Walkthrough of proposed education funding bill highlights sparsity definition, homestead exemption and staged transition

John Gray, office of the elected counsel, walked participants through sections 34–59 of a draft education funding bill, describing where House and Senate language aligns and where it differs.

Gray said, "My sections start at section 34 and run through section 59," and explained that sections 34–36 set Title 16 definitions and update education payment terms including the base amount of 15,033 and references to an educational opportunity payment (EOP) and supplemental district spending.

The meeting focused on three sets of substantive differences between the chambers: how sparsity is defined, how districts transition from the current education spending model to EOP, and divergent approaches to property tax classification and the homestead exemption. On sparsity, Gray described the House approach as defining "sparse school districts" where population density is fewer than 55 persons per square mile and awarding a sparsity support grant based on a two‑year average enrollment of each public school in the district. He contrasted that with the Senate approach, which defines a "sparse area" at the ZIP‑code level and counts "sparse schools" within those ZIP codes for grant allocations.

Gray summarized a new Senate task in section 45a that would direct the Joint Fiscal Office (JFO) to contract with a vendor experienced in Vermont's education funding system to develop a cost‑factor foundation formula. He said the contractor would recommend tiered weights for CTE, English learners, special education and other empirically necessary factors, evaluate geographic measures for sparsity (including ZIP‑code problems), and report to Ways and Means and Finance by Dec. 1, 2026. He noted the bill includes funding to hire the consultant at $115,000.

The bill includes transition mechanics intended to move districts from the current education spending model to EOP over five years. Gray described a transition gap calculation that compares a district's education spending in FY 2028 to its EOP for the year in which the gap is calculated and apportions that gap in approximately 20% increments over five years so that districts would be "fully transitioned in fiscal year 2034." He said the EOP transition is determined each year, so annual movements may vary rather than be identical 20% steps.

Tax‑rate transition language also appeared: a separate five‑year transition (fiscal years 2030–2033) would smooth changes to homestead property tax rates, using a gap between a notional FY2030 uniform homestead rate without transition and each district's FY2029 homestead rate to calculate phased discounts or penalties.

Gray flagged a significant drafting divergence tied to property tax classifications. The House proposal retains statutory property tax classifications (homestead, nonhomestead, etc.) with a single statewide education tax rate adjusted for classifications; the Senate proposal removes property tax classifications and instead references a uniform homestead rate and a uniform nonhomestead rate without a fixed relationship between them. That change drives multiple conforming edits across Title 32 sections in the draft.

On who administers tax‑payment calculations, Gray noted the Senate draft assigns determination of net tax payments to the Secretary of Education, while the House draft assigns that role to the Commissioner of Taxes; conforming edits appear in multiple sections to reflect that difference.

The proposals take different approaches to replacing the property tax credit with a homestead exemption. Gray summarized the House proposal as an income‑bracketed exemption against a claimant's house‑site value (for example, under $25,000 of household income would receive a 95% exemption against house‑site value under the House draft, while higher bands reduce the percentage up to a cutoff near $115,000). He contrasted the Senate table, which ties exemption percentages to both income brackets and a capped house‑site value (for example, the lowest income band in the Senate draft provides a 99% exemption against the first $425,000 of house‑site value). He said both proposals include inflationary "inflators," but the drafts differ on whether inflators apply to income brackets only or to both income brackets and house‑site value caps.

Gray also described several conforming and technical changes: updates to appeals and special education funding rules (including repealing a census grant line for special education), adjustments to payment schedules and reserves, and proposals to change the grand‑list date and to create statewide and regional property assessment districts starting Jan. 1, 2030 in several sections.

He emphasized that several provisions are contingency or implementation design items: sections 57–59 are contingently effective if the state moves to an evidence‑based foundation formula, and section 45a tasks JFO with a study and recommended geography/weights before the foundation formula would be adopted.

No formal motions or votes were taken during the walkthrough; Gray closed by saying he was "happy to answer any questions" and turned remaining sections over to Kirby for final review.

Why it matters: the draft redraws how Vermont would measure sparsity, calculate district payments and phase in both per‑pupil funding and property‑tax changes. Those drafting choices affect which communities receive sparsity support, how quickly districts reach their EOP, and how homeowners and nonhomestead property owners share the tax burden. The JFO consultant report due Dec. 1, 2026, and the multi‑year transition schedules are the next key technical milestones noted in the walkthrough.