Education taxes expected to rise
By Peter Hirschfeld
Vermont Press Bureau | February 17,2013
MONTPELIER — A “perfect storm” of increased spending, declining student enrollment and flagging property values could conspire over the next two years to create historic increases in the tax used to pay for public education.
The debate over taxes in Montpelier has until now focused largely on break-open tickets, gasoline, soda and health care. The arrival of projections last week detailing the tax implications of skyrocketing education costs, however, will soon steer legislators’ attention toward schools.
Rep. Janet Ancel, a Calais Democrat and chairwoman of the House Committee on Ways and Means, characterized as “staggering” the rate increases about to show up on the doorsteps of many Vermont homeowners.
Gov. Peter Shumlin on Thursday said there’s nothing he can do about the looming increases. If taxpayers have grievances, he said, they should take them to their local school boards, not Montpelier.
“Vermonters decide how much we spend on education every year when they go to town meeting and vote on school budgets,” Shumlin said. “Montpelier doesn’t make those decisions.”
A number of lawmakers, however, say the severity of the problem, and the speed with which it’s intensifying, demand intervention.
“On one thing I hope we all can agree, and that is that Vermonters are not ready for this one-two punch in property taxes,” said Rep. Heidi Scheuermann, a Republican from Stowe.
“People need to come together now and admit there is a problem with our current funding system,” she said.
Statewide education spending over the next two years is forecast to rise nearly $150 million, even as student enrollment, already on a decade-long decline, dips by another 2 percent.
The nearly 11 percent rise in spending, unveiled last week in projections tallied by fiscal analysts for the Legislature, would have a commensurate effect on statewide property tax rates. If the projections hold true, the base rate on homes would climb from 89 cents per $100 of assessed value up to $1 by fiscal year 2015.
The nonresidential rate is forecast to climb 12 cents over the same period, from $1.38 to $1.50.
Rep. David Sharpe, the ranking Democrat on Ways and Means, said that while the 5-cent rate increase for next year may be set in stone, projections for fiscal year 2015 are still “highly speculative.”
Those projections assume a 5 percent increase in school spending between next year and fiscal year 2015.
Education funding formulas are notoriously complex, and the statewide tax rate is one of several variables affecting homeowners’ bills. But it is among the most significant factors.
And it means that even taxpayers in districts that hold spending to the rate of inflation over the next two years could see a double-digit percentage increase in the real dollars paid to support public education.
“One of the problems we have in this system is that the financial impacts of spending decisions are no longer felt by the people who are making them,” said Rep. Adam Greshin, a Warren independent who also sits on the House Committee on Ways and Means.
Provisions like income sensitivity, many lawmakers argue, have insulated voters from the financial consequences of the budget increases they approve.
Democratic lawmakers tend to reject the notion that progressive tax policies have spawned a spendthrift electorate. Ancel said many taxed-out residents appreciate the impracticality of increased spending on a dwindling population of students. But when it comes their own districts, she said, they want the best education money can buy.
“It’s kind of like how people don’t approve of Congress but really like their own congressperson,” Ancel said. “I think people are legitimately concerned about spending statewide, but they don’t want their kids to go to a school that isn’t of the highest quality.”
Lawmakers will consider a number of changes to the property tax code this year aimed not only at curbing education spending, but changing the way Vermonters pay for it. The more consequential reforms wouldn’t kick in until fiscal year 2015 — the school budgeting process creates a 12-month lag in any property tax legislation.
Efforts to reduce spending could include stiffer financial penalties for higher-spending towns, the elimination of special grants for low-enrollment schools, and the continuation of the “two-vote mandate,” which requires a second vote for school spending above the rate of inflation (the provision is scheduled to sunset).
Other measures on tap would look to redistribute the tax burden in a way that increases the share borne by people making less than $90,000. Households in that income category pay school taxes based on their income as opposed to house value, a perk that often lowers their taxes considerably.
Legislators will also consider capping the value of homes that qualify for income sensitivity, and lowering the income threshold needed to qualify for it.
Also up for debate is the nonprofit sector, and whether buildings owned by universities, fraternal organizations or other not-for-profit groups should continue to enjoy their blanket exemption from property taxes.
Scheuermann and others will push for more systemic reforms, including the mandated consolidation of supervisory unions and an overhaul of the education funding formula.
Ancel said there are no easy solutions.
“There may be some things we can do to help the trend stay lower than it would be otherwise, but I don’t think we have any magic answers,” Ancel said. “I don’t think we want to take over local decision-making, and I don’t think Vermonters want us to.”