State House

2014 Legislative Update: Week 5 (2/4 – 2/7)

by Jeff Wilson

As we move closer to town meeting time, the statehouse has been abuzz about education; especially as it relates to some of the more seemingly ominous predictions about property tax impacts. So this week, let’s talk a little bit about education finance – pre-k thru 12th grade.

The Current System: Vermont’s school finance system has evolved from the 1997 Brigham decision and the subsequent laws (Acts 60 and 68) that were approved in 1997 and 2003. Although there has been a good deal of tinkering with education finance over the years, the heart and soul of Act 60/68 has remained in place. This system, aimed at equalizing tax effort and educational opportunity, is predominantly based upon the notion that the more a school district spends per student, the higher the tax a Vermont homeowner in that school district will pay. For these folks (the VT homeowner), the education tax rate is made up of two components: the base rate and the above base rate. The base rate ($0.94 in FY 14) is set by the state and is tied to factors like statewide education spending, the state’s grand list value and how much general fund money is transferred into the education fund. While the rate above the base is determined by how much a school district spends above the base per pupil amount. So – if a school district has “education spending” of $15,000 per student, it is 64% over the base education amount of $9,151, which means the equalized tax rate for a homestead property (permanent resident & 2 acres) would be 164% x $0.94 = $1.54. For nonresidential property (commercial, vacations homes, etc…), the statewide equalized rate for the current year is $1.41. Looking ahead to next year, the preliminary numbers for the base tax rate are forecast for a 5 to 7 cent increase, depending upon how we massage the variables, and how district budgets are crafted. On the latter factor, the good news is that it appears school budgets are coming in a bit under projections; 3% increases, instead of 3.8%.

Some Facts: About two-thirds of Vermont homeowners are income sensitized and pay their ed taxes based upon household income. Of the Vermonters who pay based on property value, those with household incomes of between $90,000 and $190,000 pay the highest percentage of their incomes towards education taxes. From the bevy of reports recently released, we’ve also learned that Vermont has pretty darn good educational performance outcomes, but we spend a boatload of money in order to get those good returns. Some of the more sobering data being kicked around lately reveals: We spend 14% more per student than what our peers are spending in the New England region. We are #1 nationwide in ed spending per $1,000 of income. There are 87 elementary schools in VT with enrollments of less than 150 students. 19.1% of all classes offered in VT K-8 schools have only 3-9 students in them. And the list goes on.

The Future: I don’t think we’ll see any dramatic changes to the financing system this session. This is not really due anymore to ardent Act 60 supporters defending the status-quo, but more of a recognition that no one has been able to come up with an alternative that would meet the Brigham constitutional test, reflect sound fiscal policy and be marketable from a political perspective. The focus instead (I think rightly so) will be directed towards building a more efficient system; one that emphasizes a new governance and decision-making process. This new system, currently being shaped in the House Education Committee (I hope), envisions a more regionalized school district model and will be bound to upset the apple cart of town-by-town based local control. However, if we have the courage to stake this step, it very well could mean cost containment, more reasonable property taxes and even better student outcomes. Changing 120 years of tradition won’t be easy, but it’s clearly time to have the conversation.

– Jeff Wilson, Manchester, Vermont, State Representative

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