How Vermont Pays For Schools

The last 30 years, told in plain words

July 28, 2026

Vermont has changed the way it pays for schools many times. Some changes were small. A few of them changed everything.

This is the story of those changes.

It starts in the 1990s. It ends this summer.

Before 1997: every town on its own

For most of Vermont’s history, your town paid for your town’s schools.

Your town added up the value of all the land and buildings inside its borders. That total is called the grand list. Then the town set a tax rate to raise what the school needed.

That sounds fair. It was ruled not.

Think about two towns. One has a ski resort, a lake full of vacation homes, and a big store. Its grand list is huge. The other town has farms and small houses. Its grand list is small.

The rich town can set a low tax rate and still raise plenty for its schools. The poor town can set a high tax rate and still come up short.

So the family in the poor town paid more and got less. Every single year.

1997: the court says stop

In February of 1997, the Vermont Supreme Court ruled on a case called Brigham.

The court’s answer was blunt. The system at the time broke the Vermont Constitution. A child’s education should not depend on how rich her town is.

The court did not say how to fix it. It just said the old way had to go.

Lawmakers had a few months to build something new.

1997: Act 60, the first big fix

Act 60 was the answer. It was the biggest change to school funding in Vermont history, and people still argue about it.

Here is what it did.

It created a statewide property tax. Your school tax no longer stayed in your town. It went to the state, into a pot called the Education Fund. Then the state paid every district out of that one pot.

It gave every district a set amount of money for each student. Same amount, rich town or poor town.

Then came the part people remember. A district could spend more than that set amount. But the extra money went into a shared pool. Towns with big grand lists had to send some of their money into that pool. That money went out to towns with small grand lists.

People called those wealthy towns “gold towns.” People called the pool a lot of things, and most of them were not polite.

Poor districts got real money for the first time. But it made a lot of people furious, and that anger drove the next change.

2003: Act 68, the second big fix

Act 68 kept the good parts of Act 60 and got rid of the shared pool.

It set up two tax rates instead of one.

The homestead rate is for the house you live in.

The non-homestead rate is for everything else:

second homes
rentals
businesses
camps
bare land

In a lot of Vermont towns, second homes and businesses carry a big share of the school bill.

Act 68 also locked in a rule that is still the heart of the system today. Spend more, pay more.

If your district spends more per student than the state’s target, your homestead rate goes up. Spend less, and it goes down. Your rate is tied to your own district’s choices.

That is why the school budget vote in March actually matters.

Act 68 also grew a program that softens the whole thing. Most Vermont homeowners do not pay the full property tax rate on their house. They pay based on what they earn instead. The state calls this income sensitivity.

It is why your neighbor’s school tax bill can look nothing like yours on the same street.

The mid 2000s: a penalty for spending too much

Lawmakers added one more piece a few years later.

If a district spends far above the state average per student, it pays a penalty. The dollars over the line get taxed a second time.

The point was to slow down the biggest spenders.

Keep this one in mind. It gets switched off, then back on, then tightened. It comes back at the end of this story.

2015: Act 46, fewer districts

By 2015, Vermont had a strange problem. Student counts were falling fast. School districts were not.

The state had over 270 school districts. Some ran a single small school. A few ran no school at all.

Act 46 pushed towns to merge their districts together. Merge, and the state cut your tax rate for a few years as a reward. Wait too long, and the State Board of Education could put you in a merger anyway.

Vermont went from over 270 districts down to about 119.

It also left scars. Some towns fought it hard, sued, and lost. When people in Vermont hear the word “merger” today, that is what many of them are remembering.

Act 46 changed one more thing, quietly.

Before, the state named a dollar amount that each district got per student. Act 46 flipped it. Now the state names a number called the yield.

The yield is how much a district can spend per student at a one dollar tax rate.

Piece 2 walks through the math. The short version is that it is the same “spend more, pay more” idea, said backwards. And it is still how your rate gets set today.

2018: Act 173, special education money

For a long time, the state paid districts back for what they spent on special education. Spend a dollar, get about sixty cents back.

That had a strange side effect. It rewarded a district for labeling a child, because the label unlocked the money.

Act 173 changed the deal. Now the state hands each district one lump of money for special education. The size of that lump is based on the district’s size and its student need. Not on its receipts.

The idea was to let districts help struggling kids earlier, without the paperwork. The change took full effect in 2021.

2022: Act 127, counting students a new way

Some students cost more to teach. That is not an opinion. It is arithmetic.

A student learning English needs more help. So does a student from a family in poverty. A tiny school in a remote town cannot spread its costs across many kids. High school costs more than elementary school.

Vermont’s old system knew this, but its numbers were old and rough. A study said so plainly.

Act 127 fixed the numbers. It counts a student who costs more as more than one student.

So a district might have 500 kids in seats and count as 700 for funding. That makes its cost per student look lower. A lower cost per student means a lower tax rate.

For districts with high need, this was a real break. For districts with low need, it was a real hit.

Act 127 also switched off that spending penalty from the mid 2000s. It was supposed to stay off through 2029.

It did not last that long.

2024: the year the bills jumped

Then came a very bad year.

The Joint Fiscal Office estimated the increase at about 13.8 percent. And it was not only homeowners. The JFO put the same rough increase on income based bills and on non-homestead bills too. Second homes, rentals, and businesses all got hit.

Lawmakers passed a bill to deal with it. That bill did four things worth knowing.

It bumped the property tax credit. Every person who claims the credit got a one time increase of 13 percent for that year. That cost the Education Fund about $20.6 million.
It found new money. Vermont had not been charging sales tax on cloud software, the kind a business rents by the month instead of buying in a box. The bill ended that break. It also put a 3 percent surcharge on short term rentals, the vacation rental kind. Both send their money to schools. Together, about $26 million in the first year.
It turned the spending penalty back on. Remember, Act 127 had shut it off until 2029. This bill brought it back starting in 2026, set at 118 percent of the state average per student.
And it started a study. The bill created a group called the Commission on the Future of Public Education in Vermont. Thirteen people, a year and a half of work, one job. Figure out what Vermont’s school system should look like.

That last one turned out to matter most.

2025: Act 73, a whole new formula

The Commission reported. Lawmakers acted. In 2025, they voted to throw out the yield system entirely.

The replacement is called a foundation formula. Most other states already use one.

Here is the idea. The state decides what it actually costs to educate one student for one year. Call that the base amount. Every district gets that amount for each student, plus extra for the students who cost more.

That is a real change. Under the yield system, your district decides what to spend and your tax rate follows. Under a foundation formula, the state decides what a good education costs and funds that.

Act 73 also said Vermont still has too many school districts. It also started the work of redrawing the map.

2026: Act 170, back to the map

The summer of 2026, Act 170 became law.

It does not merge anybody. It does not change your tax bill. Not yet.

What it does is put every district in Vermont through a study with its neighbors. Should we become one district? What would it cost? What would it save? Voters answer on Town Meeting Day in March of 2028.

Act 170 also pushed the foundation formula back again, to the 2029 to 2030 school year.

Piece 3 covers what all of that means for your town, and when.

What has not changed in 30 years

Three things have held steady since 1997.

The money is pooled at the state level, and every district drinks from the same well.
Your rate still depends on what your district chooses to spend.
And the property tax still carries most of the load.

Everything else has been rearranged, renamed, and rearranged again.

Why any of this matters

For 30 years, Vermont has answered the same question over and over. How do you fund every child fairly when some towns are rich and some are not?

Act 60 answered it one way. Act 68 answered it another. The foundation formula is the next answer.

But 2028 is different from all of them. In 2028 the question comes to your town, on your ballot, with your name on the check.

The towns that come out of this in good shape will be the ones that understood their own numbers before the vote. Not after.

Where these numbers come from

The 13.8 percent figure, the 13 percent credit bump, the $20.6 million cost, the new taxes, and the 118 percent spending threshold all come from the Joint Fiscal Office fiscal note on H.887, dated May 10, 2024: https://ljfo.vermont.gov/assets/Publications/2023-2024-As-Passed-the-General-Assembly/2288824ad5/GENERAL-376316-v4-Yield_Bill_FN_AsPassedGA.pdf