Senate’s education funding bill makes dent in tax increase but kicks the can on big change

The Senate’s version of the annual education funding bill, passed Wednesday night, would make a dent in Vermonters’ looming property tax increases but stopped short of changing the system. 

By and large, the bill punts tough questions about how to reduce costs in Vermont’s schools. While the House and Senate considered radical reimaginings of education finance — transitioning to a system that pays school districts per student — both chambers backed away from big change this session.

Since the legislation, referred to as the “yield bill,” left the House, a combination of increased revenue to the education fund and decreased school spending has brought down the average projected school property tax increase from 14.2% to 12.5%. That number was projected to be closer to 20% earlier this year. 

“We would have liked to make it a lot lower,” Sen. Ann Cummings, D-Washington, who led drafting the Senate’s version of the bill, told her colleagues on Wednesday. But Cummings said her committee, which worked on the bill for about a week, “just haven’t had the time to do our due diligence” on more significant education finance changes. 

The legislation, however, looks destined for a veto. Gov. Phil Scott said at a press conference on Wednesday that “without changes,” he would reject the bill. 

Amendments made by some of the body’s finance committee passed on a 19-10 vote, while the yield bill itself, once amended, passed by voice vote. 

Lawmakers plan to buy down property tax rates with about $25 million from a one-time state budget surplus and add two new taxes to the education fund projected to bring in approximately $27 million in additional revenues next year. That $52 million is relatively small compared to the current projected education spending increase of $182 million. 

The Senate’s bill increased the House’s proposed tax on short-term rentals from 1.5% to 3%, which is projected to raise around $12 million in its first year. 

The Senate’s version also more narrowly tailored the House’s proposed “cloud tax” — a repeal of a tax exemption on some software. The upper chamber’s version nixed software taxes that would have more specifically targeted businesses.  

The bill would also bring back and lower the “excess spending threshold,” which penalizes higher spending school districts. The Senate decided to lower the bar from 20% above the state average spending to 16%, one of the bill’s most substantial cost containment measures. 

Rather than push out new education finance ideas this year, some members of the Senate Finance Committee, including Cummings, the committee’s chair, decided to prioritize an education finance study committee, which would include a small group of lawmakers, a state education leader, and a state tax expert. Working this summer, the committee would have to consider: school and class size, alternative funding models, school consolidation, administrative consolidation, spending caps, local control and a variety of other topics. 

Both chambers’ version of the yield bill also tweaks how the Common Level of Appraisal, or CLA, is applied to individual towns, with the goal of decreasing the local tax rate impact after the CLA is applied.  

Often inaccurately accused of driving up property taxes, the CLA is used to adjust local tax rates so that property owners pay taxes on the fair market value of their properties. As reimagined in the bill, the CLA would be used in such a way that “cut(s) down some of that big wide (tax rate) swings that people get so upset about,” Cummings said on the Senate floor.

In one of the biggest changes from the House version, the Senate voted to postpone the “commission on the future of public education,” a large group that would be tasked with taking a system-level look at education, including education finance, in Vermont. 

Instead, the Senate decided to prioritize the study of school finance before examining public education generally, drawing criticism from some lawmakers.

“I think this puts the cart before the horse,” Sen. Alison Clarkson, D-Windsor, said. 

“We need as many people at the table as possible,” Sen. Ruth Hardy, D-Addison, said. “It cannot be done by a few legislators, a brand new secretary of education who does not understand our school finance system, and the tax commissioner.”

Arguing in favor of prioritizing funding changes, Sen. Randy Brock, R-Franklin, said lawmakers needed to “stop the bleeding now” by finding finance fixes as soon as possible. 

The upper chamber also shot down two amendments by Sen. Martine Gulick, D-Chittenden Central, which she said would have helped with “cost containment.”

One amendment would have prevented public tuition dollars from going to private schools more than 25 miles from the Vermont border. A second amendment would have prevented private schools from charging publicly tuitioned students more than families who pay out of their own pockets. 

The yield bill now goes back to the House, which must decide whether to agree to the Senate’s changes or make further changes. Alternatively, the bill could be hashed out by a conference committee.