Editor’s note: This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.
Among the great centers of volunteerism in Vermont are local school boards. For decades, Vermonters have stood for election to local school boards to help guide these vital community institutions. Some run as parents, seeking the best education possible for their children and their neighbors’. Others run to contribute management skills to assure their local school district is efficient and property taxes kept under control. And others run simply to serve.
The countless board meetings are often a grind, sorting through personnel actions, facility maintenance decisions, state regulations, ever changing methods of standardized testing, and the annual budget cycle, among others. Yet, in the end, these volunteers must be recognized by their results, which rank Vermont as one of the best education states in the nation.
The Supreme Court’s Brigham decision and its statutory offspring, Act 60 and Act 68, dramatically changed the role of local school boards. No longer do school boards balance school district budgets using local property tax revenues. Quite properly, the court found that the vast disparity in property wealth among school districts results in unequal access to education revenues. Recent studies by both the Legislature and Campaign for Vermont, however, confirm that such revenue disparities have been mitigated.
Today, school boards place district budgets before voters, approved budgets are then added together by the Agency of Education and funded by the Legislature with statewide property taxes and state funds (the General Fund transfer, a portion of the sales and purchase and use taxes and lottery proceeds, among others), with the bulk of the revenue coming from statewide property taxes. For the current fiscal year, over $1 billion of the $1.5 billion cost of school budgets comes from property taxes. There is an adjustment to statewide property tax rates based upon a local district’s spending per student, but it’s of minor consequence to overall revenues raised.
With Acts 60 and 68, the state has substantially grabbed control of education property taxes from school districts. While legislators and the governor fund local school budgets with these revenues, they also siphon off substantial property tax revenues to fund legislative initiatives.
As examples, since the passage of Act 68 these legislative priorities, and annual costs, have been added to the Education Fund: increased income sensitivity eligibility from $75,000 to $97,000 ($15,694,000); the Department of Correction’s Community High School ($3,800,000); Tax Increment Finance Districts ($3,040,000); current pre-kindergarten programs ($16,508,000); and the 2012 raid on the General Fund transfer to the Education Fund ($23.2 million). Additionally, the Legislature has passed costly mandates on to school boards such as agency fees for the NEA, $1,072 annual fees on new teachers to fund pension obligations, and the further expansion of the pre-kindergarten program ($9.5 million) to be implemented next year.
It is clear given the Brigham decision that local school districts will never return to the old way of funding local school budgets with local property taxes. Yet the Brigham decision does not require the near complete takeover of the property tax by the Legislature and governor.
These state add-ons amount to well over $72 million. In fact, they add to more than the increases in state contributions to the Education Fund over recent years. In 2006, non-property tax contributions to the Education Fund amounted to $417.7 million. In 2014 they were $465.5 million, an increase of only $47.8 million. Bottom line — post Act 68 state leaders used the statewide property tax to fund new legislative priorities that ratchet up local property tax bills by millions.
For local school boards, the legislative power-grab might get worse.
Recently, Speaker Shap Smith convened a group of current and former legislators to suggest “reforms” to Vermont’s education funding system. The group came up with three concepts — the “Renovation Plan,” the “Variable Income Tax Plan” and the “Regional Block Grant Model.”
All three of these concepts further strengthen the Legislature’s control over the property tax to the detriment of school boards. The “Renovation Plan” essentially tightens the screws on school boards of the current education funding system with state-crafted cost controls and district consolidation incentives; the “Variable Income Tax Plan” retains property taxes but offers to lower the residential property tax, at least initially, while inaugurating a new income tax tied to school district spending levels; and the “Regional Block Grant Model” has the state giving regional entities block grants to distribute among school districts based upon a per pupil spending target set by the Secretary of Education.
It is clear given the Brigham decision that local school districts will never return to the old way of funding local school budgets with local property taxes. Yet the Brigham decision does not require the near complete takeover of the property tax by the Legislature and governor. Nor does Brigham mandate top-down, top-heavy constraints on local school boards. In fact, Brigham states:
“To be sure, some school districts may manage their money better than others, and circumstances extraneous to the educational system may substantially affect a child’s performance. Money is clearly not the only variable affecting educational opportunity, but it is one that government can effectively equalize.”
The equalization of educational opportunity can be achieved through a bottom-up property tax system controlled by local school boards and that offers lower property taxes. Such a system removes state control of the property tax and ends state raids on this revenue source. Regional administrative entities, controlled by local school boards, can coordinate setting district education budgets and raise property taxes that stay with local school districts. Spending and revenue decisions are reunited once more at the local and regional levels, re-empowering local school boards to manage and control property taxes. State funds would be distributed to ensure equity across regions and school districts.
Campaign for Vermont has designed just such a plan. You can read it here. Statehouse leaders, having caused high property taxes, are now wolves in sheep’s clothing. They should not be allowed to further eviscerate local school boards, the backbone of our education system.
