Vermont’s education funding system is one of the most unusual in the country. While every state uses a different formula to finance public education, 46 out of 50 states follow the same basic model: the state establishes a minimum funding amount per student, often through a foundation formula, and ensures that each school district receives sufficient resources to meet that baseline. Local school boards then develop budgets around those resources, and if communities choose to spend beyond the state’s allocation, local taxpayers generally finance most or all of the additional cost.
Vermont’s current financing system is largely the product of the Vermont Supreme Court’s 1997 Brigham v. State decision and the legislature’s response in Act 60. Before Brigham, schools in Vermont were funded primarily through local property taxes. Communities with higher property wealth could raise substantially more money at lower tax rates than property-poor communities, resulting in predictable disparities in per-pupil spending. The Vermont Supreme Court concluded that this violated the Education Clause of the Vermont Constitution because educational opportunity depended too heavily on local wealth. The Court held that while local governments may administer schools, the state “cannot, however, abdicate the basic responsibility for education by passing it on to local governments.”
Ensuring substantially equal educational opportunity therefore became a constitutional responsibility of the state. Importantly, Brigham requires the state to ensure equal educational opportunity, but it does not require the state to be the sole provider of education. Public responsibility for funding education is not synonymous with a government monopoly on delivering educational services. Just as competition improves quality and responsiveness in other sectors of the economy, allowing multiple educational providers to compete for students can expand options for families while preserving the state’s constitutional obligation to ensure every child has access to a quality education.
Act 60 fundamentally changed Vermont’s financing system by creating a statewide Education Fund and putting the state government in charge of redistributing education dollars among school districts. Communities still vote on their local school budgets, but unlike nearly every other state, districts first determine how much they wish to spend, and the state then raises and redistributes the revenue necessary to support those budgets, severely limiting district incentives for financial restraint.
The pooling of education revenues means communities with greater property wealth must now raise substantially more local revenue to maintain the educational programs and services their residents expect, because a significant share of their tax capacity supports the statewide Education Fund. At the same time, districts with lower property wealth can access resources beyond what their local tax base alone would support. The result is a system that has reduced disparities in available funding but weakened the connection between local decisions, local costs, and local accountability.
In the 46 states where this process works in reverse, school leaders know how much funding they will receive before building a budget. If enrollment declines or costs increase faster than available revenue, districts must make difficult decisions about staffing, facilities, and spending priorities in order to remain financially sustainable. Because Vermont’s system begins with district spending decisions rather than a predetermined funding allocation, the state’s funding formula responds to local budgets instead of guiding them. Because education costs are spread broadly across the state, districts that keep spending down do not always see relief in their local tax bills if spending keeps rising elsewhere. The statewide pooling structure can make it easier for districts to maintain higher levels of spending and keep very small or inefficient schools open because the full cost of those decisions is not always borne by the communities making them.
These incentives help explain why Vermont has maintained unusually small class sizes, high teacher and staff-to-student ratios, and comparatively large numbers of instructional support personnel despite roughly a 30 percent decline in student enrollment. During the same period, education spending has increased from approximately $840 million in 1997 (before Act 60) to more than $2.5 billion for the 2026-2027 school year, while student performance on national assessments has significantly declined.
The foundation formula proposed in Act 73 would move Vermont much closer to the funding approach used in most other states. Rather than financing whatever districts choose to spend, the state would establish a predictable base level of funding for each student ($15,033 under Act 73, plus any applicable weights according to student needs). School districts would then develop budgets around that allocation, while communities wishing to spend above the foundation amount could continue to do so with greater local financial responsibility.
The foundation formula would restore fiscal discipline by constraining spending growth and reconnecting spending decisions with their financial consequences while preserving Vermont’s constitutional commitment to educational equity. Districts would have greater incentives to align staffing with enrollment, evaluate the long-term viability of school facilities, maintain sustainable reserves, and prioritize programs that produce the strongest educational outcomes.
Pairing a foundation formula with expanded educational choice would strengthen those incentives further. When funding follows students, whether they attend a public or independent school, schools compete to attract and retain families, and schools that deliver strong academic outcomes, respond to parents, and use resources efficiently are rewarded, thus creating an environment for continuous improvement.
True educational equality has not been achieved by equalizing funding formulas. It will only be achieved when every family, regardless of income or ZIP code, has meaningful access to the educational environment that best meets the needs of their child. A system that allows funding to follow students, rather than institutions alone, empowers parents while encouraging every school to improve.
Vermont has an opportunity to move in that direction. If these reforms were also paired with full, unrestricted participation in the federal Tax Credit Scholarship Program, the state could significantly expand educational opportunity through privately funded scholarships supported by federal tax credits, without placing additional demands on Vermont taxpayers.
Last year, the Legislature declined to adopt reforms that would significantly slow education spending or reduce pressure on property taxpayers. Vermont cannot continue spending more each year while serving fewer students and producing weaker outcomes. A foundation formula, combined with expanded educational choice, offers a path toward a system that is more accountable, more sustainable, and ultimately more responsive to the students and families it exists to serve.
