A Chink in the Armor: Update on Vermont's Act 60 -- Rural Policy Matters, Volume 4, Number 7 (July 2002)

The Vermont Legislature's recently completed session included a miscellaneous tax provision that takes a small, though significant, bite out of Act 60's equity promise.

When Act 60 was passed in 1997, the main components required all districts, whether property-wealthy or property-poor, to tax at the same rate to raise the same amount of money. Wealthy communities had to raise taxes to be comparable to all other Vermont towns. Since their actual tax revenues generated more than they needed, the extra money was put into an Education Fund to supplement low yields in poor districts, allowing them to begin to invest more in local schools.

There were loopholes in the original bill. First, to ease the tax pain of wealthy communities, the initial legislation included a 4-year phase in period. Second, towns could raise money privately and keep some expenses "off the books." This second loophole has been used extensively by wealthy communities that raise millions and avoid the so-called sharing provisions. Essentially they have been able to keep taxes down by appealing to out-of-town second homeowners with no stake in local schools.

This year, a third chink in the equity appeared. The Legislature approved a capital construction "special deal" that allows districts to fund building projects off the Act 60 formula. Thus funding these projects comes from their own property-wealth base and not through the equalized yield used for all the rest of education costs.

This provision will allow property-wealthy communities to do capital construction at a much lower rate than poor communities. The other result is that millions of dollars may be diverted from the Education Fund. At this time, the Fund is flush and is experiencing a significant surplus, so the diversion of money is not a problem -- yet.

Adopting this "special deal", however, does establish a very dangerous precedent. It was passed to appease politicians representing these wealthy districts. The political pressure to radically change Act 60 was enormous, and though proposals for more fundamental revisions were unsuccessful, this does represent a perilous retreat from Act 60 equity.

In Vermont, where most communities are rural, political divisiveness is rarely rural versus suburban/urban, but rather wealthy versus poor towns. With changes to Act 60, those communities with higher numbers of second homeowners and fortuitous mountains (ski areas) can and will benefit. The poorest rural areas will once again be disadvantaged.

Though this chink in the equity armor is small, it threatens to expand and it underscores the necessity for advocates to remain ever vigilant in the quest for equity.

Time will tell. This provision is slated to "sunset" in 5 years. Past history, however, indicates that it often is a very prolonged sunset.