The future of Vermont’s education system again hangs in the balance as lawmakers return to Montpelier this week to reconsider a sweeping law that would change how the state funds and governs public schools.

Six months ago, Republican Gov. Phil Scott and Democratic leaders in the House and Senate stood together at a bill-signing ceremony in Montpelier to celebrate the passage of Act 73. The landmark law launched a multi-year plan to consolidate Vermont’s 119 school districts into five regional governance hubs and ultimately shift control over school spending from local boards to the state.

“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 in July.

But that path may no longer be politically viable in 2026.

The critical first phase of Act 73 — mandatory school district mergers — has ignited fierce opposition in communities across Vermont. That resistance got amplified last month when a task force appointed by the Legislature to draw new district maps rejected the premise of forced consolidation altogether.

In its final report, the group cited “strong concerns about student wellbeing, loss of local control, transportation burdens, rural equity, and a process perceived as rushed or unclear.”

Cornwall Rep. Peter Conlon, the Democratic chair of the House Education Committee, said lawmakers now have to confront the possibility that Act 73 no longer has the political support needed to move forward as originally envisioned.

“Whether state-imposed larger districts would pass the General Assembly I’d say is questionable,” Conlon said. “To be very honest, we’re still wrestling with the question of what the best way forward is.”

A new plan to rein in school spending

The seeds of Act 73 were planted on Nov. 5, 2024, when Vermont voters punished House and Senate Democrats at the ballot box following an average 14% property tax increase driven by education spending.

Republicans made historic gains in both chambers, shifting the balance of power and forcing Democratic leaders to negotiate an education reform compromise with Scott, despite significant resistance within their ranks.

Senate President Pro Tem Phil Baruth said he remains hopeful lawmakers can still move forward with district consolidation. But the Chittenden County Democrat acknowledged that the task force’s refusal to produce new maps has delayed implementation by at least six months to a year.

That delay also pushes back the rollout of Act 73’s centerpiece: a new “foundation formula” that would give the state the authority to set per-pupil spending levels for every public school in Vermont. Lawmakers view the formula as the primary mechanism for curbing education spending, which has increased by $850 million over the past decade.

With property taxes projected to rise another 12% on average this year, Baruth said taxpayers can’t afford to wait. He plans to introduce legislation this week that would impose hard caps on school budget increases ahead of Town Meeting votes in March.

“Now that we have this delay, I think it’s very hard to say that anything is going to produce savings within the next three or four years,” Baruth said. “So I started thinking about, ‘How could we reduce the rate of growth in the education system quickly?’”

Baruth said he has not yet settled on a specific allowable growth rate. He said the growth caps would be in effect for the next two fiscal years.

The proposal has drawn swift pushback from school officials. Sue Ceglowski, executive director of the Vermont School Boards Association, said budget increases are largely driven by rising health insurance costs that boards can’t control.

Imposing hard caps, she warned, would force districts to cut core student services. And she said the proposal comes as school boards put the finishing touches on spending plans they’ve been carefully crafting for months.

“Imposing hard caps on those same school budgets would inject chaos and confusion into the budget process, possibly postponing budget votes until later in the spring,” Ceglowski said.

House Speaker Jill Krowinski echoed those concerns. While she acknowledged the need to address what she called “unsustainable” property tax increases, the Burlington Democrat warned against a last-minute mandate.

“I am concerned that a last-minute pivot to new (a) school budget construct will upend communities and lead to rash decisions that will have a negative impact on our Vermont kids,” Krowinski said in a written statement.

Redistricting or bust?

It’s now up to the Legislature’s education committees to redraw school district maps, though neither has a clear plan for how to proceed.

“The task force, whether you agree with them, don’t agree with them … it set the process back,” said Bennington County Sen. Seth Bongartz, the Democratic chair of the Senate Education Committee. “And so we’re going to have to regroup and figure out the path forward.”

Bongartz said he remains supportive of redistricting but warned lawmakers not to let opposition derail broader funding reforms.

“The funding formula that we have right now is not working, is not going to work, and is putting Vermonters in a position where they can’t afford to pay their bills, so we must fix the funding formula,” he said.

The governor, however, insists that no aspect of Act 73 can fall into place until and unless the Legislature votes to approve new district maps.

Jason Maulucci, the governor’s director of policy development, said the foundation formula depends on economies of scale that only larger governance structures can provide. Act 73 also envisions major reforms to special education, pre-kindergarten, and career and technical education, all of which, he said, require larger administrative units.

“We don’t see a scenario where the foundation formula that we established last year would work well at all with 119 districts of significantly different sizes,” Maulucci said. “They need the protection of scale in order to make the best budget decisions given the funding that will be provided them.”

A different path

Jericho Rep. Edye Graning, the Democratic co-chair of the School District Redistricting Task Force, was one of several lawmakers who drew the governor’s ire for failing to deliver new district maps.

She said lawmakers’ response to the group’s work has been far more positive.

“We have had more often than not an incredibly positive response to what we did, which feels much better than some of the other responses we got from the administration,” Graning said.

Instead of forced mergers, the task force recommended voluntary consolidation and the creation of “Cooperative Education Service Areas,” which would allow districts to share services such as special education, transportation, and IT.

Graning said the task force heard from thousands of Vermonters and received a clear message.

“Don’t try to jam through massive redistricting without public input and without creating trusted bonds within our communities,” she said. “It was almost a unanimous voice across the state saying, ‘Please do not close our schools, but also we know that there is some reform that is needed, but please do so slowly and deliberately and thoughtfully.’”

For their part, state health officials say Vermont’s nursing homes are a vital piece of the eldercare landscape. Without extraordinary financial relief, they say, the state would have lost even more critical bedspace.

Efforts to address the upstream causes of the nursing homes’ financial crises, like the state’s reliance on traveling nurses, have received far less financial support.

Around half of the extraordinary financial requests from 2020 onward mention concerns with increased costs of staffing, particularly contract staffing. Staff and contract staff make up about 50 percent of total costs in nursing homes’ budgets, according to the state.

Vermont’s nursing homes depend on traveling staff more than those in any other state, according to federal data from the Centers for Medicare and Medicaid Services.

There are many reasons extraordinary financial relief is not a sustainable means to “plug the gap” for nursing homes, “but we needed something,” said Helen Labun, the Vermont Health Care Association’s executive director.

“We don’t want EFR to be a standard option,” Labun said. “It really is meant to be an extraordinary measure.”

Despite existing for more than 20 years, Vermont’s extraordinary financial relief program started playing a recurring and sustaining role for the state’s nursing homes only since the COVID-19 pandemic.

The bureaucratic program routes through multiple departments nested within Vermont’s Agency of Human Services.

The Department of Vermont Health Access’ rate-setting division, which sets Medicaid reimbursement rates for nursing homes, reviews requests submitted by facilities. But the funds for extraordinary financial relief come from Medicaid dollars allocated through the Vermont Department of Disability, Aging, and Independent Living, according to the department’s commissioner, Jill Bowen.

Nursing homes, which receive extraordinary financial relief, provide the most intense level of care, serving people who wouldn’t have their needs met in an assisted living or residential care home, according to Labun. These facilities must serve patients on Medicaid to qualify for financial relief, she said.

There are 33 nursing homes in the state, with a total of about 2,847 beds as of July, a decline of nearly 900 beds in the last 20 years, according to the DAIL.

Bowen said the loss of beds in long-term care facilities is worrying given Vermont’s aging demographic, though she said the trend may partially stem from people seeking at-home care instead.

Angela Smith-Dieng, director of DAIL’s Adult Services Division, said the state does not want to lose options for its large elderly population, so extraordinary financial relief is “incredibly important as a tool to prevent nursing home closures.”

One factor leading to increased emergency funding requests, according to state leaders, is the “rebasing” of Medicaid reimbursements. Rebasing, which most recently occurred in 2025 and 2023, according to state leaders, changes Medicaid reimbursement rates based on cost data from earlier years. In 2023, the state altered reimbursement rates based on 2020 costs, which didn’t yet capture the new financial pressures brought on by the pandemic.

In July, the state again balanced reimbursement rates, this time using 2023 costs, which Bowen hopes will limit the need for extraordinary financial relief.

Working with the Legislature, the DAIL advocated for changing how much facilities are paid based on their occupancy, reducing penalties for not meeting high thresholds, according to Bowen.

In some instances, the state has advanced nursing facilities money through the bailout process or provided more money than a facility requested. The state may advance facilities funds if they will not be able to meet payroll for staff, Bowen said, but she added that the state was more likely to provide less — not more — than a company requested.

The state has recouped every advance or was in the process of recouping them, according to the department’s rate setting division.

As part of an extraordinary funding review, Jaime Mooney, the director of the rate setting division, said the state examines a company’s finances and whether facilities are in compliance with state and federal requirements.

After the rate setting division reviews the request, combing through the provided financial information such as past-due invoices and the amount of cash on hand, the division makes a recommendation to the DAIL.

The rate setting division also consults with DAIL regarding possible issues with the care provided by the requesting facility. But Mooney said she couldn’t recall ever denying a facility’s request due to the quality of care.

The state restricts grant use, and facilities cannot pay penalties or exorbitant owner-administrator fees with the funds, according to Mooney.

The facility must also meet reporting requirements, including providing updated financial information, she said.

According to Labun, nursing home owners need to demonstrate they don’t have money from other sources. That prevents companies that own many facilities from shifting their investments to out-of-state homes and then requesting bailouts from Vermont.

In the past, nursing homes had savings they could rely on when reimbursement rates weren’t covering expenses, Labun said. But, during the pandemic, nursing homes’ coffers ran dry, and extraordinary financial relief was retrofitted to respond to the emergency, Labun said.

Nursing homes typically used extraordinary financial relief in one-off cash flow emergencies to “fight financial storms that they might not otherwise have been able to weather,” according to Labun.

That’s now changed, and the cost of nursing is driving the crunch.

Contract staff tend to cost facilities at least twice as much as permanent staff, contributing to nursing homes’ financial distress, Labun said. The use of contract staff in Vermont has fallen slightly, according to Centers for Medicare and Medicaid Services data. But the state’s rate is still exceedingly high compared with the national average, Labun said.

While the nation saw heightened rates of contract staff at the onset of the pandemic, the rates have generally returned to the pre-pandemic norm, said Richard Mollot, executive director of the Long Term Care Community Coalition, a national nonprofit organization.

Vermont nursing homes had the highest rate of contract staff employment compared with those in other states in 2024, peaking at 31 percent in the first quarter of 2024, according to analysis of Medicaid data by the Long Term Care Community Coalition. The national average in the same period was 8 percent.

Mollot said nursing homes often use a larger number of contract staff when there is high attrition among permanent staff.

Staffing tends to be the highest expenditure for nursing homes, and oftentimes nursing homes that work with temporary staffing agencies are contractually obligated to pay contract staff more than permanent staff, said Kaili Kuiper, Vermont Legal Aid’s long-term care ombudsman. That means nursing homes spend much of their budget on filling the staffing gap.

This is a “difficult cycle to break, because there’s only so much money to go around,” Kuiper said. The cycle can also cause poor care, and Kuiper said her office has seen “a lot of issues that are related to there not being enough staffing to provide the care that’s needed,” including problems with response times and hygiene.

Vermont’s demographic challenges are driving the underlying problem of nursing homes’ high use of contract staff, Labun said.

So, in recent years, the Legislature has allocated some funds to rebuild the nursing workforce.

The state put half a million dollars toward attracting and keeping licensed nursing assistants in the current fiscal year budget. That investment was an attempt at addressing the upstream causes of nursing homes’ financial woes, according to state Senator Richard Westman, Republican of Lamoille, who sits on the Senate Appropriations Committee and serves on the board of a rural hospital.

The state plans to draw down federal funds for workforce development from the Civil Monetary Penalty Reinvestment Program that had previously been held up in between the President Joe Biden’s and President Trump’s administrations and during the federal shutdown, Labun said.

The legislative investment was far less than the money spent on extraordinary relief, but Westman argued that prioritization makes sense, given the financial weakness of some facilities. In the last two years, about two-thirds of nursing homes have requested extraordinary relief, he said in a May interview.

“I think one could make an argument that without that help, they probably would have gone out of business,” Westman said.

Staffing underlies the financial challenges, Westman said, echoing others. Investing in nurse recruitment and retention, as well as increasing reimbursement rates nursing homes receive, could prevent the facilities’ reliance on bailout money, he suggested.

Kuiper said that using temporary emergency staff is an important tool. As the state’s advocate for nursing home residents, Kuiper said employing contract staff is a better alternative than allowing a facility to be understaffed.

But in the long run, Kuiper said she would like to see “a stronger movement away from temporary staff,” and for the care community to prioritize strategies to curb the high use of contract staff as the “status quo.”

Former VTDigger reporter Peter D’Auria contributed reporting.

This story was originally published by VTDigger and distributed through a partnership with The Associated Press.