On Wednesday the House Ways & Means Committee dug into education finance with the Joint Fiscal Office (JFO) with some hypothetical situations facing school districts. Chairwoman Kornheiser cast the topics for the day as surrounding property valuation and the Common Level of Appraisal (CLA) and understanding what the impacts of those actually look like for taxpayers. This is meant to be a bit of a prelude for Thursday’s joint hearing on education finance.

Of primary concern was the 5% cap on tax rates introduced by Act 127. Representative Sims asked districts “overspending” after hitting that cap and whether that cost shifts to everyone else. JFO indicated that the short answer is yes that will occur. The Education Fund (EF) is “self-balancing” and spending above those caps will need to be paid out of it. How that additional revenue is raised is a “policy decision” for the Legislature but with no intervention it would shift the cost back onto property taxes.

As more of these capped expenditures get transferred to the EF it decreases the yield amount (which is based on the tax revenue yielded to the EF for a $1.00 tax rate). At some point the statewide yield could be pushed low enough that all the school districts could be capped at 5%.

Sims followed with a question about what would happen if the CLA were eliminated. Essentially the answer from JFO is that it would degrade the revenue into the EF as towns without recent re-assessments would be underpaying. Eventually the EF would be short.

The major conclusion here is that “CLAs are not the reason taxes are forecasted to go up in 2025.” This is a narrative that was re-enforced in the public hearing on Thursday.

Chairwoman Kornheiser introduced the topic for the joint hearing on Thursday by saying that “we have a significant situation in front of us, our schools have significant needs, and our Education Fund has fewer revenues going into it than it has in previous years.”

NOTE: It’s not that the Education Fund is receiving LESS revenue, it’s actually that there aren’t massive surpluses this year because federal funding has gone away.

The Joint Fiscal Office shared that if the projected tax increases were uniformly distributed, it would result in a 17.3% increase.

Heather Bouchey (Interim Secretary, Agency of Education) shared that she was “concerned about the current implementation of Act 127 and has received communications from districts such as Winooski who express frustration that the very law that is meant to correct long-standing inequities for historically marginalized populations of students is in fact potentially penalizing them through regional budgeting decisions.” She continued that the “long-term weighted pupils, which are the new pupils under Act 127. The number of students served by the extraordinary cost threshold is increasing as well, which means more students and higher tuition rates.”

Jake Feldman (Senior Analyst, Tax Department) briefly reviewed the Common Level of Appraisal (CLA) “Town Correct Value.” He was adamant that CLAs don’t increase or decrease the overall tax revenue. They are not responsible for increasing education spending.

Garrett Palm (Chair, Norwood School Board) and Jay Badams (Superintendent, SAU70) read from their written testimony to the committee. Palm shared that the Norwich School Board voted unanimously in support of a VSBA resolution that “advocated for the changes brought about by Act 127.” They have been working to educate their community about the impending changes and promote work to “increase the diversity of our student population.”

Under the new weighting factors, they would see a 35-40% and the 5% tax cap allows them to “ease into that.” He added that they are still expecting to see some years with over 15% increases and that to get under the 5% threshold would require cutting nearly $4M from their budget.

Tom Flanagan (Superintendent, Burlington School District) was concerned that the impact of the CLA that “has been placed” on the weights in Act 127. However, he sees the underlying goals of Act 127 as righting “the moral wrongs in our education system.” Burlington witnessed a significant CLA decline of 7.87% this year, causing the local tax rate to be nine percentage points higher due to increases in property values. In order to put forth a tax impact of less than 10%, they would need to lay off nearly 12% of their workforce.

While some may suggest revisiting the new weights in Act 127 to solve the problem, Flanagan urged a different approach. He argued the state should “address the serious impacts caused by the CLA without conflating it with the weights in Acts 127.”

Violet Nichols (Superintendent, South Burlington School District) shared that their current budget of $62M produced a 7% homestead tax increase. If rolled over to the next fiscal year, the increase would be almost 18% even without qualifying for the 5% cap.

She called on legislators to consider limiting CLA fluctuations, increasing the education yield, and removing the section of Act 127 that forces a school district to become disqualified for future access to the 5% cap.

The North Country School District has over 500 students and was hoping to have significant decreases in projected taxes for their taxpayers before CLA rates came out. Now, the district is having to debate increases between 27 and 60 cents in some of their poor and rural towns.

“It is a miracle we are going to pass school budgets this year, and it's a mess,” said Elaine Collins (Superintendent, NCSU). “Schools have been asked to do much more than school our children.”

Ryan Heraty (Superintendent, Lamoille South Supervisory Union) spoke to a “spirit of collaboration and working unison towards a solution that does not lose track of why this legislation was enacted.” However, he warned that the new weighting model “does not offer a transparent look at annual spending increases by town, pupil weights, common level of appraisal, property yields, etc.” He added that the lack of timely statewide academic performance data also leads to an “erosion of trust.” Instead, he suggested the state should establish safeguards for annual spending and provide “clear annual reports on school performance.”

In his closing statement he emphasized that “we shouldn’t pursue equity while pushing our residents into poverty.”

NOTE: Now that’s something we can get behind!

Sheila Soule (Superintendent, Addison Northwest School District) provided testimony on behalf of the Addison Northwest School District. She noted that their budget for FY2025 includes a 14.5% increase in expenditures, which is a 15% tax increase. This includes the continuation of 8/10 ESSR funded positions due to continued needs and $750K in capital spending for middle school expansion.

She noted that each budget cycle “feels like a fresh round of zero some bargaining and blame.” She admitted that her district remains among the highest spending districts in the state, and they are left with a difficult choice of continually increasing costs or cutting programs.

Heather Bushey (Director of Finance, Essex Westford) shared that her district “strongly supports” the underlying goals of Act 127, but has “observed significant challenges in the mechanics of this legislation” that have led to a decrease in taxing capacity that “far exceeded our initial expectations.”

Robert Carpenter (Chair, Essex Westford School Board) shared that he is one of the 60% of families in Essex that are taxed on income sensitized and he is being placed in a position of having to choose between two terrible scenarios: increasing their tax bill or cutting millions from the school budget. The projected increase for FY2025 would be $1200 for his family.

“As school boards,” he said, “we need explicit direction from the state on whether to dramatically scale back public education as we know it in Vermont, or pass the burden to taxpayers.”

Franklin Northeast found that, for them, the increase in student weights allows them to “increase some offerings to meet the intent of the law, including opportunities for students that they have not been able to access before.”

Morgan Daybell (Superintendent, Franklin Northeast SU) warned that capping CLAs would just push the statewide yield down even faster and push more districts up to that 5% cap. He added that “people understand their house is worth more than before the pandemic, even if their assessment hasn't changed.”

Brooke Olsen-Farrell (Slate Valley) serves approximately 1300 students in five schools and has closed one school and moved all of its seventh and eighth grade students to the high school campus. It has reduced 26 positions over the last seven years. The have always been “fiscally conservative,” she said, “starting zero-based budgeting.” The majority of their surplus is returned to taxpayers to reduce tax rates, but even so their budget often does not pass on the first vote.

Amy Minor (Colchester) shared that they qualify for the 5% tax rate cap this year as long as statewide yield holds. If the tax caps were removed, the estimated tax bills for Colchester residents would increase 32%.

John Alberghini (Superintendent, Chittenden East Supervisory Union) noted that they “studied Act 127 carefully” and consulted with the Agency of Education. They increased their long-term weighted ADM (pupil count) to get to the 10% spending per pupil threshold. This threshold was important, he claimed, because if they had a “substantial increase” in equalized pupils under the previous weighting funding formula, they “would have considered” facilities improvements.