John McClaughry: When imagination fails, raise school property taxes - VTDigger

John McClaughry: When imagination fails, raise school property taxes

Editor’s note: This commentary is by John McClaughry, the vice president of the Ethan Allen Institute.

The heavily Democratic Vermont House has passed a bill (H.889) designed to squeeze out enough new dollars to keep the Education Fund solvent for 2015. Republicans voted “No” on the higher education property tax rates, and their state chairman declared that the Democrats’ passage of the bill was a “cold and callous action.”

Let’s take a trip down memory lane to see how we got to this point.

In 1994 Gov. Howard Dean, then in his parsimonious phase, froze the amount of state aid distributions to school districts under the Foundation Plan. A group of disappointed money seekers, led by Rutland Northeast Superintendent William Mathis (now a Shumlin appointee to the State Board of Education) and ACLU co-counsel Peter Welch (now a congressman), brought a case to the Vermont Supreme Court. They made the highly imaginative argument that the “common benefit” clause of the Constitution (adopted in 1777 to outlaw special favors to cronies) somehow required property-rich districts to share their property base with property-poor districts. The court, led by Justice John Dooley (still a justice), gave them everything they wanted (without even a trial!).

The 1996 Brigham decision held that all school districts had to have “substantially equal … access to tax resources.” Armed with this judicial mandate, the Democratic Legislature joyously pushed through Act 60 of 1997 with its “shark pool” of revenue redistribution.

Act 60 broke the link between your school budget and your school property tax rate. It also conferred enormous and long-sought regulatory power on the State Board and Department of Education.

When popular resistance to the Act 60 shark pool mounted, the Republican Legislature and governor of 2003 enacted Act 68. The revised law tried to brake that spending by tying the “district spending adjustment” of the education residential property tax rate to the amount spent above a legislatively set dollar amount. In 2014, if a district’s voters spent 20 percent over $9,151 per pupil, their residential property tax rate would increase by 20 percent over the state-set 94 cents per $100 of fair market value.

The Republicans blame the Democrats for raising property taxes, but if the Republicans were in the majority they’d have to do exactly the same thing – unless they could come up with some magical new scheme, about which they seem to have no clue.


But those brake shoes aren’t slowing down the spending bus. The link between education spending per pupil and the residential property tax rate is still there, but it’s not at all obvious to the voters of any given district, because the tax revenues are all shipped off to Montpelier for redistribution through the Education Fund.

The Legislature’s duty is to keep that fund full enough to cover the budgets sent in for payment by the 277 school districts. They could, but won’t, add another penny to the sales and use tax (which the Republicans did to pass Act 68), or increase the General Fund contribution beyond $296 million when that fund is again $70 million in the red.

That leaves them with raising the two school property tax rates, and trying to find some new brake shoes to slow down local spenders without hammering them over the head with state spending restraint mandates.

Hence the present bill, that raises the residential base rate from 94 cents to 98 cents per $100 of fair market value and the nonresidential base rate from$1.44 to $1.515. The bill also increases the base education spending amount from $9,151 to $9,382. That is well under the 4.2 percent residential property tax rate increase, and thus inflates the district spending adjustment that translates to higher residential tax rates.

The Republicans countered with a proposal to scrap the whole system for 2017 and concoct something else (details not even hinted at). The Democrats voted that down and passed their alternative for feeding the education monster: creating a new education income tax in 2017.

The bottom line here is that legislators of both parties are facing politically unsustainable public school spending. The Democrats are doggedly using the tools of their beloved Act 60 to raise ever more revenues. They are also rushing forward with mandatory consolidation into Regional Education Districts that they believe might save a little money (but almost certainly won’t). Looking ahead, they have now gone on record in favor of raising income taxes.

The Republicans blame the Democrats for raising property taxes, but if the Republicans were in the majority they’d have to do exactly the same thing – unless they could come up with some magical new scheme, about which they seem to have no clue.

There is an alternative: changing the ponderous and increasingly state-controlled monopoly school system to a model built upon parental choice and provider competition. That seems to be well beyond the imagination of either quarrelling party.

Leave a Reply

8 Comments on "John McClaughry: When imagination fails, raise school property taxes"


Comment Policy requires that all commenters identify themselves by their authentic first and last names. Initials, pseudonyms or screen names are not permissible.

No personal harassment, abuse, or hate speech is permitted. Be succinct and to the point. If your comment is over 500 words, consider sending a commentary instead.

We personally review and moderate every comment that is posted here. This takes a lot of time; please consider donating to keep the conversation productive and informative.

The purpose of this policy is to encourage a civil discourse among readers who are willing to stand behind their identities and their comments. VTDigger has created a safe zone for readers who wish to engage in a thoughtful discussion on a range of subjects. We hope you join the conversation.

Privacy policy
Sort by:   newest | oldest | most voted
Dave Bellini
2 years 9 months ago

Vermont needs a property tax cap.
We need Proposition 13 to happen in Vermont. The only way to control property taxes is to first reduce them, then to cap them. Then the education community would be free to argue the best class size, the best new program, how to expand special ed. and anything else but the bank would be closed.

Peter Everett
2 years 9 months ago

How about Massachusetts Prop 2-1/2, enacted in 1980. Unions stated the collapse of Education then. Now, it’s one of the top states in the country.
Yeah, there were some layoffs, class size grew a bit, funds were cut, etc. It wasn’t devastating as the Unions said it would be. How to I know? I was a MA teacher from 1971 – 2006.
Don’t let the NEA or politicians blackmail you. I found out that the Union is concerned about one thing only….it isn’t the children, it’s themselves. As for politicians, I don’t think I need to say anything.

Wendy wilton
2 years 9 months ago

Peter thanks for your insight. I think you are right. If a cap or a student:teacher or staff:student ratio were imposed, the system would adjust and go forward. I think John makes a good point also in the impact of parental choice: ultimately this would shift the dollars to the schools that perform the best for the students. If both spending controls and choice were enacted it would be meaningful.

Paul Richards
2 years 9 months ago

“Don’t let the NEA or politicians blackmail you. I found out that the Union is concerned about one thing only….it isn’t the children, it’s themselves.”
Well said Peter. As long as we have public sector unions we will all be subject to blackmail. The system works great for the union and the politicians that benefit from their revenue. The kids and the taxpayers? not so much. Why do you think they are so afraid of charter schools?

Jamie Carter
2 years 9 months ago
I think John is spot on with school / parental choice. School choice will allow parents to place their children in a school that they feel best fits their needs. And their are a range of ways schools could distinguish themselves to compete for students. That said, I believe the state using an educational income tax primarily is a much more equitable way to fund education. People will cry over it taking away local control, but the fact is there is no local control NOW. Money goes to Montpelier and then redistributed. Further, by drastically lowering property taxes, it allows… Read more »
Janice Prindle
2 years 9 months ago
A tired bunch of conservative complaints and the same old same old fantasy that the myth of a free market, applied to schools, will solve everything. When it’s actually the “free” market that has driven up the costs of schools: health insurance (as the largest part of personnel expenses), fuel, technology– and it won’t be any different for independent schools (I know because I taught at one). When education is not a commodity you are required to purchase, but a social covenant upon which the future of a civilization depends, and we have a moral obligation to do all we… Read more »
Paul Richards
2 years 9 months ago
So schools and health insurance are examples of the free market? Maybe I have been misinformed all these years but it seems to me that both are far from examples of the free market. Public sector unions are nothing but a forced monopoly managed by the unions and the government with no real involvement from the tax payers. Health insurance, the last I knew was and has been a government regulated industry. One of the reasons why it is “the largest part of personnel expenses” is because we have all been bribed into continually funding better health insurance plans for… Read more »
Ed McFarren
2 years 9 months ago

You give far too much credit for original thought to the legislature. There’s always some nameless, faceless bureaucrat from the education department with a magical scheme to save the public system “for the sake of the children.” Can’t help wonder how much that magical system will cost us.

Thanks for reporting an error with the story, "John McClaughry: When imagination fails, raise school property taxes"