Every year, lawmakers must pass what’s commonly referred to as the yield bill — that’s the legislation that sets the property tax rates necessary to pay for school budgets.
Often, this is a pretty straightforward, uncontroversial process. But this year is not like that.
For this week’s edition of the Capitol Recap, Vermont Public’s education reporter Lola Duffort tells us how lawmakers in the House want to use this legislation to respond to double-digit property tax hikes.
This interview was produced for the ear. We highly recommend listening to the audio. We’ve also provided a transcript, which has been edited for length and clarity.
Mary Engisch: So, Lola, we’ve been hearing for months that Vermonters could see 18% percent property tax increases due to rising school budgets. Have lawmakers figured out a way to head off those spikes?
Lola Duffort: Somewhat! But not much. Which should not be a big surprise. Legislative leaders have been saying from the beginning that their options were pretty limited, because they can’t not fully fund school budgets, and property taxes are the primary mechanism for doing that.
But House lawmakers are nevertheless proposing to do a couple things in this yield bill: First, enact a 1.5% surcharge on short-term rentals, like Airbnb, and second, remove the sales tax exemption on prewritten software — things like QuickBooks and TurboTax. Collectively, that’ll raise a little over $26 million.
There was also a lot of concern this year that middle- and lower-income homeowners would get hit with a double whammy this year. That’s because the credit they receive to offset their property tax bill operates on a one-year lag. Usually, when taxes rise slowly year-over-year, that lag goes unnoticed.
But because tax bills are expected to rise so abruptly this year, the credit that those Vermonters would have gotten this year would not have matched this year’s increase. In an attempt to make them whole, the bill that advanced this week creates an additional property tax credit for them.
Mary Engisch: What does this all add up to, in terms of property tax relief?
Lola Duffort: The most recent estimates project that homestead taxes will rise an average of 15% while the average non-homestead bill will go up 18%. That’s not much lower than the 18.5% increases that were initially forecast.
I asked Emilie Kornheiser, the Democrat who chairs the tax-writing committee in the House, what she would say to someone who would argue lawmakers should do more. And her response was, what other tax do they think I should raise?
Kornheiser: We looked across our tax system and the revenue sources that we usually think of in relationship to the Education Fund. And we explored each of them and said, "Would this be sort of more progressive than the existing property tax system — than property taxes? And in most cases, the answer was no.
Mary Engisch: And lawmakers are also using this legislation to lay the groundwork for bigger structural reforms down the line, right?
Lola Duffort: Yes. It includes the creation of a Commission on the Future of Public Education, which will be tasked with recommending a soup-to-nuts overhaul of Vermont’s pre-K-12 system. And as a small stopgap, the legislation would also reenact a tax penalty, starting next year, for school districts that spend over a certain threshold.
The committee that was working on this bill on several occasions considered using this legislation to enact much bigger reforms right away. They considered completely overhauling education finance. They considered taking money out of district reserve funds. And ultimately, they decided they just didn’t have the time to properly vet these ideas. I heard this adage repeated several times: that you have to go slow to go fast.
Mary Engisch: Where does Gov. Phil Scott, a Republican, stand on all this?
Lola Duffort: He’s used this to absolutely hammer Democrats. He’s essentially said, Vermonters can’t afford this increase, and the Democrats are going to sit by and do nothing except raise other taxes. Democrats, on the other hand, have been asking all legislative session, Well, what’s his idea? Or is this our job alone to deal with this?
Mary Engisch: And has the governor proposed anything?
Lola Duffort: He finally did. Last Friday, his tax commissioner, Craig Bolio, came to lawmakers and pitched this kind of curveball idea. He said, what if the state pays for a portion of school budgets from some as-yet-unnamed pot of money? And then, over several years, we would ask districts to pay us back some of that money. And he added, we could also basically forgive some of this loan if they met certain improvement metrics. Like, for example, higher math scores.
Mary Engisch: What did lawmakers think of that?
Lola Duffort: Well, Kornheiser compared the idea to a payday loan for schools. But she went to Vermont’s treasurer, Mike Pieciak, to see what he had to say. And he testified to her committee on Monday that this would further imperil Vermont’s standing with credit rating agencies. So legislators pretty quickly set it aside.
Scott, in response, has basically complained lawmakers aren’t doing enough to give his idea a fair shake.
Scott: Well, then they ought to get creative and figure out a way to make it work without it affecting our bond rating. They’re smart people. They’re smart people.
So I think that pretty clearly illustrates the state of the relationship between Democrats and Scott right now. Which is a pity. Because Vermont has a really difficult problem on its hands, and clearly the Legislature and the governor are not able at this point to have a particularly productive exchange.
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