Senate Finance panel weighs three school funding formulas; sparcity, special education and transportation drive debate

The Senate Finance Committee on May 13 heard detailed comparisons of three proposed K–12 foundation formulas and extensive questions about how each would change state education spending and local tax liabilities.

Ezra Holden, a fiscal office analyst, led the committee through dollar equivalents for the formulas and noted the current fiscal‑year 2025 education payment that these exercises reference: "The education payment is $1,880,000,000," he said. Holden compared H.454 (as passed by the House), the Senate Education committee recommendation (H.450), and the administration's "enhanced evidence‑based" model, showing how the same student population yields different education opportunity payment (EOP) totals when bases, weights and boundary assumptions change.

Committee members said the contrasts matter because the models make materially different policy assumptions that affect both total state cost and how money is distributed to districts. The hearings highlighted three areas that repeatedly changed the bottom‑line estimates: whether special education costs are included in the base or kept as categorical grants, how sparsity and small‑school factors are applied (by school or by district), and how transportation reimbursement is treated.

Holden explained technical terms and modeling choices to the committee. He said the House‑passed H.454 uses an education cost‑function approach with a base of roughly $15,033 per pupil and a long‑term weighted ADM that produced an illustrative EOP near $1.908 billion when its weights are applied to current district boundaries. By contrast, the administration's enhanced evidence‑based model uses a lower base (roughly $14,700–$14,800 in presented slides), assumes prototypical consolidated districts in its design, and produced a lower EOP estimate near $1.77 billion when some categorical items are excluded from the base. Holden cautioned that those totals are not directly comparable without accounting for where costs such as transportation and special education are placed.

"If you don't think we can just you want a whole price increase," a committee member said while pressing Holden on whether the administration's projection assumed consolidation and future cost growth. Holden and later witnesses stressed each model used different inflators and different underlying assumptions about district consolidation, which makes direct comparisons misleading.

Professor Tammy Colby, who led the education cost‑function analysis referenced by H.454, told the panel why her team used current‑spending data in regression models to estimate the base and weights: "What we're trying to do is find what is the minimum amount of dollars we need to spend, right, to get a certain level of outcome?" she said. Colby described the education cost function as a method to estimate the "most efficient" dollars needed to achieve statewide outcome standards; she added that an evidence‑based model is instead a costed package of practices and a governance configuration and therefore represents a possible future state rather than the status quo.

Committee members pressed on special education funding. Colby said the administration's model treats special education largely as a categorical aid outside the base, while H.454 and H.450 use tiered or grouped weights (categories A, B, C) that would be included in weighted per‑pupil calculations. Colby warned that the state's current census‑block special education grant is a fixed payment and does not function as a targeted cost adjustment for individual IEP needs, so ‘‘those two funding mechanisms don’t work together’’ if the state moves to a pupil‑weighted foundation.

Sparsity and small‑school treatment also drew sustained scrutiny. Several senators and Holden noted that JFO modeling applied sparsity as a district‑level weight in one run, which inflated the cost because sparsity then multiplied all students in a district rather than only those in specific small schools. Senator discussion and Holden’s slides both flagged that applying the sparsity weight at the school level — as Professor Colby modeled it — would reduce the EOP estimate; the committee asked staff to clarify whether ZIP‑code or school‑level geography should govern sparsity eligibility.

Transportation reimbursement was another source of divergence. The administration's memo used a 100% transportation reimbursement assumption in its illustrative construct while current law reimburses roughly 50% of allowable transportation costs; Holden said the administration "took the present transportation payment and doubled it" in its model, a choice panel members said needs scrutiny because consolidation or boundary changes would change actual transportation expenses.

Several senators voiced a broader policy concern: whether basing a foundation on a cost‑function estimate that uses current spending treats current practice as an adequate target. Colby responded that the cost function uses current spending data only to identify the most efficient spending level tied to achievement outcomes; deciding what share the state will fund versus what is left to local taxpayers is a separate policy choice and interacts with Vermont's statewide property‑tax structure.

There were no formal votes or motions during the hearing. Committee members asked staff and the Agency of Education for clarifications — including how sparsity and small‑school weights were applied in JFO's models and more detail on how the administration derived its categorical lists and inflators — and requested printed copies of slides for follow‑up.

Why it matters: the base and weight decisions will determine how a future foundation formula redistributes education dollars across Vermont's districts and how much the state must appropriate. Officials warned that the choice to include or exclude special education and transportation from the base, the unit (school versus district) used to calculate sparsity, and whether models assume consolidation will materially change both statewide cost and winners/losers among districts. The committee asked for additional technical clarifications before making policy recommendations or drafting legislative adjustments.

The hearing closed with the committee planning further questions for Agency of Education staff and for Colby on implementation details, followed by additional work this session on supplemental district spending and related budget exercises.