Commissioner warns property tax rate will increase by 5 cents unless lawmakers change formula

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.

Anne Galloway

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  • I hope folks are starting to get the picture:

    Base rate of inflation would mean a 3 cent increase in the statewide property tax rates.

    Special education costs to increase by 7%.

    Employee health insurance costs to increase by 12.8 to 14%

    New costs incurred for implementing the top down mandated common core curriculum to increase expenses by whatever it takes – nobody is sure how much.

    New costs to implement the Governor’s mandate of Algebra to increase expenses by whatever it takes – nobody is sure how much.

    We’re still catching up from all the mandates associated with No Child Left Untested/Behind.

    (That’s just a sampling of the spending pressures … visit your local school board this budget season for more. I’m not saying these are good or bad – I’m saying these are simple facts.)

    Housing values are down for the rolling three year average (extremely important to note because lower value means the same tax rate results in a lower tax bill which means less money collected).

    And the inference of all this? Your local school boards have to do a better job tightening belts to avoid a statewide tax increase of 5 cents!


    Your local school boards will be taking in all the mandates and all the local needs and desires, and then your local school board will be melding that into the best possible budget. Your local school board would rather respond to you, the local voter, then the feds or the state; but the law is what the law is – and not all mandates are bad.

    It would be nice to hear the state tell us how they would help support local choices instead of gathering more policy making authority under the Montpelier umbrella – and then telling us at the local level what a crappy job we’re doing.

    And finally – a drop of 650 out of almost 90,000 students is meaningless and could just as easily be a typo – stop repeating that like it has meaning. Besides – there are towns such as Bennington, Stowe and Williamstown that are seeing increases in enrollment.

  • George Cross

    As ususal Rama tells it like it is! What was missed? Every dollar spend by a local school board has been approved by the voters. Not one dime of the state budget is ever approved by the voters. When the state is ready to subject its budget to voter approval, the state will earn the right to comment on local budgets

  • Kathy Callaghan

    Re the 14% health insurance increase, this can be lowered, perhaps significantly. As I commented in another post, the Vermont School Boards Insurance Trust (VSBIT) can (arguably should) do what the State Employees Health Plan has done for over 30 years – self insure and buy stop loss coverage for high claims.

    The State rid itself of any fully insured products (including 2 HMOS), designed its’ own HMO-like copay plan, and self funded all of its’ 4 plan designs under one umbrella, using a third party to administer the plan. We put the administrator contract out to bid every 5 years as required by statute, which creates competition and ensures best pricing. The schools can have a variety of health plans as they do now with Blues insured products. The difference is that they will save the overhead they are paying to a carrier, which can then be used to pay claims.
    They can also put their stop loss out to bid and get better rates in the marketplace. Finally, it doesn’t take a phalanx of staff to do this. As former State Benefits Director until I retired in 2012, I did it with 4 – 5 staff.

    Our overhead costs are around 1% of our claims costs, not the 30% that is most often touted. We have a very effective inhouse Wellness Program. Our premium increases have been in the single digits for at least 10 years. Last year it was around 3.5% and this year we are getting 1.5 mos. ( 3 pay periods) of premium holidays due to a surplus of premium over claims. That means that the state and employees do not pay premium for those periods, while we still keep a safe reserve in the plan. This model that works extremely well for larger groups, and is not as widely known throughout the State as perhaps it should be.

    You can’t always control claims but you can intelligently control (and predict) your expenses by self insuring, managing your own plan, and protecting yourself against high claims by the prudent purchase of stop loss coverage. For large groups such as VSBIT, it works. It totally works. It is surprising that they have not moved to this model yet. But with taxpayers footing the bill for significant health insurance increases, it is time to get serious about it.

  • David Usher

    UNSUSTAINABLE! How else to describe Vermont’s education spending?

  • rosemarie jackowski

    HELP… I had to borrow money to pay the taxes this year.

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