At the Champlain Islands School District’s next regular school board meeting in June, board members will be grappling with a thorny question: how to fill a roughly $280,000 budget hole.
That sum is approximately equivalent to three jobs. Now, the school board must decide which positions to leave vacant: Should the board decline to fill a counseling role? A music teacher? A French teacher? A maintenance supervisor?
“It’s the optional things that always suffer,” said Michael Inners, chair of the Champlain Islands School Board. “It’s the language programs; it’s art, music, student support, athletics.”
Across Vermont, local school officials are facing similar funding holes. The cause? Act 173, a law passed by the Vermont Legislature in 2018 that changes how special education dollars are doled out to school districts.
Although that law has been on the books for four years, some of its most significant provisions — ones that, some school officials say, are shortchanging their districts — are taking effect now.
For years, schools have funded their special education services through a reimbursement model.
School officials tally up their costs twice a year and submit them to the Agency of Education, which reimburses expenditures at either 56% or 90% per student, depending on how many services each student needs, according to Mary Lundeen, a past president at the Vermont Council of Special Education Administrators.
But that process was widely seen as overly bureaucratic and costly.
Studies found that the state was spending millions more on special education than it should have, and officials said completing the reimbursement process was cumbersome and time-consuming.
“The funding was so restrictive that you really had to document every minute of a special educator’s day and make sure that it was (spent) doing things that were related to special education,” Lundeen said.
So in 2018, the Legislature passed a law to overhaul the funding process. Instead of reimbursing districts for their costs, the Agency of Education would simply provide “census block grants” — direct payments to districts based on how many students each district has.
The shift is intended both to save money and to give schools more flexibility in how they spend their share. After a delay, the new block grant model is scheduled to take effect in the upcoming 2022-23 school year.
But some school officials see problems with how that is being rolled out.
‘Inherently inequitable’
For many districts, like the Champlain Islands Unified Union, the change means that they will simply receive less money for special education than they did previously.
Between the current school year and the upcoming school year, the state of Vermont is expected to spend roughly $16 million less on special education through the new system, according to data provided by Brad James, the agency’s education finance director. That could change, though, if Gov. Phil Scott vetoes legislation on the subject.
About three-quarters of Vermont’s school districts and supervisory unions are expected to lose money under the new funding model, according to James’ data.
In the North Country Supervisory Union, schools will contend with a roughly $1 million shortfall in the upcoming school year, Superintendent John Castle said.
The new model “is inherently inequitable,” Castle said. The system assumes that the prevalence of special education students is constant across the state, which, he argued, ignores the fact that some lower-income districts have greater needs than their counterparts.
“There’s a relationship (between) poverty and increased need around special ed services,” Castle said.
Emilie Knisley, superintendent of the Orange East Supervisory Union, said in an interview earlier this spring that her districts will lose hundreds of thousands of dollars per year with the shift.
“The money that we’re getting in the block grant isn’t large enough to make up for the loss,” Knisley said, although she noted that strong tax revenue and federal pandemic aid dollars have helped balance budgets for the upcoming year.
But the shift does not necessarily mean that special education services will be cut. Federal regulations protect special education services in schools, meaning that districts could be forced to trim their budgets — or spend more — in other areas.
“(If) you’re faced with having to make reductions in order to make a budget reasonable for taxpayers, the things that you’re looking at cutting are math or reading intervention services for students, or things like that,” Knisley said. “Because it’s not like you can eliminate second grade.”
Overlapping reforms
Because Act 173 passed in 2018, the shift in the funding system was not a surprise.
But some school districts expected that the change would be lined up with another big financial reform: the upgrade of Vermont’s school funding formula, which the governor signed on May 23 and which is scheduled to begin phasing in during 2024.
Those upgrades are expected to offset at least some of the losses from the special education shift.
During the legislative session, some school officials asked lawmakers to delay the switch to the block grant system until the new funding formula kicks in.
The two changes “must go hand in hand,” Kingdom East School District Superintendent Jen Botzojorns wrote in testimony to lawmakers. “One without the other is in contradiction to the very law that is to be enacted.”
But lawmakers ultimately opted not to delay the block grant system, although they did tweak the rollout to allow many districts to obtain more funds for the upcoming school year. That is intended to provide a cushion for the first year, if Gov. Phil Scott signs the bill.
Outgoing Rep. Kate Webb, D-Shelburne, who chaired the House Education Committee in the just-finished legislative session, said lawmakers had been reluctant to delay Act 173 further.
The law’s special education reforms are “the best response to students who lost ground during the pandemic,” she said.
She noted that some districts, like those in the Orange East Supervisory Union, were able to fill budget holes with strong tax yields and federal pandemic aid money.
“We know that this conversation is not complete,” she said. “Let’s implement Act 173, get that moving, and then we can address some of the financial considerations in the coming years.”
Possible legal action
But without a delay, some districts could face at least two years of financial losses before both new systems are implemented.
That will unfairly shortchange districts across Vermont — especially those that rely most heavily on special education services, said Castle, the North Country superintendent.
He pointed to a section of Act 173 that directs the Agency of Education to “consider and make recommendations” about whether districts with more special education needs should receive larger block grant payments.
The law notes that “the General Assembly intends to reconsider this matter after receiving this recommendation and before the census-based model is implemented.”
None of that has happened, he said.
Ted Fisher, a spokesperson for the Agency of Education, said the issue was “something we will need to monitor over time as the new systems take effect.”
“With the updated weights not going into effect until (fiscal year) 2025, and the census-based funding model still not in effect, it’s likely that any changes would be premature,” Fisher said in an email.
But Castle raised the possibility of legal action over what he sees as a failure to act — an option that the North Country Supervisory Union board is scheduled to consider, he said.
“There’s a pattern of being dismissive of this issue by the Legislature and by the secretary (of education),” Castle said. “And at some point, if it takes litigation to get somebody’s attention, that may be what it takes.”
