Vt. Lawmakers Include New State Property Tax in Finance Plan

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Vermont lawmakers approved a major school-finance-reform plan in the final days of their legislative session, achieving a goal that has eluded state leaders for decades.

The restructuring of the funding system comes just four months after the state supreme court found the present system unconstitutional and ordered the legislature to fix it.

Passed June 13, the legislators' plan calls for creation of a new statewide property tax earmarked for schools and designed to remedy funding inequities among districts.

The $58 million bill, which was awaiting Gov. Howard Dean's signature late last week, would abolish the current funding system, which relies on local property taxes to pay 70 percent of local education costs. Instead, property-owners would pay a flat-rate property tax to the state, and other statewide taxes would increase slightly. Local property taxes, relatedly, would be done away with.

In addition, the bill would order the state education department and board of education to improve school quality. By January 1998, the bill calls for education officials to draft a strategic-improvement plan every five years and a comprehensive system of early-childhood services, and to evaluate funding for special education.

State education department employees are analyzing the legislation and reviewing the additional tasks it spells out for the department.

"Although this work looks daunting, it is very important," said state education commissioner Marc Hull in a statement. "Vermont's students and its education system will be well served by the work we do over the next six months."

Mr. Dean, a Democrat, plans to sign the bill into law this week after state lawyers review its language, his press secretary, Stephanie Carter, said last week.

"It is a historic bill," the governor told reporters shortly after the House and Senate passed the measure. "It clearly accomplishes what the supreme court ordered us to do, which is provide equity."

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In February, the state supreme court declared Vermont's education funding system unconstitutional, saying that the system's dependence on local property taxes caused large funding disparities between wealthy school districts near Vermont's ski resorts and those in poor, rural areas. ("Court Orders Lawmakers To Fix Vermont School-Funding Formula," Feb. 12, 1997.)

Nationwide, more than a dozen state systems of financing schools have been declared unconstitutional since 1989. ("Finance Battles Show Solutions Remain Elusive," June 11, 1997.) However, no state has taken such broad steps in such a short amount of time as Vermont, Ms. Carter said.

As passed, the tax package would total $58 million for fiscal 1998, most of it coming from the new statewide property tax. But no household could be forced to spend more than 2 percent of its annual income on the statewide tax.

Under the plan, the state would pay $5,000 toward the elementary and secondary education of each child in Vermont. Towns could choose to increase that amount by levying a new local property tax, but that money would also be channeled to and distributed by the state using an equalization formula.

The statewide tax rate would be uniform for all property owners, in contrast to the wide variance of property-tax rates that towns now impose. Taxes on gas, restaurant meals, and hotels would also rise slightly.

Vermont has tried to reform its property-tax rate in past years, but state legislators found little to agree on.

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