Taking a beat on education funding reform

A projected jump in school taxes next year has everyone’s hair on fire in Montpelier. But before taking drastic action, legislators and the administration ought to take the time to assess all of the reforms of recent years to understand what’s really going on.

Nobody is saying that the double-digit increases in education spending and likely tax bills this year are sustainable, including many voters. In a normal year, a handful of school budgets get voted down while 90-95 percent of them pass. This year, a third went down, some more than once. The voters spoke and rejected increases that felt too high. 

But does that mean Vermont needs more funding reform? It’s too soon to tell. Let’s look at how we got here. The Legislature, at times with the grudging help of the governor (who has made no secret of his goal to cut spending on public education), has passed significant education funding reforms over the past nine years, including Act 46 of 2015 (school consolidation), Act 173 of 2018 (special education overhaul) and the one causing a lot of the trouble this year: Act 127 of 2022, which changed the way the state calculates pupil weights beginning with fiscal 2025.

Weighting counts certain types of students—from low-income families, multilingual learners, and those attending small, rural schools—as more than one student. It lowers per-pupil spending for districts with lots of kids in these categories, which lowers their tax rate. The whole point of the policy is to make it easier to raise the money districts need to educate children in these categories.

But it wasn’t clear what any district—whether they were facing a tax increase for the same spending or a tax decrease—would do. They could choose to split the difference. Those with more weighted pupils could get more resources and also provide a tax break, while districts with fewer weighted pupils might cut some costs while still accepting some increase in taxes. In the end, most districts increased spending: According to preliminary budgets collected by the Agency of Education before Town Meeting, 100 districts increased their fiscal 2025 education spending by a total of $235 million. Only seven reduced education spending—by only $1 million total.

And this was largely because of factors outside districts’ control. Sure, the now-repealed cap on tax increases played a role, and the $100 million legislative rate buydown in fiscal 2024 caused some of the 2025 jump, but the bottom line seems to be that much of the increase was unavoidable. An AOE analysis identified five cost drivers totaling more than $200 million, and most of that was linked to inflation.

But we don’t know whether these drivers are temporary or ongoing. Inflation was slowing before ticking back up in recent months. Education spending, the figure used to calculate tax rates, has grown at an average annual rate of 3.4 percent for the last 10 years. In fiscal 2024, education spending grew 8 percent, probably also driven by inflation, but the rate buydown softened the effect on taxpayers. Fiscal 2025 is looking at spending growth from 11 to 12 percent. Is this year a perfect storm of policy changes and funding pressures and unlikely to recur, or is there more to come?

There’s also a lot we don’t yet know about all of these recent ed funding reforms: whether the weights have, in fact, increased resources for the students they intended to help and if so, how those resources were spent; whether kids in need of special education services are better off; whether consolidation helped kids and reduced costs as promised (although some evidence suggests it had the opposite effect).

It’s too soon to know whether we need more funding reform. Let’s take the time to get the answers we need to understand the long-term problems we’re facing before we decide on a solution.