— By Nina Sablan

Norwich, VT 2/27/24

For all the recent news about the changing education funding landscape in Vermont, one feature for some towns in the state remains constant: Thanks to their demographic makeup, they’re looking at steeper increases in education property tax rates than other towns.

The issue is rooted in Act 127, the 2022 law that went into effect this year. It’s purpose is to create greater equity among school districts by adjusting tax rates to reflect how much funding schools need to support their students—taking into account barriers like poverty, English as a second language, and the extent of an area’s rural character. Ironically, in towns that already have high property values and well-off populations, the result may narrow who can afford to live there in the future and could lead to even less diversity.

Perhaps the most dramatically affected town in the state under this law is Norwich—though Thetford, Hartford, Hartland, Strafford, and Sharon will also take a hit to their “tax capacity,” meaning that they’ll either get less from the state education fund for a given tax rate, or will have to boost taxes in order to get what they received last year.

In Norwich’s case, it comes down to a lack of diversity in the town’s school district, says Josh Stearns, a Hanover High student on the Dresden School Board. “Norwich effectively has become a gated community without the gate,” he says. He’s lived in Norwich for 13 years, and says that “these tax increases will, in the long run, make it harder for people of lower socioeconomic status to move into Norwich.” In other words, rising homestead property tax rates might bar or push out the demographic the town needs if it wants to lower its taxes and create a more inclusive community.

This is because Act 127 changes how students are counted. Vermont doesn’t just count students one for one. As the legislature’s Joint Fiscal Office explained it last year, “Since the demographics of a student body can vary significantly from one school district to the next, so too can the costs to provide education. To account for these differing costs, Vermont integrates pupil weights into the education funding formula. The pupil weights adjust school districts’ student counts according to the particular needs or circumstances of its student body.”

To a large extent, the tax rate equation has always worked this way. So why are taxes rising so dramatically? In 2019, a Vermont Pupil Weighting Study Link found that the weighting factors used for decades weren’t scientifically backed by how much it costs to educate students. Act 127 enacted the proposals from the weighting study to reassess weighted pupil counts in each town.

The pupil count boosts the weight given to those who live in poverty, are from rural areas, or are English language learners. Those weights then factor into the state’s formula for determining how much money school districts will gain from the education fund. The result of the weighting changes Act 127 made favors towns in the Northeast Kingdom and in places like Winooski, with highly diverse student populations. Under the new weighting system, on the other hand, Norwich’s share of weighted pupils statewide dropped 19 percent. Thetford’s fell 16 percent, Hartford’s 6 percent, Hartland’s 5 percent, and so on. You can see those numbers in the VTDigger map and chart here.

At heart, legislators are funneling resources to schools facing poverty and other disadvantages so that they can better support their students. Some 39 percent of Vermont’s school districts saw their share of weighted pupils drop, whereas 61 percent saw the opposite and will have more revenue under the same tax rate. In a January letter to the General Assembly, lawmakers wrote that “Act 127 was intended to create greater equity between districts - to narrow the range between the haves and the have-nots.”

Though final school budgets haven’t been set—H.850, which was signed into law Feb. 22 by Gov. Phil Scott, gives school districts extra time—there’s no question that Norwich, at least, is looking at a significant homestead property tax jump in order to fund public education there. Originally, Act 127 capped tax increases at 5 percent per year, but the legislature recently changed that after budgets coming in from towns across the state, coupled with various costs imposed by the state, forced significant tax increases across the board. Instead, H.850 targets a discount—one cent off on the homestead tax rate for every point a town’s weighted pupil share dropped, phased out over time—to towns like Norwich. Even with that, says Norwich school board member Neil Odell, who’s also past18 president of the Vermont School Boards Association, the town is likely to see a tax rate increase of 18 percent in the next fiscal year.

This has been exacerbated by what’s known as the Common Level of Appraisal (CLA) for a town, which depends on how much houses are selling for and factors into Vermont’s school funding formula. The smaller the CLA, the more the town must pay in taxes, and many towns around Vermont have seen a decrease as housing values have skyrocketed and townwide reappraisals haven’t kept up. For Norwich it has shrunk from 74 percent to 68 percent, and in Hartford the number has fallen to 66 percent.

In the end, Odell says, there are two ways to counter the upcoming tax increases. The school budget could shrink, or the number of equalized pupils could increase.

H.850 creates a direct correlation between a district’s school budget and its school taxes. Instead of being able to spend as much as they want without feeling the consequences, school districts will now have to lower their budgets to soften the blow of Act 127.

Even so, budget cutting is unlikely to achieve much for Norwich. Before the new legislation passed, Norwich’s school board ran an exercise to show how much they’d need to cut from the budget to avoid any tax increase and found they would have to shed close to $3.6 million. “We would have had to have gotten rid of all of the teachers, textbooks, and school supplies,” Odell said at the time. “Which obviously wasn’t something we could do.” Even with H.850’s tax discount, he argues, “pick a percentage [tax] increase number that you think is reasonable. Say it’s around 10 percent. We’re still talking almost a million dollars that would have to be cut from the Norwich budget to get there.”

Beyond budget cuts, the other option to combat the increase created by Act 127 would be to boost the count of weighted pupils by building affordable housing. This would be a long-term solution, however. In the short term, “we’re a little bit stuck,” Odell says.

Norwich taxpayers have shown loose support for affordable housing, but don't seem to realize how vital it is. Jeff Lubell, who chairs the planning commission’s Affordable Housing Subcommittee but stressed that he was speaking as a private citizen, says, “People are not demanding affordable housing, but if they knew that their taxes will go up a lot if there isn't affordable housing then we might have a stronger imperative to find a solution.”

He adds, “People should pay attention to this, whether or not they’re interested in affordable housing, because [Act 127] is going to affect every taxpayer in Norwich and it's going to be a significant change to their tax bill.”

Low-income housing is an urgent need, Lubell argues, and not just for the sake of taxes. “There’s no way the kids of existing residents can afford to live here, at least until they make a fortune and come back,” he says. “And for seniors who want to stay in the community, there are very few options.” The Affordable Housing Subcommittee is trying to find a solution. Their strategy, approved in 2019, recognizes that “climbing housing costs threaten families’ ability to remain in Norwich and keep others out of Norwich altogether.” However, their efforts have been thwarted by high costs of land for construction and the fact that the town has no public wastewater system.

Summarizing the issue, Lubell says “There are a lot of variables here but the bottom line is that it's expensive to build housing, and there’s a lot that the public can do to help.”