School funding ‘fundamentally broken’?

Mar. 8, 2009, Times Argus
By PAUL CILLO

Vermont has the most equitable, stable, sustainable, and publicly accountable education funding system in America. Vermonters spend a lower percentage of their income on school property taxes now than they did before Act 60 was enacted in 1997. The Education Fund has a projected surplus this year-allowing the legislature to lower the education property tax rate.

Vermonters control the purse strings. In 2008, local voters weighed in on school budgets with 170,000 votes in communities across the state.

And more good news: The state education commissioner reported last month that student test scores showed improvement over last year in reading, writing, and math. Vermont’s public schools rank in the top five in the nation.

We should be celebrating.

Yet we hear that Vermont’s school funding system is-in the words of one prominent critic-“fundamentally broken and beyond repair.” Why? The system is too complicated for people to understand, some say. Plus, school property taxes have increased while enrollment has declined.

On the first point, yes, the system is complicated; most people can’t explain it. That’s true of every such system in the country and every one Vermont has had. In fact, Act 68 is far easier to explain than the foundation system it replaced. Act 68 should be even simpler to explain. But that’s no reason to dump it.

On the second point, Vermont’s K-12 student count has indeed dropped 5 percent over the past four years. It’s logical to think that spending should go down, too. But it’s not that simple. School buses still need to be driven, school buildings heated, and 12 grade levels taught. Many basic costs don’t change when enrollment fluctuates.

There are other reasons for spending growth. Vermont passed its landmark legislation in 1997 to correct an unconstitutional system that left some towns with under-funded schools and high tax rates, while other towns enjoyed robust spending with low tax rates. Over the past 12 years, Acts 60 and 68 have substantially closed the spending disparities between wealthy and poor districts. To accomplish that, lower-spending towns spent more. They needed it.

And while the higher-spending towns did not budget less than before, their spending growth slowed. As we move closer to equity, the overall rate of growth is diminishing-all before the so-called two-vote legislation, which takes effect this year.

School taxes as a percentage of personal income have dropped since 1996. They used to consume 5.4 percent of Vermonters’ personal income; now they take 4.8 percent.

Meanwhile, in the past five years municipal taxes have grown as fast as school taxes. If the school funding system is “beyond repair” because spending is growing too fast, is the municipal finance system on the rocks, too? We don’t hear anyone making that assertion.

And what about health care? In 2008, health care cost Vermonters $370 million more than the year before-an increase greater than five times the growth in education spending. Almost nobody understands the health care finance system. Is health care on the list of finance systems declared irreparably broken? Nope.

Maybe these complaints about Act 68 aren’t really about education funding at all. The real problem may be the General Fund, which is facing a $250 million shortfall next year. The governor’s 2010 budget drives up property taxes by relying on $40 million from the Education Fund to balance the General Fund. It seems like the Education Fund – the only healthy state fund – is the solution here, not the problem.

It wouldn’t be the first time that happened. In 2006 and 2007, the state held money in the General Fund that should have been transferred to the Education Fund as the law required. The result was $25 million in higher property taxes to fill the hole.

Vermont’s education finance system could be made better. But the bottom line is: it ain’t broke. Until someone can point to a system, anywhere in the country, that works better than ours, we shouldn’t be looking to scrap it.

Paul Cillo is President of the Public Assets Institute, a nonprofit, Montpelier-based think tank that analyzes state tax and budget issues (www.publicassets.org).