MONTPELIER – A House education committee staged a Challenges-for-Change mutiny Thursday by refusing to endorse a controversial proposal that would have mandated more than $23 million in cuts to public education.

Commissioner of Education Armando Vilaseca last week unveiled a plan to slash the fiscal year 2012 education budget by consolidating school districts, imposing staff-to-student ratios and closing some of the state's smallest schools. Key to the plan was a provision that would have given Vilaseca unprecedented authority to impose budgetary decisions traditionally left to local school boards.

Members of the House Committee on Education, however, were unwilling to go along with wresting fiscal control from the same boards that delivered level-funded budgets to many voters statewide in March. And concerns over the potential impacts of the top-down mandate led committee members to replace the Challenges proposal with a resolution that instead seeks voluntary cost reductions.

"I think we've agreed we're not going to mandate," Rep. Johannah Leddy Donovan, a Burlington Democrat who is chairman of the House education committee, said Thursday afternoon. "We're going to depend on the good intentions, the good work, of school boards in this state."

The committee's decision, which essentially exempts education from the Challenges process, won the surprising support of the man who just last week proposed the sweeping changes. Vilaseca said the imposition of district consolidation and minimum staff-to-student ratios in such a short period of time would undoubtedly have severe repercussions.

"I like the being exempt from Challenges for Change for fiscal year 2012 part," Vilaseca said. "And I do believe and I do know that boards around the state have done a really good job of managing their budgets."

Rep. Linda Waite-Simpson, an Essex Democrat, said school boards proved during the last budget cycle that they are capable of acting on voluntary directives from state officials. Vilaseca and Commissioner of Finance James Reardon warned boards last fall about the looming tax-rate consequences of budget increases.

The specter of an increase in the statewide education property tax in fiscal year 2012, Waite-Simpson said, should be sufficient motivation this time around as well.

"The hammer is that the tax rate is going to go through the roof," Waite-Simpson said. "That's the hammer."

But Vilaseca said lawmakers' plan won't necessarily blunt the impacts of the state's fiscal crisis. The committee's decision won't eliminate the $23 million hole in next year's education fund. And if school districts fail to deliver the necessary savings, according to both Vilaseca and legislators, taxpayers will absorb the shortfall through higher property taxes.

Vilaseca said the governance structure of education in Vermont – he has long supported district consolidation – will exacerbate the effects of budget cuts on smaller districts and schools. The state, he said, needs to encourage district consolidation if it hopes to achieve cost savings without gutting education services.

"My fear is boards, especially in smaller districts … will start making reductions to meet that goal that will, in my estimation, hurt kids," he said.

The consolidation plan, he said, was intended to provide a framework that would soften the blow of the cuts by dispersing them over a wider swath of schools. Vilaseca's original proposal would have radically reduced the number of school districts from 280 to fewer 50.

"We all fear that arts and extracurricular activities are what's going to be reduced if we don't provide a strategy or a plan," he told committee members.

The initial version of the education committee's resolution consisted of little more than a paragraph exempting education from the Challenges process. That changed after House Speaker Shap Smith requested a personal meeting with committee members, in which he called that proposal an "abdication" of fiscal responsibility.

"Challenges for Change is about creating an environment where people can try to design how they're going to deal with fact that they have less money," Smith said. "The responsibility of the House Committee on Education is to work with various communities to figure out how you can give them the tools to meet those goals and to reach the outcomes. Exempting yourselves from that task is not necessarily going to help the people who need that help."

Hours later, committee members were deliberating a lengthier resolution that, while still making the savings voluntary, establishes a laborious process intended to help school districts achieve the savings.

The proposal asks Vilaseca and the Department of Education to conduct district-specific fiscal analyses of all 280 districts in the state. The department will then establish cost-cutting targets for each district, taking into account their histories of fiscal restraint, staff-to-student ratios and other factors.

Committee members will review the department's findings later this summer and ask districts to use them as a roadmap for their budget plans.

"This depends on … the Department of Education doing yeoman's work in setting equitable targets," Donovan said. "We felt we needed to somehow give some criteria on how these savings should be done."

By Thursday evening, Smith seemed appeased by the latest iteration of the committee proposal.

"I actually think the direction they're providing will be helpful in moving the process forward," he said. "It's going to be important for districts to follow the recommendations of the Department of Education, because the reality is that the money they're slated to save is not going to be there next year. And the tax consequences of not meeting those targets – that's the ultimate hammer."

Donovan said the Challenges process has been a difficult one.

"This has been an incredibly stressful and emotional day for this committee," Donovan said.

And Donovan herself isn't convinced that, without a statutory mandate, school boards will be able to meet the savings targets. Last year's efforts by school boards, she said, may have already cut to the bone.

"I'm wondering if they have that magic again," she said.

Today, Donovan and Waite-Simpson will try to sell their proposal to the House Committee on Appropriations, which has ultimate jurisdiction over the fiscal measures in Challenges for Change.

Opposed to the committee's solution of a resolution is Tom Evslin, overseer of the Challenges process for the Douglas administration. Evslin said the administration never endorsed Vilaseca's Challenges proposal (though a commissioner, Vilaseca is appointed by the State Board of Education, not the governor, and is not a member of the administration).

Evslin encouraged lawmakers to keep the savings mandate, but modify the mechanism to achieve it.

"We, as you do, believe in local control," Evslin told committee members. "I think you give the locals the best opportunity to take control if you set the constraints now."

For example, Evslin said, lawmakers could abandon the consolidation plan and impose only minimum staff-to-student ratios. Currently, Vermont schools have an average staff-to-student ratio of 4.55-to-1 (which would include everyone from janitors to teachers, business staff and superintendents). Ratcheting that ratio up to 4.75-to-1, according to Department of Education projections, would save $23 million (and require the elimination of more than 600 positions).

"That's fairly simple. It's not prescriptive," Evslin said.

If lawmakers are concerned about top-down mandates, Evslin said, they can just pass the savings requirement down to local districts and let them work out the details.

"You can in a sense pass the challenge on to districts," Evslin said. "Say, 'this is the fiscal restraint we expect. And you can't sacrifice education in order to meet this constraint.'"