The House Education Committee attempted to get a “big picture” of the education financing challenges on Thursday morning. Julia Richter (Senior Fiscal Analyst, Joint Fiscal Office) noted that the material she was presenting would seem familiar because it is meant to be. Chairman Conlon wanted a refresher as they began to review the current situation. Richter stated these are the same slides she presented about a month ago with some updates based on recent data and budgets. Her presentation showed the various commitments of Education Fund dollars and the ways in which school districts receive them.

Representative Austin asked if the Net Education Payment (80% of Education Fund spending) was predominantly teachers’ salaries & benefits. Richter confirmed this was true.

Another question followed about Census Block Grant funds for special education. One legislator wondered if they “unspent” can they be returned? Richter cannot say beyond saying these need to be spent in the proper areas, they are not fungible.

NOTE: It is highly unlikely that these would be returned. There is no auditing process to ensure appropriate use and thus no penalty if funds are spent inappropriately.

Conlon asked what the cost is to the Education Fund for Income Sensitivity adjustments? Richter noted that this is estimated at $158.3M for FY2025, which lags by one year as the tax refund applications are processed.

Conlon wondered if the “present scenario” plays out if it would be significantly higher as the tax liabilities increase across the state. Richter added that this will be determined largely by the property tax yield set in this year’s bill.

Austin wondered if they had similar numbers for the Current Use system (which exempts working lands, farms, forest land, etc. from property taxes). Richter did not have the details on tax expenditures (such as Current Use) in front of her.

Austin Davis (Director, Government Affairs, Lake Champlain Regional Chamber of Commerce) spoke next, he is not an expert in education tax policy, but is more attuned to the “big picture” surrounding housing, workforce, economic, tax and Career and Technical Education to name a few.

His presentation focused on how our system is growing unsustainably, we've mostly mitigated this with the addition of new revenue. In doing so, we've created more perverse incentives and directed the burden to taxpayers. We argued that we need to better connect decisions while accommodating economic diversity.

He pointed out that education spending is decided at the local level, but grand list growth “goes to Montpelier to be redistributed.” In his view, the state should find ways for local districts to retain some of this, and ultimately, they prefer to grow the tax base versus other ideas around adding more base (new taxes) into the tax system.

The state ethos of "one's ability to pay" is lost in the myopic use of income as a proxy. Homestead declarations and renter rebates should include an attestation of household net wealth and not penalize multiple earners, using housing more efficiently, from sharing one roof.

Davis also made an argument that the marginal utility of a four-bedroom home occupied by two elder people on fixed incomes (so income sensitized) was lower than for a young family with kids. A four-person family could be living in the same home and perhaps paying a higher actual education property tax liability.

He asserted the state tax policy has “halted the churn of the housing market” which results in stagnation. We questioned whether the state should tax on that “marginal utility.”

Davis also made a point that the current education crisis is not made up of a “healthcare”, “construction”, “education” or other separate “crises” but is one larger workforce crisis driven largely by housing costs and scarcity.

NOTE: Economics of this are certainly at play in education, but the broader economics are also being coupled with large increases in spending in education.