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Every week, Vermont Public's politics team provides a succinct breakdown of some of the biggest issues at the Statehouse.

Capitol Recap: Lawmakers retooled Vermont’s school funding law. Now, no one is happy

A kindergarten classroom includes a table, and shelves of toys.
To understand what's driving a forecasted spike in taxes, lawmakers dug into school budgets this week.

The most recent forecasts predict that school taxes could rise an average of 17% next year. Last week, two high-ranking Democrats sent a letter to districts, urging school boards to trim their budgets.

Then this Thursday, House and Senate lawmakers held a two-hour hearing, taking testimony from school districts across the state to get a better understanding of this unprecedented rise in spending.

Vermont Public’s education reporter Lola Duffort tells Mary Engisch how this budget cycle is unfolding at the local level and in Montpelier. This interview was produced for the ear. We highly recommend listening to the audio. We’ve also provided a transcript, which has been edited for length and clarity.

Mary Engisch: So, Lola, what kind of reaction did lawmakers get on Thursday from school officials, who last week received this letter essentially chastising them for spending too much money?

Lola Duffort: Several school officials noted the timing is not great. A lot of school boards have already adopted proposed budgets and are about to send them off to the printers ahead of Town Meeting. So there isn’t a lot of time for adjustments.

A number of superintendents argued that schools are increasingly asked to do so much more than just educate kids. They’ve really become social service hubs. They provide mental health services. They feed kids. Here’s Elaine Collins, the superintendent for North Country schools, from Thursday’s hearing:

Elaine Collins: Schools have been asked in the last 10 to 15 years to do much more than school our children. And that is really where the increase of education spending is coming from.

Lola Duffort: Plus, schools are dealing with a ton of inflationary pressures that are out of their control. Healthcare, for example. But otherwise, reactions were actually pretty mixed. In fact, certain districts on some level welcomed this intervention from lawmakers.

Mary Engisch: Wait — really?

Lola Duffort: Yeah. But I think that in order to explain why, we need to back up and try to understand Vermont’s very wonky system for funding schools.

Mary Engisch: OK, explain away.

Lola Duffort: So, in Vermont, local voters decide how much their individual district will spend. And then whatever amount they greenlight, the state MUST pay. So to foot this bill — which now totals more than $2 billion annually — Vermont has built this statewide pool of money called the Education Fund.

To figure out each town’s fair share into this fund, the state calculates how much each district is spending per pupil. If your town has high per-pupil costs, your tax rate goes up relative to the rate for residents in other towns.

So far so good?

Mary Engisch: I’m still with you.

Lola Duffort: Great, because it gets more complicated. That per pupil cost number is not straightforward.

To calculate it, the state uses a weighted formula that tries to account for the fact some kids SHOULD cost more to educate. Basically, it weighs some kids — for example, those who are low-income — more heavily. And with the new funding law passed last year, Act 127, lawmakers retooled this weighting formula. They wanted to encourage districts with higher-need students to spend more. But the cost of that is other more affluent districts will need to be taxed at a higher rate — or spend a lot less.

The problem right now is that lawmakers wanted to give those affluent districts some time to adjust. So they included a provision that year-over-year homestead property tax rate increases were capped at 5% for five years. That 5% isn’t a hard cap, but for the sake of simplicity, I’m going to call it 5.

And now a lot of people are concerned that this cap is actually encouraging wealthier districts to spend more in the short term. Because right now, if your tax rate is artificially capped — even if you spend a lot more — but in the future, it’s probably going to go up by A LOT to help fund lower income districts. You have an incentive to front-load as many costs as you can.

Mary Engisch: Can you give me an example?

Lola Duffort: A common thing that’s come up is school facilities. Vermont schools are old and rapidly deteriorating, and there’s no state aid to defray bonding costs. So a lot of districts thought to themselves: "Hey, why don’t we use this one-time opportunity, when our taxes can’t go up by more than 5%, to raise a bunch of money and park some of it in a reserve fund? That’ll lower our costs in the future."

If you’re only thinking about your district and your taxpayers, that’s probably a smart thing to do. The problem is that if enough districts do this all at once, the aggregate impact is really problematic.

That’s the point that Brooke Olsen Farrell, a superintendent in Rutland county, made to me in an interview on Wednesday.

Brooke Olsen-Farrell: I don’t think any school district is doing this maliciously — it’s all well-intended. I think it’s just the ripple effect that it’s having across the state. And folks have not fully realized the true implications of decisions that are being made at the local level.

Lola Duffort: So, to close this loop: when I said some school districts welcomed this letter that lawmakers sent, what I’m talking about is districts, like Olsen Farrell’s, that were supposed to reap the benefits of Act 127 this year. They’re upset because the spending in neighboring districts is putting so much pressure on the education fund that it’s raising everyone’s taxes and essentially canceling out the benefits they were supposed to see.

Mary Engisch: So, a law that was supposed to temper education spending in wealthier communities and help less affluent districts is actually leading to a surge in spending and big tax increases everywhere. Do I have that right?

Lola Duffort: Yeah, you do. And so poorer districts are saying: "Can you do something about this cap?" And more affluent districts are saying: "Absolutely do not touch this cap." And also: "Can you do something about the fact that our taxes are going to skyrocket in five years?" It’s a mess. And this Town Meeting Day, we could see a lot of budgets fail.

Have questions, comments or tips? Send us a message.

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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