Public Assets Institute > Press > Press Releases > School-Budget Voters Are Minding Their Own Purse Strings (report release)

School-Budget Voters Are Minding Their Own Purse Strings (report release)


February 20, 2008

Paul Cillo 
Public Assets Institute 
Montpelier, Vermont 

MONTPELIER – Vermont’s 10-year-old school funding system has helped to reduce disparities between property-rich and property-poor towns, and it has done so without encouraging the overspending that had been predicted, according to a new report issued today by Public Assets Institute.

“We looked at school spending town by town,” said Public Assets Institute President Paul Cillo, “and we found that those that got the most help from the Education Fund tended to have the lowest spending per pupil.”

The current funding plan eliminated the system of paying for schools primarily through local property taxes. The new system established a statewide property-tax base on which all towns could draw. While it was designed to create more equity among towns and taxpayers in their capacity to raise money for schools, some have suggested that the new funding law encourages poorer communities to take advantage of their wealthier neighbors.

Public Assets’ analysis found just the opposite is true. “In fact, there is a very strong disincentive in the law to keep spending down, especially for those with low and moderate incomes,” said Jack Hoffman, Public Assets Institute’s Senior Policy Analyst and an author of the report. “Lower spending per pupil means lower taxes.” According to the study:

• Towns that get more do not spend more. In fiscal 2008, on average, the more a town received from the Education Fund compared with what it paid in, the lower its per-pupil spending.
• The consequences of higher spending fall on the people who approved that spending. When a town chooses to increase per-pupil spending, the tax consequences are, on average, more than 200 times greater on the homestead taxpayers in that town than on property taxpayers in other towns.
• High per-pupil spending was linked to high resident income. Towns with more high-income residents voted higher school budgets than those with lower-income residents.

Act 60 was passed in 1997 to address what the Vermont Supreme Court called “the gross inequities in education opportunities.” It established a system in which a penny or percentage point on the tax rate raised the same amount in every town. The funding system maintained local control by giving communities the freedom to determine their own level of spending. However, it also required that in all towns with the same level of per-pupil spending, taxpayers had to make the same effort – that is, pay the same tax rates.

This mechanism that requires equal effort for equal resources has helped to increase equity among towns. But it also has proved to be a check on spending in towns that might appear to have an incentive to approve higher school budgets because of the return they get from the Education Fund. The analysis showed that the towns that get the best return, in fact, spend the least per pupil.

Another question that has been raised about Act 60 and Act 68 is how much spending decisions in one town affect taxpayers in other towns. Our study showed the effect is slight. And again, the fact that higher spending means higher tax rates appears to discourage taxpayers from trying to game the funding system.

The Public Assets Institute is a non-profit organization that researches and reports on state fiscal and policy matters. Public Assets supports democracy by helping people understand and keep informed about how their state government is raising and spending money and using other public assets.


For more information, contact: Jack Hoffman, Public Assets Institute, 802-223-6677 or

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