Education Reform / Property Taxes
Education reform and property taxes were the defining issues of the 2026 session. Faced with continued property tax pressure, declining enrollment, and growing concerns about affordability, lawmakers revisited major portions of Act 73, the landmark education reform law enacted in 2025. The result was a high-stakes compromise that preserved many of Act 73’s long-term goals—including regionalization, a new funding formula, and system-wide restructuring—while modifying some of its most controversial provisions, particularly mandatory school district mergers.
H.955 – Education Transformation
H.955 was the Legislature’s flagship education reform bill and the culmination of a year-long debate over the future of Vermont’s education system. The legislation revisited major portions of Act 73, which had established a pathway toward a new foundation funding formula, district consolidation, and broader system restructuring. The issue dominated much of the session, with Governor Phil Scott repeatedly signaling that meaningful district consolidation was necessary to earn his support for the broader education package.
The final legislation represents a high-stakes compromise between the Governor and Legislature. Rather than mandating district mergers, H.955 creates seven Cooperative Educational Service Areas (CESAs) to coordinate regional services and requires districts to participate in state-facilitated merger study groups, while leaving any ultimate consolidation decisions to local voters. In exchange for dropping his demand for forced mergers, the Governor secured an accelerated timeline for implementation of the new education funding system and additional spending controls intended to moderate future cost growth.
The bill advances the transition to a new foundation funding formula scheduled to take effect in FY2030, continues the move toward separate tax classifications for homesteads, second homes, and nonresidential property, creates Regional Assessment Districts to standardize property appraisals, and gradually tightens excess-spending thresholds. It also establishes a new framework for statewide school construction planning and financing, including up to $50 million in annual state bonding authority, state support for certain legacy debt obligations, and incentives tied to regionalization efforts. Additional provisions incorporate Career Technical Education priorities, class-size reforms, tuition and fee guardrails, and long-term facilities planning requirements.
While H.955 resolved the immediate standoff that threatened the close of the legislative session, it leaves many of the most consequential decisions to future study committees, local votes, rulemaking, and implementation efforts over the next several years.
H.949 – Education Yield Bill
Establishes FY2027 education property tax rates and yields, including a $100 million one-time property tax buy-down that reduces the average projected increase from roughly 7% to about 3.5%. A major point of negotiation was how to use available surplus funds: Governor Scott and the Senate supported applying the full $100 million in FY2027, while the House initially favored spreading the relief over two years. The final agreement adopted the Governor/Senate approach. The debate also underscored a growing concern that Vermont has relied on significant one-time revenues to moderate property tax increases for several consecutive years, reinforcing the need for longer-term structural reforms.
S.313 – Career Technical Education
S.313 positioned Career Technical Education as a central component of Vermont’s workforce, equity, and postsecondary-readiness strategy. The bill focused on expanding access through earlier student exposure, reduced transportation and scheduling barriers, more flexible regional delivery models, and funding policies that do not discourage participation. A major practical win was language protecting CTE credits, proficiencies, and grades by requiring sending schools to honor them toward State and local graduation requirements, helping ensure students can fully participate in CTE programs without jeopardizing on-time graduation. The bill also directs additional work on governance, funding, licensing, career navigation, work-based learning, safety standards, and regional delivery models. Many of these priorities were reinforced through broader reforms enacted in H.955.
Property Tax Classifications
H.955’s property tax provisions set up, but do not fully implement, major tax changes. The bill establishes a framework for three education property tax classes: homestead, nonhomestead residential, and nonhomestead nonresidential. It requires collection of property classification data in 2028, with tax rate multipliers to be set by the Legislature by July 1, 2029; if that does not happen, the classification system repeals before taking effect. If contingencies are met, the classifications would take effect in 2030. H.955 also creates regional assessment districts beginning in 2031, requiring municipalities to complete full reappraisals every six years, with the State paying part of reappraisal costs. The overall tax impact remains uncertain because it depends on future legislative decisions, classification multipliers, reappraisal costs, and implementation of the broader education finance formula.
School Construction State Aid in H.955
H.955 reestablishes a state-supported school construction aid program for the first time since the 2007 moratorium, creating a framework for the State to provide assistance for future school construction, renovation, and capital improvement projects. The bill directs the Agency of Education to develop rules governing project eligibility, prioritization, and aid awards, with consideration given to factors such as educational opportunity, facility condition, enrollment trends, governance structures, and whether districts are deemed to be participating in good faith in regional governance and consolidation discussions. School construction costs would be exempt from the supplemental district spending cap, and districts would only submit debt-service spending for supplemental spending calculations at the time indebtedness is initially authorized, potentially making large capital projects more feasible for districts.
The bill also creates a potential legacy debt aid program for districts carrying qualifying preexisting construction and renovation debt. If specified contingencies are met and annual appropriations are provided, eligible districts could receive State aid equal to 75 percent of debt service costs, subject to a statewide annual cap of $46 million. The fiscal and policy implications of this provision remain uncertain. While legacy debt aid may not increase overall Education Fund spending, it could significantly redistribute education tax burdens among taxpayers depending on which districts hold qualifying debt and how the program is ultimately implemented.
Significant questions remain regarding timing. Districts facing urgent facility needs—such as failing roofs, boilers, or other critical infrastructure—may still seek voter approval for bonds in 2026 and 2027. However, districts generally cannot receive school construction aid until the Secretary of Education determines and communicates the amount of State support available. Because Agency rules are not due until March 2028 and additional implementation, review, and funding decisions must follow, districts may not know the value of available State aid until 2029 or later. This creates uncertainty for districts considering near-term bond votes, as communities may be asked to make major capital decisions before the new construction aid program is fully operational and available funding levels are known.
H.542 – PCB Testing in Schools
Vermont’s school PCB testing program was created in 2021 after elevated levels of polychlorinated biphenyls (PCBs) were discovered in Burlington schools. The program requires indoor air testing in schools built or renovated before 1980 based on concerns that PCB-containing building materials could expose students and staff to harmful chemicals. As testing progressed, costs increased significantly, prompting concerns about the affordability and practicality of testing every eligible school in the state.
H.542 preserves the testing program but extends the deadline for completion to 2035, substantially slowing the pace of required testing. The bill creates a PCB Testing and Remediation Special Fund to support future testing and cleanup efforts, including potential proceeds from litigation against PCB manufacturers. It also links the program to the new school construction aid system established in H.955 by requiring covered schools to complete PCB testing before becoming eligible for construction aid. ANR estimates that 171 schools built or renovated before 1980 have not yet been tested. The legislation represents a compromise between those seeking to reduce program costs and those advocating for continued statewide testing and remediation efforts.
H.931 – Miscellaneous Education Items
H.931 makes a variety of technical and policy changes to Vermont education law. It clarifies that the moratorium on approving new independent schools does not prevent ownership changes for existing approved therapeutic schools, provided they continue operating as therapeutic schools. The bill also authorizes Vermont’s participation in the Interstate Compact for Education and strengthens background-check requirements for Agency of Education employees and contractors who may have unsupervised contact with students.
The legislation further revises the Intercollegiate Sexual Harm Prevention Council and restructures the Advisory Council on Harassment, Hazing, and Bullying Prevention, expanding membership, reporting requirements, and opportunities for student and community input. Additional provisions broaden the scope of eligible projects under school energy performance contracting statutes.
