5.19.2017 – Public School Employee Health Care, Veto Threats, and Adjournment

The 2017 Legislative Session continued this week because of a difference of opinion between the Legislature and the Scott Administration on public school employees’ health care. At the very end of the Session, the governor announced that he wanted public school employees’ health care, usually a part of a local collective bargaining process, to be determined by negotiations with the state. This last minute move did not allow time for proper review, testimony, and debate, which, for such important legislation is inadvisable. Rushed action on complicated legislation is bad process and often results in unintended consequences.

The governor claims that the idea was first floated in his budget proposal but members of the House Appropriations Committee shared with me that at the time, no details were provided and the governor did not follow up with anything further. There also seems to be confusion about that proposal and the one that came with his budget that shifted higher education, childcare, and some teachers’ retirement costs to the Education Fund. That proposal included a General Fund transfer to the Ed Fund but it was $50 million short of covering the cost. That difference, the governor said, was to be made up by school boards going back to the drawing board and level-funding their budgets and by making teachers assume 20% of health care premiums, which were contractually agreed to at 15%. That idea went over like a lead balloon since school boards (I chair one) had already finalized their budgets and had little, if any, interest in revisiting it and similarly had no interest in breaking contractual agreements. I wondered, at the time, if the governor had a clue as to what was involved in the process of developing a school budget and what contractual agreements represented.

In his last minute proposal, the governor claimed that there were $26 million in savings to be had and that if we didn’t act now those savings would be lost. To understand why this is not exactly accurate, it’s helpful to know a little background. When the Affordable Care Act was enacted, public school employees’ health care plans changed and their choice of plans became more limited. The Vermont Education Health Initiative (VEHI), a non-profit that offers employee benefit plans to school districts, estimated that there might be $75 million in savings due to lower premium costs. They also estimated that it would cost $48-50 million to hold the employees harmless for out-of-pocket costs and deductibles, leaving $26 million to “harvest”. The governor proposed using one third of that to reduce the property tax and two-thirds on General Fund expenditures such as teachers’ retirement. What made this inaccurate was the fact that it was really only half a year making it $13 million. There was also concern about spending what is rightfully Ed Fund money on General Fund expenditures.

A number of suggestions and amendments were brought forward to try to solve the stalemate. Meanwhile the clock was ticking and each additional week of the Legislature costs $250,000.

I give a lot of credit to Speaker Mitzi Johnson and Senate President Pro Tem Tim Ashe for their repeated attempts to work with the governor. It was hoped that the Legislature and the Administration could agree on a compromise. The governor threatened to veto the budget, which seems misguided given the fact that it raises no new taxes or fees and originally passed the House on a 143-1 vote – it passed the Senate unanimously.

The stalemate between the Legislature and the Scott Administration, unfortunately, did not result in a compromise. Throughout the last day of the Session, meetings went on amongst the Speaker, Pro Tem, Governor, the Dean of the House, Rep. Alice Emmons, and Dean of the Senate, Sen. Dick Mazza. Both Emmons and Mazza had worked closely with Phil Scott when he served in the Senate.

A deal was put on the table that included several provisions including the creation of a Commission that would look at the pros and cons of allowing the state to negotiate public school employees’ health care. Serving on the Commission would be members from both labor and management and a report would be made to the Legislature next year. Health care contracts, unless agreed on by July 1, would have to end by Sept. 1, 2019, which would allow for the “one-time opportunity” again. Also included were a property tax reduction and a couple other elements.

House members were asked if they could support the agreement and the answer on the part of the Democrats and Progressives was yes. The governor, however, after consulting with his staff came back and said that he needed the public school employees’ health care negotiation piece despite the other provisions. This was disappointing, seemed to lack good faith, and we couldn’t accept it.

The Legislature decided enough was enough and moved forward with our well-considered and supported budget, as well as with H.509, the property tax bill to which we added the Commission and other above-mentioned provisions including a residential property tax reduction of 1.5 cents. We passed those bills and adjourned late at night.

Much has been written in the press about the various proposals that were made regarding public school employees’ health care but the bottom line was the fact that bringing up such a significant policy change at the end of the Session with little chance for committee testimony and review is not good process.

The ramifications of vetoing the budget and property tax bills should be considered very carefully. If a budget isn’t in place by July 1, no money may be expended on behalf of government. If the governor vetoes H.509, the veto is sustained, and there is no property tax bill in place, current law will expire at the end of the fiscal year and there is no provision for returning to previous year yields. With no way to set a tax rate for homestead properties, there will be a loss to the Ed Fund of $410 million.

A veto session is scheduled for July 21 and 22 – hopefully it will not be necessary.