Public Assets Institute > Policy Areas > Education > At best, the new education tax law is unfair

At best, the new education tax law is unfair

In addition to pushing up property taxes in many towns, the education reform bill passed in the closing days of the session violates a fundamental principle of fairness in Vermont’s education funding system: towns with the same education spending per pupil have the same homestead tax rates. Before Gov. Peter Shumlin decides to sign the bill into law, he might want to check whether the tax penalties it contains in Section 37 also violate the Vermont Constitution.

In 1997, the Vermont Supreme Court found the state’s previous funding system was unconstitutional because of the disparity between towns’ access to money for their children’s education. Some communities could spend thousands of dollars per student with relatively low tax rates, while other communities spending much less per student suffered truly burdensome tax rates. In Brigham vs. State of Vermont, the court concluded that the system was unfair and violated the state constitution because it deprived Vermont children of equal access to funding for their education.

The Legislature responded to Brigham by creating a system that allows local voters to decide how much to spend on their schools, but it also gives all communities substantially equal access to education funds. Vermont homeowners who live in towns that vote the same education spending per pupil—regardless of the value of property or amount of income within the town boundaries—have the same homestead property tax rates. The system also allows homeowners to pay school taxes based on their income, and the same principle applies. Taxpayers in towns with the same education spending per pupil have the same income-based tax rates.

Ostensibly to force communities to cut or at least slow the growth of their school budgets, the Legislature passed a reform bill last week that imposes penalties on towns that exceed prescribed growth rates in per-pupil spending. But if towns trigger the penalties, it will mean they no longer have equal access to education funds. Their tax rates will be higher than other towns that don’t trigger the penalties but have exactly the same education spending per pupil.

According to data from the Agency of Education, Brattleboro would be allowed to spend $15,779 per pupil in fiscal 2017 without paying a penalty. Using next year’s base rates, the homestead tax rate would be $1.65 if Brattleboro stuck to its prescribed spending limit. However, if Barre City, with an allowable limit of $11,228 per pupil, wanted to spend the same amount as Brattleboro, it would be hit with a penalty. The homestead tax rate for Barre City residents would be $2.08—26 percent more for the same education spending per pupil.

Members of the House, especially, appeared to be frustrated all session at their inability to bring Vermont voters to heel on the matter of school spending. This plan for tax penalties emerged just days before adjournment and didn’t get the scrutiny required for such a major system change.

The governor now has the time to review the bill and weigh its implications. To preserve the basic fairness of Vermont’s education funding system is reason enough for the governor to require the Legislature to reconvene and remove the tax penalties. And if the legal experts conclude the penalty system is unconstitutional, the governor may have no choice but to demand revisions.

Posted by Jack Hoffman on May 22, 2015 at 10:30 am

4 Responses to “At best, the new education tax law is unfair”

  1. Oliver Olsen says:

    When can we stop talking about money and start talking about equity of educational opportunity?

    Is it “fair” that our current funding formula allows Burlington to provide its students with iPADs, while a rural school like Leland and Gray is debating whether they can even afford to offer French as a second language, even though it’s member towns are subject to substantially higher taxes than Burlington’s system?

  2. Margaret MacLean says:

    Seriously Oliver? Your statement about opportunity is actually all abt the $ and what $ districts have and choose to purchase.

    But let’s talk opportunity, currently VT has no system for assessing EQS Education Quality Standards.

    We used to have one – public school approval, but since the 1990’s the state has given up this responsibility to assess schools against a clear high standard and give communities comparative information.

    Without such a rigorous system in place we have only anecdotes, totally insufficient to make sound judgements on.

    This session that has hardly seemed to matter. School have been judged and targeted purely on the basis of size not merit.
    No resources are included in H 361 for a rigorous quality assurance system.

    It could be inconvienient to have sound data on EQS we might find we have some small schools doing a fabulous job in terms of outcomes and some large ones with gaps when it comes to student performance.

    Schools are not afraid of accountability but all schools should be accountable to clear high standards. The finger pointing at small schools based on assumptions and anecdotal stories needs to stop.

  3. Peg Martin says:

    My Wisconsin farm boy dad had a saying when things got frustrating -“It’s like pushing on a rope!” That is surely an apt description of legislative education funding discussions. I wish I could convince myself that simply making schools larger, offering carrots and wielding sticks will save money – but I can’t and the assumption seems foolish. The constitutional question is not a trivial one and I trust some wise and determined person(s) will take steps to have it answered.

  4. David K. Durfee says:

    Your argument is a sound one. Furthermore, Rep. Olsen’s formula (which is of course all about money, and the Legislature’s desire not to have us spend so much of it on education) appears ripe with unintended consequences. For historically high-spending districts, the new penalties are softened by the elimination of the excess spending threshold, so they are less likely to provide an incentive to cut spending. Meanwhile, school boards serving in towns that have spent conservatively over the years and maintained higher student/teacher ratios will feel more pressed to avoid the penalty and in many cases be forced to cut staff, further exacerbating the existing inequity in opportunity. So at best unfair, and at worse, counter-productive.