Good Morning House Ways & Means Committee,
Thank you for your work on the new foundation formula, this will be an important step forward for education policy in Vermont by reducing the complexity of the current system and providing transparency and predictability to voters about how the school budgets they vote on will impact their tax bills.
See our analysis of the Governor's Education Transformation Plan for additional context.
The recent discussions around capping excess spending allowed by local districts is an important one in order to avoid the disparity between high and low spenders re-asserting itself in the new structure. Today there is a 5:1 ratio between our highest and lowest spenders. That is concerning and may be out of compliance with Brigham. The new system should create a dis-incentive for this type of disparity.
That being said, I’m not sure a cap is the best mechanism to achieve this. It could also possibly be subject to a constitutional challenge since it may impede a district’s ability to provide adequate education for its students. Beyond that, if the weighting formula were to be found inadequate in some way in its ability to compensate for students who cost more to educate, excess spending is the recourse a district has to combat these inadequacies. 10% is not a lot of wiggle room to work with in this instance.
The mechanism you are contemplating for calculating excess spending tax rates could be used to address this. Currently that mechanism (which we prefer to the Governor’s) is only focused on equalizing taxing capacity. It could also be used to put downward pressure on excess spending in lieu of a cap. The new 80% yield threshold does help to generate some additional revenue for the Education Fund and serves as a “penalty” of sorts for spending above the base amount. We had suggested a mechanism in our education proposal that increases the tax rate a 2x relationship with excess spending. Something closer to this, where every dollar you spend above the base amount costs more, could be an effective tool to put downward pressure on excess spending above the base amount.
To put additional downward pressure, you could reduce the 80% yield at face value, or you could reduce it proportionally to the percentage of spending over the yield that a district approves. In this scenario, the first 10% of spending over base would be at an 80% yield of the lowest capacity district. After that, every additional percentage point over base would result in a percentage point reduction in the yield (or maybe even two!). So, for example, a district spending 20% above base would have a 70% yield applied (first 10% is “free” and the additional 10% results in a penalty to the yield %).
This should all of course be modeled by JFO. It’s important to remember that school boards, when they are presenting budgets, are typically focused on the tax rate and now how much money they are “sending” to the state. Modeling will need to confirm that these mechanisms will result in measurable impacts to local tax rates, otherwise they will not be effective.
One other thing that I haven’t seen the Committee discuss yet (although I could have missed it) is the ballot and tax bill language. It should be very clear to voters where the tax rate increases are coming from. This is a critical failing of the current system. Is it a drop in the base funding amount from the state? Is it excess spending from the local district? A combination of both? These answers should be abundantly clear in the ballot language. We also believe that the tax bill itself should break out the statewide property tax from any local excess spending as separate line items. In this way it is clear what portion of your tax bill was generated from statewide taxing decisions versus local ones. The reduction in house site value based on the new credit mechanism should also be clearly displayed on tax bills.
Many thanks for your consideration. Keep up the good work!
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Ben Kinsley Executive Director |
CFV is a nonprofit, nonpartisan advocacy organization comprised of over 20,000 Vermonters and dedicated to the vision of a more prosperous Vermont and growing middle class. We seek to accomplish these goals by reconnecting Vermonters to their government and advocating for more transparent and accountable policymaking.