LETTER: Other States Show That the Foundation Formula CAN Work for Small Districts

Good Evening Chair Kornheiser and Members of the House Ways & Means Committee,

There has been some discussion in committee this week about the impact on the foundation formula if districts are left at their current size. This has sparked concerns about viability for small districts, but I would content that the viability of the entire system in jeopardy.

The foundation formula is the single most impactful policy change we can make. Vermont education spending has grown at nearly three times the rate of the national average since Act 60 passed. If our growth had kept pace with the nation as a whole over that time period, we would be spending over $9,000 less per student.

We believe that a foundation formula CAN work in Vermont without large-scale consolidation. This is particularly true if CESAs are implemented alongside the foundation formula. We know this because several predominantly rural states with very small average school district sizes (including Maine, Montana, Nebraska, North Dakota, and Wyoming) rely on a foundation-style school funding system with an equalization mechanism to ensure that students are not disadvantaged by geography or local property wealth. While each state’s formula differs, the common principle is clear: establishing a baseline level of support and then adjust for local fiscal capacity and the added costs associated with sparsity, transportation, cost of labor, and other factors.

These states offer a useful point of comparison for Vermont. Their experience suggests that even states with a significant number of small districts can create a workable foundation formula. We believe this effort moves us towards a more transparent, predictable, and responsive education funding system. The other useful point of comparison for Vermont? All five of these states have Education Service Agency structures to support those rural districts. And, they all spend significantly less than Vermont on a per student basis.

A foundation formula should be implemented as quickly as possible following the creation of CESAs to begin stabilizing statewide tax rates. Shared services will provide a tool for districts to increase their efficiency and expand service offerings while offering savings to local taxpayers. The implementation of a foundation formula will put pressure on districts that do not take full advantage of these tools or that are no longer viable. If you add construction incentives to the mix (particularly for merged districts) then you end up with a pretty compelling set of incentives for the least efficient districts to merge on their own within the next few years.

The path forward is clear, implement shared services first to give districts tools to control their costs. Followed by construction incentives and a foundation formula to constrain spending and put pressure on districts that are still operating inefficiently. A mandate is not necessary.

I would add that CESAs, or some variation of them, are clearly the most pragmatic and viable option on the table today when it comes to structural reforms of our education delivery system.

Why is this the case?

1. They have proven to reduce cost both here in Vermont and elsewhere.
2. They can be implemented quickly and at a lower up-front cost than district consolidation.
3. They increase the long term viability of small-medium sized districts by allowing them to share administrative overhead.
4. They have the potential to expand programming for students whereas the current fiscal constraints are doing the opposite in many areas.

Thank you for your work on H.955 and I look forward to your continued work on S.220 and other mechanisms to put downward pressure on education spending until the foundation formula can be fully implemented.

Many thanks,