A key Vermont House committee on Tuesday unveiled the outlines of a major education finance overhaul that would fundamentally alter the state’s tradition of local control in school budgeting.
An initial vote could come on Friday on the proposal, which, starting in 2027, would have the state make an initial decision on how much school districts should spend, and impose a tax penalty on districts that choose to spend a higher amount.
Decisions about how much Vermont school districts spend are currently made locally, although school spending is funded nearly entirely by the state. School boards craft a proposed spending plan for the upcoming year, and, in the spring, put those budgets before local voters. The Legislature then tallies up all voter-approved budgets, then calculates how much money it needs to raise to fund spending in every district. That’s when they set property tax rates.
It’s a system that perennially vexes lawmakers, who complain that spending remains out of their control, even as voters blame them for ever-higher taxes. But those concerns took on increased urgency this year as lawmakers wrestled with an unprecedented increase in education spending.
The House Ways and Means Committee this week took a first look at legislation that would radically transform the school budgeting process. Starting in fiscal year 2027, the state would calculate how much each district should spend, based on its enrollment and demographics, and send an “educational opportunity payment” directly to districts. Local school boards could propose, and local voters could approve, “excess spending” in addition to these state payments, but local property taxpayers would pay a tax penalty in exchange.
Rep. Emilie Kornheiser, the Brattleboro Democrat who chairs the panel, said in an interview that this proposal aimed to give Vermonters more “stable, predictable, and knowable tax rates.” And so much of what her committee has heard this year, she said, is “pushback on why we even say that there’s local control.”
Districts must already account for a slew of state and federal mandates and guidelines, Kornheiser said. And because all school budgets are funded out of the same statewide pot of money, each districts’ spending decisions impact not only their tax rates, but everyone else's.
“I think in a lot of ways this is acknowledging the reality that each of our schools’ choices are all tied up together and folks need more simplicity in order to focus on what matters for them,” she said.
The legislation also contemplates some short-term changes to deal with property tax hikes this year. It would eliminate the sales tax exemption on cloud-based software, which would raise an additional $20 million for the education fund. The bill would also create an additional one-time property tax credit for income-sensitized homeowners. But the matter of this year's taxes remain far from settled, and the panel also plans to discuss other potential revenue sources to offset property taxes, including sports betting receipts.
How much money schools will spend next year — and therefore how much lawmakers must raise to pay for district budgets — also remains in flux. But the latest forecasts predict that the average property tax bill for a homeowner would rise 15.5%; the average property tax bill for non-homestead properties (which include commercial buildings, rental properties, and second homes) would rise 18.6%.
Though adjournment is barely a month away, the legislation before the House Ways & Means Committee is a long way away from becoming law. A committee vote on the bill is not expected until Friday at the earliest, and the panel is planning wall-to-wall testimony in the interim. If the legislation wins the committee’s approval, it will still need the full House and Senate’s green light.
“The bill that we discussed in committee today is a deep draft with so many decisions left to be made, so many changes still to be made, so much to be worked out, so many stakeholders that need to be consulted,” Kornheiser said.
Gov. Phil Scott’s office said Tuesday that the governor had only just received the bill and would need to study it further. But in an email, Scott press secretary Jason Maulucci also signaled that the Republican governor would like aggressive measures taken much sooner than the legislation contemplates.
“Structural changes cannot just (be) punted to future years, after the damage of this year’s hike is already done,” Maulucci wrote. “The Governor is also opposed to buying down the property tax increase by simply raising new tax increases elsewhere. That’s just taking Vermonters’ money out of a different pocket, without actually addressing underlying affordability concerns.”
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