DRM Advocacy Update – Week 2 – 2026

Mandates, Maps, and Mayhem: The Current State of Vermont’s Educational Overhaul

Vermont is currently navigating a period of unprecedented attempted transformation and financial strain in its education system. There are a few areas of concern this session that we’ll address here; 

• The future of last year’s legislation, Act 73, and the policy levers in it
• Additional action for cost containment 

First, zoom out: There are some unfortunate truths we need to base this conversation on. 

• High spending, ever-declining enrollment: Vermont ranks as one of the highest spenders per pupil in the nation, second only to New York. However, the student population has dropped from over 110,000 decades ago to approximately 80,000–84,000 today.
• Rankings: Vermont ranks in the bottom third of states for 4th-grade math and reading unadjusted scores.
• Graduation Gaps: While the national high school graduation rate is 87%, Vermont trails at 83%. 
• Special Education: The gap between students with and without disabilities (IEPs) widened to 19 percentage points in 2024. 
• Career Technical Education (CTE): Access is currently uneven and largely dependent on a student’s proximity to a center. 
• Cost keeps growing: State officials project a nearly 12% average property tax increase for 2026. This follows a five-year trend where education property taxes have already risen by more than 40%.
• In short: Despite some of the highest spending, Vermont’s academic outcomes are at best frequently described as “below average” when adjusted for demographics.
• Why it all matters: High property taxes are adding to Vermont’s high cost of living and doing business. Meanwhile, ensuring our students are equipped for the future is important to their success as well as our state’s economy. 

What’s making it so expensive? 

• The Tail Wagging the Dog: Anyone who has been around budgeting knows how it starts; you get instructions about the priorities and allowable growth or savings targets. Except that’s not how it works in education: school boards set local budgets first, based on local priorities, rather than a top-down state revenue limit. 
  • Once a local community passes a budget, the state education fund must pay for it, regardless of whether the state has the revenue on hand.
  • This ‘bottom-up’ autonomy is exactly what the Act 73 ‘Foundation Formula’ is designed to end by 2028, replacing local budget-setting with state-set spending limits. This year, it might be done more bluntly with caps. More on that later. 
• Approximately 70% of education spending is dedicated to salaries and benefits. Health care premiums for the most common school plans rose 125% from FY18 to FY25. 

• Special Education: The number of students requiring IEPs is rising faster than the national average despite declining enrollment. 
• Facilities and Environment: Many school buildings are in poor condition. This week, much of the conversation was around the state being forced to pause its mandatory PCB testing program because the original $30 million appropriation was exhausted, leaving many schools with identified contamination and no remediation funds.

Catch up quick: Last year’s efforts were focused on structural reform and resulted in Act 73, which was designed to achieve scale and predictability through two primary levers (there are others):

1. District Consolidation: The law intended to shrink the current 119 school districts (managed by 52 supervisory unions/districts) into 10 to 25 regional entities. These new districts were mandated to have an enrollment of 4,000 to 8,000 students “to the extent practical”.
2. Foundation Funding Formula: Scheduled to take effect in July 2028, this would shift decision-making authority from local districts to the state. The state would provide a base “Educational Opportunity Payment” (set at $15,033 per pupil in initial drafts) adjusted for specific student needs like poverty or English language proficiency.

In addition, the Act was meant to create cost mitigation through two levers; 

• A Homestead Exemption: The Act sought to move the state from a property tax credit to a homestead exemption, which brings with it some advantages, such as a clearer understanding of the impacts of school budget decisions on property tax bills and leveling some benefit cliffs. The design decided on does come at an additional cost of $30 million annually, to what was a $170 per year benefit to lower the property taxes for many Vermonters. 

• Tax on Second Homes: The Act also seeks to implement a tax on second homes, the revenue of which can cover the cost of the homestead exemption. The Department of Taxes was tasked with bringing back a report on how to do this, which we’ll get into. 

The Current Standoffs 

With just one week back, the Legislature is back to work debating the future of Act 73 as well as what might be appropriate for cost containment. 

1. The future of Act 73’s structural reform levers;

• District Consolidation: A central requirement of Act 73 was for a School District Redistricting Task Force to produce a new map of consolidated boundaries by December 1, 2025. The task force failed to deliver the mandated maps. Instead, members endorsed a proposal for voluntary mergers and the creation of five Cooperative Education Service Areas (CESAs).
  • Because the “foundation formula” implementation is contingent upon new school districts being operational, any delay in redistricting could postpone the state’s entire financial reform plan.
  • The House and Senate Education Committees must decide whether to attempt to draw the new district lines themselves or adopt the task force’s voluntary CESA model.
  • The Agency of Education Secretary, Zoie Saunders, proposed a joint hearing on potential maps. 

• Tax mitigation: Also contingent on the implementation of new districts is the creation of a tax on second homes, and thereby, the fate of the more expensive homestead exemption. 

• The tax committees heard an initial walk-through of the report, which highlighted the complexities and challenges of implementing the new tax. It’s also been made abundantly clear: no new tax without a larger transformation. 

2. How to achieve short-term cost containment? 

The Future of Act 73 aside, Vermonters are demanding some form of tax relief sooner than what has already been legislated. 

• Buy-down and BAA fight: The Governor has proposed buying down the projected 12% average property tax increase to about 5.8% using roughly $75 million in surplus state revenue, a fight that played out in the Budget Adjustment Act, where he insists this should be done. 

• Caps on spending: Senate President Pro Tem Phil Baruth has proposed a two-year hard cap on school district budget growth to slow spending in S.220, specifically with a “per-pupil spending growth cap.”

• Addressing educators’ healthcare: the Vermont School Boards Association has brought forth a proposal to change how the state bargains with teachers for healthcare benefits that has been percolating for some time and may now have traction.