School district budgets in limbo

With less than three weeks until Town Meeting Day, legislators are proposing new changes to the state’s education funding formula that’s brought headaches for school officials this year, leaving South Burlington and Champlain Valley school districts’ budgets in limbo.

Budget season in Vermont has quickly become even more complicated — especially for districts that have already passed and warned budgets for the annual vote — with the effects of Act 127, a law passed in 2022 that changed the state’s education funding formula.

 “It’s extremely unprecedented,” said South Burlington superintendent Violet Nichols, who added that boards and educators are having “extremely taxing conversations” and are “looking at decimating schools and programs that we’ve dedicated our lives to developing for the benefits of students in our community.”

A new law being fast-tracked through Statehouse committees would not only nix a major facet of Act 127, but also allow time for districts to adjust spending by postponing Town Meeting Day school budget votes until April 15. The proposed law offers $500,000 to offset election costs resulting from the delay.

Act 127, which adjusted the state’s previous equalized pupil weighting system, allowed districts a 5 percent tax cap to soften the blow for districts that saw pupil weights drop dramatically as a result. The law also allowed districts a 10 percent per-pupil spending limit — meaning that whether the Champlain Valley school district, for example, approved an $88.5 million budget or a $105.8 million budget would have no difference in its $1.37 tax rate increase.

Similarly, the South Burlington school district could have spent anywhere from $63 to $71.5 million with the same exact effect on tax bills.

But legislators took issue with that aspect of the law early in the legislative session, arguing that districts throughout the state were taking advantage of the spending mechanism.

The new bill proposed by legislators in the House Committee on Ways and Means would replace the 5 percent cap with a one-cent tax rate discount for every percent decrease loss in the district’s taxing capacity since Act 127’s implementation.

Although the 5 percent cap was available for every district, this new discount would only be available to districts negatively affected by the new funding formula.

Tim Jarvis, senior director of operations and finance for the South Burlington School District, said that of the 122 school districts and supervisory unions in the state, nearly 38 of them were deemed to be disadvantaged by Act 127, including just about every school in Chittenden County aside from Winooski and Burlington.

The Champlain Valley School District saw a 17 percent decrease in its taxing capacity because of Act 127. Under the new law being moved through the Statehouse, the district, instead of utilizing the 5 percent cap, would see a 17-cent discount on its tax rate.

Gary Marckres, the Champlain Valley district’s chief operations officer, said the district would ultimately be worse off than it was under the current law, and the new calculations would likely leave tax rates higher than what was projected in the last couple weeks.

South Burlington, meanwhile, would receive only about a 5-cent discount under the proposed law. Under the new methodology, its $71 million budget would now generate a tax rate increase of 24.15 percent, Jarvis said.

“I feel a responsibility to the community who has live ballots out there to understand what’s happening and to understand that the just over $71 million (budget), that was once an 18.26 percent tax rate could very well not be that in a very short time,” Nichols said.

The Champlain Valley district’s board approved its $105 million budget in January and had tacked on an 18 percent school tax increase to residents in Hinesburg, Charlotte, Shelburne, St. George and Williston. South Burlington approved a $71 million budget — a 14 spending percent increase over last year — including an extra $2 million set aside in a capital reserve fund that produced the 18.26 percent tax rate increase.

Regardless of Act 127’s provisions, both districts would have seen their tax rates increase by 13 percent resulting entirely from the recent common level of appraisal figures. Simply put, the common level of appraisal compares the assessed value of properties on a town or city’s grand list to actual property sale prices considered to represent their fair market value.  

The 5 percent cap made it difficult for school districts to find tax relief with budget cuts since any spending up to a certain point would still reap the 5 percent increase, but the new methodology would allow districts to “actually get tax relief with virtually any cut that we make from the adopted budget,” Jarvis said. 

Both districts have yet to decide on whether they will postpone their budgets or how they will revise them. There is already little wiggle room in the budgets that are balancing various budgetary pressures — inflation, negotiated contracts with built-in increases, and double-digit percentage increase in health insurance and other employee benefits.

“The problem for South Burlington is that once we push past this March 5 date, we’re still having to communicate information and pass a school budget to staff our school,” Nichols said. “It benefits the district to have a passed budget on March 5, so that operationally we can staff our schools. When there isn’t a finalized budget, that impacts hiring and our ability to staff.”

The Champlain Valley district is set to hold a finance committee meeting Tuesday night, after press deadline, where it will discuss budget and tax rate figures based on the draft law and try to come up with an agreement on the best course of action for students, staff and taxpayers to “try and make some sense out of all this,” Marckres said.

The options for the district, he said, is to delay and rework the budget and start the communication cycle with constituents again. The other option is — since there’s no change in the law yet — to stay the course with the budget currently built for fiscal year 2025 and see if voters support it.

“Even with all the unknowns, both situations are challenging for various reasons,” he said.

He noted, however, that “the big unknown” in all this is the state’s yield, the number generated by the Agency of Education and approved by the Legislature, which represents the overall draw on the education fund and is how districts determine per-pupil costs. That usually isn’t set until sometime in May or the end of the legislative session.

“That’s super hard to predict, and it all depends on how many districts statewide decide, because of the potential law change, to delay and potentially reduce the budget,” he said. “That can have a big impact on the yield if you get $10 or $12 million statewide in reduction, that has a major impact on final tax rates for towns.”

Some South Burlington School Board members, during their recent meeting last week, expressed frustration with the process the Legislature is taking with this new methodology since it has yet to become law and some voters have already received absentee ballots.

“I’m just thinking a lot about the integrity of this process, which feels pretty troubling to me,” board Chair Kate Bailey said. “It’s not my practice to listen to testimony given in one House committee and then treat it as law and that’s sort of what they’re asking us to do in order to make decisions from a local budget standpoint. Never mind the integrity of just us having enough information that we can communicate with the community about making informed choices on voting day.”

The Champlain Valley and South Burlington school boards are expected to make more definite decisions at their board meetings next week on Feb. 20 and 21.