Column: Don’t blame Act 127 for higher Vermont tax rates

By MARC B. SCHAUBER

For the Valley News

Published: 02-09-2024 4:25 PM

Act 127 of 2022, the law that corrected 25 years of injustice in our education funding system, is a good law. It allows all children in Vermont to receive an excellent education regardless of their background or zip code, all while supporting local control and decision making. The bill that led to Act 127, S.287, passed almost every committee review unanimously, then passed both the House and the Senate with unanimous voice votes, and the governor signed it. Hundreds of Vermont school officials, teachers, school board members, and citizens spoke in favor of the legislation. It was among the most important tripartisan pieces of legislation to be passed in years.

Sadly, with immense and complex economic upward pressures on Fiscal Year (FY) 2025 school budgets, many are mistakenly and unfairly blaming the equitable funding law for the sharp rise in property tax rates. There are many economic and political pressures on FY 2025 school budgets that seem to be creating a perfect economic storm. Act 127 is not one of those pressures.

Let’s consider the upward pressures on FY 2025 school budgets. Many existed long before Act 127. Inflation, double digit increases for health insurance for the past several years, and the Common Level of Appraisal (CLA,) just to name a few. Other pressures have been ratcheted up for a variety of complex reasons.

Let’s take special education. The recent implementation of Act 173 of 2018 changed how the state pays for special education services from a model of partially reimbursing costs incurred to a flat “Census Block Grant” dollar amount. Many districts are seeing a substantial reduction in funding from the state for these services, putting a larger and larger portion of these costs on local taxpayers.

Mental health is another example. In recent years we’ve seen a major shift in how our schools provide the mental health support that more and more Vermont students require to be able to learn. In the past, most of that support was provided through the Designated and Special Services Agencies, the county or regional organizations that are contracted by our schools. Those funds come from the state's General Fund. For many reasons the Designated Agencies are unable to provide our schools and children with all the necessary services they need, forcing schools to either hire staff themselves or contract privately with other providers. This has shifted the cost burden from the general fund to the education fund and thus local taxpayer supported budgets.

Finally, some school districts are facing a fiscal cliff with the Federal COVID relief funds coming to an end. Many districts used these funds to hire staff. Many of those hires were for positions that our schools sorely needed and are now seen as invaluable for the education of our children. In many cases, the costs for those positions are now shifting from federal funds to our local taxpayer-supported budgets.

Many of these pressures have existed for years. Indeed, for the last two years one-time funds were used to artificially lower tax rates. While the relief was welcome, it now causes what appears to be an even larger tax increase now that one-time funds are no longer available.

Mistakenly blaming Act 127 for the impacts of all of these upward pressures on school budgets is inaccurate and does a disservice to students and taxpayers.

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Act 127 is largely expense- and revenue-neutral. It creates a more accurate allocation of Education Fund resources to improve equity in our statewide school funding system. With one exception, a multi-year transition provision, no more and no less money need be raised for the Education Fund because of Act 127. During a five-year transition period, Act 127 limits the increase in a school district’s “Equalized” tax rate to 5% per year, as long as the school district’s spending per pupil does not increase by more than 10%. Important note: this cap is applied before the CLA. The idea is to protect schools from experiencing an unmanageable, one-year jump in equalized tax rates as the new funding mechanism is implemented. A laudable idea.

However, that provision is proving to be problematic as it also creates a gap in revenue. How will that gap be filled and where will the additional funds come from? In Vermont’s statewide education funding system, one school’s shortfall will be made up with higher taxes borne by other school districts’ taxpayers. Moreover, many of the districts that might bear that added tax burden from higher spending elsewhere are likely among those schools that Act 127 was originally intended to help.

The transition provision is problematic and the legislature should look at potential solutions to address it. But make no mistake, doing so will not solve our education spending challenges. Until we address major societal issues like health care costs and mental health care, we will have an ever more expensive education system on our hands. Let’s fix this one provision in Act 127 but let’s not destroy a good law in the process and take our eyes off the real drivers of education spending.

Marc B. Schauber is the executive director of the Coalition for Vermont Student Equity. He lives in Dover, Vt.