Why so Complicated

The funding of public education in Vermont is complicated for two primary reasons: The Vermont Constitution and our love of local control. Vermont's constitution and Vermont Supreme Court decisions have determined how education funding must be collected and dispersed. Our love of local control determines how much should be collected and exactly how it should be spent.

The Constitution

Vermont’s Constitution’s Article 7 states:

That government is, or ought to be, instituted for the common benefit, protection, and security of the people, nation, or community . . .

Chapter II Section 68 of the Vermont Constitution state:

Laws for the encouragement of virtue and prevention of vice and immorality ought to be constantly kept in force, and duly executed; and a competent number of schools ought to be maintained in each town unless the general assembly permits other provisions for the convenient instruction of youth.

In the 1997 Brigham decision the Vermont Supreme Court considered both the “common benefits” clause and Section 68 and ruled that the existing “Foundation Formula” for funding public education was unconstitutional. The court summed up its ruling with:

Children who live in property-poor districts and children who live in property-rich districts should be afforded a substantially equal opportunity to have access to similar educational revenues.  Thus, as other state courts have done, we hold only that to fulfill its constitutional obligation the State must ensure substantial equality of educational opportunity throughout Vermont.

To understand the way taxes are calculated in Vermont it is important to read that last quote carefully. “Substantially equal opportunity to have access to similar educational revenues” says a lot. It does not say that all students should receive the same education, or even that they should each have the same opportunity for a quality education. Instead it says that everyone should have equal opportunity to access similar revenues. The revenues are what funds a district’s education budget. They come from the state’s Education Fund. Everyone must have equal opportunity to access those revenues. They may not take advantage of that opportunity. They may chose not to receive those revenues, but they must have equal access. 

What this means in terms of the education funding formula is that school districts have the freedom to determine how much of the education benefit they will receive. They vote on a budget. They pay for that opportunity with their property tax rate. Higher revenue generally requires higher tax rates. The “substantially equal opportunity” means that if two districts both want to receive the same revenues (benefit), they should pay the same tax rate. A poor district wanting to fund each student with $17,000 a year, should pay the same tax rate as a rich district that also wants to receive $17,000 a year from the education fund for each of its students. That $17,000 of educational benefit must be equally accessible no matter how property-rich or property-poor the district is. Throughout the state, a dollar of property tax rate must yield an equal amount of education funding for each student. That amount, is what has come to be called the Dollar Yield.

The rationale is similar to that referring to racial inequalities. A public lunch counter must provide equal access to coffee for people of all races. That does not mean everyone gets coffee. It does not mean that coffee is free. And it does not mean that all lunch counters must charge the same for coffee. What it does means is that the cost of the coffee and the access to the coffee must be equal regardless of race. Vermont’s educational benefit (money from the Ed Fund) must be available at the same cost (tax rate) to everyone. 

The Dollar Yield is the amount of coffee available for one dollar of tax rate. A district's tax rate is calculated by determining how much coffee they want at the price-per-cup available to everyone. If a district wants one cup (the Dollar Yield amount), they pay $1.00 in tax rate for every $100 of homestead property value. To determine the tax rate each district divides the voter-approved amount of spending for each weighted pupil by the Dollar Yield. [i] That determines how many cups of coffee each district is purchasing with their tax rate.

$TR = $PPS / $DY

Tax rate = per pupil spending / dollar yield

See this explanation of the Dollar Yield for details.

This does not mean that a dollar of tax rate in a property-poor district will result in collected taxes equal to the collected taxes from a property-rich district with an equal tax rate. The amount collected may be very different because the value of the property being taxed may be very different, however,  the funding received from the Education Fund must be the same on a per pupil basis for those two districts. A dollar of tax rate buys the same amount of coffee no matter how rich you are.

Another important concept to understand is that individual districts do not fund their own budgets. All districts vote on budgets. The state then combines all those budgets to determine how much money must be in the state’s Education Fund. To receive enough money to fill the Education Fund, the state calculates the Dollar Yield, and therefore the local property tax rates. Property taxes do not fund local budgets, they are just a way to fill the education fund. It's similar to paying for State highway maintenance. We all kick in even though the funds are used to maintain roads outside our town. Public education is a State resource, like State parks and highways. 

Local Control

Imagine what would happen if each town voted on a road maintenance budget and then let the State figure out how to fund it. That's where we are with education funding.

Each town in Vermont determines its school budget. Voters approve that budget annually. The State will collect enough taxes to fund whatever voters approve. It's not quite that simple, of course, because the federal and state government have all kinds of requirements that restrict those local decisions. A town can't vote not to provide some behavioral or mental health services or to not have schools ADA accessible or to reject the statewide negotiated health care benefit for teachers. But . . . local votes determine, to a large extent, the size of the local budget. And that determines the overall education funding need of the State and therefor the tax rate to provide that funding.

[i] After that division, the CLA comes into play. But that is not the subject of this page.