April 27, 2020
We hope this update finds you and your family healthy and at least relatively sane in the continued strangeness of sheltering in place. Perhaps you even managed to eke out something that felt like a vacation last week?
In the time since our last meeting on April 8th, we have been reflecting on what we heard and trying to think about next steps we as a board might take. During the meeting, we heard that Board members wanted to wait and see what legislation might come out of the State House that would affect our budget decisions as well as how the “stay at home” directives might affect when and how we could hold elections (a budget re-vote). We were greatly relieved to see that just today, the Secretary of State’s office issued new guidance which will help our Board to assess our re-vote options. Please see this email for more details that the Elections Division shared with town clerks today.
In the last several weeks, we have understood one of our roles to be that of monitoring ongoing legislative and state economic developments so that we could inform you all about potential changes likely to affect the HUUSD. We have been following the conversations in the House and Senate very closely and Caitlin has participated in numerous calls with the VSBA and other school board chairs in districts without approved FY21 budgets. While the legislature has made some progress in proposing new legislation, the House and Senate Education Committees have not yet resolved the differences in their bills. For that reason, we have scheduled our next Board meeting for May 6th, hoping to have more clarity from the Statehouse by then.
In the meantime, we offer an update on what we’ve learned so far:
19 districts do not have approved budgets. Their total expenses are estimated to be about 22% of total K-12 education spending in the state. About half of the 19 districts had budgets that were defeated on Town Meeting Day; the other half had budget votes scheduled during the “stay at home” orders and have been unable to hold elections. Many school districts have, like us, begun to meet remotely, though most have not resumed their normal meeting schedules.
Prior to COVID-19, state statutes directed that if a district had not passed its budget by July 1st, the school district could continue to operate by borrowing up to 87% of the previous year’s expenses -- which would hopefully allow them to start the new school year and hold them over until the district could pass a budget. While not the norm, it was not unheard of for a district to warn multiple re-votes. In this situation, districts could easily borrow funds while continuing to pursue a budget vote, at a relatively low interest rate.
Given public health concerns that have delayed any public voting, the legislature has been considering offering school districts without approved budgets a path forward that would offer
more financial predictability than the current statute provides (16 VSA § 566). We have heard that in the present climate, banks have a great deal of concern about property tax delinquencies and the deficit projections of the Education Fund. Having a budget in place for FY21, prior to June 30th, will be one less uncertainty the banks have to consider when choosing whether to extend a loan, and the interest rate they will charge.
The VSBA as well as school board chairs from affected districts have strongly urged the House and Senate Education Committees to refrain from penalizing districts without approved budgets and instead guarantee them some baseline options comparable to our peers elsewhere in the state. Would districts who passed budgets in early March have been able to do so if their voters had known what was coming in terms of COVID and its effects on our economy? Most parties seem to agree that the 19 affected districts cannot and should not suffer disproportionately from the current fiscal crisis because other districts happened to approve their budgets before mid-March. Most parties also seem to agree that the financial impact must be shared statewide, and most likely through the FY22 budget process.
The options under consideration by the legislature include the following possibilities for districts without approved budgets:
Another option that has been discussed at length involves an “inflator” of up to 4% to ensure that school districts do not have to operate at FY20 levels. Offering an inflator acknowledges the annual spending increases (especially in salaries and health care) that make FY20 spending almost impossible for most districts to achieve without drastic and devastating cuts. Adding 4% on top of FY20 spending would be on par with the state average for budgets already passed.
Here are a few links for your reference:
At the time of our last meeting, the state was only beginning to realize the impact that COVID-related reductions in income tax revenue will have on the Education Fund. We already know the news is dire, well over $150 million short and growing, and we expect an update this week from the Joint Fiscal Office on the shortfall. As challenging as the shortfall will be for FY2021 budgets, we can expect things to be perhaps even more severe for FY2022. While it doesn’t make sense to go down the FY2022 road too far at this point, it is important for us to know that the financial impact on government institutions (like public schools) will continue for at least another year.
Another major factor in understanding the tax implications of any budget decisions we make is the yield. While the tax commissioner sends out a letter prior to budget season to share projections about the yield, the yield is typically finalized by the legislature in the spring. We are under the impression that the legislature will wait as long as possible to do so, possibly at the end of May. That ambiguity will remain in our budget planning, but perhaps be even more of an unknown than usual because of COVID’s effects on the Education Fund. We’ll keep following this and update you as we learn more.
As we have been trying to wrap our heads around the implications of these policies under consideration by the legislature for the HUUSD’s budgeting, we asked: how would FY2020 spending for FY2021 compare to the budgets we’ve already reviewed? To give a rough idea, Michelle and Brigid estimate that this would require an additional $128,000 in cuts, on top of the $300,000 we had discussed at our April 8th meeting (Budget #3). They have also indicated those cuts would be possible to achieve without reductions in current programming. This is very good news for our district, but we can only be confident about our options once we hear more definitively from the legislature.
You can expect another update from us on Monday, May 4th as part of the 5/6/20 Board packet. Please feel free to reach out before then with any questions. We hope that you and your families are staying healthy and look forward to seeing you on the 6th.
Caitlin and Torrey