Eric Davis: Education funding debate looming

House Speaker Shap Smith recently said that the Legislature’s highest priority in the 2015 session should be changing Vermont’s system of financing and governing K-12 education. Smith noted that the large number of school budgets rejected last spring, and the concern about high and rising property taxes demonstrated by the November election results, mean that the Legislature must address the education issue soon.
Smith also cautioned that even if a bill is enacted in 2015, its provisions would not take effect until the 2016-17 school year. Full implementation of a major change would take several years beyond that, so the pressure will continue on school boards to restrain their budgets in the short term.
Smith has appointed a working group of experts in education and school finance to study alternatives to the current property-tax based system, and that group has been meeting regularly throughout the fall. They are expected to present their report in a few days, with their proposals forming the basis for legislative discussion once lawmakers return to Montpelier in January.
News reports indicate the working group will propose alternatives ranging from tinkering with the current system to making major changes in both finance and governance. The least radical proposal would involve tweaking the current rules to put greater pressure on small schools with high per-pupil costs and low student-staff ratios.
These changes would be designed to provide strong incentives for those schools either to consolidate or to reduce staff. The schools that would be most affected by such proposals would be elementary schools with enrollments under 70 (an average of less than 10 per grade from K through 6), and middle and high schools with 50 students or fewer per grade level.
The other proposals reportedly under consideration by the working group would involve a shift in the responsibility for funding K-12 education from the property tax to the income tax. The argument for these proposals is that income is a better measure of one’s ability to pay than property values.
The first income tax-based proposal would retain the current structure of local school districts, but would have most of the funds needed to operate the schools, above a basic per-pupil grant from the state, raised by a locally voted income tax rather by than the property tax.
While determining the winners and losers from this proposal will have to wait until the details are published, likely winners include households with incomes in the $90,000-$125,000 range, just above the cutoff for the current income sensitivity program.
Many of these households are now paying between 4 and 6 percent of their incomes in property tax, compared with less than 3 percent for households in the $80,000-$90,000 range, just below the income sensitivity cutoff. Losers are likely to be the highest-income households, whose property taxes are often much lower, as a percentage of their income, than middle-income households.
The working group’s final proposal is likely to involve major restructuring of education governance as well as finance. The state would pick up most of the costs of K-12 education, through a combination of broad-based sales and income taxes. “Block grants” would be given from Montpelier to regional education boards, which would then decide how to allocate spending among individual schools in their districts. Each region would likely combine several of the existing supervisory unions.
Many questions remain. Will the Legislature and other stakeholders in K-12 education be able to reach consensus on any finance and governance proposals? Will residents of smaller communities agree to give up some of their school districts’ autonomy? If changes are adopted, can they truly “bend the cost curve”?
Eric L. Davis is professor emeritus of political science at Middlebury College

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