Gov. Phil Scott on Tuesday signed a landmark education reform bill into law, laying the groundwork for a historic transformation of Vermont’s public education system.

“While this session was long and difficult and uncomfortable for some, we were able to come together and chart a path towards a system that better serves our kids and one that taxpayers can afford,” Scott said, surrounded by top legislative leaders and other dignitaries, before signing the bill.

He noted, however, that the legislation was “just the beginning,” and work to continue public education reform in future legislative sessions “will be just as difficult and just as important as what we did this spring.”

The signing marks a significant political milestone for the Republican governor, now in his fifth term, who used electoral gains in the state’s Republican Party in November to set the tone for education reform. While the ambitious plan that Education Secretary Zoie Saunders set before lawmakers in January was not adopted wholecloth, what came to Scott’s desk contained similar elements.

Over months of contentious debate this session inside committee rooms and both chambers, Scott put pressure on the Legislature’s Democratic leaders to press on with reforms he wanted, even through deep disagreement within their own caucus.

But lawmakers at the signing lauded what they called a bipartisan achievement. 

Senate President Pro Tempore Phil Baruth, D/P-Chittenden Central, said the legislation that emerged “was a substantially bipartisan bill.” House Speaker Jill Krowinski, D-Burlington, called it the “most significant education transformation” in decades. And Rep. Peter Conlon, D-Cornwall, said the bill will “ensure that every Vermont student will have access to high quality public education regardless of where they live.”

The law comes as the state’s public education system faces declining enrollment. The bill states that over the last three decades, the number of students being educated in the public school system has dropped by almost a quarter, from around 110,000 students to approximately 84,000 students. 

“Many schools have lost a significant number of students and, with them, the ability to offer robust services and programs at every school,” the bill’s preamble reads. “Vermont’s youth need to be prepared for a rapidly evolving future.”

Lawmakers went into overtime to get a bill passed this session at Scott’s insistence, working weeks past the Legislature’s typical end date to get the bill over the finish line. The governor went so far as to tell lawmakers that if they adjourned without a major overhaul bill, he would use his emergency power to call them back into session.

Votes in the Senate and House were far from unanimous. Most of the Senate’s Democratic caucus members voted against its passing. The bill then passed the House via a controversial voice vote.

Broadly, the new law tries to achieve two goals: equalize educational opportunities across the state, and, over time, make public education more affordable for taxpayers.

Supporters of the legislation have said the law’s changes will slow the rise of education costs and stabilize property tax increases, which were exacerbated in 2024 by changes to the current education finance system and the transition mechanism for them that the Legislature put in place.

But, as the governor noted, the wide-ranging reforms laid out in the bill are far from guaranteed, and the work is hardly over.

“There’s so much work to do that I can’t even see the finish line,” Senate Minority Leader Scott Beck, R-Caledonia, said at the signing ceremony on Tuesday.

The law contains several caveats and contingencies, and will require years of work by state agencies — particularly the Agency of Education and the Department of Taxes — and various advisory committees and working groups before the transition is complete.

Specifically, several dominos need to fall before the Legislature can enact a new education funding formula, which itself will be phased in over a five-year period and, like many of the biggest reforms, would not begin to go into effect until 2028 or beyond.

However, right away, the law puts limits on Vermont’s longstanding practice of public school districts paying tuition to send students to private schools (called independent schools in Vermont law). Starting July 1, out-of-state private schools will no longer be eligible to receive public tuition for new students. Public schools in other states will remain an option.

Private schools located in the state will have to meet two tests to maintain their participation. First, they must be physically located in a school district or in a supervisory union — an administrative unit made up of multiple districts — where at least one district does not operate a public school for some or all grades as of last July.

Second, they will need to have at least 25% of the student body composed of students funded by a public school district during the 2023-24 school year.

A spokesperson for the Agency of Education said the state is working to validate enrollment data for these schools, and has set a July 28 deadline for independent schools to certify their enrollment.

“Once we have those numbers validated, we will have a clearer picture of how many schools will no longer be eligible to receive public tuition,” said Lindsey Hodges, an agency spokesperson.

A transition written into the law requires public school districts to continue paying for current students, or students who have already been accepted through graduation.

Now, the next step for a select group of lawmakers is to craft the proposed boundaries of new, larger school districts. Their colleagues must then approve a proposal next year, sure to be a contentious undertaking.

“At the end of the day, we will have another vote next year to continue this effort, so people will have a chance to speak with their representatives, and the entire process will begin over again,” Baruth said Tuesday.

If lawmakers cannot come to an agreement on those maps, the rest of the law’s provisions likely won’t see the light of day.

Here’s what will happen next now that Scott has signed H.454 into law.

Redistricting

The next step for lawmakers is to adopt a new configuration of school districts by consolidating the state’s 119 school districts — contained within the 52 supervisory districts or supervisory unions.

The School District Redistricting Task Force, expected to meet “on or before” Aug. 1 this year, will work on “not more than three” options for new school district boundaries, according to the law.

The task force will have 11 members, including six lawmakers and five former superintendents and school business managers, according to the law. To compose the six lawmakers, three will be nominated by the leadership of each chamber and cannot all be from the same party nor same school district. Of the five others, two each will be nominated by leaders of the Senate and the House, with one nominated by the governor.

The group is expected to bring back plans with anywhere from 10 to 25 future districts. At least one of those options will incorporate the supervisory unions and supervisory district structure, which advocates believe are required to allow for the continuation of historic tuitioning relationships between certain independent schools and specific geographic areas without an operating public school for at least some grades.

These new larger districts would oversee a minimum of 4,000 prekindergarten through grade 12 students, but no more than 8,000 students “to the extent practical,” according to the law.

That directive is likely to bring major upheaval to Vermont’s public schools. Currently, only the Champlain Valley School District in Chittenden County has more than 4,000 students, with other larger districts, like Burlington and Essex-Westford in Chittenden County, hovering around 3,500 students.

The new law mandates that the task force “work closely” with the Commission on the Future of Public Education in Vermont, created as part of 2024’s Act 183 to study Vermont’s public education system.

The commission is tasked with conducting public outreach sessions, and making recommendations to the Legislature about what roles and powers should remain at the local school district level versus what should be moved up to the state level.

But that commission has floundered since January, when Scott and Saunders released their education proposal. And last week, two members of the commission resigned, saying in emails to colleagues that the commission was “never fully embraced” by the Legislature.

The commission will submit its final report in December, and will then dissolve by the end of the year.

The redistricting task force, meanwhile, is expected to finalize and deliver new school district maps to the Legislature by Dec. 1. Lawmakers will then take up the new maps for consideration during next year’s session, which begins in January.

Because of the time needed to create representative voting districts for school boards within the new districts, their boundaries would need to be approved and signed into law before the end of the year for the rest of the timeline to remain viable.

Class size minimums

Under the law, at least 10 students per classroom would be required in first grade, 12 students in grades 2 through 5, 15 in grades 6 through 8; and 18 students for grades 9 through 12. These class size minimums would take effect in July 2026 for the 2026-27 school year and would apply to both public schools and private schools that receive tuition from public school districts.

Some classes and programs would be exempt from those requirements, including prekindergarten and kindergarten, as well as Advanced Placement courses and career and technical education programs, according to the law.

The law allows the State Board of Education to close a school that doesn’t meet these minimums after three years, but the board isn’t required to do that, and the bill allows for a waiver process that would let schools petition for an exemption.

The law does anticipate that small rural schools will continue to exist and reserves some support for them. By Dec. 1, the State Board of Education, per the law, will submit a written report to the House and Senate Committees on Education with proposed standards for schools to be deemed “small by necessity” or “sparse by necessity.”

Districts with schools meeting those definitions would be eligible for additional support funds.

New school board elections

While the redistricting task force begins its work, the School District Voting Ward Working Group, set to first meet by Oct. 1, will keep an eye on its progress. The law requires the group to consult with the task force by Oct. 15.

That working group will begin creating voting wards for the new districts as soon as possible, depending on what’s been accomplished.

Chaired by the secretary of state, the group, like the redistricting task force, will make recommendations to the Legislature for how to draw voting districts within each new school district “that are compact, contiguous, and drawn to achieve substantially equal weighting of votes” while meeting other state and federal requirements.

The group will recommend to the Legislature the “optimal” number of members on each new board, as well as the boundaries for voting wards within each new school district.

The first school board elections for the new districts are expected to take place in a special election in November 2027, according to the law. The new school districts, with their new board members, would then take over operating schools in July 2028 for the 2028-29 school year.

The law provides staffing and resources to the Agency of Education and State Board of Education to help guide current school districts as they transition their operations to the newly formed districts. That will involve a myriad of legal and administrative tasks, ranging from a new district adopting shared rules and procedures to taking over a former district’s debt obligations.

Prior to the transfer of school operations, the law will also attempt to address one of the more significant expenses affecting local school districts: aging school infrastructure and its cost to repair or replace.

The law creates the State Aid for School Construction Advisory Board, expected to meet in September of this year, to advise the Agency of Education and both current and new school districts on state financial assistance with construction.

That board would work to develop rules for accessing the School Construction Aid Special Fund, which the Agency of Education will administer once the fund is created on July 1, 2026. That fall, the law anticipates that the agency’s budget request will include the fund’s expected spending.

Education finance

One of the more contentious issues the bill hopes to address is how to allocate funding for public education in the state.

The new law has the state gradually pivoting away from its current funding mechanism — which allows school districts wide latitude in determining how much to spend or not spend — toward a so-called foundation formula, a construct used in most states across the country. A foundation formula will provide each school district with the same amount per student, weighted to account for the increased costs of educating certain students, such as English learners and students with disabilities.

Effectively, while school district governing boards would likely still set a budget, the foundation formula would largely give the state control over the size of that budget, and how much the district spends on each type of student.

Full implementation of the new funding formula, however, will not occur for some time. If new school districts are adopted and specific studies completed, the foundation formula would go online July 1, 2028, and would be phased in over a five-year period.

Local districts could raise additional funds from local property taxpayers with voter approval. But that spending, termed supplemental spending, would start out capped at just 10%, though districts can spend less. That cap would be ratcheted down every year until the cap hits 5%.

The first opportunity voters would have to weigh in on that supplemental spending would be in March 2028.

Phase in

Under the law’s timeline, the commissioner of taxes would call the first meeting of the Education Fund Advisory Committee in July 2026 to assist in the “transformation” of Vermont’s education finance system. Recommendations on specifics related to the mechanics would then be due in December of that year.

The Legislature’s Joint Fiscal Office would have already found one or more contractors with “expertise in Vermont’s education funding system” to study a number of portions of the new formula and submit a report due in December 2026.

During this phase-in period, the Vermont Department of Taxes is tasked with leading a shift in the state’s mechanism for income-sensitive property tax relief, moving from one based on tax credits to a tax exemption.

The new framework allows Vermonters making $115,000 or less to exempt a portion of the value of their homestead, which is a dwelling occupied year round and up to two surrounding acres, from property taxes. 

The exemption creates a sliding scale, with lower-income homeowners eligible for bigger exemptions. Up to $425,000 in home value is eligible for the discount. The law suggests there will be a mechanism for the income threshold and property value threshold to be increased in the future to account for inflation, requiring reports from the department on how to do it.

By Dec. 15, 2026, the tax department, in consultation with the Joint Fiscal Office, will submit a proposal to legislative committees in both chambers on how to design a homestead exemption structure that minimizes the property tax impacts for homestead property owners and avoids a sudden dropoff in eligibility often called “benefit cliffs.”

By the same time the following year, Dec. 15, 2027, the department, in consultation with the Joint Fiscal Office and the Agency of Education, will report to House and Senate lawmakers on an implementation plan “to ensure that education property tax rates do not increase as part of the transition.”

Separate rate for second homes

Perhaps the most uncertain portion of the law is a proposal to rework how second homes are taxed in the state.

The law creates two new categories of property for taxation purposes. One is called “non-homestead residential” property. Lawmakers hope to use this new classification to raise taxes on second homes, which would potentially cover the cost of the homestead exemptions or otherwise alleviate property tax pressure on Vermont resident homeowners. Another new category of “nonhomestead nonresidential” would apply to other properties.

The tax department is tasked with reporting by Dec. 15 of this year on how the new property tax classifications would be implemented. In 2027, the department would need to develop a form that allows property owners to report how their property fits into the classifications. 

However, the new classifications would also be repealed if the Legislature has not approved a new school district map by Jan. 1, 2027. Another deadline is July 1, 2028. By then, lawmakers need to have assigned different tax rate multipliers to the new categories of property or they also go away. 

This story was republished with permission from VtDigger, which offers its reporting at no cost to local news organizations through its Community News Sharing Project. To support this work, please visit vtdigger.org/donate.