Committee Discusses Letting School Districts Accept Less Than Full Foundation Funding; Seeks More Modeling on Tax Impacts

Members of the Education Finance Committee discussed whether some Vermont school districts should be allowed to accept less than 100% of the foundation (often referred to in the meeting as EOP) and the tax and budget consequences of that change.

“I just wanted to really, sort of affirm the need for us, have people be better off on the other side of this. Right?” Speaker 3, Staff member, said as the group opened the finance discussion. The committee regarded that principle—districts and taxpayers should be no worse off under any new system—as central to considering changes.

Committee members spent the meeting weighing an idea floated in the Senate that would let a district’s electorate and school board choose to accept a lower share of the foundation formula—examples discussed in the meeting included accepting 90% or 92% rather than the full percentage—and to set a correspondingly lower homestead tax rate for that district. Speaker 1, Committee member, described the concept: “If your voters choose to take 90%, then our district homestead tax rate would be 90% of the statewide.”

Members and staff repeatedly cautioned that the tax-rate mechanics are complicated. Speaker 3, Staff member, noted preliminary Joint Fiscal Office (JFO) analysis that in many cases “the foregone revenue would be, I think, far greater than with the tax savings,” meaning a district that spends less could lose more in revenue than it would save in reduced tax collections. Speaker 1 asked whether that was true “for every district,” and JFO’s limits on modeling were described as a reason for more work before any policy change.

The committee also discussed how any underspend option would interact with statewide technical details: the statewide grand list used to set homestead tax rates, district sizes, and how smaller districts can produce different results numerically than larger ones. Speaker 3 said the current draft of the bill locks tax and supplemental-spend rates “in the year before” so districts would know their rates for budgeting, and emphasized that the math “works significantly better with larger districts” in modeling the proposal.

Members flagged related provisions that would affect where surplus revenue goes. Two versions of the bill discussed in the meeting propose using initial excess revenue to stabilize rates in the first year and allowing remaining funds to “waterfall” into a school construction fund in later years. Speaker 3 said that using the initial surplus for rate stabilization and then directing funds toward school construction was intended to address concerns that education transformation requires school construction funding, a point several members called important.

On homestead exemptions and caps, committee members compared different cap levels that appear in competing drafts. The group discussed numeric cap options (participants referenced “400” and “425” in the transcript) and expressed a preference toward the higher cap in one member’s original proposal; one participant said, “I think we’d prefer 425. Sure. Okay. Thanks.” The transcript does not record a formal motion or vote adopting a specific cap.

Members repeatedly requested more precise fiscal modeling and clearer draft language before approving substantive changes. Speaker 1 asked for details on how the underspend option would be implemented in practice, saying the idea was “a new idea to me” and that the member could not “fathom how that would actually work” without applied numbers. Speaker 3 agreed to bring further details and said staff had intentionally avoided inserting final effective dates into early drafts.

The committee also touched on other finance elements in the bill: phasing plans for tax rates and spending (examples in discussion were annual percentage steps such as 85%, 86%, 87% leading toward a target), an Agency of Education (AOE) role in validating district services, and a Department of Taxes request to study raising an income or exemption threshold (referred to in the transcript as “1 75” and “1 10” in the meeting). Committee members described that study as necessary to determine how larger thresholds would affect households and program costs.

No formal motions or votes were recorded in the transcript. Instead, the meeting closed with staff direction and scheduling: members asked staff, JFO and the tax department to refine models and draft language, to reconvene after lunch with additional work, and to keep working on the sections still open (tax classifications, supplemental district spending, and certain weights). Speaker 3 summarized remaining open items: “What’s still open is, the tax classifications, and then, the supplemental spending and some of the weights as well.”

The discussion emphasized that the committee intends to continue technical work—modeling distributional and tax impacts and converging bill language—before making final policy decisions. Committee members repeatedly asked for more granular modeling and clearer statutory language so they could assess whether options such as permitting districts to accept less than full EOP would leave taxpayers and students “better off on the other side of this,” as Speaker 3 framed the committee’s objective.