Committee reviews S220: would exempt all voter-approved school bonds and lower excess-spending threshold

The committee convened April 8 to review S220, a statute amendment that would change how Vermont calculates excess school‑spending and how that calculation affects local property tax rates.

John Gray, Office of Legal Counsel, told members the bill removes a July 1, 2024 cutoff so “voter approved bond payments for principal and interest shall not be included in education spending for purposes of calculating excess spending” regardless of when a bond was approved. He also explained the bill lowers the statutory excess‑spending threshold: “the proposal here is to change that to move it downward to 112%,” down from the current 118%.

Why it matters: the excess‑spending adjustment is a tax‑rate mechanism. When a district’s per‑pupil spending exceeds the threshold, the amount above it is effectively double‑counted into the per‑pupil figure used to set homestead property tax rates, shifting taxes within and across districts. The Joint Fiscal Office warned the fiscal outcome depends on local budget choices: districts could cut to avoid the adjustment or be subject to additional tax burden if they do not.

Julia of the Joint Fiscal Office presented preliminary modeling and spreadsheets prepared for the committee. Under the FY27 modeling scenario she described, lowering the threshold to 112% (before applying the new bond exclusion) would have increased the total amount above the excess‑spending threshold to about $21 million, compared with roughly $4.7 million under current law — an increase of roughly $16 million. Julia cautioned the estimate omits some newly proposed exclusions (bond service data are not fully integrated) and does not predict how districts would change budgets in response.

The bill also contains several hold‑harmless carve‑outs. A district’s excess spending would be set to zero if either (a) its total education spending is not greater than the prior year or (b) its per‑pupil spending is not greater than the prior year. Separately, the Secretary of Education, advised by three business managers and three superintendents, may determine that increases above the threshold were “for good cause or beyond the district’s control” (examples listed include emergency capital expenditures and substantial revenue losses) and exempt a district. Counsel noted the statutory language offers broad discretion and includes examples but does not prescribe strict criteria for that determination.

Committee members pressed on several risks and practical questions: whether the bond exclusion would unintentionally encourage bonding for non‑capital items; whether lowering the threshold would create year‑to‑year volatility as districts move above and below the line; and how weighting and tuition accounting affect which districts are targeted. Julia said the Vermont Bond Bank supplied preliminary data indicating roughly $11.6 million in additional annual debt service across 11 districts that could become eligible for the exclusion, but she emphasized that debt would only be excluded if that district also exceeded the threshold.

Members also discussed distributional outcomes. Julia’s spreadsheet—based on agency data as of March 9, 2026—flags 26 districts that would be held harmless under the hold‑harmless rules in the FY27 scenario, and estimates that 10 districts would exceed the existing 118% threshold (about $4.7 million). Under a 112% threshold, her model showed 32 districts exceeding that threshold with a total above‑threshold exposure of about $20.5 million. She and members noted some data issues (agency weight calculations and tuition accounting) that are not yet reflected in the analysis and could change who is affected.

Quotes capturing debate: John Gray summarized the bond change as removing the cutoff and broadening the exclusion; Julia cautioned that “we don't know what school districts are going to do” in response to the rule change and described the modeling limitations; other members urged caution about perverse incentives and data quality.

Next steps: the committee did a brief recess and planned to return to language review; members were directed to the posted fiscal note and district spreadsheets for further review. No formal vote was taken during the walkthrough and staff said they did not anticipate a vote on S220 this week.