Mary Peterson, the commissioner of the Vermont Department of Taxes, put the Legislature notice on Friday: The statewide property tax will go up by 5 cents unless lawmakers change the statutory increase in the base education amount in the coming session.
That’s because school spending is slated to increase 4.8 percent, even as student enrollments continue to slide and will drop by 670 students from 90,606 to 89,940 this year. Special education costs are expected to go up by 7 percent. Last year, total education spending was forecast to increase by 1.7 percent. The actual rate of increase was 3 percent.
“The broad perspective is the number of pre-K to 12 students continues to fall in Vermont, as do property values,” Peterson writes. “Unless school districts trim expenses commensurately, the amount of spending per pupil rises and the property rate increases.”
Real estate property is taxed per $100 in value. The current rate is 0.89 for homestead property and $1.38 for non-residential (commercial, rental and second home) property. Over the course of the recession, property values have declined. The trend is expected to continue in the coming year and Petersen says that means “last year’s rates on property will raise less money to spend per pupil.”
Under state statute, the base education amount, or the per pupil rate at which the state reimburses schools for education costs, is set to go up by $428, from $8,723 to $9,151 this year. The increase represents inflationary growth that was not built into the annual formula over a three-year period prior to 2012.
Peterson suggests that lawmakers increase the base education amount by one year’s worth of inflation instead of three. If they do so, she says, the property tax rate will increase by 3 cents instead of 5 cents.
In addition, if schools hold spending at inflation, or 2.2 percent, the rate could be further lowered to 2 cents, she writes.
The increase includes a 3.5 percent to 5 percent set-aside in the education fund stabilization reserve.
The rate is derived from consensus forecasts from the Department of Taxes, the Department of Finance and Management, the Department of Education and the Joint Fiscal Office.
In 2011, the Legislature “rebased” the General Fund transfer to the Education Fund to 2008 levels. This resulted is a 3 cent increase to local property taxes.