On April 10, 2024

Lawmakers will consider a new education funding formula

By Ethan Weinstein/VTDigger

When Vermont lawmakers last tinkered with education funding earlier this session, the president of the Senate called for “groundbreaking” new ways to contain costs. 

Thus far, such radical reimaginings are yet to materialize. But they may be coming.

Rep. Emilie Kornheiser, D-Brattleboro, chair of the House’s tax-writing Ways and Means Committee, said that lawmakers are likely to discuss possible changes to the state’s education funding formula. But those conversations, she said, are likely to start broad. 

“I don’t have a secret plan that I’m waiting to unveil,” she said in an interview at the end of March.

Nevertheless, ideas are floating around, both in the building and across the country. 

“I think there are a lot of really good ideas from other states that we’re going to talk through. But I don’t think anyone has anything that’s fully baked, because this is all really complex,” Kornheiser said, “and it needs to be a collaboration with districts who are the ones who are making these tough budgeting decisions.”

A change to the education funding formula could appear in the yield bill, the annual piece of legislation that begins in the House and helps set education property tax rates statewide.

Altering the state’s funding formula, Kornheiser said, would require balancing two pervasive and competing messages education leaders have repeatedly sent lawmakers this year: One, big change is needed now. And two, don’t rush into making changes that could upend an education system already in crisis. 

Nationwide, the most common way to fund education is a “foundation formula” or “foundation grant.” Simply put, most foundation formulas ensure each district receives a certain minimum amount of money per student. New Hampshire and New York are among the states that use a student-based foundation, according to the Education Commission of the States. 

Kornheiser called a foundation model “the most obvious possibility.”

“There’s certainly a lot of people who are calling for it,” she said. “It solves many of the problems that people have expressed, and a lot would need to be resolved to make that work in Vermont.”

Lawmakers and school officials alike have said that education, and education finance, are at a crossroads. 

Vermont’s schools, the country’s second oldest, require billions in construction costs. Increasing mental health and behavioral needs of Vermont’s students, coupled with disappearing federal dollars that paid for specialists, add to the financial burden. So too does the skyrocketing cost of health insurance.

Voters on Town Meeting Day grappled with school budgets projected to raise education property taxes an average of 19%, and rejected a historic proportion of them. 

Gov. Phil Scott, meanwhile, has suggested that the state’s education funding system may have reached the end of its useful life and has prodded the Legislature to make structural changes by the end of the session.  

Amid that fixation on finances, lawmakers also want to tread carefully. Schools’ and the public’s attention on the Ways and Means Committee is intense. Kornheiser said she knows that every time the committee considers hypothetical new proposals or runs new tax projections, those ideas have ripple effects statewide.

“School districts are incredibly stressed,” Kornheiser said, “and I don’t want to add more stress to their plate.”

Tightening the connection

While the leader of the house’s tax committee might not have an education funding plan already drafted, one of its members does.

Rep. Scott Beck, R-St. Johnsbury, who serves on the Ways and Means Committee, has a funding formula that he argues would lead to cost containment and address two problems school leaders have raised.

“In my travels around the building this year, I have clearly heard two things from school districts. School districts will tell you, they’ll say, ‘We are disconnected from our tax rate.’ You know, they’re not, but it’s a loose connection,” Beck said. “The other thing that they’ll say is that ‘we don’t have control.’ You know, that ‘the Legislature is doing stuff that affects our tax rate … but we can’t vote on it’.”

Armed with an empty whiteboard and a black marker, Beck attempted to outline his idea, visualizing new building blocks for a system that in its current form is often described as overly complicated and opaque. 

Beck’s plan would incorporate ideas of a “foundation formula,” granting a set amount of money annually to districts based on each district’s enrollment and pupil weights. But the system would still allow districts to spend more, and would still use a statewide property grand list in line with Vermont law. 

The St. Johnsbury Republican proposed a similar idea in 2018 when lawmakers attempted education funding changes that Scott ultimately vetoed.  

As Beck explained it in his proposal, money for school districts would come from two distinct pots: one with non-property tax revenue and non-homestead property taxes, and one with homestead taxes.

The first pot, the non-homestead and non-property bucket, would make up roughly three-quarters of the overall money, as is currently the case. Categorical aid for things like special education, which frequently involve federal dollars, would come out of this bucket.

The plan also would create a weighting payment for districts, providing funding based on pupil weighting categories such as English language learners and low income students, much like Act 127, the law that recently took effect and launched a wave of concern about its unintended consequences.

The districts would also receive a chunk of money based solely on the number of students they teach. 

The second pot of money would come from money raised through statewide homestead property taxes. If districts wanted to spend more money than what they would receive from the first bucket, they would need to raise it through additional homestead property taxes. 

Because that extra spending would be funded exclusively by homestead property taxes — rather than also being funded by other taxes — it would more closely tie local spending decisions to local taxes, according to Beck.

“For the district that’s making the decision, it’s a more expensive decision for them,” he said. 

Put another way: Districts’ tax rates would increase faster as they increase spending — a method of cost containment, Beck suggested.

It remains unclear whether reform of the education funding formula will happen this year, and if so, what a new funding formula would look like. Any ideas will likely face some opposition from the education community.

The consequences of altering the system is unknown. So too are the consequences of inaction.

“It’s hard when we’re stressed to get our heads around the full complexity of situations. And so, that ‘perfect storm’ line keeps on getting thrown around,” Kornheiser, the tax chair, said of the challenges facing education finance. “But the number of factors that have led us to this moment, it’s remarkable.”

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