The House Ways and Means Committee approved a key education bill Friday that also included setting the homestead property tax rate.
Lawmakers approved the so-called “yield” bill 10-1, using the same formula that has been in place for the past year. At the same time, they threw out a proposal that would have changed the way the education tax is calculated and set up the possibility that dueling tax bills could be considered on the House floor.
“Ye old yield,” as Rep. Kurt Wright R-Burlington, referred to the formula established with Act 46, sets the property yield at $10,077 and the income yield at $11,851 for those who pay based on income for fiscal 2018. The non-residential property tax rate will be set at $1.555 per $100 of assessed property value.
In December the tax commissioner projected that the property tax yield would be $10,076 for property and $11,875 for income and that is what local school districts told voters on Town Meeting Day.
The Agency of Education’s preliminary estimates predict average spending per equalized pupil will be $15,380 in fiscal 2018.
This was the first year the yield formula was used, the calculation was tied to a fixed rate of $1.00 per $100 of assessed property value (and a 2 percent multiplier for those paying on income). 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 pre-K to 12th grade 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 decides to spend per pupil and the statewide yield rate.
Last week, a divided House Education Committee voted 8 to 3 on H.509, a bill that would have changed the way the education tax was calculated and would have set just one yield and a residential tax rate.
Ways and Means chewed over the proposal that was written by Rep. Scott Beck, R-St. Johnsbury, that he said would have brought fairness to taxpayers. because under the current system, low-spending school districts are subsidizing high-spending districts.
H.509 would have been gradually phased in over four years. In fiscal 2018 it would have set a statewide base per pupil spending amount of $13,111.
In year one of a four-year-phase-in, the calculation would be 80 percent of the per pupil base spending, or $10,489. After that it would ratchet up until fiscal 2021.
For this year, the rate would be calculated by subtracting $10,489 from the actual amount of per equalized pupil spending. The difference would be divided by the new statewide yield. The quotient would be added to the tax rate.
School districts spending $10,489 or less would have a tax rate of $1 per $100 of assessed property value. School districts spending more would have a higher rate, but the excess spending threshold penalties were dropped over the phase in — they would come back in fiscal 2021.
Rep. David Sharpe, R-Bristol, chair of the House Education Committee, told members of Ways and Means that the proposal would bring equity to the funding system. “Despite all the work we have done on Act 60 and 68, we still have school districts spending in excess of $20,000 per pupil and some spending $10,000 per pupil. That is a pretty wide disparity,” he said.
Sharpe said that students have different levels of education opportunities across the state. “Some get three science courses in high school and some get a dozen science courses. We have to work to bring further equity to the funding mechanism and opportunity for our students,” he said, adding that this plan moves in the right direction.
Members of Ways and Means were concerned that the proposal wasn’t a big enough change and wouldn’t really affect education spending.
Sharpe said in his experience the General Assembly makes incremental changes. He also said the Legislature has one lever to contain costs — pressure on school boards and taxpayers to pay attention to spending.
But the current system encourages districts to spend more because the education fund is subsidizing them, according to Sharpe.
“As long as we persist in subsidizing local taxpayers and school boards to spend over the base amount we have to pick up the costs. This moves in the direction of making school boards responsible for 100 percent of those costs,” he said.
Sharpe said a vote for the bill would take political courage and lawmakers need to decide if it is worth spending that political capital.
Committee members voted to spike the plan 9-2-0, setting the stage for possibly having dueling tax bills considered on the House floor.
The Ways and Means tax bill includes a provision that allows Act 46 study committees to deal with debt and assets in their reports and articles of agreement. A similar provision is in the Senate Education Committee’s Act 46 bill.
Their bill also would require the governor to add any unfunded education mandates to his budget recommendations. The Joint Fiscal Office would need to flag how much policies would cost local school districts to implement as lawmakers consider changes.
Rep. Cynthia Browning, D-Arlington, was the only member to vote against the tax bill. She said it didn’t do enough to rein in spending.
“Without real cost control or intent for cost control or something else it is really hard for me to vote for this bill,” she said.