In December, Gov. Peter Shumlin asked school boards to level fund budgets for the third year in a row, and he booked a “zero percent” increase in the statewide property tax in his fiscal year 2013.
Meanwhile, the Department of Taxes offered a competing recommendation of a 2 cent increase in property tax rates, based on expected growth in school spending of 1.7 percent.
Ultimately, the Legislature sets the tax rate, and the House of Representatives is splitting the difference with a one penny increase.
Whether the governor, given his hold over the Democratic majority in the Golden Bubble, will rein in lawmakers, as he has on other issues, remains to be seen, but at the moment, the Dems in the House of Representatives appear to be prepared to go their own way — not only with the penny increase, but also with the issue of rebasing the General Fund transfer to the Education Fund.
House Speaker Shap Smith supports the higher tax rate.
“The governor hoped for a zero percent increase, but that was predicated on no new spending statewide, and it does not look like that’s going to happen,” Smith said. “We thought it was appropriate to give guidance for towns to let them know what base rates will look like.”
More than half of Vermont school districts have reported budgets to the Department of Education and so far the spending rate is about 2.63 percent above last year’s levels. That estimate includes Burlington, which is looking at a more than 10 percent hike in school property tax rates.
Last year, lawmakers effectively eliminated inflationary increases in the transfer over a three-year period when it approved an Education Fund transfer for fiscal year 2012 that was at 2008 levels, or $27.5 million less than originally required by law. Instead of transferring $309 million from the General Fund to the Ed Fund this year, including inflationary increases, the transfer will be $282 million. The reduction is on average a roughly 3 cent property tax increase at the local level.
A majority of lawmakers in the House support a proposal that would divert surplus funds to the Education Fund and eventually fill the gap created by the rebasing change. Surpluses are not anticipated in the near future.
Rep. Oliver Olsen, R-Jamaica, a member of the Ways and Means Committee, proposed that the state divert 50 percent of any surplus funds (after the stabilization fund has been filled) toward the General Fund transfer to the Ed Fund, and more money into the per pupil funding formula. The mechanism would remain in place until the transfer and the formula have caught up with inflation. The Joint Fiscal Office would be required to issue a report on the plan every year.
The amendment passed in a bipartisan 138-0 vote last month.
Shumlin has said he opposes the surplus allocation to the Education Fund.
House Speaker Shap Smith backs Olsen’s plan.
“I’d like for it to remain in the Budget Adjustment Act,” Smith said. “I think if stripped out (in the Senate BAA) that won’t be last time see that amendment coming from us. We believe it’s important to send a signal to property taxpayers of Vermont. This is sending a signal about the direction we’ll go in future should we have surpluses.”
The so-called Olsen amendment to the Budget Adjustment Act was killed in Senate Appropriations Committee on Friday, but it it will be brought back to life, zombie-like, in the form of a new amendment, co-sponsored by Dave Sharpe, D-Bristol, to the House standalone property tax bill on the floor Thursday. House Ways and Means unanimously supported the amendment.
Other House lawmakers, who are still drafting proposals, will likely push for a rollback of the fiscal year 2012 rebasing proposal.
An Olsen-Sharpe-like proposal from Sens. Peg Flory, R-Rutland, and Randy Brock, R-Franklin-Grand Isle, will also likely emerge in the Senate this afternoon when lawmakers discuss the Budget Adjustment Act.
Sen. Jane Kitchel, D-Caledonia, chair of Senate Appropriations, said her committee came to the conclusion that the Olsen amendment didn’t belong in the Budget Adjustment Act.
“There are other avenues to do this so we did not say yes or no, we simply said not in the budget adjustment and we tried to articulate the reasons why it warranted a great deal more legislative attention,” Kitchel said.
Kitchel said senators need to first consider how much money should be set aside in the budget stabilization fund and the Agency of Human Services caseload reserve fund.
Kitchel said diverting surplus money to the Education Fund raises a number of questions about budgetary priorities.
“How do you make sure LIHEAP levels are adequate?” Kitchel asked, rhetorically. “How do you make sure, if you’re calculating a surplus, that you’re not including in it savings that might be there to be reinvested in Choices for Care, and keeping our seniors in their homes and in their communities, or the Justice reinvestment? So, if you aren’t very careful, you can end up at cross purposes with other legislative or statutory objectives.”
Editor’s note: This story was updated at 6:11 a.m. and again at 6:34 a.m. Feb. 8, 2012.
Correction: The House will take up the Olsen-Sharpe amendment on Thursday.
