In the February 1997 Brigham decision, the Vermont Supreme Court ruled that the way schools were being paid for was unconstitutional. Lawmakers responded with a new school finance plan called Act 60.
The funding system developed by Act 60 and modified by later legislation is the most equitable and fairest school finance system in the country, according to Paul Cillo, of the Public Assets Institute. As a legislator, he was an architect of the law. But others, including Gov. Phil Scott, are questioning whether it is still the best way to fund education.
In his budget address last month, Scott said high property taxes are contributing to an “affordability crisis” for the state, and he offered lawmakers a pre-Act 60-type education budget on a timeline they couldn’t accept.
At a recent news conference, Scott was asked if he believed freezing education spending at fiscal 2017 levels, as his budget plan would have done, would run afoul of the Brigham decision. The court had ruled that Vermont’s system allowed inequality in the ability to pay for schools because of town-to-town variations in the tax base.
“If (the budget proposal) is freezing inequality across, that would tell me it’s unequal. So, maybe the system we have right now is unequal. Maybe it should be challenged,” Scott said, adding that the state has been sidestepping this issue for a long time.
The Legislature rejected Scott’s proposal recently. It would have provided school districts with the same amount of money from the state that they received for fiscal year 2017 for this and future years. Since school boards had already budgeted for 2018, towns would be allowed to raise more money from their grand list for that first year to cover planned spending, but the following year and beyond would be forever tied to per-pupil spending in fiscal 2017.
Diaz said that had the plan become law, the ACLU would have “been forced to consider litigation.”
He drew a parallel to the caps on spending growth that had been written into Act 46, saying those violated Brigham as well. Last year lawmakers scuttled the caps because of unforeseen consequences that increased education spending but were out of school boards’ control, such as health care and special education.
Act 60 cut the tie binding local school spending to local property wealth by creating a single statewide tax base. Any nonresidential property is taxed at one rate, but primary residential tax rates are different for each town based on the per-pupil spending voters approve each year. If two school districts spend the same amount per pupil, they will have the same residential tax rate if their properties are assessed at fair market value. If voters choose to spend more, their tax rates will be higher, according to the Public Assets Institute.
Rep. Alice Miller, D-Shaftsbury, described the central mechanism of the law this way: “All these pennies would go into a pot, and if my town could raise a penny per child it would go into the pot, if Stratton could raise three pennies, it would go into the pot, if Manchester could raise two pennies it would go into the pot. Then all six pennies would be divided by three.”
Cillo said he isn’t aware of any significant disparity. “The way the structure works is that the state doesn’t mandate that every district spend the same — this was the big innovation. It allows every town to raise the same amount of money per pupil at the same tax rate.”
Before Act 60 there were towns spending $12,000 per pupil with a tax rate of 3 cents and other towns spending $9,000 per pupil with a tax rate over $3, according to Cillo. “That was the disparity. The court saw it and said, ‘You can’t do this,’” he said.
The immediate precursor to Act 60 was the foundation aid formula, adopted in 1988. This was the third attempt since 1969 to find a way to equalize funding across school districts. It defined a minimum amount of money schools needed to provide “a minimum quality education” — the foundation cost. The state paid towns the difference between this cost and what they could raise from local resources.
Some saw Scott’s plan as a return to a foundation formula.
Diaz said the problem with his plan is it would force towns to rely even more on property taxes. “Freezing the amount of statewide distributed funding puts more reliance on property values of the towns to determine per-pupil spending, thus whittling away at Act 60 and the spirit of Brigham,” he said.
Greshin, who is on the House Education Committee, said the foundation formula may have worked if the state hadn’t reduced the amount of aid it doled out in tough budget years. Atrophied funding didn’t hurt the wealthy towns, but it left poor districts with underfunded schools and high taxes.
“It was because of this body’s inability to fund the foundation formula and make the right decisions that we changed from the state dictating” education spending to letting people exercise control over their budgets, he said. Greshin likened it to asking the kid what he wants for his allowance — you can bet it’s different from what you were planning to give him.
While agreeing that Act 60 in concept is simple and fair, Greshin said it has become “complex and deeply flawed.”
Diaz, while agreeing the system has produced inequalities in funding and services to students, said it hasn’t failed to meet Brigham’s requirement of “substantially equal educational opportunity.”
During a House Education Committee discussion on school finance, Rep. Dylan Giambatista, D-Essex Junction, said it takes significant fiscal discipline to support a statewide funding system that amounts to more than keeping the lights on in a school.
“This body will continue to need to exercise discipline if we want a state where kids have equal opportunity in schools,” he said.
