Insurance Co's eager for 'reform' ...

Business skeptical of federal health law

By Jesse Roman

Published:

Thursday, April 15, 2010 12:09 PM EDT

A strange dichotomy emerges when you ask Vermont businesses and insurance companies about the new federal health-care law.

What you might expect is not what you get.

Insurers seem to embrace the federal reform — or at least aren’t complaining much about it — while businesses and many individuals, the people whom the law is supposed to help, are confused, frustrated or worse.

“It’s a disappointment among business owners,” says Tom Rugg, an account executive at Hikok & Boardman Group Benefits division in Burlington, which helps 300 or so employers with their employee benefits programs. “Not one of my clients has said, ‘This is great,’ or has even suggested they were glad that this has passed.”

Rugg, a former staff member for U.S. Sen. Jim Jeffords, a Vermont Republican turned independent, thinks the law will do little to reduce costs for employers — in fact, he says the opposite is true.

“For businesses owners, this is not conservative vs. liberal ideology. This is application, this is functionality, this is fiscal impact,” said Robert Gaydos, president of Benefit Group of New England LLC, which represents more than 300 employers. “Business owners have long understood that the state and federal governments place financial and administrative burdens on them. They are resigned to this fact. … They will act slowly, deliberately, cautiously, and with one eye over their shoulder, waiting for the next shoe to drop.”

Most of his clients are not pleased with the legislation, he said, because he predicts that “large employers will only see increased costs and increased responsibility.”

Costs will rise

Insurance companies think premiums will likely rise, at least in the short term, as a result of the law.

“For many health-care consumers, this experience of health-care reform will be increased costs,” Gary Hughes, director of public and community relations at MVP Healthcare, said in an interview. The reason: “Added taxes and fees and mechanisms that will affect the commercial health-care insurance companies,”

An excise taxes on premiums kicks in in 2014, which MVP estimates will add 7 to 8 percent to total premiums. Pharmaceutical companies will start paying an excise tax next year, which may add 2 to 4 percent on premiums. Add that to the typical 8 to 10 percent annual health-care rate increases, and employers may be crushed, Rugg says.

“The government needs those revenue sources” to pay for increased access and subsidies, Rugg says. “But everybody gets that those charges will be passed on to the consumers. That’s the frustration. … There is no cost containment in this law.”

Bill Little, vice president of MVP of Vermont, says as much.

“Many times, insurance companies are what people focus on (when it comes to cost) because what we do appears very tangible,” Little said in an interview. But, he says, much of the problem “tends to be the cost of care, not the insurance carriers. Insurance carriers really just reflect that cost of care.”

Executives at Vermont’s two largest insurers, MVP Healthcare and Blue Cross Blue Shield, both said in interviews that the federal changes will not be huge obstacles for them.

“The impact on insurers like Blue Cross Blue Shield and others in Vermont will be nowhere near as significant as it will be in other parts of the country,” said Kevin Goddard of Blue Cross. “A lot of the insurance reform that is part of the federal law is already in place (in Vermont) and was done as far back as the 1990s.”

Neither MVP nor Blue Cross seemed particularly wary of the law or all that concerned about any of its provisions, beyond higher costs for consumers.

“We are committed to implementing this legislation,” said Hughes of MVP. “We are diligently working on the parts we can … (and) find ourselves in a position now of really analyzing and moving forward at the same time.”

Blue Cross officials “embrace the fact that government regulation and legislation is a very important and significant part of what we do,” Goddard said. “We see ourselves in partnership.”

Asked if anything in the law worries Blue Cross from a business perspective, Goddard couldn’t name anything.

Cost trumps access

There are two pieces to the health-care reform debate: cost and access.

Vermont has long been among the nation’s leaders in access, insuring 93 percent of residents. State health-care costs, while increasing at alarming rates, are still below the national average. According to a 2008 report by the state Department of Banking, Insurance, Securities & Health Care Administration, Vermont residents spend an average of $7,414 per year on health care, below the U.S. average of $7,681. However, the state is catching up. Vermont health-care costs are rising faster than the U.S. average — up 8.2 percent from 2005 to 2008, compared to 5.7 percent nationally. Health care in Vermont in 2008 was 18.1 percent of the state’s gross domestic product, compared to 16.2 percent nationally.

Cost is a huge problem for individuals and employers, who devote more and more resources to premiums, often at the sake of employee wages.

Many believe the federal law addresses only one side of the equation and totally balks on cost containment.

“Access is easy to do politically; give everyone access and worry about the costs later,” Rugg says. “Cost is different. That’s not an easy thing; it upsets hospitals, doctors and insurance companies. There are a lot of players there and you have to look at it really hard.”

But addressing one and not the other is a losing strategy, says Dr. Deborah Richter, a doctor from Montpelier and past president of Physicians for a National Health Program.

“Increasing costs means decreasing access because people can’t afford coverage. We’ve got to get (costs) under control,” she said in an interview. “Subsidies won’t take effect until 2014, and my fear is any subsidies will be outweighed by enormous increases in premiums the next four years.”

For much of the health-reform debate in Washington, increased access was the rallying point. Many people thought that making health care more accessible was going to fix the health-care system — and that’s plain wrong, Gaydos said.

The long debate “was never about pre-existing conditions or community rating — insurance companies already do those things in about half the states,” he said. “This was about building a (fiscal) model that works.”

In that regard, the law “gave some people more health insurance, but it didn’t do much else,” Richter said.

Unintended results

Gaydos sees many flaws in the law.

“The unintended consequences will be vast,” he warns.

The legislation mandates insurance, and penalizes employers and individuals who don’t get it.

However, there is a significant disconnect between incentives and reality.

“Why would a 30-year-old healthy male purchase health insurance for $4,000 annually when the penalty is only $95 annually, and when and if he needs the insurance, it is guaranteed issue, community-rated, and no limitations for pre-existing conditions can be applied?” Gaydos said.

Another flaw he sees involves the penalty on employers and the insurance exchange subsidy structure.

The average U.S. employer pays about $7,000 (about 67%) per employee per year for health insurance costs. The average employee pays $3,500 per year, Gaydos says, citing figures from the Kaiser Family Foundation.

“Effective 2014, an employer with 50-plus employees could drop their health plan and only have to pay $2,000 per employee per year penalty. The math says that they will drop coverage,” he says.

Odds are those workers will go to the new health insurance exchanges, which will be set up by 2014. At the exchanges, premiums will be based on household income. Low-income households ($30,000 or less per year) would pay only 2 to 3 percent of income, or about $1,000 annually — significantly less than current averages.

Average-income households ($66,000 per year) would pay 7 to 8 percent of income, about $5,280 annually — one third higher than employees now pay, on average. Higher-income households ($100,000 and up) would pay 12 percent of income, about $12,000 annually — nearly triple the current employee contribution.

“To make matters even worse, the premiums listed above are based on 2010 premiums, and by 2014, the premiums will be cumulatively increased by over 28 percent,” Gaydos said.

However, he doesn’t believe most employers, at least in Vermont, will be so heartless as to get rid of health insurance and pay the fine.

“Most employers are in fact moral, and strive to be fair to all employees,” he said.

The logistics of health care reform

Vermont tackles reform

Health-care law’s impact not clear yet

By Jesse Roman

Published:

Thursday, April 8, 2010 12:10 PM EDT

Well before President Obama signed the long-anticipated federal health-care law last month, hospitals, doctors, government agencies, insurance companies, consultants, lobbyists, regulators, patients and state politicians were digging through all 2,700 pages of it, trying to decipher what it all means for Vermont.

As you might expect, it’s not yet clear. Not even to the experts.

The hardest part will be “learning and understanding what the different components of the legislation actually means,” said Paulette Thabault, commissioner of the Vermont Department of Banking, Insurance, Securities & Health Care Administration, in an interview.

Gov. Jim Douglas has asked his health-care cabinet — comprised of various department heads — to study the new law to see “if there’s anything we need to do in the Legislature right now to comply with the law,” he said Monday in an interview in Morrisville.

One key member of the Douglas team is Susan Belio, Vermont’s director of health-care reform. Belio, also the head of the Office for Vermont Health Access, was appointed by Douglas to coordinate and facilitate the state’s own broad health-care reform efforts in 2006. That was a lot of work, but nothing compared to leading the state’s efforts on the new federal reform.

The federal legislation is “much bigger than in 2006,” and in many cases leaves her to guess about the how and the what.

“In this (federal) document, the majority of areas don’t have specific detail, and not a lot of federal guidance has come out on what it means or how to implement it,” she said Tuesday in an interview. “We’re having to do our best guess at this point what some things mean. …

“At least (in 2006), I could go to the Legislature, the ones who wrote it, and ask, ‘What did you mean by this?’”

Not only must the federal law be read, digested, understood and implemented, the work must be done in a race against time.

The Legislature has largely firmed up the budget for the fiscal year that starts July 1, and any money that may be needed for the new health-care program, or laws changed to comply with federal statute, must be accomplished before the Legislature adjourns in May.

The federal law offers grants and other resources to help states, “but no detail about how to access them. We’re in wait-and-see mode,” Besio said.

The health-care law is huge and sweeping, “but states were not given legislative resources to deal with it,” said Douglas, who is chairman of the National Governors’ Association. He said he has spoken with U.S. House Speaker Nancy Pelosi about providing money and assistance to help states put the health-care law into action.

“This is very significant for states,” he said. “It will take some financial effort. We’ll have to continue to work with states closely.”

“There is a lot of planning that has to happen,” Thabault said. “2010 are the immediate things, then we have to anticipate the second round of changes in 2011, then the really big changes happen in 2014. So between now and 2014, a lot of planning needs to be done.”

Ups and downs

“This bill is a real paradigm shift, and one we will continue to move from,” says Marie Beatrice Grause, president and CEO of the Vermont Association of Hospitals and Health Systems. “In a way, it’s really a new beginning and it will be a big challenge for hospitals, patients, insurance companies and doctors to start looking differently at how health care is financed: How doctors are paid, how consumers pay and how providers administer health care.”

There are so many moving parts and vagaries that hospital administrators, doctors and other health-care leaders are still in the process of figuring out what the new law means to them.

The consensus among health-care providers is that more access to health-insurance coverage is good.

“There is nothing worse than having patients who lack adequate insurance, who don’t see a physician unless it’s an emergency,” says Paul Harrington, executive vice president of the Vermont Medical Society.

The health-care bill will extend coverage to 10,000 uninsured Vermonters and improve existing coverage for 381,000 more, says U.S. Rep. Peter Welch, D-Vt. Nobody argues the merits of that.

What has been debated is the mandate that everyone buy health insurance.

“Conceptually, I think it’s a great idea,” said Judy Tarr, president and CEO of Central Vermont Medical Center in Berlin. “After all, you need insurance to drive a car. It’s not unreasonable to ask people to be concerned with their health.”

Vermont hospitals had to eat more than $57 million worth of bad debt or unpaid bills last year, for care provided to people unable or unwilling to pay, according to a BISHCA report.

That will be slashed by $46 million — or 80 percent — because more people will have insurance, Welch said.

Most hospitals, doctors and others also applaud the end of certain insurance practices, such as denying coverage to people with pre-existing conditions — which Vermont already does — and dropping patients’ insurance once they get sick.

But hospitals, doctors and state officials also have their worries.

For instance, the law includes $148.6 billion in Medicare cuts over the next decade, which hospitals and doctors say will increase the widening gap between what health care actually costs, and the amount that Medicare will pay. Medicare is the federal insurance program for older Americans. The Medicare rate drop will affect six of the state’s 14 hospitals — the other eight are critical access hospitals, which have a different funding structure, Grause said.

Just last week, because Congress failed to adjust the reimbursement formula, Medicare rates paid to doctors and hospitals fell a dramatic 21.3 percent, Harrington said.

“This is a well-recognized problem and Congress failed to address it,” he said. The laws are making it difficult for doctors to afford to see Medicare patients, he said. In many cases, patients covered by Medicare and Medicaid — the federal-state health-insurance program for the poor — account for half their business.

Every hospital, including critical access hospitals, such as Copley in Morrisville, will be affected by a provision in the bill that reduces the amount federal money hospitals receive to help pay for uninsured and low-income patients. The federal government theorized that the reduction in Medicare and Medicaid reimbursements would be more than made up by increased revenue from the boost in the number of insured.

But in Vermont, where 93 percent of the population is already insured, that effect will be negligible, Grause said.

“The good news is, that isn’t happening immediately; it will take awhile,” she said. “In the world I live in, that’s 10 political lifetimes, and we’ll have a chance to take another bite at the apple.”

Hospitals and doctors also criticized the lack of any medical-malpractice reform in the law. Frivolous lawsuits lead to defensive medicine and higher costs, Tarr says.

“If you fear being sued, you may change how you practice and order more tests and be that much more careful, which really drives up costs,” Tarr says.

Malpractice insurance can run upward of $70,000 per year, depending on what type of practice a physician has, Harrington said.

Another issue is staffing. As more and more Vermonters have access to health care, more doctors will be needed.

“It’s all well and good to have more people insured, but if they don’t have access to physicians, it’s kind of a broken promise,” Harrington says. “There is already a shortage of primary-care physicians in Vermont. These workforce issues have not been adequately addressed.”

Gov. Douglas says requiring everyone to be insured will also cost Vermonters money, at least in the short term, as a result of what he called the “woodwork effect.”

About 7 percent of Vermonters are uninsured, and many of them are eligible for Medicaid or other programs but haven’t yet applied, he said. The mandates will bring them out of the woodwork and add more people to the state and federal programs, Douglas predicts.

“There will be added pressure on the budget, because of the mandates,” he said. “But I think it will affect Vermont a lot less than other states because we have such an expansive Medicare system already. … We are leaders and cited nationally for our innovative approach to care.”

For now, everyone is waiting to see what’s going to happen and hoping the state and federal governments will make the transition as smooth as possible.

“I wouldn’t mind having the Vermont Legislature support us in implementing this bill,” Tarr said.

•••

Timeline of health reform

Effective Immediately

Small-business tax credits for offering employees insurance.

Federal grants for a state health care “ombudsman” to assist consumers with complaints and questions.

Effective within 90 days

Indoor tanning services tax.

A Web site through which Vermont residents can identify affordable health-insurance coverage options in the state.

Effective within six months

Elimination of pre-existing condition limitations for children.

Children can stay on parents’ health insurance plan until age 27.

Elimination of lifetime limits on benefits.

Free preventive benefits. No cost-sharing (such as co-pays or deductibles) for preventive health care.

Prohibits rescissions: companies cannot cancel coverage.

Effective January 2011

Employers must report the value of health benefits on employees’ W-2 tax forms.

New voluntary government-operated long-term insurance plan financed by payroll deductions.

2012

Hospital payment must be linked to health outcomes, as defined by U.S. Secretary of Health and Human Services.

2013

Hospital tax (0.9 percent to 3.8 percent of income) on high-income wage earners ($200,000 individuals, $250,000 couples).

New Medicare tax on capital gains, dividends, interest and other unearned income.

Insurance carriers must adopt standard administrative rules and procedures.

2014

Creation of state health-insurance exchanges.

Income-based individual premium subsidies.

Limits all group deductibles to $2,000 for individuals and $4,000 for families.

Limits eligibility waiting periods to 90 days.

Limits maximum out-of-pocket health-care expense based on income as it relates to the federal poverty line.

Guaranteed health care, no pre-existing condition limitation, community rating (two exact plans must cost the same; premiums can vary only according to age, geography, family size and tobacco use).

Elimination of all limits on benefits.

2018

Excise tax on high-cost plans

— Source: Benefit Group of New England

http://www.stowetoday.com/articles/2010/04/08/stowe_reporter/news/local_news/doc4bbdcc882416f208105252.txt

Insrance broker talks health care reform

Benefit Group president sees pros and cons in health bill

By Jesse Roman

Published:

Thursday, April 15, 2010 12:09 PM EDT

There’s so much in the federal health-care law passed last month that few people, even the experts, can explain it all.

Robert Gaydos, president and founder of Benefit Group of New England (now called BGNE), may come the closest.

Gaydos, whose company helps more than 200 employers across New England figure out their health-care plans, has read all 2,700 pages of the bill and has designed and hosted webinars to explain the nuances of the new law and how it affects employers.

In 1999, Gaydos co-founded Choice Plus of New England, which was a plan manager for ERISA health plans. In 2001, Gaydos co-founded the Waterbury-based Choice Care Card, which administers health reimbursement accounts and flexible spending accounts.

Gaydos was a member of the Vermont Public Oversight Commission from 2001 to 2003, which reviews hospital budgets and certificates of need. Since 2006, Gaydos has been on the CIGNA National Producer Advisory Council, and in 2008 was appointed to the MVP Healthcare Broker Advisory Group.

The Stowe Reporter recently talked with Gaydos about the federal health-care law, and what it means for Vermont’s businesses and insurers.

Question: What immediate impacts do you foresee in Vermont from the new health-care law?

The only short-term effect for Vermont is the small-business tax credits. These tax credits are effective immediately, and available for businesses that employ 25 or fewer full-time equivalent employees with an average annual wage less than $50,000 (excluding the owners’ salaries). These tax credits are significant for employers with fewer than 10 employees, which is the majority of Vermont businesses. Information is available at www.irs.gov/newsroom/article/0,,id=220809,00.html.

Q. Are other states more affected?

Yes. In 1992, Vermont enacted significant small-group health-insurance reform with Act 52. This act implemented guarantee issue, community rating, and tight controls concerning limitations for pre-existing conditions.

In Vermont, small groups are not rated based on health status, age, sex, etc. Approximately 30 states never implemented these types of significant insurance reforms. For these states, adapting to immediate health-insurance reforms (the elimination of pre-existing conditions on children, increasing children age to 26, removing lifetime limits, etc.) will have premium impact. Later in 2014, when these states fully implement the insurance exchanges, they will have to comply with guarantee issue, community rating, and the elimination of pre-existing conditions. This will have significant rate impact for these states.

For example, community rating creates an average price rather than a varying price. Hence, younger workers will see their rates double, while older workers would see their rates drop slightly. Vermont moved to community rating 18 years ago.

Q. Do you think insurance premiums in Vermont will ultimately go down, up or stay the same as a result of this law?

The Vermont small-group health-insurance market (1 to 49 employees) functions well, especially in comparison to other states. We have the highest market penetration of consumer-driven health plans in the U.S. This has kept our average small-group premiums below the national average. Hence, there will be less trend and rate effect in Vermont than other states.

In fact, there is a chance that more carriers will enter the Vermont market, and this increased competition would be a good thing.

The law would change the small group insurance market from the current 1-49 employees to 1-100 employees. Employers with 50-99 employees are currently rated based on claims and demographics. Effective 2014, these groups would become guarantee issue and community rated, and would eliminate pre-existing conditions limitations.

The individual health-insurance market in Vermont is virtually nonexistent. Allowing individuals to purchase from the same insurance market as small business (which is one of the purposes of the insurance exchanges) will dramatically improve the plan choices and costs for individuals in Vermont.

Q. What are some of the primary concerns your clients express about this bill?

Concerning the new health reform law (PPACT), Vermont employers are lost. They do not understand PPACT. They are reaching out for guidance. They have little faith that anyone can solve their problem (the cost of health insurance is rising 2.5 times faster than inflation).

Over the past decade, I watched as business owners gave up and almost seem to resign themselves to this burden. They are very frustrated. We expect that now that this law is in place, they will learn and adjust.

Why do employers provide health insurance? The logic is to attract and retain employees. However, that is really not the case anymore. Over time, it has become somewhat an accepted moral obligation. We expect that employers will struggle over the next three years as they review this new law, learn the impact on their businesses, and adjust their business strategies appropriately.

Q. Has the reaction been positive or negative among businesses you work with?

Negative. For businesses owners, this is not conservative vs. liberal ideology. This is application, functionality, and fiscal impact.

Business owners have long understood that the state and federal governments place financial and administrative burdens on them. They are resigned to this fact.

Since the recession took root in late 2008, most business owners are living in a new world where credit is difficult and where the future is unknown. They have learned to operate on less. They have lost predictability.

While most business owners do believe that the worst of the financial crisis is over, they also believe that we are years away from full employment. They will act slowly, deliberately, cautiously, and with one eye over their shoulder, waiting for the next shoe to drop.

Q. What, in your mind, are the big questions or changes in this law that remain unanswered or ambiguous?

Functionality and financial projections. PPACT is perhaps the single largest government intervention in our history. The unintended consequences will be vast. There are many parts of this law that clearly do not function in the real world (premium subsidies, out-of-pocket subsidies, improved Medicare costs, improved utilization of medical procedures). If even one part of this law fails, then the entire fiscal projection falls apart.

This law projects that 32 million currently uninsured Americans will purchase insurance from the insurance exchange or access Medicaid. Under this law, we are banking on improved utilization and health status, and lower per-capita costs on these individuals. This is extremely unlikely. Economic predictions are based on rationality. Human behavior is never rational.

Then there is the basic idea of supply and demand. Under this new law, we are increasing demand immediately (adding 32 million Americans to insurance). However, it is not possible to increase supply (providers) at the same pace. It takes decades to increase the supply of medical providers. Once again, the unintended consequence of this will be vast.

Q. Who (patients, hospitals, businesses, insurance companies, or other) is the big winner in Vermont as a result of this legislation? Or is everyone a winner? Or loser? Or a little of both?

Very good question.

Small businesses benefit immediately with government subsidies.

Individuals without access to employer-subsidized insurance will benefit in 2014.

Large employers will only see increased costs and increased responsibility.

Hospitals and providers will see significant changes in compensation, and I believe that in five years, providers will see PPACT in a very negative light.

Concerning insurance carriers, the blame has been shifted. It is no longer their responsibility. They are being told what benefits to cover and not cover. They being told how much to spend on care and administration via the mandated loss ratios. They are being told who to cover and how to calculate the premiums. They are being told where to sell their products (exchanges). They are being told how much to compensate their executives (executive pay limits in the law). They are being told how much to compensate their agents and brokers.

Where is their responsibility? They have none, other than to administrate, which they are very good at. Citizens will learn that it is not the insurance company’s fault (or decision); it is the government’s decision (and fault).


http://www.stowetoday.com/articles/2010/04/16/stowe_reporter/news/local_news/doc4bc6fb11cb0d0371884108.txt

Vermont edcation reform gaining traction

School leaders call for reform

Newly elected Stowe School Board member Richard Bland addresses the Vermont Senate Education Committee at a hearing in South Burlington High School on Tuesday. Photo by Jesse Roman

By Jesse Roman

Published:

Thursday, April 1, 2010 12:10 PM EDT

Teachers, parents, school board members and top school officials delivered a unified message Tuesday night to the Vermont Senate Education Committee:

Vermont needs education reform.

What reform should look like is still open for debate, but most, if not all, of the people who spoke at a public hearing in South Burlington said consolidating school governments would benefit students and taxpayers.

Vermont has more than 260 school districts, each with its own school board, and 63 supervisory unions that provide top-level administrative services to those districts. One proposal in the Legislature would reduce the number of supervisory unions to 15 or 16.

“Sometimes in discussion on this we fail to recognize the seriousness and fall into quaintness and cuteness; this is not about the past, this is not about what used to happen, this is serious business,” said Jim Fitzpatrick, superintendent of the Essex Town School District and a former Stowe school employee. “This is one of the few times I’ve seen the Legislature in Vermont have a real opportunity to change the way we provide education in this state and I’d hate to see you guys miss this. … The system we have is inefficient.”

With consolidation, “we will either save money, get more for the money we already spend, or perhaps both,” he said.

Inefficiency was the word repeated time and again by school administrators, who told the Senate committee they spend more time dealing with school board members and selling budgets than actually running the schools.

Voters in the Franklin Northeast Supervisory Union, home to Richford and Enosburg High Schools, would probably reject consolidation, said Jay Nichols, the superintendent.

“They are willing to talk about merging to a unified district, but in the end they are not willing to give up local control,” Nichols told the committee. “But the administration and staff believe going to a unified district would be better for the kids and better financially. …

“One set of policies, hiring practices, transportation, economies of scale, sharing professionals — that all makes sense.”

Nichols said he spends a lot of time just negotiating teachers’ contracts, which are different for every school in the district.

“We do everything five times: five budgets, five policy manuals, five board meetings. There’s an awful lot of redundancy,” said David Bickford, superintendent of the Orange-Windsor Supervisory Union. “You need to provide the opportunity for your education administrators to spend more time on education issues, and less time serving governmental bodies.”

While almost everyone said the current school structure needs fixing, there is hardly consensus on how to proceed. Many favored letting school districts decide for themselves whether to consolidate, then, if they don’t take the bait, requiring them to merge.

“After applying the carrot, there has to be a stick,” said Richard Bland, who won election to the Stowe School Board this month.

Bland, like others who spoke, is open to a short window for allowing school districts to consolidate voluntarily, but wants the state to step in if progress is slow, because the state’s budget problems require it, he said.

Not everyone was as hawkish.

“Begin with freedom to consolidate, move to incentives to consolidate, but if we go to a system where we’re told to consolidate, I would be very careful,” said Richard Cassidy, chairman of the South Burlington School Board. “What if two districts have very different pay scales? You need to ask how that would be resolved, and my guess is it won’t be to move toward the less generous compensation.”

Whatever comes out of the Legislature, cost cuts should not damage educational quality, Cassidy said — a sentiment echoed by many.

“If we don’t do a good job on education, people will not want to come here to open their business; people will not want to stay here and will not want to move here,” Cassidy said. “Be careful of the quick fix.”

Not enough money

For the first time in years, there is broad consensus among Republicans and Democrats about a need to shake up Vermont’s education system.

“The problem is there isn’t enough money to pay the bill, and that’s a big problem,” said committee Chairman Bobby Starr, D-Essex-Orleans. “Our children are doing well, test scores are good, but there’s not enough money to pay the bill. We’re trying to find a way to provide good, quality education and save some money.”

On Tuesday, state Education Commissioner Armando Vilaseca outlined a plan to consolidate Vermont’s 281 school districts into 50 or fewer, and save $15 million to $17 million in fiscal year 2012. The plan would give him broad authority to consolidate districts as he sees fit, and reduce student-staff ratios.

The measure would increase student-staff ratios from 4.55 to 1 to 4.95 to 1 for fiscal 2012, eliminating more than 1,200 jobs and saving about $46 million, he said.

House members have been unwilling to embrace that type of top-down approach to consolidation and seem to prefer an incentive-based plan.

Earlier this month, the House Education Committee endorsed the only education reform bill now before the Legislature.

The bill — often referred to as the Peltz bill for Rep. Peter Peltz, D-Woodbury, who wrote much of it — does not require that school districts consolidate, but does require supervisory unions to at least discuss it. Budget and tax incentives are offered to districts that decide to merge.

If the House passes the bill, it goes to the Senate. It’s unclear what a final bill might look like, since there are major rifts between chambers about whether the state should require school districts to consolidate, or leave it for the districts to decide.

Two other plans have been proposed, but likely won’t be considered this year — from Rep. Heidi Scheuermann, R-Stowe, and Sen. Robert Hartwell, D-Bennington; each would require consolidation from 260 school districts to only 15 or 16.

Unlike the Peltz bill, Scheuermann’s bill also does away with the statewide property tax that now funds education. Instead, the individual, much larger school districts would set their own property tax rates.

That funding change is crucial in any reform, says Bland, of the Stowe School Board.

“In the gold town of Stowe … we have suffered through maintenance budgets over the last decade. Now we are seeing our programs cut wholesale,” Bland told the committee. “We are seeing one of the best school systems in the state of Vermont being dismantled in front of our eyes.”

In the Peltz bill, “there is no recommendation about funding at all, or for ameliorating the situation we face,” Bland said.

The best hopes for school-finance reform seem to reside in the Senate, which Scheuermann says has been more receptive to her ideas.

However, Senate leaders, including Susan Bartlett, D-Lamoille, although open to the idea, say it’s likely too late in the year to consider dramatic funding changes.

http://www.stowetoday.com/articles/2010/04/01/stowe_reporter/news/local_news/doc4bb48bbbe0786008853624.txt