Senate Appropriations Committee pitches payback plan for property taxpayers

The House Chamber of the Vermont Statehouse. Photo by Ceilidh Galloway-Kane
The House Chamber of the Vermont Statehouse. Photo by Ceilidh Galloway-Kane

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.

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Anne Galloway

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  • Please stop pandering to taxpayers. A refund of $30 to $100 is about the same as spitting in the ocean. No one likes paying taxes but the refund is such a small amount compare to the tax burden, it is just plain stupid. Stop debating these trivial issues and attend to the job of spending the money wisely

  • Renee Schaffer

    If you’re going to go through with this, it should be refunded to ALL taxpayers, not just the homesteaders. I have a friend who bought a home in Vermont expecting to move back to be closer to family, only to be screwed out of that option when the state changed the rules about what kind of septic system was required for year-round occupancy (she has a holding tank and lacks the required land for an alternate septic system). So now she’s working three jobs in two states throughout the year trying to afford the taxes, waiting for the town to finally approve and construct necessary sewers, and she’s paying more in education taxes than the folks who actually live here full time and have children in the school system. In arguably the most democratic and engaged state in the union, I find it unconscionable that she is paying 12 months of taxes to a state she’s only allowed to inhabit for 6, at a higher rate and without representation on how the money is spent (can’t vote without residency). I know we’ve always been intolerant of flatlanders, but her family has been in Vermont since the first European settlers. Since when did Vermont become the “screw you, bend over and take it” state?

    • George Milo

      Dear Ms Shaffer: i want to thank you ,as a 5th generation Vermonter whose family name was here before Vt was a Sate and only a Territory, for speaking up for us non resident Vermonters who still hve hi9mes there . My real Vt Real Prop taxes on our place in grand isle county vt in 2003 were $3300. My prop taxes on proery in Florida in 2003 were 3200$ .In 2012 my prop taxes in Grand Isle went up towards 7,000$ and in Forida they have gone down to 2,400. Now the Town of North Hero is tzxing roof gutters, cupolas and skylights as addons and using their on yardstick for a general aqssessment measurement not the state of Vt tax per sq foot of skylighs or cupolas. Vt has lrural town listors have turned renegade in its way in taxing Vt real prop. The only outcome in Montpelier for the future is State bankruptcy. The Vt gov spends more than it can generate in tax revenue. The state is morallyand ethically bankrupt and tax bankrupt and it picks on non residents in its rural towns.

  • Constance Brown

    I wonder what the administrative costs of cutting and mailing all those checks would be.

  • Scott Mackey

    How about sending the rebates to taxpayers in school districts that actually did what the governor asked and controlled school spending? Sending rebates to taxpayers who caused property taxes statewide to rise by failing to control school spending does not provide incentives to control future property tax increases.

  • Tom Pelham

    Scott….you can’t make this stuff up. It’s ridiculous, bordering on embarrassing. At the same time the JFO comes out with an estimated property tax increase for 2014 of 7 cents

    on top of the 2 to 3 cents for 2013, the Senate and Administration are talking about rebates (on top of the current rebate system no less) should there ever be a general fund surplus. But, if the 2014 budget is anything like the 2013 budget where spending is up 6.4% overall and 5% for state dollars, the likelihood of a general fund surplus is zilch and the probability of general fund tax increases is in the red zone. Talk of rebates from future surpluses in this context is la la land, possibly serving only a political purpose. The core problem, as you note, is school spending growth amidst a rapidly declining student population and a legislature unwilling to face this music and make the necessary reforms to our permissive education funding system that will constrain per pupil spending growth.

  • Has this state been taken over by aliens? Where do the “children” running this place think the money is coming from? Out of 626,000 residents how many are property owners? We property owners are carrying this state and they are talking about more $$$ for education? Ohthey will return $20.00 to me. Great! I have been trying to sell my house for 4 years now so that I can get out of here. Vermont could use some adult supervision.