Professor Tammy Colby lays out design choices for a student-based foundation formula

Professor Tammy Colby told the Ways & Means Committee that designing a foundation formula requires three core policy choices: the base spending amount, the cost adjustments (weights or per-pupil grants), and how students are counted for funding. “Foundation formula are fundamentally student based funding systems,” Colby said, and she added states must make intentional design choices rather than adopt another state’s model verbatim.

Colby recommended starting with a clear definition of the base: the amount of general-education operating spending required, on average, for a student with no additional needs to reach state standards. She emphasized that capital and debt service are typically excluded from the base because they are handled through separate funding mechanisms. On escalation, Colby urged that most states stipulate a statutory escalation method (an inflation factor) and also require a full recalibration of the formula every four to five years.

On cost adjustments, Colby grouped common adjustments into four buckets: individual student risk or need (for example, disability status, English‑learner status, economic disadvantage), school- or district-context factors (for example, concentrations of high-need students), scale and sparsity (small schools, low enrollment, rurality), and input-price differences (geographic differences in labor/input costs). She cautioned that Vermont’s empirical work did not find input-price differences to be a statistically significant cost factor and said cost factors and their magnitudes must be determined using Vermont-specific analysis.

Colby addressed Vermont’s tuitioning towns and urged the committee to “start to rethink, rather than having tuitioning towns, we have tuitioned students,” explaining that in a student-based system dollars follow students and that has implications for weighting and tuition arrangements. She reviewed pros and cons of single versus variable bases (a single statewide base, a simple variable base that differentiates on a few transparent factors like sparsity, and complex variable bases that are harder to understand and administer).

On special education, Colby said many states are moving from single weights toward multiple, need‑based weights or matrix approaches because disability category alone is a poor proxy for cost. She recommended policymakers consider a high‑cost reimbursement or insurance mechanism (many states do) and to calibrate special‑education weights using empirical methods that measure cost differences in Vermont. Colby urged pairing statistical cost-function analysis with qualitative methods (professional judgment panels) when possible to cross-check estimates.

Committee members asked questions about updating the base when statutory requirements or costs change (Colby recommended triggers such as formal recalibration and cautioned the Legislature should plan for major changes), how to treat facility maintenance and capital (typically outside the operating base), and how choices about counts (average two‑year enrollment, average daily membership, or most‑recent-year counts) affect district funding. Colby repeatedly urged that Vermont pursue Vermont-specific cost studies and use a multi-method approach to validate estimates.

The committee paused for a break after the presentation; Colby and staff indicated follow-up materials and further technical options would be shared with the committee.