Phil DoddWith two roughly 150-page bills — H.454 that passed last year and H.955 this year — the Vermont Legislature has initiated a transition to a radically different school finance scheme, designed to restrain costs and improve educational outcomes. The biggest changes, which will have significant impacts on local school districts, will take effect in three years, in July 2029.
H.955 backed away from the forced consolidation of school districts — something H.454 had advanced — and shifted to encouraging voluntary consolidation through a fast-track process that could result in merger votes in 20 months.
With Vermont’s student count in a long-term decline, the merger of districts is seen as a way to save money by reducing the number of superintendents, administrative staff members, teachers, and small schools while giving students more educational opportunities. Vermont’s current teacher-to-pupil and staff-to-pupil ratios are at or near the highest in the country.
H.955 suggests 20 groupings of school districts to start meeting this fall to discuss consolidation under the guidance of a facilitator hired by the state. The facilitators have discretion to change which districts are in each grouping.
Locally, the suggested merger group includes Montpelier-Roxbury, Washington Central, Harwood, Barre, and Paine Mountain (which includes the towns of Norwich and Williamstown). Each is to be represented by one or more members of the district’s school board.
Presumably, proposed mergers could involve the entire grouping, some districts in the grouping, or result in more than one merged district in a grouping.
Last year’s bill set in motion a plan to shift to a “foundation” formula for financing schools in July 2029, a system used in most states. Under the new formula, the state will send districts a set amount of funding per pupil, weighted for the differing costs of educating certain students. With this formula, the state will have much more control over spending than it does in the current funding scheme, which allows local districts to determine how much to spend per pupil.
This formula will pressure higher-spending districts like Washington Central and Harwood to cut their budgets, since the amount provided by the state per pupil will likely be less than what it is now. Low-spending districts like Barre, on the other hand, will be able to spend more, but they could also see their taxes increase. H.955 creates a transition period from fiscal years 2030 to 2033 to phase in such increases.
In addition to promoting mergers and implementing the foundation formula, the Legislature is taking other steps to limit school spending. With another bill passed this year, H. 949, the state is gradually reducing the spending level at which the excess spending penalty kicks in from 118% this year to 112.5% in fiscal year 2032. These measures to squeeze school budgets will take effect even as districts are experiencing rising spending pressures such as health insurance costs for employees.
Educators say the Legislature is giving more responsibilities to school districts in these bills and others passed this session while reducing local fiscal flexibility.
“If this legislative session could be summarized in a single phrase, it would be ‘do more with the less,’” said Chelsea Meyers, executive director of the Vermont Superintendent’s Association.
The foundation formula means most primary homeowners in the state will pay the same property tax rate, although there is a provision for limited supplemental district spending. School tax bills for qualifying primary homeowners will continue to be reduced by income sensitivity adjustments, but under a new system that also takes effect in three years. Meanwhile, a new tax category for second homes that are year-round dwellings will likely lead to higher taxes on those properties, also starting in July 2029.
After negotiations with Gov. Phil Scott, H.955 passed this spring with overwhelming legislative support. The Senate approved the bill on a voice vote, while the House voted 125 to 10 in favor of the bill.
Legislators seemed eager to try something completely different after seeing average student test scores decline at a time when school property taxes rose more than 40% in the last five years.
The state wants to see consolidated school districts that are physically contiguous and would serve at least 2,000 students.
If, after the merger process is complete, there are still districts with 750 or fewer students, H.955 sets up an additional process by which the state can recommend how these small districts could be merged. The Montpelier Roxbury Public Schools district currently has 1,209 students.
The 20 merger committees are directed to write a final report by Sept. 1, 2027. If the state Board of Education thinks a merger proposal is a good idea, each involved district will vote on its merger plan on March 7, 2028.
As an incentive for consolidation, merged school districts will be eligible for substantially greater amounts of state aid for new school construction than those that don’t merge. The state stopped helping to pay for school construction around the time of the 2008 recession, and the Legislature has yet to identify a funding source for the construction aid it says will be offered in the future.
H.955 also says that the state will cover 75% of a district’s existing debt service for earlier construction. However, this legacy debt aid will not be available to school districts that the merger committee facilitator concludes were “bad faith” participants in merger discussions.
This year’s bill creates new organizations called Cooperative Education Service Areas (CESAs) designed to allow districts to join forces to share programs, staff, and services and theoretically save money. The state is divided into seven CESA regions.
In a newsletter sent to parents, MRPS Superintendent Libby Bonesteel expressed skepticism about the CESAs. “I have not yet been shown how it will save us money, however, I can see how it sets up more bureaucracy and cost in an already complex education system,” she wrote.
In part two of this two-part series, The Bridge will examine the varying impacts of Vermont’s new education finance system on local school districts.
