The Legislature's grand education transformation initiative offers a mixed bag of results but does manage to move forward historic changes to the way we raise funds to pay for schools that should introduce better transparency and accountability for taxpayers while also putting downward pressure on spending. Unfortunately the combined effect of governance and finance changes that create a very top-down educational model. 

The Summary

The bill seeks to reform Vermont's education governance, quality, and finance systems by consolidating school districts (much like Act 46). The bill introduces a new education financing model based on a foundation formula, starting in fiscal year 2029. It also mandates the Secretary of Education to set quality standards for instruction and operations, while repealing outdated regulations and redefining the roles of the State Board of Education and the Secretary to enhance accountability and governance.

A new governance Task Force (comprised of representatives from the Agency of Education, State Board of Education, and various education associations) will be responsible for redrawing the boundaries of the education delivery system. New, significant, restrictions on placed on what schools students participating in the town tuitioning program can attend. Overall, the bill aims to improve educational quality and governance while ensuring equitable access to resources across Vermont's public education system.

The Details:

• Education Governance

  • There are five pages explaining the purpose of the bill, but generally the intent is to create a new framework for education as Vermont prepares to educate students for the 21st century.

  • Transition to new school districts by July 1, 2028, with support for staffing, resources, and elections leading up to that implementation date (the original versions passed by the House and Senate targeted 2029 implementation, but this was moved up during conference committee).

  • Commission on the Future of Education
    • Five non-voting members are added:
      • Appointed by the Speaker of the House and the Senate Committee on Committees:
        • Two retired superintendents
        • Two retired school business managers
      • Appointed by the Governor
        • One retired superintendent
          
    • A new directive is set for the Commission, to make recommendations for a new state-level education governance system, including roles and responsibilities for the Agency of Education and the State Board of Education.
      
    • Removed from the Commission's scope:
      • The effective integration of Career and Technical Education
      • The consideration of "unique geographical or socioeconomic needs"
      • Recommendations for reforming the education finance system (this was accomplished in the current bill).
        
    • Creates a new School District Redistricting Task Force to design and recommend new, larger school district boundaries to replace Vermont’s existing 119 school districts, with implementation targeted for July, 2029.
    • Comprised of:
      • Five members appointed by the Speaker of the house
        • One former superintendent
        • One former school business manager or school board member
        • Three members of the House of Representatives (must not be all from the same party)
      • Five members appointed by the Senate Committee on Committees
        • One former superintendent
        • One former school business manager
        • Three members of the Senate (must not all be from the same party)
      • One member appointed by the Governor
        • Must be a former superintendent
    • The Task Force is required to submit three of fewer proposed maps for new school district lines. The proposed district models should:
      • Include at least one boundary proposal recommendation must consider the use of supervisory unions, allow for the continuation of the town tuitioning system, and to the extent practical, not separate geographic areas that contain nonoperating school districts.
      • Be between 4,000 and 8,000 students (this would indicate that the final number of districts will be somewhere between 10 and 20).
      • To the extent possible, equally distribute grand list values, student count and student demographics. At the same time, it should minimize disruptions to students.
      • Consider current school district and town boundaries and other historic and current community connections.
      • Consider population distribution and facility location and capacity.
      • Consider transportation, staffing levels, and salary scales.
      • Consider grand list values, current spending, and debt liabilities.
    • The Task Force is required to submit their report and three mapping proposals to the legislature by November, 2025.
      
      
  • Education Quality Standards (EQS)
    • Class size minimums - new minimum class sizes are established, effective by July 2026, within the EQS.
      • The original House version set specific benchmarks ranging from 12-18, but the Senate version does not set specific benchmarks in statute and directs them to be make via rule instead. 
        
        
    • The Agency of Education is directed to amend the EQS by August 2026 to include:
      • Statewide proficiency-based high school graduation requirements.
      • Require that independent schools receiving public tuition comply with the class size minimum requirements.
      • Submit a report to the legislature with proposed standards for schools that are "small by necessity."
        
        
  • Construction - the Agency of Education (AOE) is directed to implement a new state aid program for school construction.
    • AOE is directed to specify "point prioritization" methodology to evaluate construction projects.
    • AOE would recommend an annual budget to the Governor.
    • The program would provide technical assistance and guidance to school districts.
    • AOE would be responsible for issuing quarterly progress reports on all ongoing school construction projects.
    • The program should:
      • Encourage "maximum utilization of space"
      • Collect and maintain prototype school plans.
    • AOE is required to submit a report to the legislature in December 2025 regarding the status of the implementation of the school construction program.
    • An advisory board for school construction is also created to issue rules on school construction, set project priorities, and issue policies and procedures around borrowing and modeling for school construction as well as overseeing the AOE's work on various aspects of the program. The board would be made up of:
      • Four ex officio members:
        • The State Treasurer
        • The Commissioner of Buildings and General Services
        • The Executive Director of the Vermont Bond Bank
        • The Chair of the State Board of Education
      • Four voting members:
        • Two appointed by the Speaker of the House
        • Two appointed by the Committee on Committees
    • A fund for school construction is created, but identified funding source is the supplemental district spending reserve (more on this later).
    • All rulemaking authority related to school construction is transferred from the Board of Education to the AOE.
      
      
  • New rules for independent schools allowed to receive public tuition:
    • Must be located in Vermont
    • Must have been approved by the State Board of Education prior to July 1, 2025 (a freeze on new schools).
    • 25% of enrollment is composed publicly tuitioned students.
    • Must comply with the new class size minimum requirements.
    • Any students currently attending a school that does not meet these requirements will continue receiving tuition until they graduate from that school.
    • Tuition payments are changed to mirror the new base amounts in the new foundation formula.
      
      
  • School districts are prohibited from closing schools and offering their students public tuition.
    
    
  • The membership of State Board of Education is changed, replacing two of the existing 10 members appointed by the Governor with appointments from the Legislature.
    
    
  • The bill also asks for recommendations for modernizing adult education funding, addressing increasing special education costs, implementing a statewide school calendar, and the implementation of a statewide financial and student information systems.
    
    
• Education Funding
  • A new foundation formula is created, effective July 2028 with a cost-factor model that is yet to be determined (the original House version set a foundation amount of $15,033 per student provided to each school district by the statewide education fund). The foundation amount would then be adjusted (upward) for each individual school district in order to account for students that are deemed to cost more to educate (this is called "weighting" which occurs in the current system).
    
    
  • A study is commissioned to determine what the base amount and weighting factors should be.
    
    
  • The ballot language for school budget votes is updated to reflect whether or not a budget spends more than the base education payment and the associated local tax rate required to fund that additional spending.
    
    
  • Supplemental Local spending is allowed by local school districts, but:
    • Excess spending is capped at 10%
    • The district's local supplemental tax rate will be determined by how much more they spend than the lowest taxing capacity district. For example a district spending $1k per student above the base amount would be taxed at a rate as if they had the least taxing capacity in the state.
    • A Supplemental District Spending Reserve Fund is created to collect any excess funds from district's supplemental spending. Because basically every district will be taxed at a higher rate than they would normally need to generate the supplemental spending, this will generate additional tax revenues that won't be used by that district. If money remains in the fund at the end of the year, those funds may be transferred to the School Construction Aid Special Fund.
    • The Tax Commissioner will issue a new supplemental spending yield annually so school districts know what supplemental spending will "cost" them on their tax rate.
      
      
  • Education Fund Advisory Committee (new)
    • Monitors and recommends updates to the education finance system, including weighting factors, categorical aid, and spending caps.
    • Considers transitioning to an evidence-based foundation formula and ensuring equitable use of Education Fund resources.
      
      
  • Income sensitivity is repealed by the bill, and replaced with a new homestead property tax exemption.
    • The property tax exemption reduces the housesite value of a property based on their income level.
    • This mechanism eliminates a lag where income sensitivity payments weren't collecting until you file your income taxes the following year after receiving your tax bill.
    • The credits are calculated based on household income as such:
      • $47K or less in income = 95% exemption for housesite value
      • $47-67K in income = 75% exemption for housesite value
      • $67-85K in income = 50% exemption for housesite value
      • $85-100K in income = 25% exemption for housesite value
      • $100-115K in income = 10% exemption for housesite value
    • Caps:
      • $115K in household income.
      • $425K in housesite values.
    • These values will be adjusted annually for inflation
      
      
  • Regional Assessment Districts
    • Creates 12 regional assessment districts (aligned with counties, with Franklin/Grand Isle and Essex/Orleans combined) to standardize property reappraisals every six years.
    • Aims for consistent data collection and valuation by trained professionals, with municipalities contracting jointly for reappraisals.
      
      
  • Introduces three property tax classifications: homestead (which existed in current law), nonhomestead residential, and nonhomestead nonresidential. These will go into effect January 2027.

Analysis:

There is little doubt that the current configuration of Vermont's public school system is unsustainable. School spending has increased 42% since 2014 while our student population has shrunk. This has pushed the state to the second highest cost per student in the country. At the same time student performance has declined. We have pointed out both of these issues in our recent report on education outcomes and spending. We also introduced possible solutions in our recent policy proposal for education reform.

While the financing changes are pretty in line with our recommendations, there are some key differences and challenges that will need to be overcome with the bill as it moves forward. The way this legislative process has played out, the direction of this bill, and the people involved are very reminiscent of Act 46 (which we were in the room for). For example, the focus is largely on the elimination of local school boards instead of focusing on administrative overhead. However, the Senate did include language that requires that at least one of the three proposals proposed by the task force to include a model that looks similar to ours.

This allows kind of system we envisioned where local school boards maintain critical ties between schools and their communities while administrative overhead is consolidated into larger supervisory unions (SUs) that provide bulk administrative services to school districts. This achieves economies of scale while maintaining local control. Even better if those consolidated SUs align with our career and technical education centers in order to provide a strong post-secondary connection. The original framework the House passed would have precluded this from happening, thankfully the Senate changed that.

Currently we have an average of two districts per SU, which means we are not properly leveraging SU's for their potential to achieve scale. Rather, we are treating them as mid-level managers in our education delivery system.

Because of the lengthy process anticipated by the working group as they redraw district lines, implementation of BOTH the governance changes and the funding changes are not anticipated to happen until 2028 (which is likely to be pushed back to be honest). This means that taxpayers will need to ride out another three years of highest-in-the-country property taxes that are increasing at twice the rate of inflation before finding any relief.

A governance system like the one we proposed can be implemented much more quickly because it does not remove locally elected school boards or change school district boundaries - instead it focuses on administrative overhead. We could be providing taxpayers relieve next year instead of at the end of the decade.

The governance changes certainly move us towards a top-down system, but so too does the way in which the foundation formula was envisioned in this bill. Most states use a foundation formula and their base payments to school districts account for 50-80% of total spending. This bill would include 90% of total spending in the base payment to school districts because they are capped at spending only 10% above the base. This would be ratcheted down to 5% over time...

What this does is move us from a system where ~90% of spending decisions are made locally to one where 90% of spending is determined by the legislature. This is a significant policy shift and not only takes authority away from school boards, but also from local voters. It is clear, from the House in particular, that they do not envision a system where local voters weigh in on their school budgets in any meaningful way.

Current Status:

The bill passed the House on 4/11/2025 along party lines and was significantly revised by the Senate on 5/23/2025. Significant revisions were made by a conference committee between the two chambers. The Governor signed the bill into law on July 1, 2025.

Last updated: 7/17/2025

DISCLAIMER: Generative AI used to assist in the production of this report.