MONTPELIER — Gov. Phil Scott stood side-by-side with legislative leaders Wednesday morning to announce a deal on how to save property tax dollars on teacher health care plans, an issue that held up the end of the legislative session last month and led to vetoes of the state budget and property tax yield bill.
Wednesday was the first of a scheduled two-day veto session after Scott, a Republican, vetoed the state budget and a the yield bill, which sets property tax rates, because lawmakers did not include his demand to save up to $26 million on the cost of teachers health care plans by, in part, creating a statewide negotiation for health benefits.
The day began with Scott, House Speaker Mitzi Johnson, D-South Hero, and Senate President Pro Tem Tim Ashe, D-Chittenden, holding a State House news conference to tout the accord. Scott said the deal “will help the state achieve significant savings in the Education Fund” and “will set property tax rates at or below fiscal year 2017 levels.”
“The resolution reached is indeed a compromise, but it’s a good one that saves taxpayers millions. We found areas of common ground and we each gave on areas where there was none,” Scott said.
But all three also acknowledged that the secretive negotiations they used to strike a deal, and even the deal itself, were not ideal.
“I think compromise is successful when nobody gets everything they want and nobody walks away with their last choice option,” Johnson said.
Scott said all stakeholders have issues with the compromise but said reaching a deal that ensures some property tax savings for Vermonters is in the state’s best interest.
“I would say that there’s something to dislike about every aspect,” the governor said. “Sometimes when you get to that point it means you’ve made a good compromise.”
Scott may have given up the most in the negotiations. He did not achieve the statewide negotiation or health plan he originally sought — nor will the state achieve the “up to $26 million” that Scott and his allies repeatedly touted over the past two months.
The teacher health are issue quickly dominated the 2017 legislative session after Scott began demanding in mid-April that the state capture from local school districts potential savings that will arise from new health care plans offered to all Vermont teachers in January. Those plans will have lower premiums but higher out-of-pocket costs.
The governor’s plan called for covering the higher out-of-pocket costs with the $75 million in projected premiums savings, leaving up to $26 million leftover. The governor and Democratic legislative leaders had significant disagreements about how to achieve the savings, however. Democrats insisted the governor’s approach would would infringe on the collective bargaining rights of teachers, while Scott rejected Democratic proposals because they did not ensure savings.
The compromise unveiled Wednesday after weeks of secret negotiations between the administration and Democratic legislative leaders will require local school districts to save $13 million over the next two fiscal years. Contract negotiations will remain at the local level, but local teachers unions and school boards will have a benchmark health plan to aim for to determine expected costs.
Johnson said the deal will not impact collective bargaining rights — traditionally defined as the right for employees to negotiate directly with their employer on benefits.
“We don’t believe it does because … it does not in any way constrain what a health care contract could look like,” the speaker said.
The benchmark plan is the gold level Consumer Driven Health Plan offered by the Vermont Education Health Initiative, with teachers covering 20 percent of premiums and school districts covering 80 percent. The compromise calls for the Agency of Education to determine what districts spent on health care for teachers and support staff in fiscal year 2017 and determine what should be spent in fiscal year 2018 based on teachers and staff utilizing the benchmark plan, plus an additional 5 percent cost cushion.
The state will then withhold 65 percent of the projected savings from schools in fiscal year 2018 and 35 percent of the savings in fiscal year 2019. The total savings for property taxpayers is expected to be $8.5 million in 2018 and $4.5 million in 2019.
Districts that do not negotiate health care contracts with teachers that achieve the savings identified by the Agency of Education will be force to cut their budgets elsewhere to account for the reduce payments from the state.
Also included in the deal:
— A directive that all health care contracts between teachers unions and school districts not already in place by July 1 end between July and September of 2019.
— A commission to study the merits of a statewide teacher health care contract, with a report due back in November.
— Homestead property tax rates will remain the same as previously passed by the Legislature, but the non-residential property tax rate will decrease by 2 cents.
The plan drew swift and strong blowback from the Vermont chapter of the National Education Association, the teachers union that represents most teachers in Vermont.
“The best thing that can be said about this compromise is that it prevented the complete takeover of collective bargaining over health insurance sought by the governor, the Vermont School Boards Association and the Vermont Superintendents Association,” spokesman Darren Allen said. “This was a backroom deal inspired by a [Washington] D.C.-style government shutdown threat and the discussions included nobody who’s directly affected, as far as I know.”
Nicole Mace, executive director of the Vermont School Boards Association, said the compromise plan will be challenging for school districts who have already settled teacher health care contracts through negotiations for the 2018 fiscal year that starts July 1.
“We’ve got 17 or 18 teacher contracts,” Mace said. “Based on what I’ve seen, none of them meet the target so that’s going to mean they have to make cuts elsewhere or dip into reserves or deficit spend. That’s going to be tough.”
Mace also said the deal is flawed because like the previously passed yield bill relies on a significant chunk of one-time funding to reduce property tax rates. That money may not be available in future years, which would require a spike in property taxes to raise the additional funding.
They bought down the rates using $35 million in one-time money and I think as a state we’re going to be in a hard starting point for FY2019,” she said.
The compromise will leave everyone dissatisfied, Mace said, and school boards around the state will give it varying reviews.
“I do think school boards will have different reactions depending on their situations and the budgets they’ve developed,” Mace said. “We came to this conversation with the goal of identifying opportunities to save money without damaging education quality. This, I think, at least keeps the conversation focused on health care.”
The House held votes Wednesday morning to override Scott’s vetoes on the budget and yield bill, but the effort fell short as expected. The House was preparing to vote on the compromise budget late Wednesday afternoon in order to send it to the Senate for its consideration. Legislative leaders were hoping to wrap up the veto session late Wednesday.