Decoding Act 46: What it means, how it works

Sen. Ann Cummings, D-Washington, chair of the Senate Education Committee, hands an agreement to Rep. David Sharpe, D-Bristol, chair House Education Committee. File photo by Amy Ash Nixon/VTDigger

Sen. Ann Cummings, D-Washington, chair of the Senate Education Committee, hands an agreement on Act 46 to Rep. David Sharpe, D-Bristol, chair of the House Education Committee. File photo by Amy Ash Nixon/VTDigger

Act 46 is a new education law that encourages and eventually requires school districts to merge into larger units over the next four years in an effort to better serve students and better manage costs. Signed into law in June, school boards quickly began setting up study groups to explore possible partnerships.

Study groups present their proposals to the State Board of Education (SBE) for approval. Once they get the green light, then they bring it to the voters of their communities to decide whether it is accepted and implemented. Essex, Essex Junction and Westford voters just said yes to the plan put forward by their study committee and approved by the SBE. This is the first school merger moving ahead under Act 46.

Section 2 of Act 46 outlines the intent of the law: to provide a quality education with a variety of educational opportunities to all Vermont’s students at a cost that parents and taxpayers that maximizes operational efficiencies and flexibility to manage, share and transfer resources.

There are three phases for voluntary mergers: Accelerated, Regional Education Districts (REDs) and RED variations and Conventional, each have timelines and different tax breaks and incentives that are meant to help with the costs of the transition, according to the Agency of Education (AOE).

The accelerated phase is the first with the tightest deadline: voters must approve it by July 1, 2016, and it must be operating by July 1, 2017. It is the strictest in terms of what type of school unions are acceptable, but it provides the largest tax break.

The idea was to get a few mergers through in the first year, mostly candidates that had already been considering merging when the law was passed, like the Essex-Westford group, to provide information on what works in a Vermont context. Then the SBE will be able to use any information gleaned when they have to restructure places later in the four-year process, according to Nicole Mace, executive director of the Vermont School Boards Association. The VSBA and the Vermont Superintendents Association have been working with school boards and administrators to help them implement the law.

The only acceptable governance model during the accelerated phase is called the Preferred Model. It creates a single PreK-12 school district with one board and one budget. The newly formed district will have a single tax rate adjusted for the local common levels of appraisal (CLA). (The CLA is an equalization process where the state’s estimation of actual market value is compared with local assessments to ensure properties are not over or under valued.) The law states that the educational goals Vermont is shooting for would be best served by a district that has 900 or more students.

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While Act 46 does not require districts to form 900-student units, if merging districts want the accelerated tax breaks, they have to adhere to that target.

Choice or no choice

The Preferred Model is the one that has become controversial since the SBE interpreted the law as saying that like districts need to merge with like districts. This has upset choice districts that were interested in merging with school districts that operate schools and maintain school choice. However, there are opportunities in the second phase of voluntary mergers for a blended school district structure. While there are tax incentives they are not as generous as those during the accelerated phase.

The preferred model won’t work or be best in every instance, said Mace. “There are enough other routes and flexibility in the law to protect choice that it isn’t necessary” to merge a choice district with one that operates a school. She said combining choice and operational “will go too far in terms of exacerbating some of the trends and issues we are trying to address through this legislation.”

So, during this first hasty phase the proposed school district will either operate all PreK-12 grades or pay tuition for all students in those grades, or operate a PreK-6 school and tuition grades 7-12 or operate a PreK-8 school and tuition the high school years.

Village School of North Bennington

Village School of North Bennington.

Those districts whose voters approve this model by July 1, 2016, and begin operating the following year will be eligible for a homestead tax rate reduction of 10 cents the first year, then 8 cents, 6 cents, 4 cents and 2 cents each additional year for five years. And there are more incentives – if any of the former districts benefited from a small schools grant or the 3.5 percent hold harmless protections against declining enrollments they can continue to get it. There is a transition grant to help defray merging costs of up to $150,000. The new partnership is also exempt from having to repay a portion of state construction aid upon the sale of a school building.

While the Preferred Model is the only one acceptable for the first phase of consolidation, the model itself can be proposed during any phase in the restructuring process.

Bucket list

The second phase is associated with multiple unification models from previous education laws 153 of 2010 and 156 of 2012. They include: Regional Education Districts (RED) and variations such as Side-by-Sides, Modified Unified Union School Districts (MUUSD) and Layered mergers. The timeline for voter approval is extended to July 2017. These structures are also eligible for tax incentives.

VSBA and VSA were calling this second phase the “conventional phase” and it included the REDS and its variations, “It isn’t in the law anywhere but we are using it to differentiate between the accelerated phase and the phase that is more conventional,” said Mace.

But this week AOE released new information on its website that renamed the phases. This article is now using AOE’s terminology so as not to confuse school board members and the public any further.

It might be easier to think of these phases in terms of buckets, according to Mace. The first bucket is the accelerated bucket that uses the preferred model only, the second bucket is the one that uses combinations created in Acts 153 and 156 – the REDS and their variations – and the third bucket, which they are now calling conventional, is for anyone who wants to use the preferred model after the accelerated phase – they still get tax breaks just not the full array as those who go forth during the accelerated phase receive.

Districts that partner up during the RED phase will receive all but one of the tax incentives offered under the accelerated phase. Because these will be approved and begin operation later they will benefit from a tax break that starts at 8 cents, then 6 cents, 4 cents and 2 cents during the first four years of operation. All the other incentives accelerated mergers enjoy are included in this category.

Lawmakers amended 153 a little bit with Act 46, but the RED structure is still a valid model for partnering districts to use. Under this plan, four school districts would merge to create a single PreK-12 district. This model is helpful for districts with lower student populations where it might be difficult to reach a 900-student minimum. Waivers are available on the size requirements in this phase and as long as the partners can show that they will be able to meet the goals of Act 46 they should be OK, according to Mace.

“This is for districts that want to determine their own destiny, want to access the tax incentives, it is important to understand that the preferred model isn’t the only way to get there,” Mace said. “The bottom line is that if you can meet the goals without leaving anyone stranded and you put together the best possible plan you can, then you should be fine.”

One of the controversies generated by the new law came out of a desire by some partners to merge choice districts with ones that operate schools. There is an option for such a merger in this phase – it is called a Side-by-Side and it originated in Act 156. This model is meant for areas in the state that don’t have enough alike districts nearby. There needs to be at least two alike districts available to partner with two others for this plan to work, and at least one of the couplings must operate all grades.

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So, if there are two school districts with PreK-8 schools (they would have high school choice) and two school districts that operate all grades PreK-12 and another two school districts that offer PreK-6 (and tuition 7-12), and each of the pairs merges to form a single district, then there would be three new districts within a supervisory union structure. All three districts would be eligible for incentives.

Unified districts

Another option under the RED phase that comes out of Act 156 is the MUUSD model. This plan was the result of the Chittenden East voluntary school merger approved last November. In this plan, the majority of elementary school districts that send their students to the same union high school district join together and merge with the high school district.

Voters in Bolton, Jericho, Richmond and Underhill said yes to voluntarily unifying under one school board. But the town of Huntington voted no, so in this case, the majority that voted in favor created a “modified” union that includes five elementary schools, two middle schools and one high school. Huntington kept one foot out and maintained its elementary school district status while still being members of the union high school district. This structure makes it possible for unification to happen when a small minority opt out.

Then there is a “layered” merger which is just slightly different from the MUUSD. This is when a majority of elementary school districts that are members of a union high school district come together to form a union elementary school district that offers all grades not offered by the union high school district. This is different from a MUUSD because the elementary districts do not merge with the union high school districts, they merge with each other.

Conventional is the last voluntary phase and the only model acceptable is the Preferred Model, according to Mace.


Schoolchildren watch from the gallery as lawmakers debate an education reform bill in April in the House chamber. Photo by Roger Crowley for VTDigger

At this point, an alternative structure plan is all that is left and there are no tax incentives associated with it. Instead, there are some penalties such as loss of any small schools grants and hold harmless protections against falling student enrollments. (Only school districts that the SBE decides are geographically isolated or can demonstrate academic excellence while keeping costs down will continue to get a small schools grant. The SBE still has to publish guidelines on how it will determine who falls into this category.)

This plan is for supervisory unions or groups of districts that aren’t going to form any of the structures that are eligible for incentives, “either they don’t think they have the partners to do it or they think they can continue to meet the state’s goals by staying the way they are. They can put together a plan, propose it to the secretary of education by the end of 2017 that says what specific actions they are going to take to ensure the goals of Section 2 are met and retained by their supervisory structure,” Mace explained.

The requirements for those wishing to propose an alternative structure plan must meet the quality standards and cost considerations put forth in the law and they need to present their plan to the secretary of education by Nov. 30, 2017.

The guidance says that plans need to contain the fewest number of school districts practicable and educate a minimum of 1,100 students. The members of such a school district will be collectively responsible for PreK-12 students in the newly formed supervisory union and must cut costs by operating as a larger unit, increasing student-to-staff ratios and sharing resources. But Mace points out that since these groups aren’t eligible for any incentives, the state is likely to be somewhat flexible with them on student counts.

“This is really for school districts that found they couldn’t fit into any other bucket. In some parts of the state forming a single unified district or even a side-by-side or a MUUSD is not feasible because of the complexity of the structure. So if you can’t form one of those but you can demonstrate that by working together you can meet the goals of the act then this path is available to you,” Mace said.

There are no incentives for this group and they would have to put together a plan that the SBE would need to approve.

So, essentially all school districts are expected to do something by the end of November 2017. Then in the spring of 2018 the secretary of education will develop a plan to transition all the school districts in Vermont to a “sustainable governance structure” that will be presented to the SBE by Nov. 20, 2018, for approval. That plan will be put in place by July 2019. Any school districts that choose to do nothing by July 2019 will have to do what the state tells them to do.

“Hopefully there isn’t much for the State Board to do in 2018,” Mace said.

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Tiffany Danitz Pache

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