The House has asked its Education Committee to study the causes of fast-rising spending education costs, something that has been identified as a key problem by Gov. Jim Douglas and the leaders of the House and Senate, both Democrats. But some top Democrats have indicated reform could turn out to be a “two-year process.”

In his budget address to the Legislature on Jan. 23, Gov. Douglas said – to applause – that property tax reform should occur this year, then presented a series of reform ideas, including a 4% cap on school budget increases, that he has offered in previous years and that were ignored by legislators.

According to an estimate from the Legislature’s Joint Fiscal Committee, per-pupil spending will grow 8.4% in Vermont for the fiscal year beginning July 1, 2007. State property tax collections to support this spending could rise 7% to 8%.

Meanwhile, the Vermont League of Cities and Towns (VLCT) has been publicizing the fact that recent increases in the state’s General Fund transfer to the Education Fund have not matched expectations set out in Act 68, a major school finance bill passed in 2003. The General Fund transfer accounts for about 20% of school funding.

According to Act 68, increases in the General Fund transfer to the Education Fund are supposed to grow each year by the same percentage that the base General Fund increases. But in fiscal years 2006 and 2007, when the General Fund budget increased by 7% and 7.4%, the transfer increase to the Education Fund was only 4.0% or so each year.

The result, as former legislator and Act 60 architect Paul Cillo has pointed out, was that the property tax had to be used to raise an additional $25 million over the two years to cover the shortfall. The VLCT has estimated the shortfall means state property tax rates are two cents higher this year than they would have been with more funding.

Mike Reardon, Commissioner of Finance and Management, told VPOR the Douglas administration had sent a budget to the Legislature that complied with the Act 68 language, but the transfer amount was not adjusted as the budget worked its way through the Legislature. “We all need to be more mindful of that in the future,” he said.

This year, Douglas has proposed a relatively austere state budget with an overall increase in spending of 3.16%.  He is proposing that the transfer to the Education Fund rise 3.2% from last year’s level, though school spending is going up at a much faster rate this year.

Douglas made it clear in his budget address that he does not support raising other state taxes, such as the income tax, to reduce pressure on the state school property tax. Many Democrats have supported a plan to institute a 1.5% income tax to fund schools, or perhaps some kind of income tax surcharge for schools.

A competing plan supported by some House Republicans – to repeal the state property tax school financing system enacted by Act 60, even before a replacement is created – is given little chance of advancing this year, especially since Republicans make up only a third of the House.

But the plan, dubbed “Revolt and Repeal,” has gained some traction outside of Montpelier. A total of 54 town governments have voted in favor of the scheme, and proponents are holding meetings around the state (see www.revoltandrepeal.com).

A more specific plan to replace Act 60 and Act 68 could be proposed in February by the Coalition of Municipalities, a group of 42 cities and towns that has long opposed the state property tax.

The critics of the current school finance system complain that property taxes have risen too far, too fast, driven by excessive spending. One factor, according to a recent report by economists Thomas Kavet and Nicholas Rockler, is that between 1996 and 2006, total school staffing in Vermont rose 22%, while the number of students fell 8.5%.

The House Education Committee is tackling school spending by seeking to answer three questions: What are schools being asked to do? How are they doing it, and can they be more efficient? What’s the fairest way to pay for schools?

Committee Chair Janet Ancel recently said she does not yet know what the answers are, but believes there will be no overnight solution. Ancel indicated the property tax should remain part of the mix of education financing, however.

According to a Jan. 24 article in the Barre Montpelier Times-Argus, she said the arguments in favor of the property tax are: it is a stable source of revenue; it can be levied on out-of-staters who own property in Vermont, unlike the income tax; and it is possible to tax the property of out-of-state residents at a higher rate than the primary homes of Vermonters.

Under Vermont’s current school tax system, there are two school property tax rates, one for primary homes on up to two acres, and another rate – called nonresidential – for all other property. In most towns, the nonresidential rate is higher.

Even among those paying the residential rate, property tax increases are not hitting everyone equally. Many primary homeowners have been receiving prebate and rebate checks based on their income that sharply reduce their net property tax bills. The state sent out about $130 million in prebate and rebate checks in 2006.

Under a new system starting this year, a rebate and prebate adjustment will show up directly on the property tax bill. Some observers believe this may convince Vermonters that their property taxes are really not that high, which is one reason some legislators may be content to wait another year to deal with tax reform.

Those property owners who are not income-sensitized – primary homeowners with incomes over $106,000, and owners of nonresidential property such as land, vacation homes, and commercial property – are unprotected from the ongoing property tax increases, however.

Since they cannot vote here, out-of-state owners of property do not carry much weight in the Legislature. But the majority of nonresidential property in the state is actually owned by Vermont residents, according to state figures. It is these voters – plus primary homeowners who don’t get tax adjustments – who may be most likely to try, and perhaps to suceed, at convincing the Legislature to enact some kind of property tax relief soon.

Legislative Update: Septic Rules,
Ancient Roads, Current Use

• Septic and well rules. The Legislature will pay close attention to the draft septic rules being written by the state Agency of Natural Resources (ANR), and may attempt to pass further legislation on the subject this session.

The draft rules are being written in anticipation of changes in septic law that take effect on July 1, 2007 as a result of a septic bill passed in 2002.

The changes, which are significant, will require some property owners who are currently exempt to obtain a state septic permit when they build a single-family home or replace an existing septic system, or even change the use of a vacation home to a primary home. In some cases, it may turn out that a lot cannot be built on, or a vacation home cannot be “converted.”

As part of the new rules, ANR has been talking about adopting a “clean slate” concept which would simplify title searches and allow a property to keep whatever septic system it has, regardless of whether it was installed legally and complies with any permit.

ANR has also considered requiring that septic systems undergo an inspection when a property sells, at an unknown cost, but it is now not certain this will be in the final draft. However, title insurance companies and banks are likely to require the inspections after July 1, even if the state does not.

• Ancient roads. The state in early December awarded grants totaling $100,000 to 22 towns to help them research and map “ancient roads.” A total of 68 towns had applied for the grants, but the state did not have enough money to fund all the requests.

In January of this year, the House Government Operations Committee voted to recommend that a budget adjustment occur that would provide funding for an additional round of ancient road grants to towns next spring or early summer.

The 22 towns that received grants were: Belvidere, Bethel, Bristol, Craftsbury, East Montpelier, Fairfield, Fletcher, Hinesburg, Huntington, Lincoln, Ludlow, Mendon, Middlesex, Morristown, Pittsfield, Pownal, Proctor, Readsboro, St. Johnsbury, Sharon, Springfield, and Wilmington.

Last spring, the Legislature passed an ancient roads bill which gives towns the option, until 2015, to put abandoned or never-built – but legally created – roads on their highway maps, in most cases without compensating property owners. The roads have been the subject of several lawsuits around the state.

Many towns are expected to try to take action by 2009 because that is the deadline for adding, without compensation, any “invisible” ancient roads – those without any clearly observable physical evidence on the ground.

Whether towns apply for state research grants for the road research is a good indicator of town interest in pursuing the ancient roads issue. Property owners in these towns would be well advised to pay close attention to ancient road research in their towns in the next couple of years. The same goes for property owners in any other towns that apply during the next round of grant awards, expected in the spring.

• Current Use. Some legislators and listers have been unhappy with aspects of the state current use program, which sharply reduces property taxes for owners of farm and forestland, including parcels of 25 acres or more, who do not develop their property while in the program. Among other things, some critics feel the program is being used by wealthy property owners to unfairly avoid property taxes.

A bill is being drafted and is expected to be introduced that would appoint a group to study the entire current use program over the summer, with the idea of proposing appropriate legislation a year from now. One issue that is likely to come up – and that could divide supporters of the program – is whether the penalty for developing land that has been in the program is too low.

Some current use advocates, such as Darby Bradley of the Vermont Land Trust, think it is appropriate to consider raising the penalty for development. But Ed Larson, a lobbyist who represents the Forest Products Association, said his group adamantly opposes a penalty increase.

Presently, the penalty for development is 20% of the value of the property at the time it is withdrawn from the program, but the penalty drops to 10% for property that has been enrolled in current use for ten years.

Gov. Wants Expanded Cell, Broadband
Coverage; Verizon Selling Phone Lines

“Homes that do not have broadband available are becoming increasingly difficult to sell,” he said. “Entrepreneurs looking to start a new business will barely consider breaking ground in a community without good cellular coverage.”

Vermont is the most rural state in the nation, meaning that it has the greatest percentage of its population living outside of metropolitan areas. While that means many people live in quiet and bucolic areas, it also means that it’s expensive to provide them with phone and Internet service.

About two weeks after Douglas’ speech, news broke that Verizon – the state’s largest phone company by far – would be selling its phone lines in Vermont, Maine and New Hampshire, to a small North Carolina company called Fairpoint in a deal valued at $2.7 billion. Verizon will retain its cell phone business in all three states, however.

A Fairpoint executive said shortly after the deal was announced that his company would uphold, and probably exceed, Verizon’s previous pledge to boost its DSL broadband Internet service to 80% of its Vermont customers by 2010.

Verizon has had a mixed history in Vermont, and regulators have fined the company at least once for poor service. State officials have been disappointed at the pace of Verizon’s broadband deployment and say Verizon’s phone service has not been as reliable as they would like.

But the news that Verizon was leaving suggested the company did not see a strong future for land-based Internet services in Vermont. In other more densely-populated states it serves, Verizon is building an $18 billion fiberoptic system that offers extremely fast Internet connections.

Next came word on Jan. 17 that Apple’s new iPhone will not be sold in Vermont because the device’s wireless carrier, Cingular, does not provide service here. Those who sign up elsewhere will be able to get roaming service in Vermont or connect at WiFi hotspots here, but the lack of iPhone availability in Vermont added to the impression that the state has the potential to fall behind in terms of telecommunications technology.

Douglas’ specific proposal was to create a new state telecommunications authority to partner with private enterprise, backing it with $40 million in bonding capability. The authority would promote cell and broadband Internet services in under-served rural areas, and also seek to create at least one WiFi hotspot in every city, town and village in the state.

The Governor said he would propose a series of modifications to the state and local permitting laws that would allow telecommunications infrastructure to be built more quickly, a proposal that may not sit well with some property owners and environmentalists concerned about aesthetic issues. Cell tower projects have not always been welcomed in Vermont.

Most Vermonters do have access to broadband Internet service now if they want it, whether through a phone company like Verizon, a cable company, or a wireless service.

As of April 2006, high speed Internet access of one type or another was available to 84% of all households, according to the Department of Public Service, and that’s probably risen a tad since then.

Chittenden and Rutland counties had the highest percentage of broadband service each at about 95%. The Northeast Kingdom’s Essex County was lowest, with 41%, according to the department.

Expansion of cell phone service in Vermont has also been slow, though resistance to placing cell towers on Vermont’s hillsides has mellowed somewhat in the last ten years, according to state officials. Wireless providers have found ways to reduce the impact of the towers, such as disguising them as trees or tucking them into church steeples.

The state’s immediate goal is to have all the major road corridors – the Interstate highways, and state routes 2, 4, 7 and 9 – fully covered with cell phone coverage by the end of 2007.

One of the two leading cell carriers in Vermont, Unicel, recently reported that, depending on the quality of the phone,  between 74% and 90% of all homes and businesses in Vermont can get Unicel coverage, an improvement by about 10% from the previous year. The other cell phone companies currently operating in Vermont are Verizon and Sprint.

The “Forest Fragmentation and Parcelization Roundtable,” organized by the Vermont Natural Resources Council (VNRC) as part of its Forest Conservation Campaign, plans to have an interim report available in March and to release a final report in the summer, according to VNRC Forest Program Director Jamey Fidel.

Based on roundtable conversations to date, suggestions in the report are expected to include strengthening the state’s current use program, creating better mechanisms to track forest parcelization, improving the long-term sustainability of the state’s forest products industry, and creating municipal planning and technical assistance strategies for addressing parcelization.

Parcelization is defined by Thom McEvoy, professor at the University of Vermont Rubenstein School of Environment and Natural Resources, as “the continual, often insidious, division of land into smaller and smaller parcels, usually resulting from land-use changes from forests and farms to more developed uses, or from bequests.”

McEvoy said that “parcelization of land leads to fragmentation of [its] purpose. The two terms are often confused, [but] one leads to the other and it is ‘fragmentation’ that we should fear.”

VNRC’s  Fidel noted that land sales have been active in the region over the last couple of decades. “[B]etween 1980 and 2005, approximately 23.8 million acres changed hands in the 26 million acre Northern Forest Region,” which includes Vermont, New Hampshire, Maine, and New York, he said.

Although these sales cannot directly be linked to parcelization, the increased real estate action “does signal that there is the huge potential for increasing fragmentation and parcelization on our landscape,” Fidel said.

In Vermont, the number of individually-owned parcels of forestland has increased from “an estimated 61,900 in 1983 to approximately 79,000 in 1993, [and is] correlated with a decrease in the average size of a parcel of land,” according to Fidel.

Estimates released in a 2005 USDA Forest Service report discussing the effects of housing development on forests throughout the United States suggest that housing density will increase from 5% to 40% in forests on important watersheds in Vermont, with the highest projected density increases along the Connecticut River.

“I think most Vermont landowners would be alarmed if they knew housing growth may increase on 40% of the privately-owned forestland in their area,” said Fidel.

VNRC formed the roundtable “to bring diverse people together to share perspectives on the causes of parcelization and forest fragmentation and to develop a final set of recommendations to address the rate at which forestland is being developed and fragmented in the state,” Fidel said.

The group has included consulting foresters, sportsmen, regional planning commissions, biomass energy groups, and conservation groups, among others. 

It has considered a wide variety of issues and expects its report to include recommendations in four areas: tax policy, planning strategies for forestland conservation, strategies for valuing ecosystem services and functions, and strategies for keeping the forest products industry sustainable.

In addition to developing policy initiatives, VNRC is also working with local and regional planning commissions to prevent parcelization, Fidel said. This partnership will help communities create local planning and zoning strategies that work toward sustainable growth and forestland conservation throughout the state.

Preserving Vermont’s rural character in the face of real estate development pressure is something that many Vermont property owners support, according to VNRC, but doing something about it may be a challenge. “Curbing the rate of forest fragmentation and parcelization will take many strategies, and there is no silver bullet recommendation to address the issue,” Fidel acknowledged.

The “Next Generation Commission” was formed to address issues related to a concern that employers may have trouble finding skilled workers in the future because Vermont’s population is aging and some young people, especially better-educated ones, are leaving the state, a problem that will be exacerbated if they are not replaced by similarly educated out-of-state workers.

The changing demographics of Vermont – where the average age is higher and is going up faster than in the nation as a whole – have been the subject of considerable discussion in the last year. A recent report by two Vermont economists on the topic entitled Off the Rails was recently released, and a mid-January economic conference focused on demographics as well.

A year ago, Gov. Jim Douglas sought to address the issue by proposing a scholarship program for Vermonters who attend college in-state and agree to stay in Vermont after graduation. The Legislature rejected the idea, but agreed to the formation of a commission to study the state’s demographic situation. The Next Generation Commission’s charge was to develop a plan to encourage Vermonters to live and work in Vermont.

The plan, released in December, notes that demographic change is not unique to Vermont. Across the nation, baby boomers are entering retirement while young people are leaving their home states for a fresh and different experience.

Current predictions are that the total number of Vermonters over 65 will double during the next 25 years, the report says, while the number of taxpaying adults will remain approximately the same. The report notes that the fastest-growing jobs in Vermont require postsecondary education, but the young people most likely to stay here are those without any postsecondary education or training.

The commission recommends significant investment from the state in postsecondary education, scholarships, loan repayments for individuals working in targeted sectors, and workforce development, and it supports efforts to strengthen students’ career awareness and educational aspirations at all grade levels. The report says the Legislature should allocate $5 million this year to these programs, with appropriations rising each year to $11 million in fiscal year 2012.

An even bleaker portrait of the state’s future is contained in the Off the Rails report, authored by Vermont economists Arthur Woolf and Dick Heaps under a contract from the Ethan Allen Institute, a free-market oriented think tank.

With an older population and a relative shortage of people of working age, those who are working, and their employers, will have to shoulder ever-higher burdens of taxation to support the state’s soaring expenditures in public education and human services, the report says. If current trends continue, by 2030 Vermont will need to spend all of its revenues on just those two items, it states.

On Jan. 12, at an annual economic conference sponsored by Woolf and Heaps, demographics expert Peter Francese argued that Vermont should be concerned that population growth here is lower than in the rest of the nation, and that the state has the second-lowest birth rate in the nation.

Vermont is losing young people and gaining retirees and second homebuyers, he said. “I don’t think you want your economy of the future to basically be a theme park for the rest of the nation, and a retirement home,” Francese asserted.

Some Vermonters appear to be skeptical of the need to boost population growth, or the view that the state is facing a crisis. Recent letters to the editor and op-ed articles on the topic have included the following comments:

• Wally Roberts,  director of a senior center in Williamstown, wrote that several surveys of baby boomers have found that 85% desire to work beyond typical retirement age. If boomers continue working, this will increase the size of the workforce and reduce the funds the state will need to provide social support to the elderly, he argued.

• Tom McKenna of Montpelier said that other states with faster population growth, more sprawl and heavier traffic are probably envious of Vermont. “Perpetual population growth is impossible on a finite planet with declining resources, like fossil fuels,” he said. By coincidence, on the same day his letter appeared, the Burlington Free Press ran a front-page story about growing traffic problems in the Burlington area.

• Doug Hoffer, an independent policy analyst from Burlington, contended that the Off the Rails report is both inaccurate and is being used to promote cutting taxes and the size of the state government. He said that the predicted rise in the state’s human services costs can be negated through fundamental reforms, and argued that if more state revenues are needed, Vermonters would find additional taxation of the wealthy acceptable.

But former state economist Woolf, an author of the report, said in his own letter to the editor that even if the boomers work long past the typical retirement age, the “most worrisome trend” is the soon-to-be shrinking labor force of younger people.

“Planning for that change and coping with all of the associated economic and fiscal implications will be one of the biggest challenges the state will face in the coming decades,” he wrote.

As the Legislature concluded its first month in session, it was not yet clear what, if any, steps may be taken to address demographic concerns.

State Warms To Sheffield Wind Farm;
Permit Also Sought For So. Vt. Project

Meanwhile, a second developer has filed for state permission to build 15 to 24 wind turbines on National Forest land in Searsburg and Readsboro in southern Vermont, and a third company announced it is scouting for locations in southern Vermont.

Wind farm proposals have been controversial in Vermont. Supporters say the state needs alternative energy sources at a time of high energy prices and global warming, while opponents object to the size and scale of the wind farms, which they say will industrialize Vermont’s ridgelines.

Earlier this year, the state Public Service Board – which must approve new wind farms in Vermont – rejected a four-tower project in East Haven, saying the developer did not provide enough information about the effects on migrating birds and bats.

The Sheffield proposal appears to be the next wind project that could be ruled on by the Board, with hearings scheduled to start in the next few weeks. The developer, UPC Wind, hopes to receive approval by May and begin construction by fall.

The project still faces opposition, however. While the town of Sheffield supports the project, townspeople in Barton – who would have a view of the towers across Crystal Lake – unanimously voted to oppose the plan, and the town of Sutton earlier approved funds to oppose the project.

In addition, the state’s Division of Historic Preservation has objected to the project because of its potential aesthetic impact on Crystal Lake State Park, which is included on the National Register of Historic Places. Dropping the two turbines in Sutton makes the project somewhat less visible from Crystal Lake, the company claims.

When it reduced the number of towers from 26 to 16, UPC also increased their height from 399 feet to 420 feet. A wind tower opponent in Sheffield, Greg Bryant, said “the size of these towers is unprecedented in Vermont. They’re the size of buildings in Boston.”

But David O’Brien, head of the Public Service Department, said the revised plan “is certainly responsive to concerns raised by the department and other parties.” He said that Gov. Jim Douglas has not changed his views of large-scale wind projects, however.

“The administration is certainly not excited about the industrialization of the ridgelines,” O’Brien said. “It’s something we are exceedingly cautious about.”

Wind farms have also been discussed for other locations in the Northeast Kingdom, as well as on mountaintops in Londonderry, Manchester, and around Townshend. The wind project in Searsburg and Readsboro that was just officially proposed by Deerfield Wind is near an older existing wind farm of 11 smaller wind turbines in Searsburg.

Recently, another out-of-state wind developer – Noble Environmental Power – said it was researching potential wind sites in Rutland, Bennington and Windsor counties, including Grandpa’s Knob near Rutland, where an early wind turbine was operational decades ago.

A spokesman said it would be another year before the company, which is actively developing wind farms in New York state, proposes something for a specific location in Vermont.

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