Senate education committee hears how 'excess spending' threshold can double‑count district spending and raise homestead tax rates

The Senate Education Committee on Jan. 28 heard a step‑by‑step explanation from the director of the Joint Fiscal Office of how Vermont’s excess spending adjustment affects homestead property tax rates.

The presenter, identified in committee as the director of the Joint Fiscal Office, told members the excess spending adjustment makes “a double tax on the amount that a school district spends per weighted pupil above the excess spending threshold.” She said the FY27 threshold is calculated by taking the average per‑weighted‑pupil spending in FY25, indexing it for inflation using the NIPA index for two years, and multiplying that result by 118 percent; the director stated the numeric threshold used in discussion was 16,470.

Why it matters: the adjustment is applied by adding any per‑pupil amount above the threshold back into the numerator used to set the homestead property tax rate and then dividing by the statewide yield. “For every dollar that you spend above the threshold, you’re taxed twice,” the director said, describing the mechanism that raises equalized homestead tax rates for districts that exceed the threshold.

The committee received a worked example: using round numbers the presenter modeled two hypothetical districts (District A at $15,000 per weighted pupil and District B at $17,000). With an illustrative threshold of $16,000 and a yield of $9,000, District B’s homestead equalized rate rose in the example from $1.89 to $2.00 after the excess spending adjustment was applied, while District A—below the threshold—was unaffected.

Exemptions and timing: under current law the director said the sole exemption to the excess spending adjustment is principal and interest on voter‑approved bonds that were approved prior to July 1, 2024; those bond payments are excluded when calculating the excess spending amount but still factor into other per‑pupil spending calculations. The presenter agreed to provide committee staff with specific district bond examples on request.

Recent history: the director outlined prior freezes and statutory changes. The excess spending threshold was suspended during the pandemic and frozen under Act 127; Act 183 (2024) later unfroze the threshold and revised the methodology and exemptions. The presenter noted Act 73 remains the baseline education finance framework under which property tax rates and supplemental district spending rules operate.

Data requests and impacts: the director said six districts exceeded the FY26 threshold of 15,926; the amounts above the threshold varied from $429 to $1,582 per weighted pupil across those districts. Committee members pressed for a list of the six districts and asked for data on districts close to the threshold; the presenter said she would email the requested lists and pointed members to Agency of Education district‑level spending data published online.

On surplus use: members and the presenter discussed how unreserved education fund surplus has been used in prior years to lower property taxes. The presenter explained that the December 1 statutory modeling must assume use of the full estimated education fund surplus to uniformly lower property taxes in the model, and that other one‑time transfers have been used in past years to reduce bills.

The committee paused to await additional witnesses. The presenter committed to follow up with the six districts that exceeded the threshold and to share the slide deck and AOE data links with committee staff.