[P]er-pupil spending is growing faster than Vermont’s economy or wages, and the average tax rate is going up 9.4 cents, or 7 percent on average, for both homestead and nonresidential property taxpayers. Those who pay on income can expect an increase of more than 2.65 percent, according to the tax commissioner.
That’s just the state’s share; local increases could be higher.
The state increase means the owner of a house worth $250,000 will see taxes go up $235 next summer.
The Agency of Education is projecting spending on schools for fiscal year 2019 to grow by 3.52 percent, or $46 million. Last year, spending increased 3.1 percent, the year before, when allowable growth spending thresholds were in place, it was 1.4, according to a spreadsheet from the Joint Fiscal Office.
The administration is blaming school districts for the 9.4 cent increase in the tax rate and is silent about agreeing with the Legislature about the use of one-time money in fiscal 2018 taxes that left a gaping hole in the education fund. There is no one-time money available this year to fill the gap.
“The projected 9.4 cent average increase in education property tax rates is primarily driven by an anticipated 3.52 percent increase in education spending statewide,” the press release states.
A Nov. 9 memo from the Joint Fiscal Office sheds more light on the cost drivers behind the tax hike.
- Use of more than $26 million in one-time money to lower taxes is responsible for about 3 cents of the overall 9.4 cent increase in the state tax rates.
- Use of $9 million in reserves, refilling to 5 percent as required by law in the estimate, cost about 1 cent.
- An anticipated 3 percent increase in school spending adds 5 cents.
In a letter to school boards, Gov. Phil Scott asked districts to limit growth in spending to 2.5 percent — that’s the rate of Vermont’s economic and wage growth. But the rate of inflation for education is 2.9 percent, and teacher health care costs are expected to go up 10 percent to 17 percent.
Tax Commissioner Kaj Samsom said the increase “sobering” and urged local action. “The cost of our education system will not adjust to our demographic trajectory absent other efforts and interventions,” he said.
Per-pupil spending increased from $15,367 to $15,966. As student enrollment declines, it costs more to pay for school infrastructure, and because students leave unevenly across the state, school boards can’t always reduce teaching staff.
A key part of the school funding formula is the “yield,” defined as the amount of money generated by $1 of property taxes per $100 in real estate value.
The yield, a key benchmark in calculating local rates, is set at $9,842 for homeowners who pay based on property value, and $11,862 based on income. That works out to $1.594 per $100 of assessed property value for those who pay on property and 2.65 percent for those who pay based on income.
For second home and business owners, the rate will be $1.629 per $100 of property value.
Samsom said local districts could reduce the projected statewide rates by spending less. “Local voters have the final say on what they see in their property tax bills.”
If a district keeps per pupil spending flat or allows only modest growth it will see a much less “severe increase to its education tax rate,” Samsom said.
CORRECTION: The tax increase based on income is 2.65 percent, not 7 percent, as originally stated.
