On Wednesday, lawmakers will begin floor debate in the House on a 5 cent increase in the statewide property tax, and it’s likely that Republicans, who are outnumbered two-to-one in the chamber will put up a big fuss.
That’s because it’s the first time in the last five years that the increase has been so dramatic. And Republicans and Democrats alike are concerned that average school spending has increased 4.9 percent a year over the last decade at the same time school enrollments have dropped to under 86,000 students from a high of 104,000. Locally controlled school districts continue to spend more and more money every year despite pleas from Montpelier to keep expenditures no higher than the rate of inflation, or about 2 percent.
This year spending levels are set to hit 5.5 percent, if voters approve school budgets as proposed on Town Meeting Day. In December, the Shumlin administration asked districts to keep spending at roughly 2 percent — at that time the projections were in the 4.8 percent range.
Taxpayers have been insulated from the increases, lawmakers say, because property values have declined, putting a damper on rates, and most of the state’s property owners qualify for property tax rebates under the income sensitivity program. In addition, during the Great Recession the state received about $40 million a year in stimulus funds, which also cushioned the increases.
But it’s the specter of next year’s property tax hikes that will serve as the subtext for the back and forth in the House. Rep. Bill Johnson, R-Canaan, asked the Joint Fiscal Office to project rates for fiscal year 2015, based on that 5 percent average increase in school spending.
A variety of factors will likely push the revenue generated from residential statewide property taxes up by 13.2 percent in fiscal year 2015 and raise the rate to about $1 per $100 of assessed value.
Estimates from JFO show that a 5 percent increase in spending in fiscal year 2015 would cost the Education Fund about $93 million more; this year the spending increase for the $1.4 billion fund would have been about $70 million with a 7 cent increase in statewide taxes, but the Education Fund had a $20 million surplus that has been applied to the increase, bringing the total to about $50 million more.
The projection isn’t a consensus figure — in other words, the Joint Fiscal Office has produced the numbers at the behest of a single representative, not for the Legislature as a whole in conjunction with the Shumlin administration — but lawmakers say the predicted increases are realistic, based on the current school spending trajectory of annual 5 percent average increases over the last decade.
Lawmakers continue to express frustration about the growth in education costs.
Johnson says the increase next year is “eye-popping.” Democrats, too, are unhappy about the potential for an 11-cent hike from fiscal year 2013 to fiscal year 2015.
Rep. Janet Ancel, chair of House Ways and Means, the powerful tax committee, says: “It’s spending that drives tax rates more than anything else.” And because Vermont’s school system develops budgets locally, there’s not much lawmakers can do about.
House Speaker Shap Smith wants the Education Committee to take testimony on what is driving that spending at a time of declining enrollments. “It’s clearly an issue of concern,” Smith said in an interview on Tuesday.
Johnson, a member of the House Ways and Means Committee, voted against the education property tax bill along with Rep. Patti Komline, R-Dorset, and Rep. Adam Greshin, I-Warren. Johnson says he expects the legislation to pass in the overwhelmingly Democratic House this week, but he felt he had to cast a nay vote in protest.
“Everyone talks about the need for reform,” Johnson said, but no one, at this point, is offering a solution to the property tax conundrum. The ultimate fix, in his view, is putting a cap on education spending, or mandating teacher to student ratio limits. Vermont has the lowest student to teacher ratios in the country.
Correction: Rep. Adam Greshin lives in Warren, not Moretown, as originally reported. Property tax revenues from the residential property tax, not rates, will increase 13.2 percent.
