Editor’s note: This commentary is by David Jaqua, of Stowe, a retired engineer who is a 20+ year member of the Stowe Conservation Commission, recent chair of the Stowe Town Meeting Task Force, and previously held many other roles in the town and community.
[P]roponents of Vermont’s education finance laws have repeatedly said that all residential household school tax bills go up proportionately with spending. That was the promise. A vote to spend more causes all residents to pay proportionately more; the same proportion. This article will show that Act 46 breaks this promise.
Stowe recently approved a $11,932,700 school budget. What impact will this have on local school taxes under Act 46?
First consider a household that does not qualify for income sensitivity with a $400,000 homestead property value. The base tax rate is $1.00 per $100 assessed or 1 percent. The base school tax amount is $4,000.
The recently approved school budget is $15,011 per equalized pupil. Divide this by the state determined “property yield” and you get a 1.49 percent equalized tax rate. After adjusting for the Common Level of Appraisal (CLA), the actual property tax rate is 1.537 percent, which is 53.7% higher than the 1 percent base rate.
Because of a local decision to spend $15,011 per pupil, this household owes $2,150 more, for a total school tax bill of $6,150. This is 0.87 percent higher than it was last year.
Next consider an income sensitive household with a similar house which has a modified adjusted gross income of $85,000. The base tax rate is 2 percent. The base school tax amount is $1,700.
Take the same $15,011 and divide it by the state determined “income yield” and you get 1.264 percent. There is no CLA adjustment. The income sensitive tax rate becomes 2.53 percent, which is 26.4 percent higher than the 2 percent base rate.
Based upon the same local spending decision, this household owes $450 more, for a total school tax bill of $2,149. This is 5.67 percent lower than it was last year, assuming their income was the same.
Due to the same increase in per pupil spending approved by voters, notice that the property tax household had a greater percentage increase over the base tax rate than did the income sensitive household; 53 percent vs. 26 percent. It is twice as much.
Since Act 60 and up to Act 46, Democratic legislators have said education funding formulas abide by the following fairness principal. For a locally decided percent increase in per pupil spending above the base spending amount, all residential households within a school district have their tax rates and bills adjusted up by the same percentage.
In a 2014 VPR interview, House education committee chair Johanna Donovan states “if a town raises their school tax by 10 percent, people in the income sensitivity program see their tax burden increase by the same percentage.”
Act 46 breaks that promise. But they never actually lived up to it in the first place. Now it is far worse.
The state will say, “We did not change the statewide rate, so what is the problem? Nothing to see here.” Well, we the people are not that stupid.
The decision to spend more on our schools now results in vastly different percent increases for households that are income sensitive and for those that are not.
The increase alone in the property tax household’s bill, $2,150, is one dollar greater that the total bill, $2,149, of the income sensitive household. They paid nearly three times more in total. The income sensitive household paid 5.67 percent less than they did last year while the residential property household paid 0.87 percent more than they did last year.
Though Stowe’s per pupil spending and CLA are used in these examples, this analysis applies to any school district in Vermont.
I believe most Vermont residents support some form of tax relief for households with moderate incomes. Act 46 shatters the belief that the burden of education taxes is shared fairly.
Non-residential property owners fared the worst. The state set the statewide tax rate 2.65 percent higher than last year. After adjusting for the CLA, the tax rate will be $1.60.
For the five years ending with next year’s school budget, residential rates are projected to have increased by 7.66 percent and non-residential tax rates by 11.08 percent in Stowe. The income sensitive tax rate is projected to have decreased by 8.66 percent.
Meanwhile local education spending was up 27 percent over the same five years. What saved Stowe from similar rate increases? It was a 12 percent increase in equalized pupils. Per pupil spending increased by only 13 percent.
On a comparable basis, the statewide base income sensitivity rate will have gone down from 1.80 percent last year to 1.70 percent projected for next year if nothing changes. The rate is lower solely because of the value of the income yield set by the state.
The state will not tell you this fact directly. They have not published a pro forma comparison. Their purpose is to get people to think about the yields and not the statewide rates, which they have now fixed. But very few people understand the yields.
The state will say, “We did not change the statewide rate, so what is the problem? Nothing to see here.”
Well, we the people are not that stupid.
One of the stated goals in Act 46’s preamble was to “promote transparency and accountability.” The law and its implementation is a miserable failure in this regard. Vermont deserves better.
This setup is pernicious. Seventy percent of Vermont households benefit from income sensitivity. Many have lower tax bills than last year, because of the value of the income yield, despite spending going up. Under this circumstance, there is no disincentive for them to question any school budget.
Gov. Phil Scott can complain all he wants, but until something is done about the new yield adjustment scheme under Act 46, do not bet against increased spending every year.
