Effort begins to re-evaluate education financing in Vermont

Lawrence Picus, author of a 2012 report on the state's education finance system, moderated the panel during an symposium on education financing at St. Michael's College on Tuesday. Photo by Hilary Niles/VTDigger

Lawrence Picus, author of a 2012 report on the state’s education finance system, moderated a panel discussion  on education financing at St. Michael’s College on Tuesday. Photo by Hilary Niles/VTDigger

It’s time to re-evaluate Vermont’s education financing system and test its fairness to both students and taxpayers. That was the consensus at an education symposium convened Tuesday by Gov. Peter Shumlin and the Legislature.

The event kicked off what’s intended to be a session-long discussion of the state’s school funding formula, with the aim of understanding how it’s working in the current economic and educational environment – and whether it could be improved.

The current funding formula was created in 1997 with the passage of Act 60, and amended in 2003 with Act 68. Now all of the laws’ complex parts and funding mechanisms, everything from per-pupil costs and outcomes to property tax structures and income sensitivity, are on the table.

Held at St. Michael’s College in Colchester, the symposium included a six-member panel discussion and three breakout sessions for wide-ranging conversations. It was organized as a response to growing complaints about high property tax rates and persistent concerns about educational outcomes — particularly for schoolchildren from the state’s poorest districts.

Panel moderator Lawrence Picus, author of a 2012 report on the state’s education finance system, will prepare a briefing paper for the administration and Legislature by the end of January. The follow-up will summarize and expand upon Tuesday’s discussion.

The six-member panel of experts from Vermont and around the country weighed in against a backdrop of divergent assumptions: that rising property taxes are unpopular compared to an income-based system, for example, or that the housing market collapse and lowered property valuations that resulted from the recession spurred only a temporary spike in property tax rates that could very well come back down.

Along with those issues, panelists looked at a separate issue at play in Vermont: ever-rising rates of growth in school budgets.

Vermont’s per-pupil cost of education alternately takes first or second place as highest in the nation, according to Daphne Kenyon, public policy consultant from New Hamsphire and a visiting fellow at the Lincoln Institute of Land Policy in Cambridge, Mass.

The state’s achievement scores don’t illustrate a return on that investment, Kenyon said, when compared to neighboring states like New Hampshire and Massachusetts, which spend less on average per student.

If one takeaway could be gleaned from the discussion, it came from those outside Vermont: The system here works well, they said. Yes, it’s 17 years old and likely needs to be updated. But it’s got “good bones,” as Picus put it. Adjustments may be called for, but not an outright replacement.

 

Patrick Walsh, an economics professor at St. Michael’s College, also challenged the conventional wisdom that more spending results in better outcomes — though he acknowledged that correlation can vary depending on which population of students is studied. Extra money directed to disadvantaged kids tends to make a bigger difference than a boost for better-off schools, for example.

But the impact of school spending is just one assumption that should be tested, according to both Shumlin and several panelists.

“Do we have a challenge with income sensitivity driving school spending beyond sustainable rates?” Shumlin asked in his opening remarks. (Under Vermont’s education finance formula, the state uses income sensitivity to reduce property tax burdens for households that earn below a certain threshold.) Shumlin said some people believe passionately that tax reductions from income sensitivity shield too many people from the true cost of their votes on school budgets. But he wonders if that theory is just a myth.

About two-thirds of Vermont households qualify for income sensitivity reductions that apply to their property tax bills. Several panelists suggested that school budgets likely would be lower if more taxpayers had more “skin in the game.”

The need for more and better data to answer such questions was a running theme in the breakout sessions. A desire for “data-driven decisions” was a mantra that applied to both the base education cost per pupil — is it set correctly? — as well as the quest for what the ideal class size and school district size is. That has long been a key issue in this small rural state with small schools.

If one takeaway could be gleaned from the discussion, it came from those outside Vermont: The system here works well, they said. Yes, it’s 17 years old and likely needs to be updated. But it’s got “good bones,” as Picus put it. Adjustments may be called for, but not an outright replacement.

Aside from adjusting income sensitivity, one component of the formula that may be tweaked is the “high-spending threshold” that kicks in as a method of moderating school budget increases. Designed to curb school spending, the function spikes tax rates if a school budget exceeds a certain level of annual increase.

“It seems like that threshold is not really doing its job (of preventing) runaway spending,” Walsh said.

Tom Downes, associate professor of economics at Tufts University, suggested reclassifying taxpayers beyond just residential and non-residential groups as is done under current law. Vermont could consider different tax rates for residential, commercial, industrial and “everybody else,” he said, the latter category being a potentially profitable way of raising taxes on out-of-state homeowners.

Introducing multiple thresholds for income sensitivity, which would taper tax implications could also help, several panelists said. Stepping up the tax burden more gradually may dissuade people from manipulating their household income from year to year to avoid a big bump in their tax bills.

Assessing a property owner’s ability to pay taxes by a more accurate measure of income may also be a good strategy, suggested Michael Wolkoff, deputy chair of the economics department at the University of Rochester.

Shumlin, Picus and several panelists cautioned that, whatever aspect of the school financing system may be altered, some people will be unhappy.

But the fundamental goal, House Speaker Shap Smith, D-Morrisville, underscored, is to achieve both equity in financial obligations and equal access to education for all schoolchildren in the state. Those two principles cannot be separated, he said.

CORRECTION: This article was updated at 1:30 p.m. on Jan. 15, 2014, to indicate that the Lincoln Institute of Land Policy is located in Cambridge, Mass.

Hilary Niles

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24 Comments on "Effort begins to re-evaluate education financing in Vermont"

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2 years 4 months ago
What is the end result these people are looking for? The end result will be more taxes, period! It’s the only thing our leaders are capable of giving us. They have no solution to the rising cost of education and I feel they have no understanding about why the cost of education keeps rising while student numbers continue to fall. In this State, our leaders seem to think the success of education is measured by “money per pupil”, “There, we spent a whole lot more, our children are smarter for it”. WHAT! Equal access to education?? What is that supposed… Read more »
Duane Thompson
2 years 4 months ago

Why does the state seem to think the local towns cannot control their own budget for school, Shouldn,t the state keep their nose out of the towns business ,

2 years 4 months ago
A couple of very important points: 1) School budgets are only proposed by the school boards. It is by law the districts that adopt budgets (Vt Title 16, § 428. Budget to be voted). An interesting side effect of this being that every year some tens of thousands of Vermonters decide the state’s education budget as opposed to 181 deciding the rest of Vermont’s government spending – crowd sourcing as Paul Cillo (I believe) put it in a different article. 2) People are empowered by the above. This means if taxes are too high both statewide and locally folks can… Read more »
Scott Mackey
2 years 4 months ago
Rama is right, it is up to local voters. Unless there is widespread rejection of school budgets in March, the Governor and Legislative leaders can rightfully argue that there is no crisis to solve. However, looking at the bigger picture, education spending is going to crowd out other priorities. In our town, Waterbury, voters are going to be asked to approve a $3 – $4 million bond for a new library and municipal building. When the news breaks that school taxes are going to increase by more than 10%, I wonder if taxpayers are going to be willing to vote… Read more »
Michael Gardner
2 years 4 months ago
Rama, If you think people are empowered and are willing to vote budgets down then you don’t understand the concept of self interest. If someone can vote for more spending and not have it impact their taxes they will do it every time! Income sensitivity has created 72% of the people with very little correlation between spending and their own tax bill. I think a simple way to raise more money and increase “fairness” would be to make the rebates subject to wealth disclosure. If you want a rebate you must submit all of your financial data. Including business assets!… Read more »
Larry Johnson
2 years 4 months ago

Mr. Gardner,

You say that 72% of the people are avoiding taxes by qualifying for “income sensitivity”. Do you have an opinion or estimate as to how many actual dollars that equates to that are shifted over to non-qualified property tax payers? Also, do you have knowledge of how many of our state representatives and senators qualify for income sensitivity relief. Just wondering.

Best regards,

Larry Johnson

James Gill
2 years 4 months ago

As one school board once told me: “there are so many state regulations and requirements it is extremely difficult to put a budget together. They don’t give us much ‘wiggle room’ to make any reductions or adjustments.”

So my question is, if a local school decided that a state requirement was unreasonable and is unwilling to meet this requirement. Can the state withhold $ until the requirement is met? If yes, then there is no local control. The man with the $ ….. controls

Chet Greenwood
2 years 4 months ago
Great News– Another taxpayer funded “symposium” to see how we can shift taxes!! The symposium was organized because taxpayers were upset at rising property taxes- as they/we should be. Totally absurd that we can expect to realign taxes “fairly” and and no one will notice that nothing is done to keep costs down. “Yes, it’s 17 years old and likely needs to be updated. But it’s got “good bones,” as Picus put it.” How about some of the Education mandates that could be 17 years old and should be repealed that put a financial burden on the school/taxpayers. How about… Read more »
Phyllis North
2 years 4 months ago

We desperately need changes, but it sounds like many people want to study things instead. The General Fund is not kicking in enough for education, the number of teachers and staff is rising while student numbers fall, many voters are insulated by property tax adjustments from the impact of the budgets they approve, and we have too many schools, school districts and superintendents. The Legislature should start making changes now!

James Gill
2 years 4 months ago

The day the $ went to the state was the day local control was lost. As the saying goes ‘the ones with the $ ….. control’

John Ullrich
2 years 4 months ago
Supporting Education and social programs is healthy but tough choices need to be made. Look to the cause then support the solution. As always when times change so will the taxes and how they are raised in VT. Yes increases in taxes has been an hurt to all in VT and can the economy support the increases. There are tough choices we could make to increase revenue for this state. Reform of the Social programs, for example the fraudulent use of tax funds by the unfortunate. Many of these benefit users can or choose not to make safe choices so… Read more »
Dave Bellini
2 years 4 months ago

Act 60/68 was just a gimmick to raise overall taxes. Those that recite “local control” as their mantra are the same people that wanted state control via Act 60/68. Before Act 60/68 towns had more “local control.” Today “local control” means: “state pays.”
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Now that Vermont has successfully driven up education spending across the state there’s just the slightest push back beginning.
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If Korea and Japan have such smart kids compared to the US, how large are their classes? How much more do they spend compared to the US?

Paul Lorenzini
2 years 4 months ago

The education INDUSTRY doesn’t give a rats A$$ about how high our taxes are because that is how they get paid. WAKE UP!!!!!!!!!! It is always in the governments interest to have higher taxes for the PAYERS because that is how they get a bigger paycheck.

Dan Carver
2 years 4 months ago
Three points: 1.) As this symposium has voices from across the country and they’ve already identified Vermont as one of the top two cost-per-pupil states, can’t they identify the Top 5 cost drivers when compared to the national average? Is it teacher costs? (Wage and benefits) Is it special Ed costs? (% of special needs from total students, or cost per special Ed student) Is it administrative cost per student? Transportation costs? Or Other? As Rama has pointed out in earlier posts, and maybe it’s a VT thing due to our liberal outlook, but we expect our schools to solve… Read more »
Teddy Hopkins
2 years 4 months ago

Mr. Gardner is 100% right. Individuals assets are not counted as part of the equation. In addition third party individuals incomes residing at residences are not counted as household income because of the difficulty in defining residence. Even some rents are lowered or paid in cash to keep the income off the books while the owner receives moderate to large rebates.

David Usher
2 years 4 months ago

The solution is really quite simple. Limit the spending by assuring voters experience the consequences of their votes for school budgets.
Mr. Cillo only speaks half the truth. Income sensitivity has benefitted the salaries and benefits of educators and those taxpayers who are not paying their fair share, not learners.

Dan Carver
2 years 4 months ago

As a follow-up:
I have been directed to the VT VSBA website (Vermont School Board Association)
They have a very informative 21 minute presntation under the heading A Situational Analysis of Public Education in Vermont: 2013.
It did answer several of my questions listed in point #1.
Just wanted to share it for the folks who do like to research issues. Thank you.

Dave Bellini
2 years 4 months ago
Vermont needs property tax reform. . Property taxes should be capped at a percentage of the value of the home. . Education should be funded via income taxes and schools districts be given X amount of dollars per pupil. End of story. School boards could debate curriculum and how best to spend the pot of money they receive. . We are now hearing politicians wanting to change income sensitivity. That could only mean one thing: They want low and moderate earners to pay more. That’s not good. Once again, the Governor talked the talk about rising property taxes but he… Read more »
Mike Ferrari
2 years 2 months ago
Thank you Dave Bellini. Education is not broken and you should never fix something that’s not broken. Seems like every time there’s a new “head of Education” whether it be here in VT or nationally we are presented by the same ideas and proposals we heard 10 or 20 years ago to fix education and of course “save” future generations. Education happens when you have teachers that want to teach and students that want to learn and this happens in an environment that values (don’t read dollars here) teaching and learning. You can’t buy that. What needs to be fixed/changed… Read more »
linda setchell
2 years 4 months ago
I attended Montpelier’s School Board Meeting last night. Our city is facing an 18 cent hike in school related property taxes, despite a budget increase of only 2.2%. Last year’s budget increase was 8% I believe, but there was no increase in taxes. Huh? Montpelier’s school tax increase is due to a combination of factors: – The home values in the rest of VT decreased and in Montpelier they increased. – Montpelier’s overall student population dropped by 9 students this year. – The state is increasing the overall education tax rate. – The state is also putting less money into… Read more »
John Hollar
2 years 4 months ago
Linda, you asked that I post my response to you on-line, so here it is. I served on the school board for 9 years, and I can say unequivocally that the board never during that time directed the administration to defer maintenance expenses. As chair, my direction to the superintendents who cycled through that position was that they inform the board of the investments that were needed in our facilities. In 2009 or 2010, we approved a bond of more than $1 million to address the deferred maintenance that were identified by then-superintendent Steve Metcalf. School superintendents tend to focus… Read more »
Nancy Baer
2 years 4 months ago
I live in East Barre in Barre Town..the taxes on my modest(I don’t even have a bathtub) 14 x 60 eight year old mobile home on a quarter acre of land with no garage..no paved drive..linoleum floors throughout..are over $1,700. a year! I live on a below poverty income of $780. a month..elderly..no children in the school system. I have a mortgage to pay on for another 22 years(yes, you read that right).I hear that the taxes are going up YET AGAIN in Barre Town. Our tax system is unfair and most definitely needs to have something done about it.… Read more »
Paul Lorenzini
2 years 3 months ago

The tax men have power and they love it! Taking food of your table and putting it on their own is all in a days work.

Nancy Baer
2 years 3 months ago

I just wanted to correct where I said in my comment(near the end)..that I have no SHOWER or rugs in my mobile home..as I stated first..I have NO BATHTUB or carpeting anywhere in my mobile home.

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