Vermont Education Spending: The Facts

PDF Version

Education spending is not out of control.

Education spending as a percentage of the Vermont economy (gross state product) has remained essentially flat since the early 1990s. Contrast that with health care, which has been growing much faster than the underlying economy. Should the education line trend down because Vermont’s enrollment is declining about 1 percent a year? Perhaps. But remember: Education spending includes those rapidly rising health care costs. Regardless of the number of pupils, the cost of Vermont’s public education is neither “skyrocketing” nor “out of control.”

.

.

.

School boards have curbed spending growth.

The growth in education spending has been declining since 2005. There was an anomalous bump in fiscal 2009, following passage of legislation that required voters in school districts with high spending growth to vote twice on the school budget. Districts anticipating that they might be subject to the two-vote requirement in fiscal 2010 may have moved certain purchases to fiscal 2009 to keep their 2010 growth below the threshold. In fiscal 2011 spending was actually lower than the previous year.

.

.

.

Property taxes now pay a bigger share of costs.

The Legislature reduced the General Fund transfer to the Education Fund in fiscal 2010 and 2011. Other dedicated revenue sources of the Education Fund, such as proceeds from the Vermont Lottery and a portion of the sales tax, also have not grown. Even with modest education spending growth, property taxes have had to cover their share, plus the growth that should have been covered by the General Fund transfer and dedicated taxes. In 2005, property taxes covered 61 percent of education costs; in 2011, 68 percent, even with the help of federal recovery funds (ARRA).

.

.

.

Even with Act 68, school taxes are regressive.

Act 68 went far in reducing the burden of the property tax, which used to fall disproportionately on middle-income residents. More than six in 10 Vermont households now pay school taxes based on ability—that is, based on income rather than assessed property value. Even with this change, however, upper-income households pay a much smaller portion of their incomes to support schools than their middle- and lower-income neighbors. The chart is based on a new analysis by the Vermont Tax Department of homestead taxes as a percentage of personal income across all tax brackets.

.

.

.

Investing in education strengthens the economy.

A recent study by economist Jeffrey Thompson at the Political Economy Research Institute documents the benefits to states and regions of investment in education, including pre-K and higher education. The benefits include higher personal income, employment, and tax collections and reduced crime and welfare dependence. Because education is labor intensive, such spending creates more jobs per dollar than many other sectors. The jobs resulting are direct (teachers and school staff) and also indirect (e.g., electricians who wire the school) and induced (workers at the market where school staff buy groceries).

Download a PDF of this issue brief.