[T]he House of Representatives approved property tax rates for next year. The proposal decreases the non-residential property rate and slightly increases the residential rate.
Today’s voice vote on the education tax bill, H.843, set the property yield at $9,701 and the income yield – for those that pay using income sensitivity – at $10,870. The penny rate will still be used to calculate the nonresidential property tax for commercial property and second homes. Under the current education tax proposal, the rate would be reduced from $1.59 to $1.53 per $100 of assessed property value.
Republicans issued a press release blaming Democrats for the two-tenths of a cent increase for residents. The House GOP says the hike in rates is a result of Democrats’ decision to increase the allowable growth percentage caps by 0.9 percent. In the fall, communities asked lawmakers to repeal or adjust the spending caps to accommodate cost increases that were beyond school boards’ control, such as health care, previously negotiated salary increases and special education costs.
During the Republican caucus held before the vote on the yield bill, Rep. Scott Beck, R-St. Johnsbury, a member of the House Committee on Education, said that the change in Act 46 probably cost everybody in the state a penny. For the average household the tax increased “ever so slightly” by two-tenths of one penny and for those who pay the nonresidential tax their costs decreased by half of a penny, according to Beck.
Rep. Don Turner, R-Milton, House minority leader, reminded those in the room that the Republicans’ No. 2 priority for this session was to rein in education spending and decrease property taxes.
“If you believe in those priorities we put out there then you know how you have to vote on this bill,” Turner said. “If they had stuck with us and not screwed around on Act 46 you could have gone home and said we lowered your property taxes.”
Education spending is down from previous projections and previous years. Lawmakers were expecting an increase of 2.5 percent in education fund spending, but after the budgets were passed by towns, the increase was only 1.5 percent. Many school boards had already completed their budgets by the time lawmakers acted to modify the AGP.
The yield formula for the statewide homestead property tax is part of Act 46, which was enacted last year. The new calculation, which takes into account educational funding outlooks, will be in use for the first time in the coming fiscal year.
Lawmakers say the yield calculation for the statewide homestead property tax is more transparent because it shows how much local districts are spending per student and because it is tied to a fixed rate of $1 per $100 of property value.
The statewide yield rate, or “property dollar equivalent yield,” is the product of the total revenues in the education fund, minus spending on programs not directly related to kindergarten-through-12 public education, divided by the total number of students in Vermont schools.
The locally adjusted tax rate is based on the difference between how much each district chooses to spend per pupil and the statewide yield rate.
Two amendments were considered during deliberations over H.853, one was offered by Rep. Cynthia Browning, D- Arlington, and the other by Rep. Oliver Olsen, I-Londonderry. Both were rejected.
Browning hoped to change the way the tax incentives for merging school districts were paid. School districts that choose to merge are eligible for a series of tax incentives from 10 cents down to 2 cents based on the timing of the merger and the type of governance model they choose. Currently, the money comes out of the education fund and Browning wanted to take the incentive monies from the general fund instead.
“This amendment will require the state to take responsibility for its own policy decisions rather than shifting them onto the taxpayer. If you support this amendment, property taxes will be lower for everybody. If you don’t support this you are ensuring they will be higher even for merging districts,” Browning said.
Rep. Adam Greshin, R-Warren, spoke against the amendment, telling lawmakers that “the incentives in Act 46 do not cost the education fund one penny, not a penny!” Greshin said incentives are paid for with a cost shift within the education fund. Earlier, during the Republican caucus, Greshin said that the two funds have different sets of taxpayers. The education fund is broad based while the general fund is paid into almost entirely with taxes taken from Vermonters, according to Greshin.
After Browning’s amendment failed, Olsen proposed another that dealt with cost-containment.
In FY 2020, H.853 changes the excess spending threshold from 121 percent to 119 percent of the 2014 per pupil cost minus exclusions such as special education and school construction costs and adjusted for inflation. Districts that cross the threshold will be double taxed on each additional dollar spent.
Olsen’s measure would have suspended the change for 2020 and require a study of the equalized pupil spending formula which he said is disproportionately hurting rural communities.
Olsen said that he supports Act 46 but doesn’t believe that the resulting mergers will completely eliminate the disparity in economies of scale that exists between rural and urban schools. To prove his point, Olsen provided examples of two high schools, one urban (A) and one rural (B). “The urban school tax rate is $1.49, they have 12 AP [advanced placement] courses and 4 foreign languages. High school B has a tax rate of $1.74 and that is without a (excessive spending) penalty and for the privilege of operating a school with 195 equalized pupils with half the programs of the urban district they would have the pleasure of paying a penalty.”
Rep. Laura Sibilia, I- Dover, rose to support Olsen’s amendment. With emotion she said that she is working diligently in her community to implement Act 46 and bring better opportunities to students. “Equal dollars do not and can not provide an equal education in schools and classrooms of different sizes … this excess spending threshold hurts small and rural towns and it does not get after the cost containment that we all want,” she said, adding that since the thresholds don’t go into effect for three years, there is time to perform a long overdue study such as this.
Representing House Ways and Means, Greshin said that the lower excess spending threshold doesn’t kick in for three years. In the meantime, school districts have time to prepare for it, he said.
“The number of school districts and the education landscape we see today will not be the same landscape we see in three years,” Greshin said. “So many schools and school districts that may be struggling to stay below the excess spending threshold today may not be a school district three years from now, they may be part of a larger body with more resources and more students against whom to amortize the costs.”
Olsen’s measure failed.
Other notable changes in the education tax bill include:
• Terms for merging school districts that have debts.
• A mandate that the education secretary require school districts to report surpluses and reserve funds.
• Creation of a study committee to look at a common level of appraisal for merged districts so taxpayers from different towns in the new district all have the same tax rate.
• A request for annual outlooks on projected education revenues and expenses to be prepared and presented by the Joint Fiscal Office.
• A study of education spending, including impacts of potential changes in the statewide education property tax.
