The average education tax rate won’t hold steady and is instead set to rise a penny after school spending came in higher than expected.
Lawmakers have hashed out a deal on the so-called “yield” bill, upon local property tax rates are set. The average residential rate will be $1.51 next year (it was $1.50 this year) and the average non-residential rate, which is applied to second homes, camps, and businesses, will be $1.59 (it was $1.58 this year). About two-thirds of Vermonters actually pay property taxes based on income – that rate will actually fall, from an average of 2.48% this year to 2.47% next year.
Vermont Tax Commissioner Kaj Samsom had projected in December that spending would grow by 3.2 percent and that, thanks to underlying growth in incomes and the grand list, tax rates would remain flat.
But the budgets approved by voters on Town Meeting Day went up more than projected. All told, education spending went up by $56 million, and special education costs rose $14.5 million, for an overall increase of more than 4%.
“There’s some concern that schools spent more than they were told they should in order to achieve no tax increase. And so we’re delivering a slight increase,” said Senate Finance Chair Ann Cummings, D-Washington.
The $1.7 billion fund that pays for the state’s preK-12 schools receives the bulk of its revenues from property taxes. But a slew of other taxes also feed the fund, including sales and use taxes, whose revenues are set to grow by $28 million, in large part because of expanded online sales taxes.
The House had gone into negotiations over the yield wanting to use all $19 million in surplus education fund dollars to buy down property tax rates. The Senate wanted to use $9.5 million to buy down rates and the other $9.5 million to carry over as a cushion. Lawmakers ultimately split the difference and opted to use a little over $14 million from the surplus to buy down the rate; $4.6 million will get carried over.
That approach is appreciated in the governor’s office, said Rebecca Kelley, a spokesperson for Scott.
“Pressure on property tax rates is, in large part, a product of local budgets being passed by voters. However, as the Governor remains committed to lessening the tax burden on Vermonters, he supports the legislature’s efforts to mitigate the impact of those decisions,” Kelley wrote in an email.
Education property taxes were one of the most controversial items of contention last session, when an impasse between the Democratic Legislature and Scott over school spending nearly led to a government shutdown.
But the governor has mostly stayed out of the fray this session. He suggested using new online sales taxes to fund a boost to child care subsidies, but key lawmakers rejected the idea early in the session as a raid on the education fund and the idea got no traction at the Statehouse.
And lawmakers, too, considered tinkering around the edges of the ed fund, but ultimately made no changes. A proposal to pay for dual enrollment entirely out of the education fund (its costs are currently split with the general fund) was picked up by the Senate, but rejected by the House. An idea to divert meals and rooms taxes from the fund to help pay for clean water projects was floated in the waning days of the session, and quickly discarded.
“I think it’s been good where we’ve had a year where this has been not as controversial,” said House Ways and Means Chair Janet Ancel, D-Calais. “We still have a concern about spending growth. We have a concern about property taxes. We’re watching all these things very closely.”
