Research & Publications

Ed Funding 101 (and what happened in FY25)

Vermont has one of the most equitable education funding systems in the country. It hasn’t felt that way lately, because there are pockets of inequities that hit some taxpayers and some districts more than others.

Public Assets’ Executive Director explains the fundamentals of our public education funding system.

Public education is one of the most important things the state does and there is a lot we can do to make the tax system simpler and fairer without losing what’s equitable about it, while ensuring that Vermonters can make good decisions about their schools.

There’s more to school tax increases than spending

Vermonters have been understandably upset by the abrupt rise in their school taxes for fiscal 2025. Most of the complaints focus on the rise in spending, as does the response from policymakers. But taxpayers may also be affected by changes that make the funding system less fair.

The Agency of Education presented some clear analyses last spring explaining the main reasons for the spending increase: rises in salaries and benefits in response to inflation; health insurance cost increases exceeding inflation; the expanding need for expensive mental health services for students; the loss of federal funds the schools received as part of the pandemic-related American Rescue Plan Act (ARPA). There are other reasons as well, related to fiscal decisions made in the past few years. The expenditures are critical for providing kids with a quality education. But knowing that doesn’t make the tax bumps easier to take. Even modest increases can be a problem if the costs, and who pays them, are not distributed fairly.

In fact, some districts and taxpayers have been facing disproportionately higher bills for a while.

Education funding: The three cliffs problem

Education spending saw its biggest jump in years in fiscal 2025, and school taxpayers are noticing the change in their bills. The increase this year was due to a lot of factors outside both schools’ and taxpayers’ control—inflation, healthcare costs, and the loss of pandemic-era federal support chief among them. All of that led to an increase in total homestead taxes of 12.9 percent, although the rate varied from town to town.

But taxpayers can see their tax bills suddenly balloon even when spending increases are modest. The reason: thresholds built into the system. A majority of Vermont resident homeowners pay all or some of their school taxes based on their household income, which better reflects their ability to pay. But the Legislature has imposed limits on these income-based taxes, which means some homeowners—and the number has been increasing—pay a combination of the income-based and property-based school taxes. The property taxes kick in when homeowners’ incomes or house values pass certain thresholds. These thresholds create tax “cliffs”—sudden rises in tax owed. Because the thresholds haven’t been increased or adjusted for inflation over time, more and more Vermonters have hit these cliffs and seen a jump in their school tax bills.

Education funding: Diagnosis before treatment

Whatever Montpelier did this year about education taxes was going to be a can-kicking exercise. By overriding the governor’s veto of the so-called “yield bill,” which sets tax rates for the coming year, the Legislature avoided a protracted fight over how far to kick the can. That bought them some time—about six months. Now, let’s hope, we’ll get a serious effort to understand what’s going on with education funding before plunging ahead with solutions.

In response to the uncharacteristically large increase in school budgets for next year, the Legislature created the ambitiously named Commission on the Future of Public Education in Vermont. It is scheduled to start meeting in July.

The new and “improved” CLA

The 1973 oil embargo prompted many energy-saving ideas—real and imaginary. Daylight savings was extended year-round, which was spoofed in a cartoon of President Richard Nixon demonstrating an energy-saving blanket. He was shown cutting a strip from one end of the blanket and sewing it back on to the other end.

The current plan to reform the notorious CLA—common level of appraisal—looks a lot like Nixon’s blanket. It doesn’t actually change how things work, it just makes them look a little better to the public.

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 Ed Fund needs an outside opinion

Gov. Phil Scott wants to use a $96 million surplus in the Education Fund for a little tax relief for homeowners and to expand job training. Another scenario laid out by the tax commissioner in December was, in essence, to just lower everybody’s school taxes for one year. These aren’t the only options, nor the best ones, which is why the Legislature needs to create an Education Fund Advisory Committee to oversee the long-term stability of the education finance system.

Governor Scott proposed last week that half of the surplus—about $48 million—be returned to resident homeowners in the form of a rebate. He recommended a flat amount of $250-$275 to each household. If you were going to issue rebates, that would be a better way to do it than, say, a small percentage reduction in everyone’s tax bills. The percentage approach favors those with higher tax bills, i.e. those with more valuable property or higher incomes. A fixed rebate is better for lower-income households, but better still would be to set a maximum income threshold and to include something for renters.

A big opportunity to improve school funding

The Legislature is actually looking at two big changes to education funding this session. There are misconceptions about each, but both, if done right, can strengthen the school funding system and make it fairer.

The change that has generated the most attention and discussion is a plan to provide more money to students who require additional resources, such as English-language learners, kids from poor families, and those attending small, rural schools. The money isn’t really the sticking point, although there are questions about the latest cost estimate for teaching English as a second language. The main point of disagreement is how to distribute additional resources to the districts that need them. One approach, student weighting, is more complicated for voters and tends to favor high-spending school districts. The other option, cost equity aid, would provide fixed payments per pupil for various categories of students, which would be more transparent and easier for voters to follow, and it wouldn’t exacerbate disparities in per-pupil spending among districts.

The other important change being considered doesn’t involve the distribution of education funds, but how those funds are generated.

Brigham Decision: Shared responsibility for funding education

Twenty-five years ago the Vermont Supreme Court declared the state’s education funding system to be unconstitutional. More than a third of the state’s residents are too young to remember what was happening back then. And more than half of Vermonters now over 25 moved here from somewhere else. It’s safe to say, for many Vermonters, the old Foundation Plan and the ruling that ended it are distant or non-existent memories.

A brief retrospective is in order.

Task Force uncovered flaws with student-count weights

The Legislative Task Force looking at changes to the state’s school funding system deserves Vermonters’ thanks for work it did over the last six months. The committee, officially known by the unwieldy name “Task Force on the Implementation of the Pupil Weighting Factors Report,” released its report and recommendations last Friday. It’s not a quick […]

Student enrollment is higher than it appears

We’ve all heard the complaint: Why does Vermont education spending continue to rise when student enrollment has declined? The answer can be found in the UVM student weighting study released in late 2019 and in the spotlight for the last 6 months. There may be approximately 87,000 actual students in Vermont public schools on any […]

Vermont’s tools for education funding equity: Weighting and categorical aid

Vermont’s education funding system is built on fairness to taxpayers, to communities, and to students. The state has two tools to help mitigate variable costs so that all schools can afford to educate all their students, regardless of need: categorical aid and pupil weighting.m

This explainer shows how they work.

American Rescue Plan brings $200 million to Vermont towns and villages

The American Rescue Plan Act (ARPA), passed in March 2021, earmarked $76.6 million for Vermont’s local governments, and another $121 million for county government. Because Vermont counties have limited roles, the feds redirected the dollars to towns and villages. Local governments can use money through the end of 2024 to help pay for government services; direct assistance to households, small businesses, and non-profits for COVID-related costs; premium pay to essential workers; and infrastructure investments.

Funds will be distributed in two equal payments, at least 12 months apart. Towns and villages have already received the first payments from both grants. See the map for the total grants towns will receive over the next two years. See the table for information on village allocations.

Weighing money and education

Student weighting dominates a lot of discussions around Vermont school funding these days. I guess that’s what we should expect after the release of a report to the Legislature titled: “Study of Pupil Weights in Vermont’s Education Funding Formula.” But the study also raises broader questions about money and education. The weighting study examined the […]

Affordable higher education

If there was ever any doubt that unaffordability prevented Vermonters from pursuing higher education, the news last week should have laid it to rest.

Reports that there was more demand than supply for a state program offering free tuition to Vermont colleges were probably not surprising to many in the higher education field. While Vermont’s high school graduation rates consistently have been among the highest in the country, college attendance rates have been low. And attempts over the years to understand and solve this conundrum haven’t provided much new clarity.

At the risk of stating the obvious, it seems that cost is a barrier for many.

Student weighting is more complicated than it seems

Many legislators and school officials are eager to adjust Vermont’s education finance system to provide more money for school districts with kids from low-income families and those for whom English is not their first language. We agree these resources are necessary and should be provided as soon as possible. But the Legislature was right to set up a special legislative task force this session to research and discuss with Vermont parents and voters the options for providing additional funding to these school districts. Here’s why:

The proposed changes are an extreme use of weights, and made more so by Vermont’s funding system. Student weighting is just what the term suggests: Certain students who cost more to educate are counted as more than one person—given more weight—as a means to provide the additional funding to their school district.

town2town: 3 Vermont school tax questions answered

Vermont’s education funding system is built on fairness for students, fairness for taxpayers, and local control. The statewide tax base supports school spending voted by each community. Each school district in Vermont sets its own budget and spending per pupil on or around Town Meeting Day. And all school taxes go into a single pot, the Education Fund. The Legislature sets a school tax rate schedule that applies to primary residences in all towns, so residents know their school tax rates based on their town’s voted per-pupil education spending.

There are two rates—one based on the value of the home and the other based on household income. Residents can choose the better deal for them, and most Vermonters pay the income rate for all or some of their school taxes. Towns with more spending per pupil have higher tax rates; those with less spending per pupil have lower rates; and towns with the same per-pupil spending have the same rates.

The system effectively equalizes the taxing power of all communities. Regardless of the actual wealth of any community, every town has to make the same tax effort—i.e. have the same tax rates—for each $1 of funding it votes per pupil.

Below are an interactive map and charts showing school income and property tax rates for all towns from school year 2012-13 to 2020-21. Select a town and year and see the current rates and spending relative to other towns, and how those rates have changed over time.

School taxes can be simpler and fairer

Simplicity, equity, and let’s-just-call-it-what-it-is.

Those were among the key reasons the Vermont Tax Structure Commission recommended recently that the state abolish the homestead property tax and move to an income-based school tax for all resident homeowners.

We support the Commission’s recommendation. We also urge everyone, but especially policymakers, to read the final report. It addresses many persistent questions that have swirled around education funding for almost 25 years.

Tax Commission will issue consensus report

The president is calling for unity, as the transfer of presidential power in Washington has been anything but peaceful over the past few months. Here in Vermont the soon to be released Tax Structure Commission’s report provides a real-world example of what united policy development looks like.

The Vermont Tax Structure Commission, established by the Legislature in 2018, is putting the finishing touches on their draft report recommending changes to the state’s tax system. The Commission has three members, two appointed by the Democratic legislature and one by the Republican governor, each with different tax backgrounds. They have been working together over the last two years analyzing the state’s tax system and developing long-term recommendations to make it “more fair, more sustainable, and simpler.”

No school tax increase for COVID shortfall

The Legislature did the right thing this year by holding property tax payers harmless after the COVID pandemic took a big bite out of the state’s Education Fund. The state is better situated to deal with a revenue shortfall than individual taxpayers or school districts, who already face monumental trials during this crisis. The shortfall […]

Testimony follow up: Vermont Tax Structure Commission

September 11, 2020

Vermont Tax Structure Commission

Re: Follow up to August 31 testimony

Dear Commissioners:

Thank you for inviting me and our deputy director Stephanie Yu to your meeting last week. We appreciated the opportunity to review with you some of the key reasons we believe that eliminating the school property tax on primary residences is good public policy and how making this change would create a fairer, simpler school funding system for voters and taxpayers.

I want to review and expand on some points that were addressed at the August 31 meeting:

Cutting school funding now is a bad idea

If there’s anything that has become clear in this pandemic, it’s just how important schools are to Vermont families.

School staff are feeding kids, providing online instruction, helping connect kids to resources that they need—everything they always do and then some, but under much more challenging circumstances.

And with schools working to reach kids who don’t have broadband access and continuing to meet students’ special education needs, they need more funding, not less.

Don’t hurt kids in the name of “fairness”

It’s too early to have a clear picture of how Vermont should allocate the $1.25 billion it received last week from the federal Coronavirus Relief Fund. But a fully funded, fully functioning public education system has to be a top priority.

We’ve already heard demands that “schools need to share the economic pain” caused by the coronavirus crisis. At first blush, that sounds like a reasonable appeal to a sense of fairness. But it won’t be schools that pay the price if we start cutting education funding. It will be children, who already are going to miss about a third of this school year. Are we really going to ask third graders or high school sophomores to “share the pain” by giving up part of their education next year too? Are we prepared to tell them they need to do more with less education?

A harder road for school construction

Last Tuesday, communities across Vermont voted on school budgets (among other things). Historically, Vermonters have provided the financial resources that school boards have indicated our kids need to thrive in school—and preliminary results this year suggest voters passed over 90 percent of the school budgets up for approval on Town Meeting Day.

In addition to voting yea or nay on the annual school budget, five school districts—Barre Unified Union, Canaan Schools, Champlain Valley, Slate Valley Unified, and South Burlington—faced a second separate school budget decision: whether to fund school construction needs.

Equitable education for all Vermont children

Voices for Vermont’s Children’s annual conference Just Systems and Thriving Communities, for Every Child and Youth is this Wednesday, November 6, at the Capitol Plaza in Montpelier. The conference will focus on economic security, child protection, and health and education. Voices is a longtime partner of Public Assets Institute, particularly in the area of ensuring […]