“Scissors, Glue, Pencils? Check. Cleaning Spray?” describes how other states are responding to the wave of school funding cuts that have occurred during this recession. Having already shifted the cost of routine school supplies onto families with schoolchildren, administrators in some states are now asking those families to pack toilet paper, paper towels, and cleaning supplies in their kids’ backpacks as they ship them off to school.

This is the kind of false savings we’re likely to see in Vermont if we allow the commissioner of education to dictate school budget amounts for every district in the state. One way to meet artificial budget targets is to simply move items off budget. Instead of buying toilet paper or Windex with tax dollars, ask local residents to pay for them. The community doesn’t save any money. In fact, without the benefit of bulk purchasing, families are likely to spend more on the supplies than the school would. But the school budget will be smaller, and we can pretend we’re better off because taxes are a fraction lower.

The school board in Williamstown recently reduced bus service in response to pressure to cut its budget. Perhaps the parents who now will have to drive their kids to schools will use less fuel than the buses, but it seems unlikely. Like many of the state budget cuts in the last couple of years, the Williamstown action will reduce school spending by shifting costs, but without a net savings to the community. It’s true that only the parents of schoolchildren will have to bear the additional cost, but that hardly seems fair when everyone has an interest in making sure our kids are well educated.

We’re coming up on the 30^th anniversary of Ronald Reagan’s declaration that government is not the solution to the problem, government is the problem. Three decades of anti-government, anti-tax rhetoric have created such a phobia about taxes that we’ve lost sight of our self-interest. We pool our money to buy and operate buses because it’s the most efficient way to get kids to school in a rural state like Vermont. We don’t (yet) ask kids to bring heating oil, chalk, fax paper, toilet bowl cleaner, or dry macaroni to school because it’s cheaper and more efficient to buy that stuff in bulk. But we’ve gotten so freaked out about taxes we’ll do almost anything to avoid them—even if ends up costing the community more than the taxes would.

The fact kits would be separate from position papers, but they would establish a common foundation on which the parties and candidate could build their positions. The kits would include basic information like the size of the state budget, tax rates, employment and unemployment numbers, as well as historical data so people could see how things have changed—or not changed so much—over time.

The idea of the fiscal fact kit came to mind after reading about a candidate for the Legislature who promised to reduce Vermonters taxes and push for a flat income tax rate of 5 percent. Five percent may sound like a pretty good deal on income taxes, especially when we think about the services the state is trying to provide. But the fact is very few Vermonters pay that much of their income in state income taxes.

According to Vermont Tax Department statistics for 2008, the latest available, it’s not until incomes reach about $300,000 that the average state income tax approaches 5 percent of income. In 2008, only 1 percent of filers had adjusted gross income of $300,000 or more. The more typical filer—those at the Vermont median family income level of $63,400—pay on average 2.5 percent of their income in state income taxes. A 5 percent flat tax, rather than reduce taxes for all Vermonters, would double income taxes for the median Vermont family. Only those in the highest income brackets—$300,000 and up—would be better off with such a flat tax proposal.

Nevertheless, if 5 percent seems like a reasonable enough income tax rate to build a political campaign around, and many Vermont families are paying less than half that amount, maybe Vermont isn’t such a high-tax state after all.

That’s not good management. You can’t give people 75 percent of the resources they need and expect them to get all of their work done. It’s unfair to the employees, a disservice to the people they’re serving, and often a waste of the money you do spend.

If we had been having an honest conversation about the state budget, everyone would know what the choices were. If we cut the budget, these are the services we might want to eliminate. If we decide we want the services and need additional revenue, these are the options for generating more money. That discussion also should include an objective assessment of what’s working and what’s not.

Challenges for Change, the government reform program passed by the Legislature this year, holds out the promise of getting better services for less money. But while the main focus of Challenges has been doing more for less, the latest progress report on the new efficiency program points to one area where Vermont may be able to do less and save more. The report doesn’t come right out and suggest we eliminate the Department of Economic Development, but it certainly raises the question.

Challenges’ first economic development goal is achieving “a sustainable annual increase in nonpublic sector employment and in median household income.” That really goes without saying; more jobs and higher wages is the essence of economic development. But look at the administration’s take on the government’s role in achieving this goal:

“We do not believe that the State spends anywhere near enough to actually affect median income. Other much more influential factors will affect medium[sic] income much more than any program or group of programs we could afford to implement. Factors such as cost of fuels, the weather, interest rates, inflation, etc will affect medium [sic] incomes far more than anything this Agency can do. We believe net new, nonpublic jobs are also more dependent on national and international forces more than our programs.”

If these programs really don’t work, why does the administration keep pushing tax credits and claiming that they’re creating jobs and boosting wages. And if we’re trying to reduce state spending, shouldn’t we start with programs we know are ineffective before we cut services that are going to diminish the lives of some Vermonters?

The Douglas administration has tried to provide some answers to that question in the latest quarterly progress report to the Legislature. But the Legislature’s oversight committee found a basic weakness in the administration’s approach.

“The report as submitted lacks baseline information for measurement in many areas and this is a key concern,” the committee said in its response to the progress report. “…. This report should have had July 1 baseline information or at least a clear timeline when that will be in place.”

Reading through the progress report, it’s easy to see what the oversight committee was talking about. There are boldly stated goals. But for many programs, especially in the Agency of Human Services, where Challenges for Change is expecting to find the greatest savings, the data needed to measure progress are lacking.

Sadly, the agency used to collect and publish just the sort of information the Legislature is now seeking through Challenges for Change. Twenty years ago, the agency made a fundamental shift from focusing on caseloads to tracking indicators that reflect the health of our society—alcoholism, child abuse, prenatal care, graduation and drop-out rates, literacy, obesity, and others. Each year, the agency published a report that showed where the state was making progress and where there was still more work to be done.

The last of these “Vermont Well-Being” reports was published in 2006. In the push to reduce the size of state government, the administration also cut the state’s capacity to measure the performance and effectiveness of what it does. Now that Challenges for Change has sparked renewed interest in improving government efficiency, the administration and the Legislature are learning they need to rebuild the capacity that’s been lost.

For a good case of déjà vu, read the last published “Vermont Well-Being” report, and then read the Agency of Human Services section of the Challenges for Change progress report.

Try not to cry.

The IRS doesn’t just track the movement of people; it also follows the money by including the total gross adjusted income that migrants report. That makes it possible to determine whether the people moving into a county or state have more income than the people moving out. That was the analysis that Forbes did with the data, and then highlighted the counties where it said the rich were moving. The subtext of the Forbes analysis was that rich people are moving to places where they pay low or no income taxes.

I’m not sure Forbes’s analysis holds up. For example, a lot of the migrants to some of top Florida counties cited by the magazine came from other counties in Florida. Those people clearly didn’t move to avoid income taxes.

It’s possible to play with the map without reading through all Forbes’s tips on the best places to move if you’re trying to avoid taxes. One thing that’s fun to do is click on various Florida counties to see how many people left and where they went. On the theory that people move in search of lower taxes, it would follow these former Florida residents would go to New Hampshire or Alaska or Nevada or some other state without income taxes.

Check it out. Here’s the map.

That’s the bad news. The good news is it could have been worse.

One of the biggest criticisms of the property tax is that it’s not based on ability to pay. This problem becomes painfully evident in a recession, when people lose their jobs or have their hours reduced, but still have to come up the money for the property tax bill.

Vermont’s school finance system dealt with this problem for a majority of Vermont homeowners. Families with household income of less than $90,000 can qualify for “income sensitivity,” which allows them to pay school taxes based on their income, rather than the value of their property. In the current recession, if their income has dropped, so have their school taxes.

Although he frequently complains that Vermont’s property taxes are too high and local schools districts spend too much, Governor Douglas has pushed to increase school taxes on households with incomes of $60,0000-$90,000 who qualify to pay based on income. Even though they spend a greater share of their income to support education than the richest Vermonters, the governor proposed a plan in January that would have nearly doubled school taxes for a family making $80,000 a year and cut school taxes for those with seven-figure incomes.

The Legislature resisted some, but not all, of the pressure from the governor. Lawmakers agreed that someone with a moderate income and an expensive house—say a single mother making $50,000 who got a $600,000 house in the divorce settlement—ought to pay property taxes in addition to her taxes based on income. Meanwhile, someone with a modest income, living in a modest house, but who has lots of expensive toys like boats and planes and fancy cars, will continue to pay school taxes based on income alone.

Vermont’s school finance system is one of the fairest in the county, but it still could be improved. Unfortunately, lawmakers bowed to the governor and moved in the wrong direction.

First, they made the law more complicated. Families and individuals who qualify for income sensitivity and live in a house worth more than $500,000 will pay the income-based school tax and property taxes on the value greater than $500,000.

Second, they made it less fair. They decided that someone with moderate income and an expensive house—that is, one worth more than $500,000—doesn’t deserve to pay taxes just based on income. However, someone with a modest house and another valuable asset—like a stock portfolio or even a second home in the Bahamas—isn’t viewed as too rich to pay just an income-based school tax. Also, for the purposes of calculating school taxes, families with at least $10,000 in unearned income will pay more than a similar family with earnings from only salaries or wages. In certain circumstances, $10,000 of unearned income will disqualify some families from paying the income-based school taxes.

Meanwhile, the Legislature has ignored the disparity that now exists across income brackets. The wealthiest Vermonters, on average, pay a smaller share of their income to support Vermont’s schools than people in any of the brackets below them.

As a matter of fiscal policy, the question of whether and how Vermont should tax assets is a worthwhile debate. But there needs to be a thorough, methodical review all assets that might be taxed, and then the Legislature has to develop a defensible rationale for whatever it chooses to tax. What the Legislature did this year looks arbitrary and even punitive.

If the Legislature does conclude that it makes sense for Vermont to tax certain assets, whatever new revenue is generated should go into the General Fund. Many people—including legislators—already complain that the school finance system is too complicated. Why add another layer of complexity?

As a matter of fairness, the Legislature should look for ways to expand income sensitivity, not curtail it. Having everyone pay school taxes based on their income would at least have the richest 1 percent of Vermonters pay the same rate as a middle class family.

Vermont is a great place to live and work and an attractive place to do business because of the investments we’ve made over the years in our public structures like parks, courts, schools, and environmental protections.

With state budget cuts and state employee layoffs for the past several years, we are starting to see cracks in those public structures. In the Cracks in the Public Structures series published in our bi-monthly newsletter, we’ve looked closely at several areas of state government where the signs of deterioration are showing.

We are interested in knowing the places where you see cracks. Have you or someone you know noticed a reduction in services, or change in Vermont’s quality of life as a result of state budget cuts?

Email sarah@publicassets.org with your thoughts.

The report released last week was the annual tally of the number of people who visited Vermont’s 19 ski areas. The total for the 2009-10 ski season was 4,125,082 visits. According to the Vermont Ski Areas Association, that was an increase of 1.4 percent over the previous season.

If you divide those 4.1 million skier visits by the population of Vermont, you get 6.6 visits per capita. From there, we might speculate on the cost of all this skiing by Vermonters and whether they could really afford it.

But we know that would be a silly analysis because a lot of the skier visits were made by enthusiasts from New York, Quebec, Massachusetts, New Jersey and elsewhere.

When it comes to taxes, though, that is exactly how the calculation is frequently made. People take the total revenue collected by the state of Vermont and divide it by the population. This so-called “per capita tax burden” is presented as though it’s the amount paid by every man, woman and child in Vermont to support public services. It’s the figure the governor cites when he asserts that Vermont’s taxes are either the highest, among the highest, or just plain too high. But it’s a figure that paints a distorted picture, just as it would be a distortion to say that every Vermonter skied nearly seven days last winter.

Total revenue collected by Vermont includes sales taxes and rooms and meals taxes paid by those same people who are making the skier visits. It includes property taxes paid by businesses, like IBM and General Dynamics, and fuel taxes paid by drivers who are just passing through. In other words, total revenue includes money that is not paid by Vermont residents.

We don’t have good information on the amount of taxes paid just by Vermont residents. There is a study done by the District of Columbia that calculates taxes paid by various hypothetical taxpayers in the largest city in each state. According to that report, Burlington comes out in the middle of most rankings—not near the top. But we need more data. The governor and others typically point to Vermont’s top marginal income tax rate when they complain about taxes. That top marginal rate, which applies to very few filers, tells us nothing about the taxes paid by most Vermonters—just as skier visits tell us nothing about Vermonters’ skiing habits.

Vermont Business Magazine hired a consulting firm to survey Vermont businesses. The consultants sent out 3,100 surveys and received 254 responses. The magazine conceded that the results were not statistically valid, but then went ahead to draw sweeping conclusions based on the results.

This kind of survey is a self-selecting opinion poll—sometimes know by the acronym SLOP—and shouldn’t be used the way Vermont Business Magazine is trying to use it. The results say something about the 254 businesses that chose to answer the survey questions. But they tell us nothing about the other 92 percent of the target businesses that didn’t respond. And they certainly say nothing about 20,000-plus private sector business in the state.

There are statistical methods for creating random samples, and only with a random sample can you draw conclusions about the opinions of a larger population. Vermont Business Magazine didn’t do that. Instead, knowing the results were flawed, it claimed in the opening sentence that “[a] statewide survey conducted for Vermont Business Magazine by a Stowe-based consulting firm identifies tax rates as the number one factor that could cause companies to leave Vermont.”

The article goes on to quote some survey respondents who complain about Vermont taxes, and then cites a 2005 U.S. Census report to back up those complaints. The magazine points out that state tax-ranking surveys are controversial and may be influenced by ideology. But it identifies the Census report as “one seemingly impartial finding.”

It’s too bad Vermont Business Magazine didn’t look closer at the report and the Census Bureau’s own conclusions about the data.

The Census Bureau produces two reports about revenues collected by the states. One focuses solely on state-level revenue. The other includes state revenues and revenue collected by local governments, like counties and municipalities.

The state revenue report, which is the one Vermont Business Magazine cited, distorts Vermont’s ranking because most of our property taxes are now state revenues. In other states, property taxes are primarily local taxes. This puts Vermont at the top of the state-revenue-only rankings.

To be sure, when state and local taxes are counted, Vermont still would be ranked higher than many other states on a per capita basis. But that’s why it’s important to read the fine print on the Census Bureau website.

After 2005, the Census Bureau stopped computing per capita tax rankings. The reason: “Analysis based on rankings or per capita statistics can be misleading and misinterpreted because of subtle yet important differences in state government organization and economic structure.” A big problem, the Census explains, is that the state or state and local revenue in its reports is all of the revenue collected within a state’s borders—not just the taxes paid by residents. Alaska and Florida are two cases in point. Alaska collects a severance tax from oil companies, but has no general sales tax or personal income tax. So it would rank high in per capita taxes even though much of the revenue doesn’t come from residents. Florida relies heavily on sales taxes, many of which come from non-Florida residents.

A better way to compare state taxes is to look at the taxes people actually pay. The Joint Fiscal Office did this in a study a couple of years ago. The study created a couple dozen hypothetical tax filers and then computed their taxes in each of 12 states, including Vermont, Florida, and other New England states. The Joint Fiscal Office study did not include property taxes.

The District of Columbia regularly analyzes the taxes paid in the largest city in each state and compares them to the district’s taxes. Like the Joint Fiscal Office study, the DC analysis creates hypothetical filers and calculates their taxes. The DC study does include property taxes. In the latest analysis released last fall, the DC study looked at families with incomes of $25,000, $50,000, $75,000, $100,000 and $150,000. Except for the lowest income bracket, where it ranked 44^th, Burlington was in the middle of the pack.

The Vermont Business Magazine article was correct when it said: “Methods of calculating states’ comparative tax rates differ on the basis of who’s doing the calculating.” With credible information showing that Vermont’s taxes compare favorably to many other states, you have to wonder why the governor and others are so intent on seizing any information—even misleading information—that makes Vermont look bad. What would the public mood toward taxes be if the governor regularly cited the DC study and said families in Burlington with incomes of $75,000, $100,000, even $150,000 paid taxes that were lower than families in half the other states?

Despite feverish efforts by elected officials to find cuts to close a $154 million budget gap next year and even larger gaps looming in future years, this is one budget cut Gov. Douglas doesn’t like. He was chiding the Legislature this week for not giving businesses a bigger tax break.