JFO briefs Senate Education Committee on Vermont education finance: Act 60, property-tax shares and pupil weights

Esther Holden of the Joint Fiscal Office told the Senate Education Committee on Jan. 30 that “Vermont’s education system is different from other states,” and walked the committee through the statewide structure of education finance, revenue sources and the mechanics that translate local school budgets into statewide property tax rates.

The briefing explained why the state funds local, voter-approved school budgets under Act 60 following the Brigham decision (1997), how the December 1 letter sets the starting point for state tax-rate forecasts, and how homestead and nonhomestead property taxes, along with sales and other nonproperty taxes, fund the Education Fund.

Joint Fiscal Office staff said the Education Fund appropriation for fiscal 2025 lists the aggregated education payment (the sum of local voter-approved budgets) at roughly $2.3 billion and that about 80% of the Education Fund’s appropriations are the aggregated school budgets. They emphasized two broad revenue buckets that fund those appropriations: property taxes (homestead and nonhomestead) and nonproperty taxes (notably the sales and use tax). In the JFO presentation nonhomestead property tax was shown as the largest single source at about 39% of projected FY2025 sources, net homestead property tax about 26% (after property tax credits), and the full sales and use tax about 26%.

The presenters described mechanics that are central to Vermont’s system. Under Act 60 and related law, districts set budgets locally and voters approve them; the legislature then sets property-tax yields through the annual yield bill to fund those voter-approved budgets. The Department of Taxes and the Joint Fiscal Office issue a statutorily required December 1 letter that sets the initial tax-rate forecast for the coming fiscal year; those rates can change during the legislative session.

JFO staff reviewed the common level of appraisal (CLA), which is calculated for each town to adjust for differences in appraisal timing and bring assessments toward fair-market value. They noted a statutory “state adjustment” to the CLA included in last year’s yield bill that benchmarks towns to a statewide average CLA (about 72% for FY2026 in the JFO presentation) rather than 100% market value.

Presenters also explained homestead versus nonhomestead: homestead is defined in statute as the principal dwelling and the parcel surrounding it occupied as the owner’s domicile; nonhomestead includes other real property. The nonhomestead property tax rate is set statewide and uniform; homestead rates vary by town because they are tied to each district’s per-pupil education spending. Current-use valuation for qualifying agricultural or forest land lowers assessed value per acre (the JFO slide cited roughly $483 per acre for agricultural current-use value in 2024), but that reduction is absorbed by the statewide system rather than by the locality alone because the Education Fund is statewide.

The briefing covered pupil counts and weights: long-term average daily membership (ADM) is adjusted by statutory pupil weights (examples cited included an economically deprived weight of 1.03 and an English-language-learner weight of 2.49). JFO staff explained these are tax-capacity weights in the current system and are applied to ADM to produce long-term weighted ADM; that figure is used in the per-weighted-pupil calculation that helps determine homestead tax rates. The presenters cautioned that weights described by the administration in a separate proposal are applied in a different mechanism (a base-dollar approach) and are not directly the same as the tax-capacity weights JFO described.

Committee members asked how the December 1 letter is produced and how JFO and the Agency of Education collect assumptions and district estimates. JFO said the Agency of Education surveys school districts about budget growth assumptions and that line-by-line assumptions are used across the Education Fund outlook; staff noted continuing updates during the legislative session refine the education payment estimate. Committee members also asked whether the nonhomestead classification could be split (for example, separating businesses from seasonal properties). John Grama of Legislative Counsel said there have been discussions, that the idea has been floated in prior biennia, and that statutory definitions are limited now, which complicates modeling a split in the nonhomestead grand list.

Presenters directed committee members and the public to the JFO website for the annotated Education Fund outlook and materials that accompanied the slides; they said the slides went up during the hearing. No formal action or vote was taken during the presentation.

The committee discussion closed with JFO offering to share a JFO issue brief on pupil weights and a reminder that the December 1 assumptions and the yield-bill process will continue to be refined during the session.