June 17, 2025 Legislative Update, Ed Fund bill

The Education funding reform bill passed after split votes in both House and Senate on Monday, with lots of angst even among some voting yes. It brought an end to this year’s extended session.

For many years, I’ve believed that “local control” over education funds has been a façade, given the actual funding mechanism. I believe that a state obligation for a crucial statewide system should have funds raised and budgeted at the state level for all students equally, across the state. Setting a path – a work plan -- for that shift is the only thing this bill actually does, and I supported it.

Contrary to discussions or opinions:

1.       It does not save money.

It spends more for transition needs, and could theoretically save money in the future. It could just as theoretically spend more. The difference will be that it will be in the hands of the legislature, accountable to voters, instead of in the hands of individual towns’ votes combining into a statewide fund imposed on all. Statewide fund, thus state budgeted spending… like roads, social services, court systems and the rest.

There are built-in new costs, such as re-starting school construction aid (and assuming the need for new construction for regional needs.) The future cut in property taxes for lower-income homeowners may cost more than the current income sensitivity system. Future consolidation may save some money, but not enough to offset new costs. Increasing class sizes will save some money, but the required increases are minimal. (At least 10 students for first grade; 12 for 2nd-5th; 15 for 6th-8th; 18 for high school.)

2.       It does not close small rural schools.

There are multiple exemptions for size to meet needs; the decision-making process for closure is yet to be defined. I think upper grades need and benefit from larger regional schools, but not elementary schools.

3.       It does not mean teachers will be laid off.

Again, class minimums requirements remain low; at most, there could be reductions achieved through attrition. There is a timeline for any changes, and a soft-touch consequence for not meeting them.   

4.       It is not happening too fast for good decisions.

Almost every aspect is yet to be determined over the next several years after more work by sub-groups that include professionals. If those steps aren’t achieved (after being fought over in future legislative sessions), the process ends. A map for proposed larger districts next year will be the first test for whether consensus will be possible for moving forward.

Note that even pieces that are “established” in this year’s bill don’t take place immediately, which means they can be changed if new information demonstrates the direction should change.

5.       It does not “privatize” education and place the public system at risk.

It actually cuts back on some access to independent schools. Yes, in theory it could make it easier in the future to expand a private school voucher system, but that would require a whole, new, controversial change in law.

6.       It does not impose big tax increases on thrifty towns, or force cuts.

Sorting out the issue of addressing changes from up or down from current local tax rates or budgets is one of the many work areas yet to be resolved. If it does have unfair results, the opportunity will be there to say, stop; this doesn’t work.

7.       It does not ignore the major cost drivers in school budgets.

Some of those drivers, such as special education, are elements that are part of the further work outline in the bill. Others are not addressed because they are not direct education system issues. Health care’s staggering cost increases are a separate problem for all of our budgets. Yes, it helps drive school budgets in a big way, but that is a component that will now be a shared problem for the state to address in funding, rather than for each town to react to by rejecting a local budget that has soared upwards because of health care costs.

 

What was I happy to see in the final version of the bill that came forward?

Two things:

First, an intent to try for a faster timeline: three years instead of four to start actual changes. It is unlikely to meet the timelines because there is so much work and so many decisions yet to be made. We will likely be voting regularly on time extensions, something we do often. But dragging out change can be a detriment; I think a goal to move decisions forward as soon as reasonably possible is good.

Secondly, it was the first time a transparent statement was made in the bill that clarifies that there is not necessarily an intent to reduce the taxes needed to support our schools. The intent is to reduce the increases in the property tax, which is being perceived as the main thing taxpayers are upset about: increased property taxes, not taxes overall.

The bill now states that within the intent to prevent property tax increases, if need be, we will transfer current spending into other budgets that have other revenue sources (income tax, sales tax… anything other than property tax.) Some of these could be very appropriate. Are school lunches or mental health supports a part of education, or are they social services that should be in our social services budget? But the outcome will be more pressure and increases to those other budgets. It shifts funding to increase other tax categories.

Speaking of mental health support – which a majority believe are a critical need in our schools – that is one of the clear examples of how inequitable the current system. Schools must pay the matching funds for the federal Medicaid support for having mental health clinicians. Many of our schools, in communities that don’t believe it’s affordable for their town, don’t have those services. These supports should not be dependent upon where you live.

If one wants to consider whether our current convoluted system of education spending represents local control while also creating equal tax burdens for equal education support across the state, one need only consider the Northfield budget over the past two years.

In 2024, Northfield tightened its belt compared to many other districts in the state. Northfield spends less than the statewide average per pupil. Yet in the final outcome, the average property tax rate increase across the state was 14%. In Northfield, it was 18%. This year, Northfield (or, the full district) tried to catch up on some pressing needs. The budget increase was 14%. Yet the tax rate will only increase by 2% to meet that increase.

This is why I term “local control” a façade under the current funding structure

While many folks are scared about potential implications, the bottom line is that this bill, this year, only begins a process for a statewide system of equal taxing for equal resources for the opportunities for each student. And it uses the same system that the majority of states use for education funding. This bill is about doing the necessary groundwork to address the many complex issues that will determine how, and even whether, it is able to move forward. It sets out intent, but no final decisions.

Most of the big decisions are still ahead of us and will present major challenges to resolve.

***

This year’s session is over, but I’m still available if you want to discuss legislation or other state issues. Stay in touch at adonahue@leg.state.vt.us (and with Rep. Ken Goslant at kgoslant@leg.state.vt.us.) We appreciate being able to serve you.

June 6, 2025 Legislative Update

 

Legislative Update

Rep. Anne Donahue

June 6, 2025

 

As a student many decades ago, I was one of those who put off studying for exams until the last minute and then crammed. If I had received a time extension, I likely would have still waited until the last minute to cram. The legislature reminded me of my early self this year. We extended the session by two weeks in order have added time to resolve differences between House and Senate on education reform. Nonetheless, lots of other major bills were still crammed into the final few days.

As a result, during the interim of those extra two weeks many committees had time on their hands; the education bill conferees, meanwhile, did not end up with a final bill. As a result we have suspended adjournment until June 16 in order to give those six conferees more time. We should have done that two weeks sooner! It would have saved a lot of money if members had completed the other work on time and left only the unfinished education reforms for more work.

At this point, the interim “progress” after six days is that the conferees finally negotiated a date – next Wednesday – to meet again to hash out a compromise. In the meantime, they will try to work on revisions to current proposals. We won’t really know where the final draft ends up until their work is done.

***

What Else Was Left Hanging?

Besides education reform, a key tax bill got temporarily stuck in the Senate. It includes the partial income tax exemption for military retirement and survivor’s benefits, which I’ve fought to achieve for many years, knowing how much it would help recruit workforce at Norwich. (Virtually every other state offers this exemption.)

The bill isn’t dead. The Senate knew it was going to get the added days in mid-June to finish its work and since the bill was approved by House-Senate conference committee members, it shouldn’t face any problem getting passed.

The bill also increases the age for the $1,000 child tax credit from 5 to 6, increases the state portion of the earned income tax credit, makes slight increases in the income percentages for exemption of social security and civil service retirement income, and adds a veteran’s tax credit.

***

What Got Finished?

The budget, which is usually the bill that closes a session, was voted out early this year. The final increases were less than the legislative proposals but more than the governor’s starting point. It was an indicator of the increase in balance when a Democrat-controlled legislature that no longer has a super-majority (the 2/3rds majority needed to overturn a veto) can no longer allows for completely ignoring a Republican governor.

With most other controversial bills, the legislature held to its own priorities but gave in enough so that the governor reluctantly supported the end result. Here’s the quick synopsis on some of the major responses to current state crises:

***

Housing

The governor got a watered-down version on one initiative, and no progress on the other. Construction costs have skyrocketed, and developers are held back on projects when they cannot turn any profit at all. Time and uncertainty add costs, but efforts to ease some of our difficult permitting processes have failed.

One new tool was created to allow investments in necessary infrastructure by towns. The money comes from property tax revenues and is paid back by the increased tax revenue created by the new properties. Near the end of the bill process, the House added some new hoops to get access to those advance funds, making it harder for towns to work with developers to achieve the desired outcome (more housing development.) It remains to be seen whether it will still be of any use for the intended target, which was smaller towns that can’t afford the investments in water, sidewalks and the like.

***

Health Care

The scope of our health care crisis became more visible as the year progressed. Smaller hospitals are losing money to the extent of facing risk of closure, and our one primary insurance company is on the brink of bankruptcy as claims come in at higher-and-higher costs. This is no longer just about skyrocketing cost – it’s about basic access.

As with many of our crises, this is much bigger than Vermont can solve on its own, and both housing and health care are critical issues for many states. We are small enough that our non-profit hospitals each have their own “catchment areas” that create a near monopoly. That eliminates competition as a cost control, and likewise for insurance companies who see there is no market to compete for here.

Twenty years ago, Vermont’s health system was running at below average cost but was increasing in costs at a faster rate than elsewhere. We are now one of the highest costs per person in the country, and our largest medical center is the most expensive, anywhere.

When there are no market pressures (and those pressures have much less impact in health care dynamics than in any other area, regardless) the only alternative become increased regulation. This year’s new bills pressed mostly in that direction, in particular in efforts to squeeze the UVM Health Network to reduce expenses in order to keep all the other parts of the system alive.

None of these bills will be game-changers. The largest initiative includes creation of a new “Statewide Healthcare Deliver Strategic Plan,” the first effort at a comprehensive tool to prioritize needs since my bill in 2002. Certainly overdue!

***

Homelessness

We should be hearing any day whether the governor vetoes the bill my committee developed in response to a dysfunctional system that pays a lot of money to put some people up in hotels, but leaves others out. The focus of the bill is a transformation into an actual unified system, run by our community action agencies (Capstone in Central Vermont), to coordinate services to move people into permanent housing and reduce the use of motels.

The governor has expressed concerns as to whether it may cost more money in the long run, although it does meet his criteria for a program that actually provides services to help folks, rather than just pays hotels to house them.

I supported this bill because I don’t see a better alternative. I don’t think the alternative of leaving people who are seeking help on the streets is acceptable. It will take a year to make these changes in the system, and they need to start now.

It was ironic – and mystifying – to see the legislature pass a budget that left in place the exact status quo as last year for funding hotels in the interim. It uses a broad definition for the eligible group of “most vulnerable” but leaves in place the same caps on the number of rooms that can be funded, and the number of days a household can stay. The result is not enough capacity for all who are eligible.

Those limits were what drew outrage from legislators when people were being evicted both last fall and this spring. There was a standoff with the governor, who would not agree to add more money to the current year budget to change what had been passed into law. We have now put into place a recurrence for the year ahead.

In the meantime, changes to the new reform bill at the last moment removed additional funds for creating new shelter programs to replace isolated hotel rooms. There are advocates who press for private accommodations for those in need of support, saying that shelter programs lack dignity. I think we are doing too much for too few, and it would be better to put our resources into less costly shelter capacity that allows fewer people to be left on the street. The new program our bill proposes is a compromise but makes headway.

***

Stay Tuned

Although not meeting until June 16, we haven’t officially adjourned. Anything, in theory, will be up for debate when we regroup.

In education reform – as with homelessness, and health care, and housing – there is both urgency and a need for enough time to make change thoughtfully. Those operate in tension, but anything that ends up being rejected because it does not respond to a crisis quickly enough, or as ideally as we might like, only means another year of delay.

If we do not move forward this year with education reform to allow us to use money more efficiently and to seek more equitable outcomes, consider this: Last year, the average property tax increase was “only” 14% because the original increase (18% on average) was reduced by transferring extra money from the general fund.

For the 2026 budget we have transferred $77 million from the general fund to the education fund to defer what would have been an additional 7% percent average increase in property taxes (it will average 1% instead.) That creates a false sense of less urgency. Taking money from the general fund means other priorities that lose out. Sooner or later, the bill will come due.

***

Thank you for all of your engagement this year. Please stay in touch with me (adonahue@leg.state.vt.us) and Rep. Ken Goslant (kgoslant@leg.state.vt.us) as we work to represent you.