Legislative counsel outlines education finance draft: foundation formula, educational opportunity payment, excess‑spending reserve

Legislative Council returned to Ways & Means March 25 with draft language to move Vermont’s school finance toward a foundation formula. Counsel said the draft is intended to be a minimal, technical framework that will accommodate further policy choices by the Education Committee.

The nut graf: The draft replaces the current ‘‘education spending’’ bucket with an educational opportunity payment (EOP) computed by a base amount (per‑pupil cost factor) multiplied by a district’s weighted long‑term membership. The bill also establishes a capped ‘‘excess spending’’ mechanism for local spending above the EOP, a reserve to hold any penalty revenue, and a school construction aid special fund to receive remaining reserve balances.

What counsel outlined: John Gray (Office of Legislative Council) said the proposal separates the statewide funding calculation (the EOP) from local decisions about spending above that foundation. “The secretary of education shall determine each school district’s EOP by multiplying the school district’s weighted long term membership by the base amount,” Gray said, restating the draft’s core mechanism.

The draft treats weights (for pupil characteristics) and the base amount as the technical plugs in the finance formula; it contemplates a five‑year review to test whether weights and the base remain appropriate. Counsel described the ‘‘cost‑factor’’ approach as a way to base the initial foundation on current costs and leave open a future shift toward an evidence‑based formula once governance and delivery changes are in place.

On local spending: The draft defines ‘‘excess spending’’ as the amount a district approves above its EOP for which no other revenue source exists. The draft caps district excess spending at 10 percent of the district’s EOP, and it requires that revenue raised locally for that excess be sent to the Education Fund; the bill would then return the voted excess to the originating district and reserve any penalty amount that resulted from the tax‑rate calculation. The committee discussed a reserve mechanism so the state could correct shortfalls caused by mathematical or timing issues and to direct any remaining reserve funds toward a school construction aid special fund.

Counsel briefly described other draft changes: updates to titles 16 and 32 to remove references to per‑pupil education spending in favor of the EOP and to adjust payment timelines (the existing September/December/April schedule would be retained for EOP and excess‑spending distributions). The draft also removes provisions that penalize districts for slower budget adoption under the prior system because, counsel said, budgets operate differently under a foundation formula.

Questions and next steps: Members asked for detail on weight definitions (grade bands, poverty measures, special education, transportation) and how the draft treats tuitioning towns, charter or interstate districts, and school construction debt. Gray and other counsel said many of those specifics remain to be decided by the Education Committee, and the draft is intended to provide the finance framework while policy work continues. Counsel flagged that the draft interacts with other education policy bills and that the committee should coordinate with JFO and subject‑matter witnesses (including Professor Colby and JFO analysts) on underlying cost studies and evidence for weights.

What to expect: Counsel said stakeholder testimony will continue and JFO and subject experts will provide technical briefings on weights, the base amount, transition timing, and school construction funding options. Committee members asked staff to produce scenarios and numeric examples to illustrate how the draft would affect district budgets and tax rates.

Source evidence: John Gray and Legislative Council briefed the committee March 25; the draft references a cost‑factor base, weighted membership, EOP computation, a 5‑year weight check, a 10% cap on excess spending and creation of an excess‑spending reserve and a school construction aid special fund.