Any Way Out of Act 60?

Nothing has taken effect besides the increases in five state taxes, but already a wave of opposition is building against the new education finance law, Act 60.

A "Vermont Coalition of Municipalities", chaired by selectman Jay Barrett of Fairlee, has recruited membership from some 42 towns. It is looking for a legal theory and a law firm to attack the new law in court. Killington businessman Bernard Rome, is running a series of newspaper ads against the act.

"Act 60 talks about improving educational quality, "says Rome, " but make no mistake: this act is founded on state control of our schools. State control of our local tax base. State redistribution of wealth. State bureaucracies, plans, mandates, approvals, fees and penalties."

What is shaping up here is a titanic 16 month political upheaval in a state whose people were ready for property tax relief, but not ready for sweeping legislation which carried out the radical everybody-the-same spending mandate of the Supreme Court, coupled with the centralized control of local public education so long sought by legislative liberals.

The question that Vermonters will ultimately have to answer is this: is there some other way to get property tax relief without the undesirable effects of Act 60? If the answer is No, then Act 60 will stand. If the answer is Yes, then what is that alternative? Here are some proposals for change, some of which can be mixed and matched.

The most comprehensive and radical change would be to create a market based education system. The state would encourage the transformation of Vermont's public schools into de facto charter or independent schools, regulate them only for health and safety, fiscal accountability, and truthful advertising, and put the dollars in the hands of the parents to choose which offering they decide is best for their children. The resulting competition for the consumer's education dollars would make all schools far more entrepreneurial, improve performance, control costs, and increase parental responsibility. The state would still have to raise the money - probably $600 million - from somewhere.

Unfortunately some very powerful groups find any such idea totally unacceptable. Chief among them is the Vermont NEA teachers union, which quite correctly fears for the salaries, benefits, and job security of its members if parents choose to send their children to non-unionized schools. Similarly most of the public educational bureaucracy - superintendents, school boards, principals, PTA, etc. - are not enthusiastic about facing the challenge of competing for pupils without the comfortable protection of a government monopoly.

The market-based model leaves open the question of the high spending school which needs funds in addition to the uniform state scholarship presented by its customers. The ACLU is bound to complain in the courts if a (rich) town raised more money through local property taxes to subsidize a more costly town school. That would doubtless lead to another Supreme Court case.

Another and less sweeping idea is just to replace the state property tax with another tax. The only likely alternative is some version of the gross receipts tax proposed by Rep. Ruth Dwyer of Thetford, which attracted 57 votes in the House last spring.. The gross receipts tax would have an extremely broad base and a low rate. It would also have to raise enough to permit repeal of the retail sales and use tax ($180 million).

This idea looks very good to the voters of the "gold towns" who will be hit very hard by Act 60's state property tax, and to local school and town officials generally, who want to protect their only tax base against state invasion. But it will be opposed by those who offer presently untaxed services (lawyers, architects, dentists, auto mechanics, etc.) In addition, while using the total tax base allows a low rate like 2%, this brings with it some compounding and inequity problems. Solving those problems - by for example, taxing only value-added - shrinks the base and increases the rate.

Another approach would be to toss out Act 60 and help all but upper income Vermonters to pay their local school taxes by expanding the existing circuit breaker program. Gov. Dean actually proposed just such a plan last January, a month before the Brigham decision. This again would require a large increase in state funding through new taxes. It is very dubious that the Supreme Court would accept this approach, since it would leave local property taxes on unequal property wealth per pupil in the towns.

Assuming (regretfully) that legislators are unlikely to produce any new plan not in conformity with Brigham, what is the most attractive combination of proposals as an alternative to Act 60? Consider something that looks like this:

• 1. To reduce costs and stimulate quality, radically deregulate public education, actively encourage educational competition by charter and independent schools, and put the power of choice in the hands of consumers (parents). This would mean that the state would no longer have a public education system, any more than it now has public grocery or fuel oil systems.
• 2.To raise the money to finance the consumers, levy some form of a gross receipts or value added tax which also replaces the 5% sales tax; or impose a flat 1% state tax on all real property , with liberal transition provision for the gold towns; or (most likely) a combination of the two. Continue the circuit breaker program to aid low income taxpayers.

What is good for the children, however, may not be so good for the educational institutions we are familiar with today. A market-based alternative would disrupt the comfortable arrangements of the state's public education industry: the unionized teachers and educational caregivers, superintendents, school boards, and state education officials. They will not go quietly into the world of competition and choice.

At school meeting time next spring, dismay over Act 60 will probably come to a head, with presently unpredictable results. But until major change is effected, Vermont will most likely be afflicted by a public educational system increasingly financed and controlled from Montpelier. More and more citizens will be likely to abandon their concern for their town schools, and more and more children will find themselves attending schools few care about except those paid to labor in the state's Act 60 megasystem. It is hard to see how this will prove to be any sort of reform.

September 1997