The House on Thursday advanced legislation that would increase property tax rates for education in the next fiscal year by 7%, on average.
The legislation will now move to the Senate. And Gov. Phil Scott has made it known that he does not support the bill.
Public education in Vermont is primarily paid for via property taxes. But average education property taxes have risen more than 40% across the state in the last five years, which has prompted lawmakers to embark on a wide-ranging effort to reform the system and rein in costs.
Like last year, the legislation, H.949, relies on surplus General Fund dollars to buy down property tax taxes. This year’s bill uses roughly $52.5 million in one time money, as well as $22.3 million in unallocated education funds, to buy down property tax rates for fiscal year 2027, which begins on July 1.
But the bill also reserves a little more than $52 million to buy down property tax rates next year, bucking the governor’s proposal to use the full $105 million to lower property tax increases this year.
Wednesday, lawmakers advanced the bill with 78 votes for and 61 against. Individual votes were not tallied during Thursday’s final House vote.
Rep. Emilie Kornheiser, D-Brattleboro, the House Ways and Means Committee chair, told House members on the floor Wednesday that her committee “doesn’t see a perfect solution in the short term to meet the revenue needs of our schools.” But Kornheiser asked members to support the bill nonetheless.
“We are balancing the immediate needs of taxpayers, the unstable future ahead of us and the pressing needs of our children, and we ask for your support,” she said.
School districts held overall spending increases to 4.15% this year, according to preliminary projections. But district leaders say they are running out of ways to contain costs, with the cost of health insurance, contracted raises and general inflation making it hard to rein in district balance sheets.
Scott, a Republican, has made it known that he does not support the bill, and suggested on Thursday that holding some funding in reserve for the following year was a disincentive to cutting costs in the future and may not be spent as envisioned.
“I get it, you know, you’d like to have some money for next year,” Scott said during a press conference Thursday. “But at the same time, when school boards hear that there’s another $50 million … waiting in reserves, I’m pretty certain that they’re going to spend it.”
Scott added that, “even if they put the $50 million away, it doesn’t mean that they’ll appropriate it and put it towards property tax relief next year.”
“We don’t know what’s going to happen in a year from now,” he said, “but we know what’s happening today.”
In his annual budget proposal, the governor called for using $105 million in General Fund dollars to reduce the 12% average property tax increase that was anticipated by state estimates in December.
And last year, Scott and the Legislature used $118 million to keep this year’s property taxes essentially flat on average.
During debate on the House floor Wednesday, Rep. Pattie McCoy, R-Poultney, proposed an amendment that would apply the full $105 million in General Fund dollars to buy down rates this year.
Vermonters, McCoy said, “simply cannot afford a 7% increase” to their property taxes, and the “conversation in this building should be about how to drive that percentage down as low as possible.”
A number of Republican House members spoke in support of the amendment. Rep. Zak Harvey, R-Castleton, said taxpayers need immediate relief and suggested the reserved funds for next year would send the wrong signal to school districts.
“If we tell (school) districts now, before they even start their budgeting for next year, that they have a $50 million cushion, much of that money will end up being spent and not returned to taxpayers as relief,” he said.
The amendment failed, with 85 House members voting against the amendment and 56 members voting in favor. The vote mostly fell on party lines, with Republicans and a handful of Democrats voting for the amendment.
Some lawmakers have argued that the continued use of one-time funds creates additional pressure on future rates the following year.
Rep. Angela Arsenault, D-Williston, said devoting the entire surplus to buy down tax rates with no plan for the following year, is a “political form of magical thinking.”
“It’s bad policy, and fiscally irresponsible,” she said.
