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‘Not intended as free money’: Lawmakers scold schools over spending

A sign saying "school budget vote - vote today" stands in the snow alongside a snowy road in the small Vermont city of Winooski.
Matthew Smith
At this point in 2024, many school boards have already voted to approve the budget they plan to bring before voters on Town Meeting Day in March.

Legislative leaders sent local school officials across Vermont an unusual – and unusually stern – missive on Friday, writing that they were “increasingly and seriously concerned,” about school spending.

The letter, authored by Democratic Rep. Emilie Kornheiser and Sen. Ann Cummings, who helm the tax-writing committees in the Vermont House and Senate, comes as state lawmakers dig into the causes behind a forecasted 18% increase in education taxes next year.

Vermont’s schools face a variety of inflationary pressures this year, including skyrocketing health insurance costs. But state officials — and certain districts — have been increasingly highlighting the role that a temporary tax break, built into a recent retooling of Vermont’s educating finance formula, could be playing as districts prepare their budgets.

Lawmakers passed Act 127 in 2022 to encourage poorer and more diverse districts to spend more on higher-need students. In theory, that new law should encourage more affluent districts to tighten their belts, because they’ll eventually be taxed at a higher rate. But because lawmakers wanted to provide a runway for districts losing tax capacity under the law, they included a provision that year-over-year homestead property tax rate increases were capped at 5% in the law’s first five years.

This budget cycle marks the first year of Act 127’s implementation, and lawmakers have been surprised to learn that most school districts are expected to hit the 5% cap. In their letter, Kornheiser and Cummings suggested that many districts, having hit the threshold anyway, were going ahead with even further spending — because they know that their tax rates were shielded from additional pressure, at least in the short-term.

“The threshold was not designed to stack deferred spending and delayed maintenance costs into a few short years. It was not designed to fix all of our state education challenges or the overall pressures of operating in an inflationary environment,” the two lawmakers wrote. “It was not intended as free money — in fact nothing in the education fund is free.”

Vermont’s $2 billion education fund, which pays for school spending, is built to self-correct, because it must pay out however much spending local voters approve during Town Meeting. And lawmakers reminded school officials in their letter that if a school district spends knowing that its tax rate is partially shielded, the slack is picked up elsewhere.

“The education fund is a promise among neighbors that we will take care of each other’s needs and costs. If districts act solely in their own rational self-interest, those costs will be picked up by property taxes in neighboring towns,” they wrote. “Most of us, regardless of the town we live in, can’t afford what it seems is happening in the education fund this year, and something will have to give.”

The two lawmakers also warned that those who use the cap could face consequences.

“We intend to have all districts that utilize the 5% threshold present their budgets to a reimagined tax rate review committee, and hope that more extreme measures are not needed this year,” they said. “You each have a part to play in this work.”

Tough timing for schools

The letter is sure to raise the ire of many local school officials, who are navigating intense inflationary pressures — from health insurance, wages, and deteriorating and aging facilities.

The timing will also be difficult, because even if districts decide to pull back on spending, they will need to scramble. Many boards have already voted to approve the budget they plan to bring before voters on Town Meeting Day in March.

“The timing is definitely problematic,” Sue Ceglowski, the executive director of the Vermont School Boards Association, said Friday.

But the letter will nevertheless be validating for several school districts who were supposed to benefit from Act 127, who argue that their neighbors’ spending while the cap is in place is putting pressure on the state’s education fund — and canceling out the financial benefit that they were supposed to incur.

The Winooski School District, for example, which is home to a large refugee population, was supposed to be a poster child for Act 127’s benefits. But district officials and the city’s mayor have written to lawmakers in recent days to plead for them to intervene.

“It is clear that the transition provisions of Act 127 are subverting the very policy objectives Act 127 aims to achieve,” Winooski school board members Robert Millar and Nicole Mace wrote to lawmakers on Wednesday.

In their letter Friday, Kornheiser and Cummings echoed precisely this concern.

“Act 127 was intended to create greater equity between districts — to narrow the range between the haves and have-nots,” they wrote. “At this point, given what we hear about how the 5% threshold is being used, it seems to be widening that gulf rather than narrowing it.”

Information about the dynamics at play as school boards finalize budgets for next year remains somewhat anecdotal. And Kornheiser and Cummings noted that they would work with superintendents and school boards to collect data on the matter in preparation for a special legislative hearing Thursday.

Both Jeff Francis, the executive directors of the Vermont Superintendents Association, and Ceglowski, stressed in interviews the importance of this fact-finding exercise.

“I think that the way we're going to navigate through this is by displaying empathy and understanding for all parties,” Francis said. “Every school district has, you know, been acting responsibly in their own eyes. And the General Assembly … [is] taking a look at this and saying: we may be contending with the law of unintended consequences.”

If Democrats in the Legislature take steps to scrutinize school spending this year they will find a willing partner in Gov. Phil Scott, a Republican who has long sought to rein in the costs of preK-12 education. Craig Bolio, Vermont’s tax commissioner, had also previously raised concerns about Act 127.

“I think they are highlighting some of the concerns that we've been talking about,” Bolio said in an interview Friday. “And it certainly looks like the Legislature is taking those concerns seriously.”

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Lola is Vermont Public's education and youth reporter, covering schools, child care, the child protection system and anything that matters to kids and families. She's previously reported in Vermont, New Hampshire, Florida (where she grew up) and Canada (where she went to college).
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