[condensed from the Task Force on the Implementation of the Pupil Weighting Factors Report]
Prior to the Brigham decision, Vermont relied on a foundation program to fund its education system. Fluctuations in the State’s fiscal situation led the Legislature to underfund the foundation formula in order to reduce State costs. Property wealthy districts could more easily raise funds, spending more per pupil for lower tax rates, while property poor districts faced higher tax rates for equivalent or even lower per-pupil spending levels. This combination of reduced State share and property tax rate inequities across municipalities led to the Brigham decision; the Legislature responded with the passage of 1997 Acts and Resolves No. 60 Under Act 60, towns with the same per-pupil spending have the same homestead tax rate regardless of their property wealth—the homestead property tax rate is a function of district per-pupil spending rather than property wealth. In other words, school districts should have the same ability to raise funding to support their schools regardless of what town they’re in.
The State Education Fund, which funds all public schools statewide, is made up of a mix of revenue sources—homestead and nonhomestead property taxes, sales and use taxes, and lottery revenue. Local school boards determine school district budgets, which must be approved by local voters, and towns collect property tax revenue, which is paid into the State Education Fund. The Legislature then sets the statewide per pupil yield for the Education Fund to ensure sufficient revenue is raised to fully fund each local school district budget. Since the passage of Act 60, the level of statewide spending impacts all school districts, as does the mix of revenue sources in the Education Fund. As a school district increases or decreases its education spending, it impacts all school districts. Similarly, if the Legislature increases or decreases any of the funding sources, it impacts the property tax rates of all school districts, regardless of their property wealth. The tax bills of homeowners who are eligible for a property tax credit also vary in proportion to per-pupil spending. Almost 70 percent of Vermont resident households typically qualify for this credit, which in tax year 2020 was set at a maximum household income of $138,500. However, since the enactment of 2003 Acts and Resolves No. 68, the nonhomestead tax rate paid by businesses and nonresidents has been uniform statewide—this tax rate is not directly related to per-pupil spending. Finally, homestead property tax rates are adjusted in each town by the common level of appraisal (CLA) to ensure property values in each town reflect fair market values.
The current education funding system uses a combination of categorical aid and pupil weights to address and equalize student needs across the State. Categorical aid is paid to school districts from the Education Fund and pupil weights are used to determine “equalized pupil” counts which, along with Education Spending for each school district, are then used to determine homestead taxes coming into the Education Fund. Because the Education Fund is essentially self-balancing, as described above, unlike in other states, a change in categorical aid or pupil weights impacts all school districts and all property tax payers.
Categorical aid grants offset direct expenditures by school districts for explicit purposes. Existing State categorical aid includes special education aid, transportation aid, and small school support grants as well as several other more minor grants. In addition, most federal aid to school districts works in the same way as State categorical aid grants, directed toward a specific, required use in order to address identified student needs, including educating students in poverty, special education, ELL, and school nutrition programs.
Pupil weights adjust student counts to address different student needs or circumstances. After an overall student count, or average daily membership, is reported, weights are applied to certain types of students to account for the potential higher costs to school districts that educate these students. This adjustment to the student count in turn impacts the district’s spending per pupil. Existing pupil weights, which precede Act 60 and were not empirically derived, apply to students living in poverty, English language learners, secondary students, and pre-kindergarten students.
