Following a year of school budget failures and double-digit property tax hikes, Gov. Phil Scott’s administration is proposing a major change to how the state pays to educate children.
The so-called foundation formula is a commonly used system that would give more power to the state — and less to local taxpayers — to determine how much money school districts receive. Some experts say the switch won’t save money, but it could be a more equitable and straightforward way to pay for education.
Education Secretary Zoie Saunders and consultants hired by her agency have already testified to lawmakers about the proposed funding mechanism. It’s part of a larger plan to transform Vermont’s education system that the governor hinted at during his inaugural address. That proposal is likely to recommend large-scale school district consolidation as a way to save money.
“This session, we have the rare opportunity to not only make our system more affordable for taxpayers but to improve the quality of education for all kids — no matter their challenges or where they live,” Scott said during his January 9 speech. “And we owe it to everyone to seize the moment and be brave, together.”
Scott is expected to describe the transition in more detail during his budget address on Tuesday, January 28, and lawmakers will be briefed on the plan this week. Democratic leaders, chastened by the loss of their supermajority in the Statehouse and without a proposal of their own, seem content with playing a supporting role — for now, anyway.
A foundation formula would allow the state to determine how much it costs to educate each student and allocate that money to schools.
At a press conference last week, Rep. Peter Conlon (D-Cornwall), chair of the House Education Committee, said his caucus was encouraged by the governor’s “strong participation in this debate” and was ready to work on reforming the education system.
“We welcome a detailed proposal from the administration, and I assume we’re going to receive that,” Conlon said. “We welcome the chance to really do this all together.”
It will ultimately be up to lawmakers to craft legislation to change the way money is allocated to schools.
Under Vermont’s current funding formula, taxpayers vote on their school district’s proposed budget every year. Once a spending plan is approved, the state provides the money from its Education Fund, which is primarily filled by property tax revenue.
A foundation formula, meanwhile, would allow the state to determine how much it costs to educate each student and allocate that money to schools. Those funds would also come from property taxes.
Thirty-six states already use what’s known as a “student-based” foundation formula. Plans vary, but their basic structure is the same, according to Danielle Farrie, research director at the nonprofit Education Law Center in Newark, N.J.
States first conduct a study to determine the base level of funding needed for the typical student to meet state standards, Farrie explained. Then, to make the formula equitable, students who fall into high-needs categories are given additional funding. That typically includes those who qualify for special education, are living in poverty or are learning English, Farrie said. It could also include students in foster care or experiencing homelessness. Cost adjustments can be made to account for school characteristics, such as their size or those located in an area with a higher cost of living.
Finally, an adjustment is made to account for the fact that some districts are better able to raise revenue than others. The state could set a standard property tax rate, for example, and then subsidize districts that are less able to afford those taxes. The state could also cap the amount a local district is allowed to raise above the state allocation to make sure wealthier districts aren’t able to spend a lot more than poorer ones.
The base amount of per-pupil funding should be adjusted for inflation annually, Farrie said, and should also be reviewed every three to five years to ensure it reflects any changes that have been made to the state’s educational standards.
One possible pitfall, Farrie said, is when legislatures sign off on a well-crafted foundation formula plan but don’t fully fund it. That’s happened in a number of states, she said, including New Jersey, which passed a school funding reform bill 15 years ago but didn’t regularly adjust it.
New Hampshire is another state that has struggled with its foundation formula. A judge there determined in 2023 that the state’s base payment of $4,100 per student did not meet its obligations to provide students with an adequate education. The court ordered the state to raise the amount to at least $7,356 per student. The case has been appealed to the New Hampshire Supreme Court. (Schools in Vermont, by comparison, receive an average of $16,900 per pupil annually from the state’s Education Fund.)
Vermont has used a foundation formula before, from 1988 to 1997. The state chipped in a set amount of money per student to fund schools, but it wasn’t enough to provide an adequate education. That meant local towns had to raise extra money through property taxes.
Stowe and Killington were able to do so easily, while property-poor districts such as Worcester and Stannard struggled. In response, a group of students, taxpayers and school districts — including an 8-year-old girl from Whiting named Amanda Brigham — filed a lawsuit that argued the system denied children equal educational opportunities in violation of the state constitution.
The case, Brigham v. State of Vermont, went to the Vermont Supreme Court. In 1997, justices sided with the plaintiffs, ruling that the state — not local towns or school districts — was responsible for ensuring that all students had “substantial equality of educational opportunity.”
The decision compelled lawmakers to pass Act 60, which created the statewide Education Fund and the general framework now in place. Instead of directing a town’s tax revenue to its local schools, all education property taxes are pooled together and doled out by the state to cover voter-approved local budgets.
But districts need to build their budgets — and taxpayers have to vote on them — before they know what the actual tax impact will be. That’s because the “yield,” the number that sets local property tax rates, isn’t calculated until later in the spring.
For the most part, when school district spending increases, local property taxes increase; when spending decreases, property taxes decrease. But because education dollars are pooled, higher-spending districts can actually increase the tax rates of lower-spending ones, a confusing phenomenon for local taxpayers.
In 2022, the legislature changed the funding formula via Act 127, a measure intended to account for the fact that certain students cost more to educate because of their needs. Under the law, students learning English and those living in poverty or in rural areas are given a higher “weight,” or counted as more than one student. The logic was that districts with a high number of weighted students would be able to provide more services without increasing taxes.
But that hasn’t been the reality.
Recent budget data show that higher-poverty districts are often the lowest spenders, Education Secretary Saunders told lawmakers last week.
“We would assume that those students that have higher needs will be getting additional resources and funding,” Saunders said. But “we’re not seeing that meaningful difference.”
A foundation formula is intended to erase that discrepancy. Bruce Baker, a school finance expert and University of Miami professor, thinks the system could work for Vermont if it were well designed. The state’s current funding model, he said, is “upside-down and backwards.” That’s because it leaves it to taxpayers to uphold a child’s constitutional right to an adequate education, Baker said, when that responsibility should lie with the state.
Brooke Olsen-Farrell, superintendent of Slate Valley Unified School District in Fair Haven, knows firsthand the inequities of the current funding system. About 56 percent of Slate Valley students live in poverty, and the district consistently struggles to pass school budgets despite being one of the lowest spenders in the state. Last year, it took Slate Valley five tries for voters to sign off, which meant cutting more than half a million dollars from an already conservative spending plan. That translated to the loss of instructional assistants, a school nurse, a middle-school orientation camp, some bus service and bus monitors.
In an interview last spring, Olsen-Farrell said it felt like “a cultural thing” in Slate Valley for some voters to automatically reject the first school budget plan. The majority of those voters don’t necessarily have animosity toward their local schools, Olsen-Farrell said, but are concerned with affordability and what they perceive as an overly complex education funding system.
At first glance, Olsen-Farrell said last week, her district could benefit from moving to a foundation formula, though she has questions about how it would be designed and implemented.
Lawmakers certainly will, too. Chief among them: Would the formula actually save money? In his inaugural address, Scott touted an “entirely new student-centered funding formula” that would “provide more and better opportunities for kids and get costs under control.”
Farrie, the New Jersey researcher, said a foundation formula wouldn’t likely do the latter — unless “some districts are going to get less.”
But, she noted, the prospect of some schools gaining funding at the expense of others is “a hard political lift.”
Still, administrators who see how the inequity of the current funding system is playing out in schools believe now is the time for a major overhaul.
“Something needs to change,” said Franklin Northeast superintendent Lynn Cota, whose high-poverty, rural district is also among the lowest spending in the state. “There is some concern about how this is going to play out, but we also realize it’s not sustainable for us to do nothing.”
The original print version of this article was headlined “Education Renovation | Gov. Scott’s proposed revamp of Vermont’s education system would change how schools are funded”
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This article appears in Jan 22-28, 2025.
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