The Vermont House Tax Drafting Committee this week released a preliminary proposal that would fundamentally rethink the state's education financing.
The plan, included in an annual bill that helps set statewide tax rates, would provide school districts with a base payment for students, with voters only considering spending above that base.
The Ways and Means Committee, led by Rep. Emily Kornheiser (D-Brattleboro), is expected to finalize many details by the end of this week. As written, the biggest changes, including the base or “educational opportunity benefit,” won't go into effect until her fiscal year 2027, two budget cycles from now.
“We know it's always a draft until it passes,” Kornheiser said during Tuesday's committee meeting. “But it's very much a draft, draft, draft,” she said, adding a few more “drafts” for qualifying.
As property tax payers face an estimated double-digit increase across the state, the Tax Commission is considering the possibility of taking significant power away from local voters.
The current forecast, which incorporates several legal assumptions, is that the average residential property tax will increase by 15.46% and the average non-residential property tax paid by businesses, rental property owners and second home owners will increase by 18.57. % will increase. The specific changes in the bill vary widely from town to town.
The anticipated tax increases reflect an estimated $192 million increase in education spending from this fiscal year to next. That increase was reduced by about $40 million last month as the district revised its budget in response to the legislative action. State data suggests that health care costs, construction, special education, disappeared federal funds and salary increases all contributed significantly to the increase.
The plan is included in the Annual Yield Bill and outlines changes to education financing this year, next year and the year after.
The plan would gradually move Vermont toward something similar to foundation funding formulas commonly used in other states, but would still rely on a statewide grand list. The new student weight calculation under the previous law, which provided schools with more funding for students with higher tuition fees, would also continue.
The idea has similarities to a plan outlined to VTDigger last month by Rep. Scott Beck, R-St. Louis. Mr. Johnsbury, Member of the Means Committee.
This year, there are few immediate corrections in mind. As originally written, the bill prohibits school districts from drawing from the education fund to add funds to capital reserves. On Wednesday, committee members discussed the feasibility of that idea and whether to add language that would return surplus funds collected by districts to the statewide fund in 2025, but the feasibility of that idea is also unclear. .
The current bill would impose a so-called cloud tax by eliminating the sales tax exemption for software accessed over the Internet. The decision is expected to raise $20 million annually.
If the state wants to move to Educational Opportunity Payments next year, lawmakers will need to further work out the details of the plan.
The bill would also create an “allowable growth rate” in district budgets for the next two years (FY 2026 and FY 2027), increasing tax liability for districts that spend more than the growth rate, and requiring districts that spend less to increase their budget further. We are planning to increase the amount slightly. than the highest spenders.
Gov. Phil Scott called it “good news” at a news conference Wednesday that lawmakers are considering a plan to address structural issues in education funding.
But Scott also said he was “concerned” that the plan did not address expected tax increases this year. He said the administration will provide a response that recognizes the plan's strengths and problems with it.
Much of the plan remains in flux, perhaps most notably the per-pupil payment amount, which comes from an analysis of the cost of an adequate education in Vermont. Kornheiser said Tuesday that the committee expects to have that number “very soon.”
Committee members also discussed a tax targeting short-term rentals, but the size of such a levy and whether it should be included at all is an open question.
“We've put a lot of big ideas out there,” Kornheiser said Wednesday morning, telling colleagues that the committee “continues to challenge” the bill.
“It’s pretty intense,” she said.
