Advocacy Update – Week 8 – 2024

What to do about Vermont’s Unsustainable Education System 

(In-depth read – 5-7 minutes) 

This is a long section, however, there is no easy or quick way to discuss Vermont’s education funding system. What we can do is break this current situation into three segments.

The immediate fix for Act 127’s unintended consequences and perverse incentives 

This week, the Governor signed H.850, a bill aimed at undoing the unintended consequences of Act 127 and its 5% cap on tax rates, which created a perverse incentive for all districts to overspend. The bill instead gives more targeted discounts to school districts that lost tax capacity due to the Act. Towns will now have until April 15th to pass new budgets. 

Answering the Immediate $243 Million Dollar Problem 

Legislators will look to make tax bills more affordable while schools are coming in at a 15% increase. It’s unclear to the financial analysts the legislature leans on how much of the new budget deficit is from Act 127 and how much of it is from other factors. 

Other factors: 

• The universal school meals program was implemented as an unfunded mandate at a time when the education fund was running a surplus. Now, that program is adding roughly $30 million to the deficit.  
• School personnel healthcare increased by 16%, costing about $20 million extra.  
• Pandemic-era ESSR funding has run out, and many schools are against getting rid of the positions they added with those funds. 
• Let’s not forget that the continually dwindling student enrollment is driving down our teacher-to-student ratio and working against us for economies of scale. 
• This week, some school districts pointed the finger at others’ lack of spending accountability, citing the increased spending capacity some gained through per pupil weighting changes comes with no direction of how to spend it. 
  • There was an attempt to do this via categorical aid, however, that was dropped. 
• School construction is another factor, with Vermont having the second oldest building stock in the nation with $280 million in immediate needs and more potential issues.

Moving Forward in a Sustainable Manner 

Vermont’s education funding system is incredibly complicated, likely the most complicated in the country, and legislators are struggling to tame this beast ahead of Town Meeting week. While Act 127 is getting a lot of the blame, it is not necessarily to blame for what is an unsustainable, unapproachable, and now unworkable system over the last 27 years.  

How did we get here, and why is this so complicated? 

• We decentralized decision-making while centralizing funding… After the Brigham vs. Vermont decision, we moved to a statewide property tax system, yet we still clung to our dead dogma of local control, which is the classic makings of a tragedy of the commons, where individuals with access to a common good act in their own best interest. It’s a statewide system, yet there is local control, which is just ripe with poor incentives. 
• The common level of appraisal (CLA), which adjusts the locally assessed property values to the estimated fair market value, further distorts the impact of local policy levers, especially at a time when housing prices are inflated. 
  • Some communities feel that they arrived at a reasonable budget after their local process and feeding it into the Rube Goldberg machine only to learn that their CLA pushes up their taxes. 

• State property taxes are income-sensitized for more than two-thirds of Vermonters, as if the statewide nature of taxes, with the CLA, didn’t make it difficult enough for voters to understand what the effect of their budget is on their tax rate.
  • On its face sounds good, however, it is not truly reflective of people’s ability to pay and is capped at $128,000 per household. 
  • It’s worth noting that this negatively affects the Lake Champlain Region, as wages in this area need to be higher to accommodate a higher cost of living, and home prices are high, too. 
  • It’s lagged, too, with the previous year’s income being used to arrive at the credit for this year’s bill, which will be problematic as legislators try to keep taxpayers’ bills down. 
• We have declining student enrollment, which is counter to our desire to gain economies of scale. Legislators heard this week about how one school has 13 staff and 42 students, however, due to their idealized view of a local school and our strong desire for local control, they won’t merge with neighboring schools. 
• We haven’t fixed issues, we’ve just added revenue.
• The result of this is that we disincentivize grand list growth as funding is centralized, and the link between one’s local budget is detached from the growth in their property tax base (grand list), one sees no positive side of development in one’s own backyard. 

One could ask, how are we to have an educated democratic conversation about these issues when the system is so complicated many legislators find it difficult to fully understand? 

So, what’s the future look like? 

• Right now, legislators are gravitating to the terminology “newer and fewer” when considering school capital construction to merge schools.
• They will likely need to claw back some local control.
• There is a push to centralize services such as special education using something similar to the Boards of Cooperative Educational Services (BOCES) model used in New York.