March 12, 2020

By Rob Roper

Act 46, the mandatory school district consolidation bill passed in 2015, was sold with the promise that it would lower the cost public education in Vermont. It has not lived up to that promise (get ready for a massive property tax increase) with one very interesting exception: The Northeast Kingdom School Choice District.

One key provision of Act 46 was that “unlike” school districts (those that offer school choice through tuitioning versus those that don’t) could not be forced to merge. As such, a collection of ten alike K-12 tuitioning towns in the Kingdom merged into a mega school choice district. And, according to the Caledonian-Record:

Superintendent Karen Conroy, who serves the Essex North Supervisory Union and the NEK School Choice District, said on Monday, “We had a large surplus with the estimates high on tuition from last year that is being used to offset our expenditures. With a better handle on the tuition rate increases and our enrollments, we proposed a budget decrease of $436,098 and with the surplus from the prior year of $696,090 our education spending request from the state has decreased by $1,119,300.”

Conroy said, “Based on our current tuition rates, the average costs to educate a student in an independent school is $15,700.75 per pupil and the average costs for a public school enrollment is $16,330.08.”

As a result, of the ten towns in the district six will see decreases in their property tax bill. This at a time when the rest of the state is looking at an average increase in the 4 to 6 percent range. Burlington is looking at a 7.4 percent property tax increase.

So, in conclusion, not only does school choice produce high quality schools such as St. Johnsbury Academy, Thaddeus Stephens School, and The Riverside School, but it is cheaper to educate children in these schools than it is in traditional public schools. And, overall, administering a school choice system is considerably more efficient than administering a traditional public system.

Something to think about when you get open your next property tax bill.

Rob Roper is president of the Ethan Allen Institute

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David Coates

by David Coates

Vermont’s $4.6 billion liability for the state workers and teachers pensions and retiree health care benefits (OPEB) increased by $171 million for this past year ended June 30, 2019, and over 110 percent since 2008. This increase was despite continued assurances by policymakers that they had a plan to pay off these obligations over the next 20 years.

Certainly, there is no evidence to date to corroborate the state’s claim, without some combination of increasing taxes, reducing benefits or cutting existing programs, which the state has been reluctant to do. At this point in time, policymakers need an independent analysis of these benefit plans.

I have been writing about the dangers of these unfunded liabilities and talking to various groups as well for over ten years. Unfortunately, the people who are in elected positions and could or should have taken action, haven’t. The unions, for their own vested interests, have successfully downplayed the urgent state of affairs during this time. But, the legislature in particular, has a fiduciary duty to address these issues in a process that is free of conflict. 

The state now pays over $200 million per year (and increasing each year) to fund just the pension plans ($2.3 billion in unfunded liability) and, meanwhile, chooses to not fund the annual required payments of around $80 million for the retiree health care benefit plans ($2.3 billion in unfunded liability).

Our top pension priority should be protecting the benefits promised to current beneficiaries, and state employees and teachers.  Keeping the existing program plans in place for new hires is necessarily a secondary goal, assuming the funding is available to do so…… but the  funding certainly isn’t available now. The state needs an independent analysis of these plans that will test not only the state’s ability to pay for our liabilities under different market and economic situations, but to ensure that the participants will get the promised benefits. And, this test needs to be conducted on a regular basis.

Several states now require these rigorous stress tests using a nonpartisan, data-driven approach that provides transparency and assesses current and future funding requirements. Such a comprehensive test in Vermont will provide lawmakers with an independent assessment of potential costs and liabilities.

This past year, the state engaged Segal Consulting, the state’s actuary, to perform a risk assessment of just the pensions plans, which you might argue presents a conflict of interest; this is not to be confused with a more complete stress test analysis. The stated primary purpose was to evaluate the reasonableness of current rate of return assumptions for the funds now invested. The current assumption is 7.50 percent, but the actual rate for the last fiscal year was 6.1 percent, and the rate of return over the last twenty years has been less than 6 percent. This means that each year the state has to make up the difference in additional contributions to the pension plans to make up the difference between the assumed and  actual rates of return.

As a side note, in 2008 the actuary projected the 2019 pension liability would be $527 million. The actual liability as reported by the actuary, as of fiscal year ending June 30, 2019, is $2.3 billion. How could they miss by over 400%? I think Vermonters need some answers.

Across the country, most other states are using lower assumed rates of return. This is just one of the reasons why an independent stress test is critical for all of these plans, the health care and retirement plans for both state employees and teachers.  But there are other, equally important reasons why a complete stress test is warranted and is sound public policy.

All Vermonters should be concerned, especially our legislators and the three retirement boards, whose policy making legacies will be the health of these funds for both plan participants and taxpayers. Currently, they’re not healthy at all.  

David Coates is a member of the Vermont Business Roundtable’s Pension Reform and Health Benefits Task Force. Read the Vermont Business Roundtable’s recent “Policy Options for Vermont State Employee and Teacher Pension and Health Care Retirement Systems” Report Here.

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March 5, 2020

By Rob Roper

Vermont now has a $4.5 billion unfunded public pension liability for teachers and municipal workers. The politicians who created this problem are slow (stationary, actually) to take up the task of fixing this because the numbers are huge and telling someone they’re going to have to suck it up and pay does not promise to be a politically popular activity.

But who should take the hit? Taxpayers or Union Members? Actually, morally speaking, neither.

The reason we’re in this mess is because the politicians charged with building and maintaining the pension system chronically underfunded it on the one hand, and on the other engaged in some book-cooking by making blatantly unrealistic estimates on investment returns, which led to further underfunding.

Why did they do this? Because they wanted to spend the money on other programs. Money socked away in the pension funds, which benefits some in the future, couldn’t be spent on this or that thing constituents were clamoring for today.

Here’s an analogy: You contract with a builder to construct a house (the pension program) for your aging parents (Union members), who are also contributing to the costs. The contract (state statute) stipulates that the builder must spend the money you and your parents give him on materials and labor to construct and maintain the house. But, when it’s time for your parents to move in, it turns out that the contractor didn’t use a good chunk of funds provided to build and maintain your house. He used them to subsidize other projects he was working on around the neighborhood. Maybe they were worthwhile projects: a firehouse, low income housing, a new rec center. But what the contractor did would still land him in court. It was neither honest nor just.

So, who should shoulder the responsibility and financial costs of making this right?

Not the taxpayers. Taxpayers have already provided the politicians with the money to build and maintain the system. To make them pay again would be like in the example above, the contractor telling you that, despite his malfeasance, if you still want your house built, you’ll have to pay him again, in this case through even higher taxes. Um… no.

Not the union members. Whether you agree with the benefits promised or not, they were promised, and that promise should be kept. That your aging parents, again referring to my analogy above, recommended the contractor and keep insisting that he’s a great guy (ie. support the politicians who did this to them) is a question for another time.

The money to fix the pensions should therefore come from within existing government revenues. The politicians who put us in this position should have to bite the bullet and make the hard decisions necessary to make the taxpayers and the union retirees whole. What the contractor did in my analogy was a crime. We don’t hold our politicians to the same standards (unfortunately), but perhaps a just sentence for what they did is having to shoulder the political ramifications of their actions.

Rob Roper is President of the Ethan Allen Institute

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March 5, 2020

By David Flemming

The rest of the United States still has a long way to go if our fellow Americans are to catch up to us Vermonters. In 2016, Vermont had 9.6 emissions per capita, down from 11.1 in 2000.

That tells a very different story than the one we are often told that “Vermonters are emitting more CO2, and need additional environmental regulations to stop this excess.” It makes much more sense to measure our CO2 in per capita terms than it does in absolute terms because individuals moving away from our state due to a high cost of living will emit more emissions than they do by sticking around here.

While we have been emitting more overall, our population has grown form 597,000 in 2000 to 623,000 in 2016. We already have the 7th lowest emissions per capita, but have one of the slowest growing economies in the country.

As the US economy has been humming along, Vermont has been struggling to reconcile its commitment for ‘reducing CO2 emissions’ with a commitment to a higher standard of living for its residents.

Both Vermont and the US are expected to have lower emissions in the coming decades. If both follow their trends of the past 16 years, America will have per capita emissions equaling Vermont’s 2016 per capita emissions by… 2044. And of course by that point, we can expect Vermont’s emissions to drop event further.

It will be easier for a state like Nebraska to reduce their emissions from 25 metric tons per capita (as of 2016) to 15 metric tons per capita, than it will be for Vermont to reduce our emissions from 9.6 metric tons per capita to 0 metric tons. After all, Nebraska saw a net increase in emissions from 24.3 to 25.4 metric tons per capita from 2000 to 2016. In that time frame, Nebraska’s per capita GDP increased $9000 from $42,000 to $53,000.

Meanwhile Vermont’s per capita GDP only increased $6000 from $38,000 in 2000 to $44,000 in 2016. There is tradeoff between emissions and GDP. Vermont has been taking extreme measures to reduce emissions. It goes without saying that we would need to take absolutely brutal measures on income levels to curb emissions further.

So long as our emissions are inconsequential in the global scheme of things, we ought to feel more of an obligation to raise incomes rather than to reduce emissions.

David Flemming is a policy analyst at the Ethan Allen Institute

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March 3, 2020

By John McClaughry

Here’s some good news about ever rising college tuitions. Last month Purdue University announced that tuition at the university’s flagship West Lafayette campus will hold at 2012 levels through 2021-22, marking the ninth straight year of no tuition increase.

Purdue President Mitch Daniels said Purdue will continue its strategy of investing in people and priority initiatives, and will provide a 3% salary merit pool for campus employees for the fiscal year that begins next July 1.

Had Purdue raised tuition and fees and room and board at the same rate as comparable institutions, Purdue families would have spent a combined $600 million more over the past seven years. A graduating in-state student who has lived on campus the past four years has saved over $12,000 compared with the rate increases at other universities; and an out-of-state student has saved over $31,000.

Daniels reported that the number of Purdue students who graduated debt-free in 2019 was 59% compared with 43% nationally. Annual student borrowing at Purdue is $126 million, down one-third since 2012, and debt per undergraduate for 2019 stands at $3,558, down $1,900 since 2012.

How can Purdue do this? It can do it by hiring an extremely competent President committed to quality education and spending restraint. Daniels was the nation’s best governor for eight years and probably could have been reelected forever. His lieutenant for several years at Purdue was Suresh Garimella, now president of the University of Vermont.

John McClaughry is vice president of the Ethan Allen Institute

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March 3, 2020

By John McClaughry

Over the past thirty years of arguing for parental choice in education, I could always count on a left wing opponent, usually an ally of the teachers union, saying “Rich people can get their children to school, but poor people can’t afford transportation and will be left out.”

When faced with that, I would say that in my small town in the Northeast Kingdom, that has closed its last school years ago, we don’t provide bus transportation, but somehow, amazingly every school child is transported to the school of their parents’ choice.”

Left wing types can’t swallow this, because unless here is a government program to move kids around, kids are fated to live forever in rural isolation.

Now Kirby is part of the ten town Northeast Kingdom Choice District. That district has three hundred kids in school. It provides no transportation. Yet those three hundred kids attend twenty six schools in Vermont and New Hampshire, including 20 to Lyndon Institute and 28 to St. Johnsbury Academy, and somehow they all get to school.

The reason is that concerned parents in supportive communities get busy and solve problems, without setting up some overarching tax supported government bureaucracy to do it for them. My own children attended St. Johnsbury Academy for seven years, and rode with a neighbor who was a teacher there.

Moral to the story: don’t dismiss the capacity of people to solve their own problems.

John McClaughry is vice president of the Ethan Allen Institute

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By Rob RoperRob Roper

We all want clean hands, especially during this cold and flu season, but we don’t want to be obsessive/compulsive about washing to the point where our skin becomes cracked and bloody. We don’t want to become obese, but neither do we want concern for our weight to develop into an eating disorder such as anorexia. We all want a healthy planet, and we want our government to play an important role in protecting our environment, but what’s happening in the Vermont legislature today has crossed the line into what amounts to an obsessive, dangerous, and unhealthy disorder.

The Mayo Clinic’s page on anorexia describes the disease as “an intense fear of gaining weight and a distorted perception of weight. People with anorexia place a high value on controlling their weight and shape, using extreme efforts that tend to significantly interfere with their lives…. No matter how much weight is lost, the person continues to fear weight gain. Anorexia isn’t really about food. It’s an extremely unhealthy and sometimes life-threatening way to try to cope with emotional problems. When you have anorexia, you often equate thinness with self-worth. Anorexia… can take over your life….”

Now re-read that paragraph and replace the words “anorexia” with “climate anxiety,” “weight” with “greenhouse gas emissions,” and “food/thinness” with “climate change.”

This sounds like a lot of our legislators as well as many of the activists parading through the committee rooms testifying on environmental policy. Climate change – specifically greenhouse gas reduction – has taken over the life of the State House.

Vermont is already spending over $200 million a year on programs aimed at greenhouse gas reduction (weatherization, renewable energy subsidies, electric vehicle subsidies and infrastructure, other clean transportation initiatives, etc.) This is twice what we spend to pave our roads ($104 million), five and a half times what we spend on clean water ($35 million), and eight times what we spend to support higher education ($25 million). Despite this, a majority of legislators want Vermont to join the Transportation Climate Initiative (TCI), a regional carbon tax on gas and diesel that would cost Vermont drivers up to another $90 million a year. This isn’t a healthy balance.

Extreme efforts that interfere with our lives? One hundred five house members just voted for the Global Warming Solutions Act (GWSA), which mandates that Vermont shed greenhouse gas emissions 50% below 1990 levels by 2030 and 80% by 2050. The law would subvert the democratic process of lawmaking via elected representatives and empower bureaucrats at the Agency of Natural Resources to make and enforce whatever rules are necessary to meet the mandates, regardless of their impact other areas of our lives and economy. What rules? We don’t know.

GWSA is another case of having to pass the law to bill out what’s in it. But some possibilities include banning ATVs and snow machines, banning backyard barbeques, wood stoves and fireplaces, banning rider mowers and gas powered leaf and snow-blowers. They could prohibit you from cutting trees on your own property or mandate that you retrofit your home to new environmental standards before you’re allowed sell it. Whatever it takes to shed those CO2 numbers. How much would this cost? They don’t know that either and they don’t care. But it will be an astounding number.

No matter how much, it’s never enough? As Tom Evslin recently pointed out in his excellent analysis, Vermont Is Already Carbon Neutral, “Vermont’s forests may already be taking more greenhouse gasses (GHGs) out of the atmosphere than all our cars, trucks, furnaces, generators, cows, etc. are emitting.” Vermont is doing its part. We are at a healthy weight. But when these folks look in the mirror, all they see is fat.

Self-Worth? It’s obvious that the people driving this effort have cast themselves in the role of heroes saving the planet. Their sense of self and self-esteem is wrapped up in this one issue. They don’t care about anything else, such as their constituents’ ability to afford gasoline and heating fuel, or the state’s economic stagnation, or the unaffordability or availability of housing. Rep. Bob Hooper (D-Burlington) said on the floor of the house in explaining his support for the Global Warming Solutions Act that his constituents were “afterthoughts” in the climate change debate. That’s not a healthy or normal attitude regarding people whose interests you’re supposed to represent.

Our state government has many issues it needs to address: a $4.5 billion public pension liability, an education funding system that is out of control, a demographic crisis driven in large part by high cost of living just to name a few. Yet, when she became Speaker of the House, Mitzi Johnson (D-Grand Isle) said, “I’m asking every committee in the House to work on some piece of legislation within your jurisdiction that lessens Vermont’s dependence on fossil fuels, reduces our carbon footprint….” That’s not a healthy balance, that’s an unhealthy obsession. It’s time for an intervention.

– Rob Roper is president of the Ethan Allen Institute.

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February 28, 2020

By David Flemming

Vermont is falling behind the rest of the United States economically. Many Vermonters have been well-aware of this for a while now. But news of our lackluster economy has reached the shores of the United Kingdom.

The Economist, published in London, England, is a left-leaning magazine. It recently published an article entitled: “The road not taken: As wages grow across America, one state is left behind.” Any guesses? Yup. Vermont.

The author writes, “on both a per-hour and per-week basis, Vermont has seen the weakest wage growth of any state in the past decade, despite a rapid rise in the minimum wage and low unemployment. Real wages remain lower than they were when the last recession ended. What has Vermont got wrong that much of the rest of America has got right?”

Notice how they mention “a rapid rise in the minimum wage” in the same breath as “real wages remain lower.” That’s not possible unless you raise the minimum wage and employers are forced to cut back hours, resulting in less pay per week.

The article concludes that “weak earnings growth is in part the product of a relatively weak economy. In the past decade Vermont’s gdp has grown at two-thirds the rate of America’s. Critics point to a mountain of red tape and regulation. The state comes close to the bottom of various indices of ‘economic freedom’ produced by libertarian think-tanks. These may be rough and ready (ie: crude but effective) but, when it comes to the regulation of land, small-government types may have a poi.”

And, yes, I bring this up in the week our legislators voted to both increase the minimum wage and “reform” Act 250 by making it more expensive, complicated, and uncertain to comply with on purpose.

Sometimes, all it takes is for a legislator or neighbor to hear something from an objective voice to change their mind. The Economist has given Vermonters as objective an insight as they are likely to find. Before Vermont can move its economy forward, a sizable number of us will have to realize the true costs of overregulation.

David Flemming is a policy analyst at the Ethan Allen Institute.

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February 27, 2020

by Rob Roper

Throughout the debate over The Transportation Climate Initiative (TCI), the convoluted scheme to squeeze up to $5.6 billion out of New England and Mid Atlantic state drivers under the thin façade that it’s really not a Carbon Tax, the one never-wavering cheerleader for the idea was Massachusetts. Not anymore.

According to Commonwealth Magazine, the $600 million transportation bill just put forward counts on zero revenues from TCI. House Speaker Robert DeLeo “called the future of TCI ‘very iffy,’ noting that no other state has committed to it. ‘It does not appear the TCI concept is catching on as we’d hoped it would.’”

Additionally, Chris Dempsey, director of the advocacy group Transportation for Massachusetts, lamented, “We think TCI has the potential to be a transformational policy, and the House language seems to diminish the potential importance and value of TCI….”

This realization that drivers (who vote) throughout the eleven remaining states still at the TCI table have no interest in paying and extra 17¢ a gallon for gasoline and diesel shouldn’t be a shocker. New Hampshire has already declared it has no intention of ever participating in what Gov. Chris Sununu called “a boondoggle,” and Virginia, a big fish in this pond, declared it has no intention of participating at this time.

Perhaps it’s time to put this sad concept out of its misery once and for all.

Rob Roper is president of the Ethan Allen Institute. 

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By John McClaughry

In January 2019 the commission to review and update Act 250 presented a well written report. Its recommendations are now the subject of 94-page bill (H.926) to dramatically reshape the state’s land use and development act.

On the plus side, in light of its 50 years in force, Act 250 was certainly due, or overdue, for thorough reconsideration. This is especially true since the bill that became Act 250 was thrown together over one desperate weekend, to “put the brakes on land development”.  I know, because I was an active participant in that process in the House and voted for it.

On the minus side, a brief trip through the report and bill show that the six legislators on the commission were pretty clearly chosen to bestow every imaginable policy victory upon the Vermont Natural Resources Council, the organization that has battled for stronger regulation over Vermonters’ use of land ever since the Act passed.

Back then, to its acute dismay, VNRC lost its battle to enshrine “social property” in place of “freehold property”, and it gnashed its organizational teeth as the third and feeblest State Land Use Plan finally perished in the Senate in 1976.  But now, with a liberal legislature eager to reward its every desire, VNRC’s fortunes have revived.

Much of the “reform” bill involves complicated legal and procedural questions, some with good arguments on both sides. Here are just eight of its key features.

First, this is now a bill to protect us from the Menace of Climate Change.  It recites the previously enacted (2013) climate change mantra – and of course declares CO2 emissions to be not plant food, but climate-wrecking “air pollution”.  An applicant must show that his or her development would not release an “undue” amount of it, which in the view of certain regulators could often mean “none”. The report even offers the specter of desperate “climate refugees” driven to Vermont “as Northeast coastal populations are increasingly impacted by rising sea levels.”

Second, the regulatory power will now be lodged in a three-member “Natural Resources Board”, appointed like Superior Judges to serve like PUC members. The Super Board members must have expertise in “environmental science, natural resources law and policy, land use planning, community planning, environmental justice, or racial equity” and must also reflect “the racial, ethnic, gender, and geographical diversity of the State.” The nine District Environmental Commissions will survive, barely, but will act only on minor applications and supervise compliance with permits.

Third, the VNRC gets its yearned-for regulation to protect “forest blocks” from “fragmentation”. This means no more development in rural areas where wandering wildlife might be deterred from crossing from one forest block to another. One may be forgiven for suspecting that this is motivated more by the urge to keep people’s homes from despoiling the arcadian landscape than solicitude for the wildlife.

Fourth, and similarly, the costly burden of struggling through the permit process will be eased in designated downtown centers where future residents are expected to cluster.

Fifth, the range of regulatory interest now extends to the development’s surrounding the “ecosystem”. Since everything in an ecosystem is linked to everything else, the applicant’s burden of proving no undue adverse impact will become ever more demanding.

Sixth, Act 250 now gives regulatory scrutiny to development that might adversely impact nearby public investment, like highways, airports, and sewage plants. That’s fair enough, but now public “investment” will include private rural property on which the Housing and Conservation Board has a no-development easement.

Seventh, after a last minute shakedown the sponsors of the bill agreed to require permit applicants to guarantee “environmental justice”. That is defined to mean “the right to equal environmental protection under the law and the right to live, work and play in communities that are safe, healthy and free of life threatening conditions.” The bill does not deal with whether the groups who believe they might be denied this newly-declared right to “environmental justice” can sue to block a development that doesn’t give them enough of it.

Finally, the bill fails to put an end to regulation by planning commission. At least three times the Supreme Court has curbed local enthusiasm for regulating developments by vague goals of a town plan. Zoning, adopted by a vote of the town, is regulatory law. Town plans are not regulatory, but aspirational. The bill gives the Super Board the power to control local and regional plans and, unconscionably, keep on using them to regulate.

In sum, the “New Act 250” is a concerted effort to make Vermont into the Perfect Little Climate-Conscious State, erecting ever greater barriers to development, and ruled from Montpelier, from whence the Super Board can best perceive the Greater Good.

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