Ways & Means hears options for capping school "excess spending" above proposed foundation

The Vermont House Ways & Means Committee on Monday heard a Joint Fiscal Office briefing on options for capping school districts’ spending above a proposed foundation amount known in bill draft 1.1 as the Educational Opportunity Payment, or EOP.

Julia Richter, Joint Fiscal Office analyst, said the office used fiscal year 2025 education spending aggregated to 11 Vermont School Boards Association regions to give lawmakers a sense of scale for hypothetical caps of 5 percent, 10 percent and 20 percent above a district’s EOP. "If the school district’s total EOP was $100 million, then it could spend up to $10 million in excess spending," Richter told the committee.

The nut graf: Committee members focused on three linked policy choices that will shape any excess‑spending cap: whether districts should be allowed to spend above the foundation; if so, whether there should be a cap; and, if there is a cap, how to calculate it (for example, as a percentage of a district’s EOP or per pupil). Richter stressed the EOP is calculated on a district’s weighted pupil count, so using the EOP as the base would let districts with higher weighted counts raise more in absolute dollars.

Richter walked members through why the office used FY2025 district spending for the demonstration rather than a proposed foundation amount: a foundation or base has not yet been set, and proposed boundaries or weights could change the distribution of funds. She presented regional examples to show scale: Addison’s FY2025 education spending in the JFO slide was roughly $96 million, so a 5 percent cap would represent about $4.8 million and a 20 percent cap about $19.2 million. Richter cautioned those figures are illustrative and “not equal to the foundation amount.”

Representative Tim (first name not provided) Feltes pressed the policy implications: "So what I'm trying to hold in my head is that this is making assumptions around current allocations ... If we're adopting a new funding formula, first of all, how high that foundation level of spending is going to interact with these percentages and how necessary they are." Feltes and others noted that changes to weights or district boundaries could redistribute dollars in ways not reflected by FY2025 totals.

Committee members also asked how nonstate revenues would interact with an excess cap. Richter and others explained the draft envisions excess spending to be raised by local property tax only, whereas current FY2025 education spending figures include state sales and use tax revenues and property tax. Members asked whether private fundraising or philanthropy would reduce a district’s need to seek local excess tax votes; Richter said private funds could lower the amount a district needs to raise at a vote because they reduce the locally required revenue, but private fundraising done outside the public district budget would not be treated the same as public district offsetting revenues under current law.

Lawmakers reviewed how current law treats excess spending. Richter summarized that the reinstated excess‑spending penalty calculates a statewide per‑pupil average and sets the threshold at roughly 118 percent of that inflation‑adjusted average; amounts above the threshold are treated in a way that effectively penalizes or double‑counts them for yield calculations. She said most previous carve‑outs were removed when the penalty was reinstated, with a single carve‑out remaining for principal and interest on bonds approved before the penalty’s passage.

Members raised follow‑up questions the committee did not resolve: whether excess spending should be restricted to particular uses (transportation, facilities, programs), when voters would decide excess spending (timing and ballot alignment), how district reserves and their interest earnings would be handled under a new system, and how a temporary hold of excess funds would feed into a school construction fund. Richter said she had not yet provided an estimate of interest earnings on retained funds and offered to follow up.

Representative Hagel asked about the proposed school construction program tied to H.454 and whether that program would cover full construction costs; staff and members replied the current proposal does not assume 100 percent state coverage and that additional policy decisions remain. Members also referenced Act 68 and earlier changes to school support programs while discussing incentives and fundraising disparities between districts.

The committee took no votes on policy changes during the discussion. Committee members agreed the central remaining decisions are whether districts may raise funds above the foundation, whether to cap that amount, and which base (EOP, per‑pupil, or other) should determine a cap. Richter said the draft 1.1 approach — a percentage over the EOP — would inherently account for pupil weights because the EOP uses weighted pupil counts.

The meeting moved on after members suggested a brief break and a possible follow‑up review of historical programs (including references to the "Shark Pool" and pre‑Act 68 incentives) to better understand fundraising incentives and disparities among districts. Richter and staff were asked to provide additional figures and clarifications for future committee consideration.