More than a quarter of Vermont school districts could soon face their newest financial dilemma: Either reduce their education spending or suffer potentially significant financial penalties.
Legislation passed by the Senate would use what’s known as the “excess spending threshold” to pressure Vermont’s highest-spending districts to rein in costs. The mechanism, first adopted in the early 2000s, suspended during the pandemic, and then reinstated in 2024, imposes tax penalties on districts that spend more than 118% of the average statewide weighted per-pupil cost.
Senate lawmakers now want to lower that threshold to 112%. The proposal, based on current year’s spending levels, is projected to increase the number of districts that exceed the threshold from 10 to 32.
"We need some kind of temporary containment in the rise in the growth of spending.”Senate President Pro Tem Phil Baruth
Sen. Thomas Chittenden, a Democrat representing Chittenden County, said it offers lawmakers a way to curb growth in school spending without imposing a mandate from on high.
“This allows districts to spend what they want,” Chittenden said. “But for every dollar over the threshold, the district gets double taxed on those dollars.”
Starting next year, that penalty would apply to approximately $21 million in education spending. Penalties collected on excess spending are used to lower tax obligations in districts below the threshold.
The legislation has drawn opposition from districts such as Mountain Views Supervisory Union, which includes Woodstock and surrounding towns. Taxpayers there would absorb an additional $2.5 million annually in tax penalties if board members don’t cut spending.
Superintendent Sherry Sousa said the supervisory union would need to eliminate 12 to 15 teaching positions to avoid the hit. She said districts shouldn’t be punished for spending what’s required to provide high-quality education services.
“I am privileged to be in a district that really values the quality of education both in student outcomes and experiences, and they have voted accordingly,” Sousa said. “But there are other regions of the state who I believe are underfunding, and as a result students are not having the quality of experiences that our students are having.”
Many lawmakers, however, say high spending in districts such as Mountain Views has fueled a 40% increase in average statewide property bills over the last five years. And they worry about growing geographic disparities in an education system where per-pupil costs range from less than $11,000 up to $19,000.
“We see the excess spending threshold as this policy tool to shape behavior. I’m not sure yet if it does.”Brattleboro Rep. Emilie Kornheiser
Lawmakers and the governor are working, unsuccessfully so far, to enact more systemic reforms that would overhaul funding and governance of public schools. But Senate President Pro Tem Phil Baruth said those efforts, if they come to fruition, won’t yield savings for years.
“I believe in the interim … we need some kind of temporary containment in the rise in the growth of spending,” he said.
The proposal is getting mixed reviews in the House of Representatives. Cornwall Rep. Peter Conlon, the Democratic chair of the House Education Committee, said he’s amenable in concept. As a school board member over the last 17 years, Conlon said, he’s seen his district make the difficult spending decisions needed to stay under the existing spending penalty.
“It has proven to be an effective tool in sort of keeping spending low,” he said.
Brattleboro Rep. Emilie Kornheiser, the Democratic chair of the House Committee on Ways and Means, is more skeptical.
“We see the excess spending threshold as this policy tool to shape behavior. I’m not sure yet if it does,” she said. “And I’m not sure yet if the other side of it, which is increased property taxes for those districts, is what Vermonters are looking for.”
While Republican Gov. Phil Scott says he supports the Senate bill generally, his administration is asking House lawmakers to amend it. The legislation would exempt all new costs related to school construction from counting toward the threshold.
Jake Feldman, with the Department of Taxes, told lawmakers this week that districts shouldn’t get exemptions from costs that aren’t “strategic.”
“Like, are you fixing up an elementary school when there’s another elementary school that’s five minutes away and you have very few students?” he said.
The administration and Kornheiser are also concerned about a provision that eliminates the spending penalty entirely for districts that reduce their spending, no matter how far over the threshold they were the previous year.
Feldman said the “loophole” could create incentives for districts to significantly ramp up spending the first year the law takes effect in order to avoid penalties in the future.
