Financial 'Death Spiral' Hits Rural Mass. Schools, Says Boston Globe—Vermont Can Relate
Two New England states confront identical challenges: declining enrollment, soaring costs, and a traditional school governance model that may no longer be financially sustainable.
Vermont’s projected double-digit property tax increase for 2026 isn’t happening in isolation. Across the border in Massachusetts, rural school districts face what educators describe as a “financial death spiral”—and the parallels between the two states reveal a structural crisis affecting the entire region.
The Numbers Behind the Crisis
Vermont’s K-12 enrollment has fallen from approximately 93,565 students in 2003-2004 to 69,289 in 2024—a 26% reduction over two decades. This “Northern nosedive” in enrollment is forecast to continue through at least 2030, affecting nearly every county in Vermont, Maine, and New Hampshire.
Massachusetts presents a split picture. While statewide enrollment has remained relatively stable, rural Western regions experienced a 15% decline between 2012 and 2020, compared to just 3% statewide. This geographic divide means political leaders in thriving Eastern metropolitan areas may overlook the specific pressures facing the Berkshires and Franklin County.
Why Fewer Students Don’t Mean Lower Costs
The fundamental challenge is what economists call “step costs.” A school that loses ten students across six grades cannot reduce staffing by one teacher—it must still maintain a classroom for each grade, heat the entire building, and provide baseline administrative and custodial services.
Vermont currently has the lowest student-teacher ratio in the U.S. at 11:1, while spending approximately $24,000 per pupil. In Massachusetts, rural districts spend 25-30% more per student than larger districts due to these economies of scale, yet receive benefit costs 17% higher than the state average.
The Self-Reinforcing Cycle
Declining enrollment triggers a cascade of consequences. Districts lose state aid (often enrollment-based) or must raise local property tax rates to cover fixed costs. To stabilize budgets, schools cut “non-core” programs: foreign languages, advanced placement courses, music, art, and athletics.
Once a school loses these offerings, families with means transport their children to better-funded neighboring districts or private schools under school choice policies. When students leave, home districts lose funding but remain “saddled with high per-pupil legacy costs,” including building debt and retirement benefits.
The ESSER Cliff and Inflation Squeeze
The expiration of federal Elementary and Secondary School Emergency Relief funds created additional pressure. Vermont school systems face a $90 million decrease in federal spending authority, yet student needs for social-emotional support haven’t diminished.
Simultaneously, inflation outpaced both states’ funding formulas. Massachusetts’ Chapter 70 aid formula contains a 4.5% inflation cap. When real costs for energy, supplies, and healthcare rose above this cap, districts effectively suffered budget cuts, losing aid promised under the Student Opportunity Act.
Vermont’s Legislative Response: Act 127
Vermont attempted to address inequities through Act 127, passed in 2022 and implemented in FY2025. The law modernized the state’s pupil weighting formula, which hadn’t been substantially updated since 1997, to provide significantly more resources to districts serving:
Students living in poverty (weight of 0.4)
English Language Learners (weight of 0.75)
Students in small or sparse rural districts
The mathematical mechanism increases the number of “weighted pupils” in the denominator when calculating per-pupil spending, thereby reducing the tax rate for districts with high concentrations of these students while maintaining the same spending level.
Unintended Tax Volatility
While Act 127 aimed for equity, its implementation has been described as “chaotic.” The massive shift in tax capacity resulted in significant increases for more densely populated, higher-income districts that didn’t benefit from new weights. The Montpelier Roxbury Public School district, for example, faced a projected 25% tax rate increase under full implementation.
The legislature initially included a 5% cap on homestead property tax rate increases, but this inadvertently incentivized districts to increase spending since any increase beyond 5% would be covered by the state’s Education Fund. Lawmakers passed HB 850 to remove the cap and introduce different mitigation strategies, further confusing local school boards during budget season.
Current projections show:
Massachusetts: Research Without Action
Massachusetts took a different approach. In 2022, the Special Commission on Rural School Districts declared that $100 million in annual rural school aid was required to adequately fund these districts.
The commission found that existing state funding formulas failed to account for unique operating costs—25-30% higher than average due to sparsity. The formula for “local contribution” is often skewed by property values; a few expensive properties can make a town appear wealthy even with low median income, reducing state aid.
The Appropriations Gap
Despite the commission’s findings, the Massachusetts Legislature has consistently underfunded rural aid:
FY2022: $9.5 million
FY2025: $20 million (peak)
FY2026: $19 million projected
The Mohawk Trail Regional School District, spanning over 200 square miles, illustrates the impact. State reimbursement covered only 18% of a $700,000 transportation bill, forcing the district to divert classroom funds to busing.
The Special Education Cost Driver
Both states cite escalating special education costs as a primary budget driver. Educators report student needs have intensified due to childhood trauma, poverty, and the opioid crisis.
Vermont transitioned to a census-based funding model (Act 173) for more flexibility, but “extraordinary costs”—expenditures for students with extremely high needs—have spiked. The state reimbursement threshold was raised to $80,000 for FY2025, with extraordinary cost estimates reaching $200 million, up from $130 million two years prior.
Massachusetts’ “Special Education Circuit Breaker” program should reimburse districts for 75% of costs above a threshold, but districts report reimbursements frequently fall below 70%. Legislators are pushing to increase the reimbursement rate to 90% and lower eligibility thresholds.
The Consolidation Debate
As fiscal pressure intensifies, both states are questioning the traditional model of small, independent school districts.
Vermont’s Push Toward Larger Districts
Act 73, passed in 2025, attempts to force consolidation of Vermont’s current 119 districts into 10 to 25 regional entities, each with 4,000 to 8,000 students. The goal is moving toward a “foundation formula” where the state sets base per-pupil funding and limits local budget authority.
Larger districts could theoretically manage special education, transportation, and administrative overhead more efficiently. However, a state-mandated School District Redistricting Task Force refused to deliver required maps in late 2025, citing “very mixed reaction” from Vermonters to mandated consolidation.
Critics argue forced consolidation will close community schools and create a “gentrification” of education where rural voices are overwhelmed by larger regional boards.
The CESA Alternative
In lieu of consolidation, the task force and some legislators proposed creating five Cooperative Education Service Agencies (CESAs). These regional entities would allow existing districts to share resources for specialized services—psychological testing, transportation, IT—without losing local boards or budget-setting ability.
Governor Phil Scott dismissed this voluntary model as a “political strategy to preserve the old system” that has failed to control costs.
The Affordability Crisis
The impact on individual taxpayers defines the political stakes. Vermont currently ranks as the second-highest spender per pupil nationally (behind only New York), yet academic outcomes—particularly in early literacy—are declining.
Seniors face particular pressure, with Social Security payments expected to increase just 2.5% while property taxes rise nearly 12%. Legislative leaders are debating “hard caps” on school budget growth (S. 220)—a move previously unthinkable in a state priding itself on direct democracy and town meeting votes.
In Massachusetts, the crisis manifests through erosion of other municipal services. Because total town revenue is capped by Proposition 2½, every dollar added to school budgets comes from road repair, libraries, or public safety. In rural towns with stagnant tax bases, this zero-sum game threatens long-term community viability.
What Happens Next
Both states face increasingly binary choices. They can continue “bandaging” the system with one-time buydowns and incremental aid increases, or pursue fundamental transformation of education delivery.
Vermont’s Likely Path
The projected 11.8% tax increase for 2026, following a 40% five-year cumulative increase, represents what observers call “defining unaffordability” likely to force legislative action.
Transformation probably involves shifting from local budget autonomy toward a state-mandated foundation formula and larger, consolidated districts. The 2026 legislative session will determine whether lawmakers pursue mandatory consolidation, embrace the CESA model, or attempt another compromise.
Massachusetts’ Requirements
Change requires either a massive infusion of rural school aid at the $100 million level recommended by the commission, or a fundamental rethink of how Chapter 70 accounts for sparsity and declining enrollment.
The state legislature faces pressure from over 1,000 educators and advocates calling for immediate action, but appropriations have moved in the opposite direction for FY2026.
The Regional Reality
Both states share identical structural challenges:
An enrollment-infrastructure mismatch, attempting to maintain networks of small rural schools built for larger populations
Inflation-formula lag, where funding mechanisms failed to adjust to rapid cost increases
An equity-affordability paradox, where efforts to improve equity for high-needs students triggered tax shifts and budget shortfalls elsewhere
Self-reinforcing “death spiral” feedback loops where cutting programs drives enrollment losses, leading to further cuts
Without fundamental changes, the fiscal realities of 2026 will likely catalyze a radical reordering of New England’s rural public education. The goal in both states is creating systems that are “efficient, sustainable, and stable,” where a student’s home address doesn’t dictate education quality. The window for managed change is closing, and the alternative—a geography of educational “haves” and “have-nots”—contradicts the constitutional promises of both state governments.