Susan Bartlett is completely in tune with the hum inside the Vermont Statehouse. She’s at ease here: This is home.

Bartlett is an insider’s insider and she wears that hat with pride. Strolling through the halls, she rarely makes it more than a few feet before a colleague pulls her aside for a quick exchange about the budget or health care, or to say a friendly hello.

Her jovial nature makes her approachable, but she also commands respect, from the governor on down. After 18 years, she knows her place in the Senate well, and seems to relish it.

This is Bartlett’s last year in the Senate. She’s embarking on an all-or-nothing run at governor this year. When the next session begins in 2011, she’ll either be Gov. Jim Douglas’ successor, or a spectator.

“It was not easy to give this up. I am very powerful” in the Senate, she says candidly, sitting in the capitol’s cafeteria sipping a diet Coke. “Power comes from 18 years of information. What I have in here,” she says, pointing to her head, “is where the power is.”

As chair of appropriations, she has unique power over the state’s pursestrings, and has a well of knowledge about state budgeting that may be unequaled.

Going back almost two decades, she knows when this or that bill was passed, why it was passed, how it works, the context for it. All of this comes with being in the trenches and watching it happen; it comes from experience.

But she’s ready for the next chapter.

“Eighteen years in the Senate is plenty of time. There are plenty of smart people who can do this job when I get out of the way,” she said. “I’m convinced everyone here is replaceable, from the top of the heap to the bottom of the heap.”

Early argument

Bartlett’s days in the Senate are not slow. Governing is faced-paced, full-time job.

Last Thursday started at 8 a.m. sharp in her appropriations committee room, at the southeast corner of the building. With her was a who’s who of health care in Vermont: Marie Beatrice Grause, CEO of the Vermont Association of Hospitals and Health Systems; Craig Jones, director of Vermont’s Blueprint for Health; Jim Hester, director of the Legislature’s health care reform commission; legislators on health committees; leaders of Blue Cross/Blue Shield, Cigna, Fletcher Allen Health Care, and the Banking Insurance, Securities and Health Care Administration; plus several consultants and other major players.

A vigorous discussion about utilization, practice facilitators, hospital costs, doctor pay structure, unsustainable growth and much more was raging well before the 9-to-5ers had had their first cup of coffee.

Bartlett and others were pushing the hospitals on ways they can control costs and cut budgets. Grause and other hospital officials told lawmakers it is near-impossible to cut as much as they’re hoping. The hospitals “are working to build consensus on what we can deal with,” said one hospital administrator. Hospitals “have been working hard to restrain growth and will continue to do that.”

Bartlett sees this kind of thing every day. Finally, fed up with the resistance, she asked, “Do we want to get run over by a glacier or do we change?”

As the hourlong meeting concluded, people rose, splintered into groups and continued the conversation for another 15 minutes in the hallway, near the door, or in the corners of the room.

“Can you pull together a group of people who can come here and talk to me?” Bartlett asks one high-ranking administrator, talking about Federally Qualified Health Centers. “I need to know what we can do, how we can do it and what do we see as the plan. If some of the things we’re talking about can work, we’ll write them into the budget.”

Making something happen

It’s remarkable how much of the work of running the state is hammered out in small informal gatherings, in the hallways or the cafeteria, standing or sitting in splintered small clusters.

During lunch, later in the day, Jones, Hester, Bartlett and several others met informally to continue the health care discussion. What seemed a frustrating morning turned productive quickly.

A consultant pointed out a fundamental difference between the state’s outlook and hospitals: Hospitals look at costs and adjust revenues (rates) accordingly, while the state’s costs are driven by how much revenue it can collect. Get the hospitals thinking more like the state, and perhaps the logjam can be broken.

All the state needs is a carrot to dangle in front of the hospitals to make them more willing to play ball. Lessen administrative duties for everyone if they cooperate? That might work.

“Once somebody has that kind of ‘aha’ moment, that’s when you start to make real progress,” Bartlett said in an interview. “What happened during lunch is the health-care bill started to come together. Sometimes that’s what happens when you get a small group of people together.”

Votes in hand

Twenty-minutes after the health care meeting, Neale Lunderville, the secretary of administration and Gov. Jim Douglas’s right-hand man, comes sauntering into Bartlett’s now-empty committee room.

He’s just arriving, with his coat still on and a bag flung over his shoulder.

Bartlett and Lunderville casually and comfortably exchange pleasantries and chitchat about primaries and personal items, then something catches Lunderville’s eye.

“Oh, I haven’t seen this,” he says, picking up the Blueprint for Health report and flipping through the pages.

“It’s a doozie,” Bartlett replies, flipping through e-mail on her phone.

“In a good way, or a bad way?”

“Oh, it’s good,” Bartlett says.

“I’m going to have to get a copy of that,” Lunderville says.

Then, realizing appropriations is slated to vote on the Challenge for Change that afternoon — the sweeping bill aimed at saving $38 million by restructuring several state departments — Lunderville asks if there’s going to be a problem; that is, does she have the votes?

Shaking her head, Bartlett says it’s a done deal.

“I can’t be there for the vote, but I want to catch up with you after,” Lunderville says.

Four hours later, after amending some language, appropriations unanimously passes the bill.

Finance Secretary Jim Reardon, the only administration official who sat in on the vote, stuck around to update Bartlett and her committee on the state budget. Then, his phone went off.

“The secretary of administration wants a copy of the Challenge for Change Bill,” Reardon said after hanging up. “As if I wasn’t going to bring one.”

Business challenges

“When I sit down in appropriations, I never get to do e-mail, because it’s one person popping in after another,” Bartlett said.

Around midmorning a white-haired man in a suit came bouncing into the room. It’s Tim Meehan, a principal at the lobbying firm MacLean, Meehan & Rice LLC, and a former Washington lobbyist. He represents several large corporations, including the Vermont Yankee nuclear power plant.

“It would be near impossible for us to have a face-to-face discussion like this with the Senate chair of appropriations in Washington,” Meehan said of the openness of Montpelier. In Washington, “there are layers and layers of people and staff between you and them.”

Bartlett is staff-less.

Meehan brought a client, an executive of a large international corporation with a plant in Vermont, to meet the senator.

“We love to live here, but for businesses it’s challenging,” the executive told Bartlett in her committee room. “Our competition have plants in Alabama and Mexico with direct gas lines. It is a challenge to compete against that.”

And Vermont politics don’t make it easier, he said.

“We see a bill that might have a lot of good intentions, that’s really good for kids, or something, then there’ll be one line in it that will make us say, ‘My God. That’s going to kill ours and every other business!’”

Bartlett concedes that Vermont’s energy future is vague at this point. She fears “there are some serious reliability issues” if the Vermont Yankee plant shuts down when its federal operating license expires in 2012. The plant is looking for a 20-year extension, but accidents, misstatements and radioactive tritium in the plant’s groundwater have put the request on thin ice.

But Bartlett stops short of making any assertions, predictions, or promises to the businessman.

Shortly after 10 a.m., Meehan and his client leave to see House Speaker Shap Smith of Morrisville.

Legitimate frustration

“People want to talk. There is legitimate frustration in the business community,” Bartlett said after they had left.

In the appropriations committee room, frustration is the norm — especially this year, when the committee is trying to solve a $150 million state budget deficit.

“In this room, we understand the weight of these cuts and their effect on people. We try to mitigate that, but I don’t know how we’ll do that this year. It’s really overwhelming,” Bartlett said.

Over the next couple of months, a cast of people will come to her and her committee and make passionate appeals about why their funding should be spared. Most will leave frustrated, disappointed and angry. Bartlett and her committee won’t feel good about it, either.

“Most (programs) at the beginning don’t fill in the measurables. So they come in with nice stories about how well things work, but they can’t show me the stats,” Bartlett said. “That’s our situation in appropriations. If there’s no way to substantiate with numbers and no proof whether something is effective or not, you are making arbitrary decisions. It’s really frustrating.”

That lack of information is critical and something she aims to correct if elected governor.

What will be more difficult to change are unrealistic expectations. She and her colleagues are working hard and effectively to balance those expectations with reality, she said.

“The system of the Legislature is really solid,” she said sincerely, gazing around the increasingly crowded cafeteria. “Vermonters don’t realize how lucky there are, how well this system works, or how hard people here work because they care.”

Despite outrage, tax laws benefit Stowe

Tax breaks have cut into fairness

By Jesse Roman

Published:

Thursday, February 11, 2010 12:11 PM EST

Everyone gripes about taxes. Everyone is paying too much. Nobody thinks it’s fair.

How to make the tax system more fair is a debate that will surely rage as long as taxes exist.

Is Act 60 fair? Last week, (see last blog post below) we showed that tax-rate discrepancies between Stowe and other towns have shrunk significantly since Vermont’s complicated school-funding law was adopted in 1997. But there’s a lot more to consider.

For instance, if Stowe and Morrisville pay the same tax rate, but Stowe has much higher property values, doesn’t Stowe get a raw deal?

What about the increase in tax exemption programs, such as income sensitivity and current use, which reduce taxes for some and drive up taxes for others?

Vermont Tax Commissioner Richard Westman says income sensitivity and another tax exemption — the current use program, designed to preserve open land — have helped cause property taxes statewide to skyrocket.

Vermonters earning less than $90,000 a year don’t pay school taxes based on property values; their taxes are capped at about 2 percent of their income. That gap between what they should pay and actually do pay, is what drives up taxes for those who don’t qualify for tax exemption programs.

And, when people’s school taxes are not tied directly to actual school budgets, “less people have skin in the game,” Stowe Rep. Heidi Scheuermann said in a recent interview. Why vote down an extravagant school budget if it won’t raise your taxes?

These laws and exemptions actually make the system less fair than it was even before Act 60, Westman says.

“Not only have we created inequities in one community vs. another, we’ve internally built in numerous differences for people, based on income and what kind of property they own, and those inequities have become much greater than we had before we developed the statewide property tax,” Westman said at a presentation in Stowe.

The winners and losers here are clear — those with exempt properties pay less; those making over $90,000 per year, or who don’t qualify for current use, pay much more.

Which category Stowe fits into, however, is less clear-cut than many believe. Stowe benefits from these exemptions much more than the average community.

Stowe benefits

According to the state tax department, just over 55 percent of residential property in Stowe is not taxed fully because of income sensitivity. That is well below the Lamoille County average of 69.1 percent and the state average of 66.3 percent. However, because of Stowe’s high property values, the size of the town’s income-sensitivity tax exemptions far exceeds any other town in the county, and dwarfs the state average.

Stowe taxpayers saved a total of $2.1 million in school taxes last year, an average of $3,282 for each of the 647 properties that qualified for income sensitivity.

The average tax savings per resident in Stowe is the highest in the state except for tiny Landgrove, where residents saved an average of $3,926.

In Morrisville, income sensitivity saved taxpayers a total of about $1 million, an average of just $1,055 per property.

Statewide, the average savings from income sensitivity was $1,182, about a third of what the average Stowe taxpayer saved.

Current use — the law that exempts open land from full taxation — also affects Stowe disproportionately because of its high property values. Last year, Stowe taxpayers in current use didn’t pay taxes on $59.2 million of property, saving over $1 million in taxes, including $961,000 in school taxes, according to state data.

Only Woodstock has more current-use tax exemptions than Stowe.

Current use saved Morrisville taxpayers only about half as much in taxes as Stowe.

When added together, Stowe’s roughly $3.6 million in tax exemptions far exceed any town in Lamoille County, and rank very high statewide, despite the town’s relatively low population of less than 5,000.

Stowe has more tax exemptions than Woodstock, Rutland, Barre (city and town combined), Montpelier, Bennington and Brattleboro, to name a few.

Burlington, which has a population roughly 10 times Stowe’s, has only $1.8 million more in income sensitivity and current use exemptions.

Property values

Of Stowe’s gripes with school funding, the biggest may be the way property is valued.

“I think if you took a look at the increase in property values, I bet values in Stowe have gone up faster than the rest of the county,” Westman said in an interview last week. “So Stowe is forced to pay the same rate as everyone else, but at the same time, their values have gone up faster than everyone else. You can’t just look at the rates; you have to look at the growth in communities, too.”

In a normal year, a house in Stowe is likely to increase about 12 percent in value, says Tom Vickery, the longtime town appraiser. The figure might be 8 percent or less in other towns.

Over time, that adds up.

In essence, “we’re sending more money to Montpelier because inflation is increasing faster (in Stowe) than other parts of the state,” Vickery says.

Since Act 60 was enacted in 1997, the total value of Stowe’s taxable property has grown more than 217 percent, according to state tax figures. Morristown’s grand list has grown 142 percent in that time, and the state average growth since 1997 is 120 percent.

However, rising values aren’t the only thing that expanded Stowe’s total property value. Development, including the huge Spruce Peak project at Stowe Mountain Resort, add huge value to the property-tax rolls.

Vickery says Stowe typically has 2 to 5 percent new construction growth per year, while most communities average 1 percent at best.

However, for the first time in many years, Stowe’s grand list growth was under 2 percent last year, below the county average. And property values in Stowe, for the first time in a long time, are decreasing.

Two years ago, Stowe houses were selling, on average, 20 percent above the appraised value. Now, sale prices are only 5 to 10 percent higher than the appraisal, Vickery said. So, a house assessed at $400,000 for taxes would have sold for about $476,000 in 2007, and for about $420,000 today.

However, state school-tax formulas consider the last three years’ worth of sales. Back in 2006 and 2007, when prices were high, Stowe had 40 percent more sales than in 2008, when prices dipped. So, in calculating Stowe’s property values for school taxes, the formulas are weighted heavily toward those years when prices were high.

Vickery is appealing to the state, hoping for a formula change that better reflects the actual real-estate market in Stowe.

“Everybody in the state has seen some value decrease, but not as much as Stowe,” Vickery said. “My job is to make sure Stowe is treated fairly in regard to where sales actually are.”

If the state agrees with Vickery, the school tax rate could be lowered about 2 percent this year, he said, and even more next year.

Is Act 60 fair?

School tax: Is Stowe squeezed unfairly?

By Jesse Roman

Published:

Thursday, February 4, 2010 12:10 PM EST

Stowe residents have long chided state officials and anyone else who will listen about the demerits of Act 60/68, the state’s complicated school funding mechanism.

Stowe is squeezed, they say, by the state’s unfair and overbearing school tax policies.

Tax bills have skyrocketed. According to the state tax department, Stowe’s school taxes have risen about 164 percent since 1990.

Anger and frustration over the rising rates have been building for years, and nearly bubbled over earlier this month, when the Stowe School Board revealed that large tax hikes would occur unless the school budget was drastically cut — again.

Many residents wrote letters to the editor, raised their voices — and some broke down in tears at a recent school budget meeting. Some longtime residents have left town for cheaper pastures. More threaten to leave, saying they’ll soon be priced out of town.

But is Stowe alone? Is Stowe’s burden much worse than in other towns in Vermont?

Tale of two towns

If Morristown’s school budget proposal for 2010-11 is adopted, a resident who owns a $400,000 house will pay $4,328 in school taxes.

A Stowe taxpayer with a house worth $400,000 will pay $6,448.80 — or $2,120.80 more than the Morristown taxpayer.

Why?

It didn’t used to be that way. For many years, the roles were reversed. Before the 1997 enactment of Act 60, each town had almost complete control over how its schools were funded.

Once the school board set the budget and voters approved it, a property-tax rate was calculated to raise the money needed to finance the budget. The higher a town’s property value, the lower the tax rate had to be. In other words, a higher town tax base meant lower bills for individual taxpayers. A lean tax base meant a higher tax rate, and higher tax burden.

In 1990, a Stowe resident with a $400,000 house paid $2,400 in school taxes; a Morristown resident paid $3,800, according to the Vermont Department of Taxes.

What did Morristown taxpayers get for all that extra tax money?

Stowe spent $2,462 more per student than Morristown on education, despite receiving about $1.6 million less in state aid. The Stowe school budget in 1990 was about $4.3 million, while Morristown’s was $4.9 million. Stowe had 589 students K-12, while Morristown had 959. Although Morristown had 370 more students, it spent only $51,501 more in teacher salaries than Stowe.

The bottom line: Stowe spent more on education, but paid a much lower tax rate for it, thanks to an incredibly robust tax base.

In 1990, the value of all taxable property in Stowe, what’s called the grand list, was $437.8 million. Morristown’s grand list was just $234 million. The net result: Morristown residents were taxed 35 cents more per $100 of property value to raise enough money for schools — schools that were funded at levels well below Stowe’s schools. This, despite $1.7 million in state aid.

That pre-Act 60 dynamic was true throughout Lamoille County in 1990.

Of the county’s five most populous towns, Stowe residents paid by far the lowest property taxes, yet had one of the best-funded school districts in the county in 1990. Cambridge residents paid $4,160 in school taxes for a $400,000 house; Johnson residents paid $4,760; Hyde Park residents paid a whopping $5,320, according to state tax figures. Stowe residents paid $2,400 per $400,000 in property value that year.

In 1990, the owner of a $400,000 house in Stowe paid $1,687 less in school property taxes than the county average. In 2009, a Stowe resident paid $839 more than the county average.

The bottom line: Although Stowe is now shelling out more money than ever before, the disparity between its school tax burden and the burden of those in other towns has shrunk since 1990, according to state statistics.

But it’s not that simple, says Vermont Tax Commissioner Richard Westman.

“I think if you took a look at the increase in property values, I bet values in Stowe have gone up faster than the rest of the county,” Westman said in an interview. “So Stowe is forced to pay the same rate as everyone else, but at the same time their values have gone up faster than everyone else. You can’t just look at the rates; you have to look at the growth in communities, too.”

Despite all the other factors and complications tied to Act 60 and its offspring, Act 68, there is no formula that takes into account property value escalation rates in different communities. That’s a flaw, according to the commissioner.

“I don’t think the founders of Act 60 realized or thought about ‘What if values go up faster in some towns than others?’ That is a whole other factor you have to look at and consider,” Westman said.

Stowe’s grand list, the value of all taxable property in town, is about $1.9 billion, a 355 percent increase since 1990. Morrisville has a grand list of just $589.5 million, a 152 percent increase since 1990.

First-person perspective

Alice Angney ran schools in Stowe, Morristown and Elmore from 1981 to 2007. She probably knows more about school funding and school dynamics in Lamoille County before and after Act 60 than anyone alive.

In an interview, she said that, whatever the funding, the school boards she worked with had the same goal: “A fierce desire to provide high-quality education to all students within the financial resources of the town.”

As with any two towns, Stowe and Morristown had different dynamics, she said. And, despite Stowe’s robust tax base, “I do not remember a time when school budgets weren’t difficult.” How-ever, after Act 60, “the level of concern moved up a notch.”

Angney was reluctant to compare the school districts or compare how each was affected by the school funding law.

“I’m guessing across the state people are going to say there is less disparity (after Act 60) in the quality of education provided to students. But I can tell you, both communities (Stowe and Morristown) worked hard to provide quality education both pre and post Act 60,” Angney said.

“I found there was high-quality education in all three systems — Stowe, Morrisville and Elmore,” she said. There were differences between the districts, such as different types of programs, “and some of that was related to the funds available in each community.”

But “state aid was a considerable factor for towns that didn’t have the kind of robust tax base Stowe had.”

Did state aid made up for disparities in spending? “No,” Agney said. “It did not equalize spending.”

Those disparities are what led to passage of Act 60.

Unconstitutional

“The current system for funding public education in Vermont, with its substantial dependence on local property taxes and resultant wide disparities in revenues available to local school districts, deprives children of an equal educational opportunity in violation of the Vermont Constitution,” the Vermont Sup-reme Court ruled in 1997, in a lawsuit brought separately by a group of students, property owners and school districts.

The historic ruling found that property taxes varied by huge, unconstitutional degrees from one town to the next. Further, it said public education is a responsibility of the state government, not local communities.

Enter Act 60. Instead of each town raising money itself for its own schools, the state now sets a base rate and each town sends all the school-tax money it collects to Montpelier, to be doled out equally to schools on a per-student basis.

Whereas before Stowe needed only to raise the amount needed to fund its own schools, it now raises whatever the state tells it, plus whatever extra money it wants to spend on its schools.

As a result, Stowe sent the state $20 million more last year than it needed to cover its own school costs.

In 2008, the state did a study to find out the impact Act 60 has had on education and taxation equality. Its conclusions were mixed on education equality. Test standards had changed since the law was adopted, and educational improvement is hard to quantify, the study said.

On tax fairness, the study was much more conclusive.

“An examination of the trend over the entire period provides clear evidence that the level of equity in local education spending and education spending is increasing,” the study said.

Present and future

Despite huge tax increases since Act 60 was adopted, Stowe taxpayers have generously continued to fund the town’s schools at levels much higher than Morristown or the state average.

In 2009, Stowe spent $12,506 per equalized pupil, about $1,000 more than the state average.

Since 2006, Stowe has increased its education spending by 24.05 percent, compared to 16 percent in Morristown, according to a state study completed this month.

If spending trends continue, Stowe and Morristown will spend about the same on education by 2015, the study said.

The Stowe school budget proposal, firmed up two weeks ago by the Stowe School Board, asks voters for $12,736 per equalized student next year. Meanwhile, in Morristown, spending is proposed at $9,749 per equalized student. The difference is just a shade under $3,000 per student.

The extra funding is partially to pay Stowe teachers, who make an average of $9,407 more per year than Morristown teachers, according to the state study. Both school districts have student-teacher ratios of about 12.5 to 1.

That extra funding adds up fast. If education spending in Stowe were on par with Morristown’s, Stowe taxpayers would shave $1.9 million off the 2010-11 school budget.

Obviously, adjusting Stowe’s spending to a Morristown level would slash the tax rate considerably. A Stowe homeowner’s tax bill on a $400,000 house would drop to $4,936.40, about $600 more than a Morristown homeowner.

It’s not quite as simple as that, however, says John Pike, the Lamoille South Supervisory Union director of finances and operation.

“It’s very hypothetical,” he said. “It’s important to note, that it wouldn’t be as simple as cutting $1.9 million in expenses.”

Reducing education spending in Stowe by $1.9 million to bring it in line with Morristown’s per-pupil spending would mean revenues would also drop, meaning you might have to cut even more to make it equal, Pike said.

Also, since Stowe has a smaller enrollment than Morristown, it might not be possible to match the per-pupil spending without seriously compromising education, said Tracy Wrend, the school superintendent.

That Stowe is faced with cutting its budget every year is proof enough that Act 60 needs to be revisited, Westman says.

“They’ve cut budgets, or have zero-level budgets, and you still see the tax rate go up significantly,” Westman says. “It has caused real conflicts within the community and I don’t think that’s good.”