Vermont governor: Increasing school costs and ‘09 tax increases are hurting state economy

Vt. gov: Reform school funding, trim tax increases

MONTPELIER, Vt. — Gov. Jim Douglas devoted nearly half of his final State of the State address Thursday to reforming and spending less on Vermont’s public schools, saying the cost had doubled in the past decade and, without changes, would grow by another 26 percent within three years.

“Containing costs is the only way to halt the climb of property tax bills and make our state affordable for families and businesses,” Douglas said. “No longer can we settle for the old paradigm that says the only way to improve education is to spend money to hire a teacher for a classroom.”

In a speech lasting about 40 minutes, the outgoing Republican governor, who announced last summer he won’t seek a fifth two-year term in 2010, called for reversing tax increases passed last year, expanding broadband Internet and cell phone service to all corners of the state and expanding tax incentives for businesses to create jobs.

“Mere ‘recovery’ is not enough for Vermonters who have persevered through this long season of decline,” Douglas said. “We must strive for a healthy and growing economy, prepared to compete with states next door and countries around the world.”

Leaders of the Democrats who control both the House and Senate did not respond in detail to Douglas’ speech, saying they’ll wait to do so when he gets more specific in his annual budget address, set for Jan. 19.

“We’ll be ready as soon as the administration is ready with its proposals,” said House Speaker Shap Smith, D-Morristown.

But both Smith and Senate President Pro Tem Peter Shumlin, D-Windham, made clear they would be ready to do battle with Douglas if he tries to cut school spending too deeply.

Smith spoke of the excitement of his son, a second-grader, has about school and urged colleagues to keep kids foremost in mind.

“If we forget what it’s all for, we’ll have lost our reason for being here in the first place,” the speaker said.

Douglas said he wants to increase Vermont’s lowest-in-the-country student-teacher ratio from its current 11-to-1 to 13-to-1, replacing each two of a soon-to-retire cadre of Baby Boomer teachers with one new hire.

The governor also said he wants to reduce what the state spends to help low- and middle-income Vermonters pay their school property taxes. The “income sensitivity” feature built into the state’s complex system of state aid to schools will cost $183 million in 2012 if it isn’t changed — 54 percent more than four years earlier, Douglas said.

“The choice between directing education resources to our children and growing this subsidy is an easy one,” the governor said.

On taxes, the governor asked lawmakers to reverse last year’s lowering of the exemption from the state’s estate tax, which Douglas labeled unfair to farmers and small business owners who want to pass on their properties to their children. Lawmakers last year lowered from the first $3.5 million of an estate’s value to the first $2 million the amount exempt from the estate tax; Douglas wants to raise the exemption back to $3.5 million.

Douglas also wants to reverse some changes made in the income tax last year that affect people who pay taxes in more than one state.

Shumlin said the Legislature would consider the governor’s tax-cutting plans, but noted the state is already grappling with a budget gap estimated at $150 million.

“What the governor just proposed is to reduce Vermont’s revenues by about $28 million” — worsening the budget problem, Shumlin said.

On job growth, Douglas said he wants to lift a $10 million cap on tax incentives for businesses promising to create jobs.

The governor also said he wants lawmakers to OK allowing the Vermont Yankee nuclear plant a 20-year extension on its license, which is currently set to expire in March 2012. The license renewal also needs approval from the state Public Service Board and federal Nuclear Regulatory Commission.

Vermont’s is the only Legislature in the country that has given itself a say over a nuclear plant’s re-licensing. But Douglas urged lawmakers essentially to take a pass, saying “it’s a decision that should be left to the federal and state regulators — away from the political fray.”