Appropriately, in the wake of a larger than normal number of school budget defeats this year, there is much debate not only about how much Vermont is spending on K-12 education, but how that money is raised and spent. It is very important to examine our funding formula and delivery system, but none of us should fall into the trap of thinking there is a quick fix to this problem. We cannot, for example, just continue to put more and more money into the system; we need to instead focus on value for our dollars and great educational outcomes for our kids. You don’t have to be Tax Commissioner to realize the problem with pursing a path of "don’t tax you, don’t tax me, tax that fellow behind the tree." There is no one else behind the trees to foot our education expenses, and Vermont already is one of the highest spending states in the country.
Some cite the fact that proportionally more of our school funding is now coming from property taxes than from other sources as evidence of state-level policy makers’ failure to take responsibility for education funding. But that view is simplistic and misleading. In fact, spending has increased at a faster rate than any increases in broad based taxes, which means that proportionally more of the burden rests on the property tax now than in some years prior.
Contrary to what some would have us believe, Governor Shumlin and the Legislature have fully funded the statutorily-required State contributions to the Education Fund for several years in a row. In addition, they have actually bolstered non-property tax funding by increasing the percentage of the sales tax that automatically goes to the Education Fund and devoted 50 percent of last year’s General Fund surplus to the Education Fund.
Leaving aside federal funds, fully 20 percent of what Vermont itself spends on education comes from a direct transfer of general revenues, rather than from property taxes. The State also dedicates a set portion of three other State revenue sources to education spending: sales and use; vehicle purchase and use; and of course, the Vermont State Lottery.
This represents a major commitment of general revenues to the education of our children. This is the second largest state expenditure behind human services. While these revenues have grown each year, they have not grown at a rate that would underwrite the increases in education spending that we have seen in the past decade. Our Education Funding system, sometimes referred to as Act 60/68, was designed so that spending increases over general revenues are spread across three types of taxpayers: homeowners who qualify to pay education taxes as a percentage of income; homeowners who pay on property value; and owners of non-residential property (businesses, second homes, camps, and the like.)
Perhaps the greatest confusion in this budget year has focused on how the rates for homeowners are set. The question many have asked is: How come my town’s property tax rate is going up higher than my school’s budget?
The key to the local rate adjustment is how much voters in each district choose to spend per pupil. It is simply impossible to compare how a district is spending state education dollars except relative to how many of the state’s students it is serving. Although this adds complexity, the concept is simple -- I can’t meaningfully compare my grocery bill to last year’s, or to yours, without considering how many family members I am feeding.
The result is that in towns with declining enrollments, maintaining a level-funded budget will increase your tax rate. Inversely, districts with rising enrollments are rewarded with lower tax rates to support the same level of spending, reflecting economies of scale.
We understand that financial pressures leave local school boards with tough choices. Eighty percent of the funds spent on public education pay for staff salaries and benefits. Yet reducing staff is hard, even though enrollments have declined for years. Total staffing was 17,400 in SY 2001-02, peaked at 18,765 in school year 2009-10 and has been at about 18,400 for the past four years. Other costs, such as health care and other overhead items, often rise despite best efforts of local boards. Hard choices are inevitable in this environment.
The bottom line is that we need to ask ourselves how we can achieve the best outcomes for our children at an efficient cost. By any measure, Vermont expends a great deal of revenue on the education of its children -- both general revenues and money raised from property owners. This money comes from the pockets of Vermonters one way or another. We are all in this together, and local and state officials must collaborate to address the issues that this year’s voters have squarely presented to us. It is only fitting and appropriate that the Legislature is now considering refinements to the funding formula and to the delivery system, to be sure that the way we raise and spend money on schools is fair and sustainable.
Mary Peterson is the Commissioner of Taxes.