MONTPELIER, VT. >> As communities vote on their school budgets at Town Meeting on Tuesday, contentious education spending limits will help to keep tax rates down but officials are questioning the method some school districts used to bridge the gap.

A Vermont Agency of Education official says it appears that many districts relied on reserve funding to stay below the threshold and avoid tax penalties.

"Districts were dipping into the reserve funds, which is not really what they're for, that's not the intent," said Brad James, the agency's education finance manager. "Now maybe they had big reserve funds anyway, that I don't know. But staying under something like this is not the intent of the reserve fund. It's for buildings, and it's for roofs and it's for offsetting tuitions for new kids to come in."

Based on preliminary fiscal 2017 budgets reported to the agency, budgets increased by nearly the same percentage as they did for the current year.

But education spending — the expenses minus any revenues such as federal grants, special education aid, and small school grants — increased 1.5 percent while it went up nearly 3 percent in fiscal year 2016. Many districts relied on nearly $17 million in offsetting revenues to bring budgets down, compared to $3 million last year, James said.

The spending thresholds "had the effect of keeping tax rates lower by keeping education spending lower. Was it a wise way to do that? I don't think so and I think the whole agency doesn't think so," he said.


The Legislature repealed the spending limits for fiscal year 2018 but districts that spent reserve funds won't have them to rely on if unexpected expenses arise, officials say.

"If they used them to contend with cost containment, they are not available for legitimate purposes, such as unexpected facility's needs," Nicole Mace, executive director of the Vermont School Boards Association, said by email.

That could have an adverse impact on taxpayers, James said.

Faced with a nearly 8 percent increase in health insurance costs and a little over a 2 percent increase in general salaries, the board of the Brattleboro Union High School district cut $200,000 from the budget including reductions in staff but opted to use reserve funds rather than cut programs.

"We used reserves so that we didn't have to make further reductions that we thought may compromise programs," said Frank Rucker, business manager for the Windham Southeast Supervisory Union. He said the district also used reserve funding in the previous fiscal year.

Some other districts chose not to dip into reserve funds. The Franklin Central Supervisory Union cut positions and programs to stay under the spending limit, superintendent Kevin Dirth said.

Gov. Peter Shumlin believes the spending caps were ineffective in bringing about substantial cost reductions, said his spokesman Scott Coriell.

"The governor continues to believe that real cost savings will come from the meat of the law, which are the conversations it has sparked among communities around the state about how they can work together to combine services and enhance educational quality," Coriell said.

The agency says it knows of districts in 28 supervisory unions that have formed study committees to consider merging and it's estimated that districts in nine supervisory unions may pursue accelerated mergers.