In the waning days of the 2017 legislative session, a Rochester lawmaker tried to buy more time for a provision that allows small schools to artificially lower tax rates, but the House didn’t go for it.
Rep. Sandy Haas, P-Rochester, proposed an amendment that would have given school districts one more year before the state starts reducing the percent of “phantom students” they can claim in order to maintain lower rates.
As districts work to comply with Act 46, the loss of the phantom student provision is one of the hammers hanging over them, according to Haas.
“I would like to give one more year to all the towns in Vermont with phantom students,” Haas said. “I think that is fair. If we are going to ask schools to get together … we shouldn’t put them in a death spiral in the year it takes to merge.”
The Rochester school has 126 students in grades K through 12, and only 37 are in high school. Just weeks ago, a school district merger of Rochester, Bethel and Royalton was defeated by voters in Royalton.
Rochester has to figure out another path forward by July if it wants to garner any tax incentives. Its small-school grant is also threatened by a failure to merge. As a result of the vote and the loss of phantom students the district can count, its taxes are projected to increase.
The state of Vermont collects taxes for schools statewide, and when towns exceed a certain spending threshold, taxpayers must chip in more locally. The money from the state education fund is then redistributed to towns based on a per-student rate.
The problem is, many schools in rural areas of the state have seen a significant decline in student enrollments.
The state protected small schools and local taxpayers from a reduction in reimbursements through a program that allows schools to count a certain percentage of “phantom students.” Under a provision in statute, the pupil count could drop a maximum of 3.5 percent a year.
Act 46, the district merger law passed in 2015, allowed that practice to continue for a short period of time and then required a three-year phasing out of the phantom student program. Starting this year, schools must absorb up to 10 percent of a drop in pupil count. The following year the percentage goes up to 20 percent. The third year the phantom student program is phased out altogether.
Rep. David Sharpe, D-Bristol, chair of the House Education Committee, said he would be more sympathetic if Rochester didn’t spend so much per pupil. “We are talking about a community that benefited from the inadvertent language in the original phantom student provisions that allowed the 3.5 percent stopgap to expand over time so this community now has 40 percent phantom students and an actual cost of over $27,000 per pupil.”
Delaying the hold-harmless provision for a year would have a significant impact on the statewide homestead tax rate, and the yield — a figure used in the calculation of local tax rates — would have to be adjusted, according to Sharpe.
“Rochester benefited from this provision for a decade or more, and I think that it is prudent we ask communities to actually spend the money per pupil for the actual pupil in their seat rather than the pupils that didn’t show up or were no longer enrolled,” he added.
The House Education Committee voted 10-0-1 against the proposal, and Sharpe urged the House to do the same.
The amendment was rejected with a voice vote.
