Act 60 of 1997

INTRODUCTION
   
  Act 60, also known as the Equal Educational Opportunity Act, was signed into law in June 1997. The Legislature drafted the law in response to a Vermont Supreme Court decision that said Vermont's existing educational funding system was unconstitutional. The court, in Brigham v. State of Vermont, concluded that the state must provide "substantially equal access" to education for all Vermont students, regardless of where they reside. 

This fact sheet is designed to address some of the questions frequently asked about Act 60. Although it may not answer all questions, it should serve as a starting point for understanding the state's educational funding system.
   
OVERVIEW
   
 

By design, Act 60 has been phased in over a four-year period. Its first full year of implementation is the current 2000-2001 school year.

  • Act 60 eliminates the wide variations of tax rates that were based on local grand lists. Under Act 60, tax rates are directly tied to per pupil spending. Act 60 assures that when districts spend the same amount per pupil, residents will have identical tax rates regardless of the town's property wealth.
  • All towns now have a statewide education tax rate of $1.10, regardless of whether they operate a school or have students. It is a statewide property tax rate that every property owner pays.
  • Equal access to revenues per pupil is now provided to all towns through state block grants. In 2000-2001, the state block grant per pupil is nearly $5,200. Any spending above the block grant is a local decision made by voters when considering school budgets. Local tax rates will go up according to how much the voters decide to spend above the block grant. The per-pupil spending gap between towns has closed by 20 percent under Act 60.
  • Under Act 60, the state's share of special education costs has increased, from approximately 40 percent to 60 percent. The law also created new grants to support small schools and transportation.
  • Act 60 includes provisions that will ensure overall educational quality in Vermont schools. These include:

a. 

  adoption of rigorous statewide and local academic standards;
     

b. 

  state and local assessments based on standards;
     

c. 

  early literacy programs;
     

d. 

  school action plans based on assessment results;
     

e. 

  reporting educational results to communities;
     

f. 

  needs-based professional development;
     

g. 

  staff evaluation;
     

h. 

  access to technical education;
     

i. 

  compliance with the School Quality Standards on conditions, practices and resources of schools;
     

j. 

  technical assistance to low-performance schools based on assessment results.
   
THE BALANCE SHEET
   
  Where the money comes from:
The Education Fund will receive $922 million for the current school year from a variety of sources, the largest portion coming from state and local property taxes, which raise $579 million. Act 60 redirected other tax revenues and created some new taxes to support the Education Fund. Collectively, these raise an additional $73 million. (Examples include rooms and meals, gasoline, corporations and telecommunications taxes). Revenues from the state lottery, federal Medicaid receipts and interest generate another $32 million. Finally, there is a General Fund transfer of $238 million, an amount that increases annually by an inflation factor.

Where the money goes:
Commitments to the state block grant and from the sharing pool total $756 million this year. Grants created by Act 60 (small schools grants, transportation, and capital debt aid) account for another $20 million, while $61 million will fund Special Education. Technical center programs, state-placed students and other costs account for $19 million. Add the projected $78 million taxpayers will receive in some form of income tax adjustment, and the total amount of money paid from the Education Fund this year is $934 million, $12 million more than was taken in. This deficit is offset by a $16 million surplus from the prior year.
   
INCOME SENSITIVITY
   
  Income tax adjustments were created by Act 60 to help homestead owners pay their education property taxes. It was designed to work with the pre-existing renters rebate program. The tax adjustments come either in the form of a prebate check received by eligible taxpayers 30 days prior to their first tax bill, or in the form of an adjustment when income tax returns are completed by April 15th of the following year.

Two options are available for eligible homestead owners when calculating the amount of education tax owed to the State. The first option is a percentage of household income paid as the maximum education tax, with the percentage being determined by the level of spending per pupil in the taxpayer's school district. The second method is to take a fixed deduction on the taxpayer's homestead and then calculate the tax owed on the reduced property value. The taxpayer may choose to pay the lesser of the two amounts.
   
SHARING POOL
   
  Any school district choosing to have a level of per pupil spending above the block grant enters the sharing pool. The sharing pool is the mechanism Act 60 uses to ensure all pupils in every town have equal access to education revenues. The purpose of the sharing pool is to remove the inequities caused by raising a tax dollar based on local education grand lists. In order to raise the same amount of money, towns with a strong grand list per pupil had a lower tax rate than towns with a low grand list per pupil prior to Act 60. Now, the law has essentially given every town the same tax base, equalizing the effort to raise a tax dollar. All towns with a given level of spending per pupil now have the same tax rate, regardless of the local tax base.

This is accomplished by a concept known as the equalized yield (also known as the guaranteed yield). The equalized yield is an amount of money the State guarantees each pupil, regardless of how many tax dollars can actually be raised on the local tax base. Local tax rates are directly tied to the per pupil spending level. Two neighboring towns with the same level of per pupil spending may have different education grand lists per pupil but both now have identical tax rates. The town with a strong education grand list per pupil will raise more local tax dollars than its pupils require, while the town with the weaker grand list will not raise a sufficient amount of tax dollars. The sharing pool does exactly what it implies - it "shares" the tax dollars from the town that raised more than required with the town that was unable to raise the necessary amount.

On the state level, this redistribution of local tax dollars translates into approximately 80 towns paying into the sharing pool, as they raise more tax dollars on their education grand list than their pupils require. The remaining towns (roughly 160) are unable to raise the necessary amount required for their pupils on their local tax base. The sharing pool directs money to these towns to make-up for the shortfall of local tax dollars.
   
COMPARISON OF TAX RATES TO PER PUPIL SPENDING, BEFORE AND AFTER ACT 60
   
  Education tax rates prior to Act 60 were dependent not only on the level of spending per pupil, but also on a town's grand list. Two towns spending the same amount per pupil could have widely disparate tax rates if one town had a low grand list relative to the second town.

The first graph below ("All Districts Before Act 60") shows this tax rate disparity. Levels of per pupil spending are on the bottom with tax rates on the left-hand side. It can be seen that there is little correlation between education spending and tax rates.

Act 60 addressed this tax rate inequity by tying spending per pupil directly to tax rates. All towns have a state education tax rate of $1.10, regardless of whether they operate a school or have students. It is a statewide property tax everyone pays. Most towns also have a local education tax rate to support the level of spending passed at town meeting. It is this spending level per pupil (above the state block grant of $5,200 per pupil) that is directly tied to the local tax rate. For the first time, any town spending at a certain level per pupil has the identical tax rate as any other town spending at the same level, regardless of grand list value. This can be seen on the second graph below ("All Districts After Act 60") where tax rates now show a linear pattern. Anybody can see the tax rate a given level of spending causes for any town. If a town chooses to increase the level of per pupil spending, the tax rate goes up. If a town chooses to decrease the level, the tax rate also decreases. What is new under Act 60 is that the rate of increase or decrease for a tax rate is the same for every town in the state.
   
 

All districts before Act 60

   
   
 

All districts after Act 60

Page Last Updated on February 25, 2014