A Senate panel has come up with a novel form of property tax relief: Mailing a check to taxpayers.
Sen. Jane Kitchel, the chair of Senate Appropriations, says the payback proposal isn’t a gimmick. Frustrated with the ever-rising school spending and little or no control over how the money is spent, she said the members of her committee wanted a sure way to shift half of all General Fund surplus money in refunds to taxpayers.
If surplus revenues are plowed into the Education Fund, she said, there is no guarantee that taxpayers will benefit because in the past schools have absorbed additional funding.
“When the expectation is created that someone will see a financial benefit from our actions, how would anyone see it in the Education Fund transfer?” Kitchel asked.
The Senate’s chief budget-writer said under the plan if there is a surplus “we could ensure a direct benefit to the Vermont homeowner.”
Should General Fund revenues increase (a promising, but not guaranteed prospect), 50 percent of the proceeds would go directly into taxpayers’ pockets, instead of the Education Fund.
The payback? Anywhere from $30 to $100 per homeowner per year. The total cost of the proposal wasn’t available at press time. Only Vermont residents who claim a homestead exemption would be eligible.
The House, in three separate pieces of legislation, sought to send half of any surplus monies to the Education Fund in order to correct the “rebasing” change that will go into effect in 2013.
Lawmakers cut funding for the General Fund transfer to the Ed Fund by $27.5 million last year. Instead of transferring $309 million from the General Fund to the Ed Fund in fiscal year 2012, including inflationary increases, the transfer will be $282 million. The reduction will result in a roughly 3 cent property tax increase at the local level on average.
Kitchel said in 2010, when the Douglas administration and the Legislature agreed to a Challenges for Change proposal which reduced spending in many areas of state government. Part of the plan was a $23 million reduction in school spending, with the savings to be realized in the General Fund transfer.
That savings, however, didn’t materialize. The Department of Education and the lawmakers worked with schools to identify specific targets based on school enrollments and other factors in 2010, but when the Shumlin administration came on board, the governor decided to allow schools to use $19 million in additional federal stimulus funds as bridge money for schools in 2011. The idea was that by 2012, schools would find those savings.
Instead, school spending increased by 2 percent this year.
To complicate matters further, the Grand List, as a result of soft real estate values, has dropped. That means the statewide property tax will likely go up 2 cents for every $100 worth of property value in 2013, and will jump 7 cents in 2014, if school spending remains at 2 percent, according to initial estimates from the Joint Fiscal Office.
Total revenues for the Education Fund are projected to drop by about $10.7 million in 2014 to $1.363 billion; estimates for total spending go up to $1.437 billion in 2014. That leaves the fund with a $73.6 million gap if the state doesn’t raise the statewide property tax rate in 2013 (by 2 cents) and 2014 (by 7 cents). The education “outlook” developed by the Joint Fiscal Office is a early projection, and subject to change, according to Mark Perrault, who developed the spreadsheet.
House Ways and Means members wrestled with that information a few weeks ago. Rep. Bill Johnson, R/D-Canaan, said the increase was a result of the Legislature “kicking the can down the road.”
Senate budget and finance leaders say they’ve been too busy to figure out how they will address the projected increase.
Sen. Dick Sears, who serves on Appropriations, stands by the idea of ensuring that all property taxpayers who file a homestead exemption benefit from the surplus. “Those are two separate issues,” Sears said. “When you have a surplus and how you spend it is one issue. How we pay for education is another issue and it needs to be examined.”
The Legislature needs to re-evaluate the property tax system, in his view, but lawmakers, he said, haven’t had the will to do so.
He says he wants the refund program “to go on indefinitely.”
“If you want to use it to pay down your property taxes or go to McDonald’s, it’s your money,” Sears said.
The governor told reporters at his weekly press conference on Wednesday that he supports the Senate’s surplus refund to property taxpayers.
“I do believe the Senate’s goal of sending hard-pressed taxpayers of Vermont more dollars so that we reduce property taxes on Vermonters, not second homeowners, not businesses but on hard-pressed Vermonters struggling to pay property taxes is a better solution than the House plan that scatters it across all property taxpayers, to some that don’t need it — second homeowners, businesses.”
House Speaker Shap Smith says he hasn’t seen the proposal yet.
Editor’s note: This story was updated at 6:40 a.m. April 19.