A step taken last week to freeze education property tax rates for the coming fiscal year was partly scaled back by the House Ways and Means Committee on Thursday.
Rep. Johannah Donovan, D-Burlington, ranking member of the committee, made a motion to increase the nonresidential rate by a penny, but leave the base homestead rate at this year’s level.
Donovan’s motion was approved. Three members of the committee voted against the proposal: Reps. Adam Greshin, I-Warren; George Till, D-Jericho; and William Canfield, R-Fair Haven.
Canfield said he couldn’t support the increase because voters sent a clear message on election day. “On Nov. 4th, John Q. Public said, ‘Don’t raise my taxes,’” he said.
Donovan proposed the increase in the nonresidential because she was concerned about dipping too far into the education fund reserve. A freeze on the nonresidential and residential rates would have lowered the reserves to just shy of 4 percent. Adding a penny to the nonresidential rate keeps the reserve fund at 4.6 percent.
State statute requires an Education Fund reserve of between 3.5 percent and 5 percent.
“If we’re going to freeze the base rate for homesteaders, I think we should freeze it for non-homesteaders,” said Greshin.
The penny increase on nonresidential rates, Donovan said, means, “We can still say that we’ve addressed the property tax issue.”
The rates this year are 98 cents on $100 of property valuation for homestead payers, and $1.525 for non-homestead payers.
The homestead rate is variable, depending on local spending, while the non-residential rate for second homes and commercial property is fixed.
The increase in the non-residential rate was one of several amendments the Ways and Means Committee drafted in response to the House Education Committee’s education governance bill, H.361.
The base homestead rate is increasing from 1.80 percent to 1.94 percent this year, which means property taxpayers who benefit from the state’s income-based prebate program will pay more.
Big ed bill passed
After deciding on the money pieces of the bill, including the tax rate, members voted it out of committee as amended in an 8-3 vote, with Reps. Canfield, Till and Patti Komline, R-Dorset, voting no.
Rep. Janet Ancel, D-Calais, chair of Ways and Means, said the vote did not indicate a position on the spending cap amendment that will be made by the House Education Committee.
“There is a separate amendment that will be offered on the floor on the caps and that will be decided,” Ancel said. “I don’t think this committee has to take a position.”
The House Education Committee late Wednesday approved a variable 2 percent spending cap that would force school districts to restrict their spending increases to 2 percent more than the prior year’s equalized per-pupil spending or the prior year’s overall education spending.
Komline voted against H.361 mainly because of the cap.
“âThis bill inflicts a hard cap on spending without considering the effects of mandates the state imposes on schools,” she said. “Among school board budget challenges are special ed needs and contractual rising employee health care costs and mandated pre-K programming. The consolidation initiative will be mandatory and could also increase taxes for some districts.”
Rep. Sam Young, D-Glover, didn’t support some pieces of the proposed legislation, but he said, “We did our section on the money here, we need to set property tax rates, we need to move this bill forward.”
The Ways and Means amendments agreed can be found here.
Ways and Means also weighed in on the tax rate incentives built into the bill and a change in the formula for how tax rates are set.
Spending cap explained
The variable 2 percent cap is aimed at reeling in local school spending for the three years of the cap. After it sunsets, it is expected that regional school systems will be in place that will create more efficiencies.
Rep. David Sharpe, D-Bristol, chairman of the House Education Committee, said the spending cap provision, as amended, puts pressure on schools cut the number of employees in schools.
Vermont’s average student to staff ratio is 4.67 to 1.
“The real solution is finding ways to reduce staff in our school system in its entirety,” he said.
Crafting budgets that stay within the cap limit will involve painful decisions, but that is its point.
“These communities are losing students, they have been losing students for some time,” Sharpe said. “You have got to find a way to reduce staff in light of losing students.”
CORRECTION: The base homestead calculation for income sensitivity is based on a percentage rate, not on a dollar amount as originally reported.
