The cost of Vermont’s education system is top of mind this election season after a spike in property taxes and a string of budget failures in the spring. But our education funding system is also notoriously complicated.
Vermont Public education reporter Lola Duffort breaks down how it all works in the video above.
Here's a glossary of terms you might hear in Vermont related to school budgets and education finance:
The yield bill: The annual property tax legislation that lawmakers pass to pay for school spending that’s been approved by local voters (usually at town meeting) that year.
The homestead tax: The tax that’s applied to your primary home and surrounding land.
The non-homestead tax: The tax that’s applied to all other types of property — including second homes, commercial facilities and rental buildings.
The education fund: The statewide pot of money that’s used to pay for schools. It is separate from Vermont’s general fund (although the general fund is occasionally used to supplement it) and represents about a fourth of all state spending. Homestead and non-homestead taxes provide about two-thirds of the education fund’s revenues. The rest mostly comes from consumption taxes — most notably the sales tax — but lottery profits and Medicaid funds also contribute.
The CLA, or the common level of appraisal: Municipalities in Vermont all appraise their properties independently, and on different timelines. That’s a problem if you have a statewide tax — people with outdated appraisals could pay more (or less) than their fair share. The CLA is the tax department’s analysis of how over- or under-valued properties are in every town in Vermont. It’s used to adjust homestead and non-homestead tax rates, so that the final tax rate applied in every town better reflects current market value.
The difference between tax rates before and after the CLA is applied can be jarring. Updates which will be in effect in 2025 aim to bake in some of this adjustment earlier in the tax-setting process, so that schools and taxpayers are less surprised when final rates come out. This change is partly a response to the common misconception that the CLA is responsible for tax bills going up.
LTWADM, or long term weighted average daily membership: The state’s adjusted count of how many students there are in a school district. This is what is used to calculate per-pupil spending. Homestead tax rates are pegged to how much a district is spending per-pupil, but because some kids are expected to be more expensive to educate, certain students are weighted differently in the state’s formula.
Education spending: A technical term for all the spending in a district’s budget that counts toward spending per-pupil — and that therefore impacts tax rates. Not all spending in a school’s budget is counted in this number. Federal grants, for example, aren’t included.
Act 60: The landmark property tax reform law passed in 1997 that decoupled a school district’s tax rate from local property wealth. It followed the Vermont Supreme Court’s Brigham decision earlier that same year, which found the prior system to be unconstitutional.
The Dec. 1 letter: A document the Vermont Tax Department publishes each year that forecasts property tax rates based on preliminary information about proposed school budgets. School spending decisions are made locally in Vermont, but our funding system means that local decisions affect taxpayers statewide. This letter helps school boards understand the aggregate impact of their proposed spending while budgets are still in development.
Further reading from trusted sources:
- A general overview of the system, from the Joint Fiscal Office
- An FAQ about how tax rates are calculated, from the Vermont Tax Department
- A history of state education finance reform, from the Vermont Tax Department
- More details on the CLA, from the Public Assets Institute and the Joint Fiscal Office
Mike Dunn, Brian Stevenson, Kyle Ambusk and Kaylee Mumford created the video in this piece.
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