After reviewing the impacts of the new Act 127 transition mechanism, our review confirms that we properly developed a budget that considered the negative impact of Act 127 while at the same time responding to the other FY25 financial challenges. Therefore, the proposed changes will not require us to modify our proposed FY25 budget nor will we need to delay the March 5 FY25 budget vote. 

The Vermont Legislature enacted Act 127 in 2022 to improve student equity across the state by adjusting the school funding formula. Quoting from the enacted bill (S.287), “The legislation is designed to ensure that the financial resources available to local school districts for educating students living in poverty, English learners, students in small rural schools, students in sparsely populated school districts, and students in middle and high schools are sufficient to meet the cost of educating these students.” 

As a result of Act 127, in FY 25 Addison Central School District will receive a 13% reduction in its portion of the State Education Fund and will need to make up the difference through an increase in property taxes. The original Act 127 legislation provided a 5% tax rate cap for districts that restricted annual increases to their per-pupil spending to less than 10%. This would allow districts to adjust to the financial impacts of the new legislation over a 5-year period. However, due to some unintended consequences of the 5% tax rate cap, the property yield was collapsing. 

In place of the 5% tax rate cap, a “tax discount,” which is only available to districts negatively impacted by Act 127, has been introduced. The amount of relief provided to an eligible district is determined by its actual reduction in state funding. ACSD will receive a tax rate discount of $0.13 in FY25. The discount will be reduced each year until it is completely phased out after the 5th year.  

ACSD’s proposed FY25 budget was developed to preserve stability during our leadership transition and responds to several financial drivers, each of which has significant impacts on next year’s finances. Besides responding to the impacts of Act 127, the budget also responds to several other factors, including the expiration of Federal ESSER funding next year, a 16.4% increase in healthcare premium costs, anticipated wage increases due to contract negotiations, and a decline in “non-tuition” student enrollment.

To qualify for the 5% tax rate cap provided in the original Act 127 legislation, the ACSD Board worked to ensure that our annual increases in education spending per weighted pupil fell below 10%. And although revised legislation will no longer require this threshold to qualify for relief, the board is committed to keeping increases in education spending under 10% to keep our tax rates as low as possible while meeting the needs of our students. This approach allows time for the board to work with the new superintendent to address the long-term impacts of Act 127. 

You can learn more about the FY25 budget here. The board will also be holding a virtual Budget Q&A zoom session on Thursday, Feb. 15, at 7 p.m.  Please check the ACSD calendar for more information. 

Barbara Wilson

ACSD Board Chair

Shoreham