The latest: Education reform

Education legislation update 6/24/26

H. 955 (Act 170)

The big news this year on education reform was public resistance to the governor’s insistence on forced mergers. It began with the recommendations of the School District Redistricting Task Force’s, which learned during hearings last fall that Vermonters just don’t want drastic, state-imposed consolidation. Despite the governor’s public pressure, including threats to hold the state budget hostage, the Legislature went along with a voluntary approach with Act 170, which the governor signed into law last week.

While the new law doesn’t make mergers themselves mandatory, it does require all school districts to participate in designated study committees to explore the formation of unified, union school districts with at least 2000 students. Merger committee progress reports are to be submitted to the Legislature by Feb. 1, 2027, and final reports and recommendations are due by Sept. 1, 2027. Voters will have their say on whether to accept or reject merger recommendation at Town Meeting 2028. Along the way, study committees have the option to dissolve if they conclude that merger is “inadvisable.”

The bill prohibits towns or groups of towns from leaving or dissolving union school districts until fiscal 2035.

The bill also shifts to a different model for shared services among districts, setting up seven Cooperative Educational Service Areas (CESAs) across the state. The CESAs will be staffed and required to offer special education services, business and administrative services, information technology, and to consult and facilitate in the creation of union school district. They can also offer additional services such as professional development and transportation if their member districts want them. Districts can opt into any of the services provided.

Like Act 73 last year, the legislation leaves important decisions to be determined later, including second home taxes, what would and would not be included in a potential foundation formula, and how to pay for school construction. The bill requires a number of reports before those decisions can be made. However, it calls for school construction “bonus incentives” that reward school districts for, among other things, mergers.

H. 949 (Act 169)

H. 949, the “Yield Bill,” establishes the school tax rates for fiscal 2027, and sets up some future changes for schools and taxpayers. The Legislature used a $100 million transfer from the General Fund and about $20 million in reserves to hold down property taxes for the coming year.

The average homestead property tax rate is expected to drop by 3.5 percent—to $1.54 from $1.59 in fiscal 2026. The average homestead income rate, for those who pay some or all of their school taxes based on income, is expected to decrease almost 1 percent. Despite the lower rates, because property values have risen, total homestead taxes for fiscal 2027 are forecast to increase by 4.6 percent. Still, thanks to extra General Fund money, the use of reserves, and lower-than-anticipated school budgets, the projected increase is less the administration’s forecast last December.

The “Yield Bill” also restore excess spending thresholds beginning in fiscal 2028. Districts incur tax penalties if their per pupil spending exceeds the spending thresholds.

Are Vermonters ready to take control of education spending away from local voters and cede it to the Agency of Education?

• Reverting to a foundation system would take control over school spending away from local voters and give it to the legislature and the governor. Instead of building a school budget based on the needs of their kids and community, local schools would be given a fixed amount per pupil.
• Vermont’s prior foundation system and foundation systems in other states resulted in stark disparities in resources between rich and poor towns. Although the House plan attempts to limit that with caps on spending above the foundation amount and tying spending to what poorer districts can raise, there are still concerns that returning to a foundation system will increase disparities across schools.
• There will be downward pressure on the foundation amount because public education is such a big part of state spending: one-third of the total budget. In the system we had before 1997, the foundation amount was often underfunded to balance other parts of the state budget. And before 2018 there was a General Fund transfer to the Education Fund that was regularly held up until the budget was resolved, which is why the state eliminated it.
• The one-size-fits-all approach does not address the biggest cost drivers that hit some districts harder than others, like mental healthcare for kids and transportation.
• Eliminating voters’ say in school budgets is anti-democratic and will reduce community engagement with and connection to their schools.
• Schools will be starting from different places in a standardized foundation system. Some schools have already made cuts to programing and need additional funds to catch up, some are in the middle of construction projects.

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For hundreds of years, Vermonters have gotten together on Town Meeting Day to decide on how much they want to spend on their local schools. Are we ready to walk away from this connection to our schools? Both the governor’s and House’s plan would dismantle democratic participation in schools in two big ways:

• eliminate local votes on school budgets on Town Meeting Day and take control of spending decisions for all districts
• could eliminate the majority of local school boards, meaning many fewer Vermonters would serve on school boards and school boards would be further removed from their communities. Currently, more than 900 Vermonters serve on local school boards and local school board meetings provide regular opportunities for community members to weigh in on key decisions impacting their schools and communities

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Who should decide where and when to consolidate? How do we measure the value of a school to a community and how do you weigh that against any potential savings?

Vermont has a long history of educating our kids in local, community schools. State imposed consolidation:

1. • hurts small schools and rural areas by contributing to population decline, reduced property values, loss of social capital, and difficulties attracting and retaining families
   • doesn’t necessarily save money or improve outcomes, based on the results of Act 46
   • takes away the democratic involvement and agency of community members

Act 73 established a School District Redistricting Task Force to propose three possible plans for districts of 4000-8000 kids. The group met from August to November of 2025, but after hearing concern and resistance from many educators and community members, opted to respect the will of Vermonters and recommend a voluntary approach to mergers.

In Act 170, the Legislature passed a compromise approach, requiring all districts to participate in designated merger committees to explore the formation of unified, union school districts with at least 2,000 students. Those committee began meeting in the fall of 2026, and final reports and recommendations are due by Sept. 1, 2027. Voters will have their say on whether to accept or reject merger recommendation at Town Meeting 2028.

Act 170 also includes incentives for mergers and requires the State Board of Education to propose merger options for small districts that fail to merge by November 1, 2029.

For more information: https://vtruralschools.org

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Are we ready to walk away from the 50 years of precedent that taxation for public education should be based on residents’ ability to pay and that a person’s income is the fairest measure of that ability?

• Since the 1970s, the state has been moving towards basing school taxes on income because the value of your primary residence is not a good measure of your ability to pay. For low- and middle-income Vermonters with mortgages, the value of the primary home overstates their ability to pay because their home equity is less than the home value. And many taxpayers have other debt so may even have a negative net worth. And at the high end, the primary residence is a small share of their wealth and understates their ability to pay.
• Any homestead exemption structure perpetuates the regressivity of the current system—meaning that higher-income taxpayers pay a smaller share of their income in school taxes than middle-income Vermonters. So the proposed system will continue to hit middle-income Vermonters the hardest.
• Because higher-income taxpayers are excluded under both the Governor and the House plans, it’s just redistributing the taxes among Vermonters under $115K or $125K in household income and creating different winners and losers. In aggregate, the group will bear a similar share of the taxes and continue to subsidize higher-income taxpayers.
• Taxpayers with the same income will have very different tax bills because they’re driven by the value of the primary home rather than their ability to pay. The way the system works now, taxpayers with the same income who qualify for income sensitivity—those under about $115K in income this year—pay the same bill if their towns have the same per-pupil spending and their income is below $90k and their home value below $400k, which is about 70% of them.
• The proposals retain all of the complexity and frustration with the current property tax system—the Common Level of Appraisal (CLA), the disconnect between bills and school budgets. And they retain all of the complexity of the current hybrid system because it’s also based on the interaction between income and property value. People will still need to cross-reference their incomes, their property values, the CLA and the exemption levels to understand their taxes.

House Ways & Means Committee Testimony—April 3, 2025: Homestead Exemption Increases Unfairness

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In all of the education reforms of the last decade, we’ve heard that the way to improve schools is to spend less:

• Act 46 in 2015 was supposed to improve outcomes and save money through school consolidation.
• Act 173 in 2018 was supposed to improve outcomes and save money by changing how we fund special education.
• Act 127 in 2022 was supposed to improve outcomes by providing more money for kids in weighted categories (and save money by pressuring higher-spending districts to spend less).

But we have not had good evaluation of any of those policies, in part because we haven’t really given them a chance to work before adding more changes into the mix. What limited information we have does not reflect much in the way of cost savings or improved outcomes. And now, after these major reforms of the last 10 years, we’re hearing again that a whole new system will save money and improve outcomes.

Act 46 of 2015
Act 46 of 2015 began a multi-year, multi-phase effort at school consolidation, with the goal of spending less but improving outcomes. While there has not been a comprehensive evaluation by the Agency of Education, other research has found limited costs savings or improvement in outcomes from the mergers and raised concerns about the effects of Act 46 mergers on communities.

Did Act 46 work? It’s complicated (Vermont Public)

Act 46: State Board of Education’s Final Report of Decisions and Order (Vermont Agency of Education)

MERGERS AND IMPOSITIONS: A CRITICAL LOOK AT VERMONT’S ACT 46 (Vermont Law Review)

Last Stand: Vermont School Districts Vow to Fight Forced Mergers (Seven Days)

Act 173 of 2018
Act 173 of 2018 changed how the state funds special education services, by converting a per-kid reimbursement system to district-based block grants. The promise was that it would save money while also providing schools with more flexibility in how they spent the money. But the block grants were calculated based on the total number of pupils in a district, not the kids that need these services. The result was that the majority of districts saw a decrease in funding and policymakers delayed the final implementation multiple times because of backlash from districts. Act 173 also required an evaluation of Vermont’s pupil weighting system, which led to Act 127 of 2022.

Vermont is changing how it funds special education. Some school districts say it’s not being done fairly. (VT Digger)

Lawmakers asked to delay special education reform law (VT Digger)

New Vermont special education law could affect local taxpayers (Vermont Journal)

Act 127 of 2022
Act 127 of 2022 changed Vermont’s pupil weighting structure, to be fully implemented by this year, fiscal 2025. Vermont has long counted pupils in different categories as more than one pupil because they need more resources, including those facing economic disadvantage, multi-lingual learners, and those at different grade levels. But Act 127 changed those weights and how they were calculated significantly, with the goal of making it easier for districts with more kids in these categories to spend more on education. But the implementation process had unintended consequences, contributing in part to the tax and spending increases in FY25. So the law has not really taken effect or been evaluated yet, even as the governor and Legislature propose an entirely new system for spending and weighting.

Vt. school superintendents appeal to lawmakers to change Act 127 (Times Argus)

‘Not intended as free money’: Lawmakers scold schools over spending (Vermont Public)

Act 127’s School Tax Impacts Appear To Be Greater Than Expected (The Bridge)

A Bill to Address Vermont’s School Finance Mess Advances, Despite Criticism (Seven Days)

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There are two ways school taxes are unfair now:

• The richest Vermonters pay a smaller share of their income in school taxes than low and middle-income Vermonters.
• Income sensitivity has gotten out of whack for many low and moderate-income Vermonters, leaving them facing tax cliffs that can double their bills from one year to the next. This is because the thresholds determining income sensitivity have not been updated in decades.

The $47,000 threshold hasn’t been changed since 1985, and the $90,000 threshold has not beenupdated since 2008. And the property thresholds were actually lowered in 2018, because lawmakers wanted middle-income Vermonters to pay more even while allowing the highest-income Vermonters pay the least.

By giving higher-income Vermonters the property option, we’re letting the people with the most income off the hook on school taxes—they have 2/3 of the income in the state, but we allow them to pay school taxes based on property. We rely on low- and moderate-income Vermonters to subsidize their substantial tax break and leave billions of dollars of income untaxed.

Leaning into a property-based system through a homestead exemption approach won’t solve either of these problems.

SOLUTION: Update the income sensitivity thresholds immediately and then complete the move to income-based school taxes.

More:

How to make school taxes fairer this year and beyond

House Ways & Means Committee Testimony—January 29, 2025

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Teacher health insurance, inflation, and rising demand for special education services and mental healthcare for kids are biggest cost drivers in school budgets and are outside of school districts’ control.

These aren’t school funding problems; they’re societal issues.

But they are squeezing our schools—and our kids—and putting some artificial statewide cap on how much schools can spend will only make things worse by forcing schools to cut essential programming in other places.

The state needs to get serious about reining in the cost of healthcare. Vermont has some of the highest healthcare costs in the country and until we solve that problem, school costs will continue to grow.

And we need to address our kids’ mental health needs. The demand for mental healthcare for kids and special education services has been growing for years. We need a robust system that doesn’t leave kids on waitlists for months or trapped in ERs for lack of mental health beds.

What’s more, these costs hit some districts much harder than others. In some parts of the state,  there are lots of mental health providers and schools can contract with them to provide services to kids. But in more rural parts of the state, there are very few providers, so school districts might have to hire full-time mental health staff at a much higher cost to them. That’s not to say that we’re not all facing increasing pressure from the need for these services. But unless we address the root of these cost drivers, schools will still have to cover these uneven costs.

Spending cuts or a one-size-fits-all approach won’t make healthcare cheaper, increase access to mental health providers, or bring down inflation.

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