Key committees in the Vermont House of Representatives released outlines Tuesday of a major education financing overhaul that fundamentally changes the state's tradition of local control over school budgeting.
The proposal, which could get an initial vote on Friday, would allow the state to make the first decision on how much school districts should spend starting in 2027, giving districts that choose to spend the higher amount Tax penalties will be imposed.
Although decisions about how much to spend in Vermont school districts are currently made locally, school spending is almost entirely covered by the state. The school board will develop a spending plan for next year and present the budget to local voters in the spring. Congress then tallies all the budgets approved by voters and calculates how much money needs to be raised to fund each district's spending. This is where the fixed asset tax rate is determined.
It's a system that has consistently plagued lawmakers, who complain that spending remains out of their control even as voters blame them for raising taxes. But these concerns have taken on added urgency this year as lawmakers grapple with unprecedented increases in education spending.
The House Ways and Means Committee this week considered for the first time a bill that would fundamentally change the school budgeting process. Starting in fiscal year 2027, the state will calculate how much each school district should spend based on enrollment and demographics and send Educational Opportunity Payments directly to districts. Local school boards could propose “excess spending” on top of these state payments, which local voters could approve, but local property tax payers would instead pay tax penalties. .
Rep. Emily Kornheiser, D-Brattleboro, who chairs the committee, said in an interview that the proposal aims to give Vermonters a “more stable, predictable and easy-to-understand tax rate.” And much of what her committee has heard this year, she said, is “refutation of why we even say there is local control.”
Kornheiser said districts already have to consider a number of state and federal mandates and guidelines. And because all school budgets come from the same statewide funds, each school district's spending decisions affect not only its local tax rate but also other local spending decisions.
“I think this, in many ways, recognizes the reality that each school choice is all tied together and people need more simplicity to focus on what's important to them,” she said. said.
The bill also contemplates short-term changes to address this year's property tax increases. This would eliminate the sales tax exemption for cloud-based software and raise an additional $20 million in education funding. The bill would also create an additional one-time property tax credit for income-sensitive homeowners. But this year's tax issue is still far from resolved, and the commission also plans to discuss other potential sources of revenue to offset property taxes, such as sports betting receipts.
How much money schools will spend next year, and therefore how much money lawmakers will have to raise to cover district budgets, also remains in flux. However, the latest forecasts predict that the average property tax bill for homeowners will increase by 15.5%. The average property tax bill for non-residential properties (including commercial buildings, rental properties, and second homes) will increase by 18.6%.
With just a month left until the end of the session, the bill is still far from being passed by the House Ways and Means Committee. A committee vote on the bill is not expected until Friday at the earliest, and the committee plans full testimony in the meantime. Even if the bill is approved by the committee, it would still need the green light from all members of the House and Senate.
“The bill we discussed in committee today leaves so many decisions left, so many changes left, so many things to resolve, so many stakeholder consultations. It's a deep draft that requires consultation with a great many stakeholders,” Kornheiser said.
Gov. Phil Scott's office said Tuesday that the governor just received the bill and needs further consideration. But Scott Press Secretary Jason Maulucci also suggested in his email that the Republican governor wants to take aggressive steps much sooner than the bill contemplates.
“Structural changes cannot simply be carried forward into the future, after the damage from this year's rate hikes has already been done,” Maulucci wrote. “The governor also opposes buying off property tax increases by simply raising new taxes elsewhere. It just takes the people of the state’s money out of another pocket.”
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