The latest: Ed funding reform

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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
• 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

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.

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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More and more Vermonters pay for schools through a combination of income and property taxes. When their incomes or house values pass certain thresholds their tax bills can jump even when school spending doesn’t change. Updating the thresholds this year would ensure low- and middle-income Vermonters benefit from income sensitivity.

However, the plan in Montpelier is a rate buydown for FY26—that means taking one-time money to lower people’s education tax bills. But the problem is that they are proposing a buydown for everyone—meaning even those highest-income taxpayers who are already getting a tax break will get a bigger break, and that low- and middle-income Vermonters will continue to pay more than the richest.

Instead of a rate buydown that gives even the highest income Vermonters a tax break, we can immediately reduce the school tax bills for over 50,000 low- and moderate-income Vermont households this year by updating the income sensitivity thresholds for inflation. This will help income sensitivity work as intended and ensure people can afford their school tax bills this year.

More:

House Ways & Means Committee Testimony—January 29, 2025

Property tax relief for Vermonters: three-part plan

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Vermont has been moving towards an income-based school tax system for more than 50 years, starting in the 1970s when the state started to implement income-sensitivity to ensure that education property tax bills wouldn’t drive seniors on fixed incomes out of their homes. It’s time to finish the transition and move to a completely income-based education tax system.

Under the current system, higher-income Vermonters pay their school taxes based on property value because it’s cheaper for them than paying based on income. But those of us who pay based on income—and that’s 2/3 of Vermonters, everyone under about $125,000 in household income—pay a bigger share of our income in school taxes. And because of those cliffs, some pay a MUCH bigger share.

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 ofthe income in the state, but we allow them to pay school taxes based on property. And we rely on low-and moderate income Vermonters to subsidize their substantial tax break.

An income-based school tax would not only be more fair, it would be more straightforward, easier to understand, and help reconnect local voters to their school budgets.

Further reading:

How to make school taxes fairer this year and beyond

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o6/17/25: Yesterday, over the objections of educators, parents, students, and community members from across the state, the legislature passed the conference committee’s version of H. 454—a bill to make drastic changes in Vermont’s public education system.

The final conference committee report is now headed to the governor’s desk and we expect that he will sign it in the coming days. 

The final version of the legislation prioritizes cost cutting over kids’ needs, is anti-democratic, does not address the cost-drivers squeezing so many school budgets, and fails to provide the timely tax relief that Vermonters asked for.

The bill leaves many significant details of these major changes to public education in Vermont unsettled. We’ll continue to update this site with more information about what’s in the bill, the timeline, the decisions still to be made, and more detailed analyses of the impacts.

o6/13/25: The Committee of Conference voted out a report Friday afternoon. An up-or-down vote on the bill in the full legislature is likely on Monday, June 16th. 

Unfortunately, the committee’s report fails to fix the existing problems and raises significant additional concerns. The report: 

• States that the goal of reform is to spend less on schools through: state-imposed consolidation; cutting educator jobs; reducing spending on Pre-K and special education services; shifting critical services to the General Fund without ensuring they’ll be funded; and other unproven strategies
• Includes an option for high schools that receive tuitioned students to charge 5 percent above the foundation amount at the request of independent schools
• Accelerates the timeline for implementation by one year, beginning with setting new district boundaries by July 1, 2026

o6/03/25: After meeting throughout last week, the conference committee on H. 454 failed to reach an agreement. The current plan is to keep working and come back in mid-June to finalize a plan.

The governor reiterated his priorities to the committee: cutting school funding; dramatic, rapid consolidation; centralizing control over schools in Montpelier; leaning into property taxes by eliminating income sensitivity; and the expansion of vouchers.

While some members of the committee resisted those funding cuts and voucher expansion, the group was largely aligned with the governor on the structural changes: eliminating local decision-making, significant but as-yet-undetermined consolidation, and moving away from a funding system based on ability to pay.

None of the plans have addressed the underlying cost drivers in school budgets or asked the highest-income taxpayers to pay as much as low- and middle-income Vermonters in school taxes.

05/27/25: The Senate passed their education reform plan Friday night, paving the way for a committee of conference to try to work out the differences between the two chambers this week. The Senate did go along with a lot of the big structural changes proposed by the governor and the House, including significant consolidation of districts, going back to a foundation system, and leaning into property taxes through a homestead exemption approach. The Senate follows a similar timeline to the House, rather than the accelerated version the governor has pushed. They differ from the House on how much to restrict vouchers and schools that qualify for public money, class size minimums and the size of consolidated districts, as well as some of the implementation and transition details.

05/23/25: As of 11:10 AM, the Senate may take up a different version of H.454 that is closer to the House-passed version, but there’s of lot of uncertainty and may be many floor amendments.

5/21/25: H. 454 is on hold in the Senate because its current version does not have the support of the majority.

5/19/25: H. 454 passed out of Senate Finance last week and will be on the Senate floor this week. The latest version goes along with a foundation system and a homestead exemption plan, but many questions about the details remain unanswered. The proposed foundation amount is higher than the governor’s plan but lower than the House amount.

05/13/25: The reform bill is not yet final and is now in Senate Finance. Based on the version from Senate Education and committee discussions, it’s looking like they’ll go along with some of the big structural changes in the House and governor’s plans. Those include moving to a foundation system and leaning into property taxes through a homestead exemption approach, but they’re looking at different numbers and possibly a different timeline. You can see our concerns about these changes here.

Like the governor and House’s plan, the current Senate plan does not fix the two most pressing problems we face in education funding: the fundamental unfairness in who pays and the cost drivers out of districts’ control.

And the Senate went along with the problems in the House’s yield bill for FY26. Both chambers agreed with the governor’s plan to give everyone a small tax break. This includes the richest taxpayers—who already get a big break—instead of targeted property tax relief for those who need it most. By using one-time money, the plan also creates a big hole for next year. And it doesn’t fix the income and property value cliffs that are harming low- and middle-income Vermonters.

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