Draft H.454 would replace Vermont school funding with foundation formula, reshape local tax rules

A legislative draft known as H.454 would replace Vermont’s current education funding system with a foundation formula intended to send a single “educational opportunity payment” to each district and create a separate locally approved tax for spending above that amount, committee staff said.

John Ray, legal counsel who led the committee walkthrough, summarized the change: “This general section … to move from our current education funding system to a foundation formula,” he said, describing a system that would create a base per‑pupil amount and weights that increase funding for students with additional needs.

Why it matters: The proposal alters how education dollars are calculated and collected across the state. Under the draft, most education revenue would flow into a single state education fund and then be distributed to districts based on a district’s “weighted long‑term membership.” Local voters could still authorize additional district spending, but that spending would be raised with a new, equalized supplemental district spending tax rather than the current local budget votes.

Key provisions and math discussed

Committee staff said the bill sets a base per‑pupil “cost factor” and a series of weights. In the walkthrough Ray read a line from the draft saying the base amount is “a per pupil cost factor amount of 15,033,” and later described the bill at a higher level as creating “a base per pupil amount of roughly $50,000 and educational opportunity payment for each school district.” The bill text and the staff presentation also draw heavily on numbers from a memo prepared by Dr. Colby, staff said.

The draft would add more granular weights for English‑language learners tied to proficiency levels and allow an additional “newcomer/SLIFE” weight for students with limited or interrupted formal education. Ray said the draft follows a consultant’s recommendations: “All of the numbers … relate to the base and the weighting factors [drawn] from Dr. Colby’s presentation.”

Special education weights would be organized into three categories and applied additively with other weights. Ray read the draft weights aloud in committee: category A weight 0.79, category B 1.89 and category C 2.49; an English proficiency level 1 weight was read as 2.11 and a newcomer weight as 0.42. Ray and other participants noted the weights are additive and calculated at the district level.

Support grants and sparsity rules

The draft removes small‑school and sparsity weights and replaces those provisions with targeted support grants. For example, the small‑school support grant in the text was described as equal to the two‑year average enrollment multiplied by $3,157; the sparsity ("sparse school district") support grant figure was read as $1,954 per enrolled pupil in a given public school, staff said. The bill delegates a role to the State Board of Education to set standards for schools deemed “small by necessity.”

Tax structure and local choices

Under H.454 as explained to the committee, there would be two distinct levies: a statewide education tax to fund the foundation formula (the educational opportunity payments and related state programs) and a separate supplemental district spending tax that districts could adopt to raise funds beyond their EOP. Ray described new ballot language the bill would require so voters can see a district’s supplemental spending request and the tax rate needed to raise it.

The draft centralizes revenue flow: locally raised supplemental district dollars would flow up to a state education fund, then be redistributed according to the bill’s equalization and recapture rules. Ray explained a newly created supplemental district spending reserve in the education fund would receive any recaptured excess and could, after addressing shortfalls, be used for a school construction special fund.

Transition, recalibration and studies

The bill text includes a recalibration and oversight schedule. Committee staff said the base and weights would be recalibrated soon after enactment and then on a recurring interval (the draft reads as an initial recalibration in January of the year after enactment and thereafter every five years). Ray said the draft sets a transition target of July 1, 2029, to move fully to the new system, but several members pressed for more detail about interim smoothing mechanisms and hold‑harmless protections for districts during the transition.

The draft also mandates reports due to the committee on Dec. 15. Those include (1) an inflator analysis from the Joint Fiscal Office (JFO) to recommend an inflation measure for indexing the base and weights; and (2) a JFO study of current pre‑K and early‑care funding and recommendations for aligning those streams with the education transformation. Ray said the Agency of Education would also produce a report on transportation reimbursement guidelines by the same date.

Questions and uncertainties flagged by committee members

Members asked how the new formula would handle big enrollment swings, whether transition years require additional smoothing, and how local labor and benefits negotiations (health care, salary bargaining) would interact with the new structure. Committee participants noted that some definitions — for example, “new American” or the State Board’s “small by necessity” standards — are not yet fixed in state law and that separate work or committee action could supply those definitions.

What the committee did: The session was a technical walkthrough; members did not vote on the bill during the briefing. Staff scheduled follow‑up briefings and reports and planned additional walkthroughs with JFO and Agency of Education staff to examine the property‑tax and equalization sections, Ray said.

Looking ahead: The draft moves major mechanics of school funding to the statutory level (base, weights, indexing, recapture and the new local supplemental levy). Committee staff repeatedly emphasized the draft is intended to set structural features and to produce several required reports and recalibrations before full implementation. Those technical reports, and how the State Board defines “small by necessity,” will shape how the changes affect districts and taxpayers.