Commentary: Education Spending’s Wild Ride

by John McClaughry

Last week’s Vermont Education Funding System report from the Vermont Realtors Association paints a startling picture of the financing of Vermont elementary and secondary education.

Here are just a few eye-opening findings in the 40-page report, prepared by Dr. Art Woolf and Dick Heaps of Northern Economic Consulting:

  • From 1997 to 2012, student enrollments fell by about 15,000 students, about 1,000 students per year.
  • Vermont’s per pupil spending in school year 2010-11 was 51% higher than the national average. Updated NEA data estimate that Vermont’s per pupil spending was 71% above the national average in school year 2011-12.
  • Using nominal dollars, Vermont median family income rose by about 25% between 2000 and 2011, nearly identical to the rise in prices in general. Vermont’s education spending per pupil rose by 80% over the same time period.
  • Vermont ranks among the top five [of the 50 states] in per pupil spending, depending on the year and data source chosen. According to Census Bureau data for school year 2010-11, Vermont’s per pupil spending of nearly $16,000 was higher than every state except New York, Alaska, and New Jersey. The NEA puts Vermont’s school year 2011-12 per pupil spending at $18,571, higher than every state but New York.
  • By the mid- 2000s, Vermont’s student/teacher ratio had [fallen] to 30% below the national average. Over the past 15 years total staffing levels have increased by 17% despite a 16% decline in the number of students. There is little or no discernible evidence that this has any large effect on student performance.
  • A 30% reduction in per pupil spending would free up nearly $500 million in tax revenues and still leave Vermont with the 15th highest per pupil spending level in the nation.
  • In prior years the state [legislature] raised both the homestead and non-homestead tax rates as well as the tax rate on household income by roughly the same proportion. [Last spring] for FY14, the legislature voted to raise the homestead and non-homestead tax rates by five cents and six cents, respectively, but left the tax rate on household income unchanged. This meant essentially no change in taxes for sensitized homeowners if their incomes did not change.
  • But this was not true for non-sensitized homeowners or the owners of non-residential property, such as businesses and vacation home owners. [This] removed the burden of the tax increase [from] the very local voters who approved the tax increase.
  • These two characteristics, complexity and subsidies to residents, have “created a system that produces high levels of spending, and ultimately, high levels of taxation. There is nothing built into the structure of the current education financing system to slow this process.”

The Report clearly shows that the bloated public educational system is employing ever more people to deal with ever fewer students; that the excessive spending does not produce notably better educational outcomes; and that Vermont taxpayers are on an increasingly wild ride in a car with inadequate brakes.

The Report cautiously suggests that the state might have to “impose greater discipline on local spending decisions”, and require school districts to replace highly paid senior teachers with lower-paid junior teachers. Both of these steps would require “new mechanisms …developed with leadership from the governor’s office” (i.e., tougher state mandated fiscal controls over public schools.)

Another contentious change would be for State to “require [each] school district to meet a target for its student-teacher ratio, or withhold state funds for the proportionate spending above that level.”

The Report also recommends Act 68 formula changes to reduce to below the present over-60% those eligible for “income sensitivity” (which immunizes them against rising school property tax rates.) It suggests making more towns liable for the excess spending tax (on budgets over $14,841 per pupil – only six districts are currently subject to this penalty.)

Increasing the household income tax level (say, to 2% of incomes) and lowering the excess spending threshold are two less heavy-fisted ways of slowing down the wild ride. But is there a better answer than expanding state controls to push Vermont down the road to “One Big School System”?

Yes, but it would be highly disruptive, threatening to the teachers’ union, and therefore politically dangerous: install full parental choice and competition among a diverse array of public schools, independent schools, and other emerging educational providers.

– John McClaughry is vice president of the Ethan Allen Institute 

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