House Education hears Act 73 finance recap: new EOP, statewide tax rate and 5% supplemental cap

Legislative counsel Doc Gray told the House Education committee the bill known as Act 73 replaces Vermont’s current funding approach with a foundation formula that sets a base amount of $15,033 per pupil and updated weights for special education, economic disadvantage and English‑learner needs. "EOP is the big check," Gray said, describing the Educational Opportunity Payment as the per‑district payout calculated by multiplying the base by a district’s weighted long‑term membership.

Gray summarized how Act 73 creates a uniform statewide education tax rate to raise EOPs for all school districts and introduces a supplemental district spending (SDS) mechanism that lets districts ask voters to approve spending above their EOP. "Act 73 is a statutory cap of 5% of an unweighted foundation amount," Gray said; for the rollout the bill phases the cap down from higher temporary limits — starting at 10% during the initial years and stepping down to 5% by the final transition year (FY2038).

Under the SDS equalization approach Gray described, a district that approves supplemental spending must impose the rate that would be required to raise those funds in the lowest taxing‑capacity district; wealthier districts will therefore raise excess funds through a process the presentation described as "recapture." Gray said recapture flows into a supplemental district spending reserve in the Education Fund to correct miscalculations or to lower future property tax rates. Committee members asked whether that recapture had been dedicated to particular uses; Gray noted that when the measure left the House those revenues had been dedicated to school construction.

Members pressed how district configuration would affect recapture and local perceptions. Gray warned that widely varying grand‑list per‑pupil values across districts could materially increase recapture and said the equalization formulas should be revisited if the state changes district boundaries. The committee discussed how a uniform statewide rate will nonetheless produce different local tax bills because of appraisal timing (CLA) and statutory classification adjustments.

Act 73 also repeals the current property tax credit and substitutes a homestead exemption with income‑sensitivity brackets, Gray said. The exemption reduces the house‑site value subject to education tax rather than providing a post‑payment credit. Gray outlined the initial thresholds the committee discussed: eligibility extends to households with up to $115,000 in household income under the adopted bracket structure, the lowest income bracket (0–$25,000) would receive a 95% exemption against the first $425,000 of house‑site value, and higher brackets phase to smaller exemptions. Section 53 tasks the Department of Taxes with returning analysis of alternative offsets that could expand eligibility (analyses up to a $175,000 household income scenario).

Committee members asked for visual examples and joint discussions with Ways and Means and JFO to better see how yields, yields’ calculation, and district maps would affect local bills, voting incentives and equity outcomes. Gray closed by noting much of the timing and some statutory factors are contingent on the foundation formula rollout, with a target contingent effective date appearing as 07/01/2028.