On Tuesday morning, the House Ways and Means Committee heard from Morgan Daybell, who was representing all the administrative groups in the education system. He noted that they felt that the funding and policy discussions should not be separated, and the same Commission should be responsible for both. They approve of the cloud tax and the short-term rental surcharge and “anything else” that would increase the statewide yield amount.

NOTE: The request for new, non-property tax, revenue is common for all four-letter groups in the education system. They have continually asked for new revenues over the past decades and, more often than not, legislators give it to them. This buys down the impact of local tax rates which are the only check on spending in the current system.

They also recommended standards for capital reserve funds instead of putting a hard cap on such expenditures. They also opposed new ballot language that would offer more transparency to voters about the tax rate impact of the districts proposed budget.

They also requested that the Legislature only adjust the student weighting factors every three years instead of every year. “We really are hoping that this is not something that we open up every year,” he stated. They also objected to the new excess spending threshold and requested the state return to the previous excess spending language that is currently in statute but has been suspended. He admitted that this was really the only effective cost containment measure we've had.

Daybell also asked that they add a contingency budget for school districts that are unable to get a school budget passed after three budget defeats.

Julia Richter (Senior Fiscal Analyst, Joint Fiscal Office) had put together a presentation for the Committee showing their proposed excess spending threshold compared to the current law one. It was clear that the current law version performed more in-line with their expectations by allowing low spending districts to increase their spending while tamping down on high-spending districts.

NOTE: The previous law formula does seem to be preferable, but the threshold should be brough down as it is quite generous and only a handful of the very highest spending districts would be penalized for hitting the threshold. To generate meaningful savings, 10-20% of the highest spending districts should be hitting this threshold.

Chairwoman Kornheiser noted that the allowable growth percentage would squeeze the lowest spending departments more than this committee intended.

Richter also walked the Committee through a new calculation of the Common Level of Appraisal (CLA) that is intended to reduce the difference between the pre-CLA and post CLA tax rates. The proposed change would result in the actual (final) tax rate being the same, but the pre-CLA rate would be different (closer to the final number).

As the Committee wrapped up for the morning, Representative Sims stated, “we recognize and appreciate the complexity of all the cost drivers that are making things incredibly challenging for schools and we can't continue at the path and the trajectory that we are.”

She added that they “can't keep doing this next year. This is unsustainable and [the excess spending penalty] is a blunt tool. I wish we didn't have to do it, but I think we can't be here again next year… bring all the stakeholders to the table to say we need to offer a high-quality education for kids. We need to do that at a price that our tiny state can afford.”

When the Committee came back on Wednesday morning, it was highlighted that the new draft of the bill created the Commission on the Future of Public Education, which was formed by merging two task forces being proposed. Three members of the House and two members of the Senate were added to the makeup of the Commission.

It was noted that the Vermont Independent Schools Association never had a seat at the Commission table, but they were the Ways and Means Committee’s task force. Representative Sims thought they should have representation, but one person was enough. Another Representative though two were better, saying that it was important to have as many voices at the table as possible. After discussion, the Committee settled on one.

Kornheiser made a comment that should thought “whole idea of state-directed spending and district-directed spending is false.” She contended that that they are “fundamentally separate things.” Her argument is that if they stopped “state-directed spending” then they would just become “district-directed spending,” implying that districts would choose to spend these funds anyway and that the state requiring that spending make them a convenient scapegoat.

Representative Anthony was not sure people can conclude that there really is no dichotomy between local and state action in the context of total spending. He was concerned that “summarizing it narratively” will exacerbate the false dichotomy.

On Friday morning the Committee reviewed the latest fiscal note for the bill, H.887, from the Joint Fiscal Office (JFO). A major limitation is that JFO cannot estimate the overall impact of the bill on the Education Fund in future years because it depends on voter approval, and they cannot “predict voter behavior.”

Homestead property taxpayers can expect an average 14.97% increase in their bills for FY2025. Non-homestead (everyone else) can expect a larger 17.99% average increase in their property tax bills. There is also an offsetting 14.97% one-time increase in the tax credit for income-sensitized taxpayers to help offset the hit for this year (income sensitivity has a one-year lag so these taxpayers wouldn’t see the offsetting credit for their property tax bills until the early in 2026).

The final bill also imposes a 1.5% surcharge on short-term rentals and dedicates the estimated $6.5M in resulting revenue to the Education Fund (FY2025 estimate). The larger new revenue source is a new “cloud tax” on software that is projected to generate $20.4M for the Education Fund.

The bill is expected to be on the House floor on Tuesday.

DISCLAIMER: Assistive Technologies used in the production of this report.