Education tax rate rising, despite less students
By Neal P. Goswami
VERMONT PRESS BUREAU | January 30,2014
MONTPELIER — A House panel received an update Wednesday on why the statewide education tax rate is projected to rise, despite declining enrollment around the state.
This is a trend lawmakers have been aware of for several years, and the discussion over potential solutions appears to be more focused this year. But while the debate is crystallizing around the issue of income sensitivity, it does not appear any major action is on the table for this session.
Lawmakers are expected to increase the base education tax rate by 7 cents, from 94 cents to $1.01 for every $100 of assessed property value. That base rate must rise to cover the increased cost of education spending, which is rising because of several factors, Mark Perrault, senior fiscal analyst for the Joint Fiscal Office told the House Education Committee.
Perrault said the education fund had a $19.3 million surplus it used in fiscal year 2014 to offset education spending. That one-time source of funding will not exist in fiscal year 2015, he said.
“One big factor that’s out there is we started (fiscal year 2014) with a $19 million surplus,” he said. “So, right from the get go, even if schools kept their funding flat, we’re looking at a 2 cent increase.”
The total number of pupils in Vermont continues to decline, according to Perrault, but statewide education spending is projected to increase by 3.8 percent, or about $46.5 million, in the 2015 fiscal year. Other education fund uses, particularly special education reimbursements, are expected to increase total education spending by an additional $10 million, he said.
Meanwhile, non-education fund sources have not kept up with the growth in education spending, especially a general fund transfer to the education fund. And the statewide education grand list is declining, meaning the cost of education is relying on a shrinking tax base.
The grand list is not projected to see positive growth until the 2017 fiscal year, Perrault said. “We’re not going to get any help from the next few years in terms of the tax base growing,” he said.
As a result, property taxes must therefore increase to cover the additional spending, Perrault told the committee.
The committee also heard testimony Wednesday from Montpelier Mayor John Hollar and Barre City Mayor Thom Lauzon, who pitched several ideas to address the rapid rise in education spending. The two mayors were representing a coalition of mayors from across the state.
Hollar said each community “only has so much tax capacity.” With property taxes rising each year to fund education, other municipal infrastructure needs will suffer, he said.
The mayors want the state to create an education cost reduction commission that would have the administrative authority to seek consolidation of schools and districts, Hollar said. Any savings could be reinvested in pre-k education.
“We’re not suggesting that we need to dramatically reduce our spending,” he said.
Additionally, the threshold for the state’s two-vote provision, which penalizes high-spending districts, should be lowered, Hollar said. The system “doesn’t capture enough districts to really make a difference overall,” he said.
Finally, the coalition of mayors wants to “create a stronger connection between local spending and tax rates.” Hollar said the state’s income sensitivity program creates a disconnect between the spending increases voters approve and what income-sensitized taxpayers must pay. “Voters need to have more skin in the game,” he told the committee.
Brad James, education finance manager for the Agency of Education, said the education fund is support by three groups — non-residential property owners, residential property owners who pay based on their property values and residential property owners who pay based on their income.
Despite the changes over time in how education costs are covered, James said he believes the system is working.
“I don’t think the system is broken. I think some things that have happened have made it more complex, but I don’t think the system itself is broken.”