Just after the stroke of midnight on Saturday morning, state lawmakers passed the property tax bill necessary to pay for schools. The vote was 93 to 44 in the House and 18 to 8 in the Senate. Negotiations over the legislation, which will see taxes climb by 13.8% on average, stretched into the final hours of the legislative session.
Gov. Phil Scott is expected to veto the tax bill, and the evening’s vote totals suggest it is unclear whether lawmakers will be able to override him when they return for a special veto session in June.
“I’ve been clear. Vermonters simply cannot afford a historic double-digit property tax increase,” Scott said at his press conference Wednesday.
The rising cost of Vermont’s prek-12 system has dominated debate at the Statehouse this year. A spike in spending, coupled with the retreat of federal Covid-era aid, created a perfect storm, and nearly one in three school budgets failed on Town Meeting Day.
Property taxes were initially predicted in December to rise an average of 18.5% this year, but three factors — new revenues, surplus funds, and lower school budgets — reduced that figure to 13.8%.
Following a string of budget failures at the ballot box, school boards trimmed their spending plans by nearly $24 million. With this tax bill, lawmakers are also removing the sales tax exemption on software accessed remotely — like Turbotax — and enacting a 3% surcharge on short-term rentals, which will together raise a combined $26 million in ongoing revenue for the Education Fund.
The state’s revenues also continue to surpass expectations, which allowed lawmakers to use an additional $25 million in one-time surplus funds from the general fund, and another $44 million in the Education Fund to further take the pressure off property taxes.
All told, that means lawmakers are using just under $70 million in one-time money to help soften the blow to property taxpayers this year. That sum concerns even the tax bill’s supporters, because it risks creating a fiscal cliff next year.
“I'm really, really concerned and it is very difficult for me to vote for these one time funds buying down rates,” Rep. Laura Sibilia, an independent, said in floor speech. “We know that these types of buy-downs exacerbate the ongoing problem. This is part of what has gotten us here — is the administration and legislature continuing to do this year after year.”
Taxes were at one point earlier predicted to climb above 20%. But a legislative intervention mid-way through the session, which axed a tax break that many believed to be partly driving spending, helped head off that worst-case scenario.
The tax bill also includes one-time credit for Vermonters who pay their property taxes based on income to help offset this year's increase.
The legislation puts back into place a tax penalty for school districts whose budgets climb over a certain threshold, but Scott and his Republican counterparts in the Legislature have heavily criticized the bill for not doing more to limit spending.
“I cannot support a bill that has zero structural change in it. Zero. We are doing nothing for the next year. I cannot support this bill with a double digit property tax increase,” said Republican House Minority Leader Pattie McCoy. “Yes, it is an average. But that average means that some people may be paying 5% — but other people are going to be paying upwards of 25 to 30% increases.”
Lawmakers are using the tax bill to set the stage for much larger reforms in the coming years. It creates a Commission on the Future of Public Education, which will be required to release an interim report on cost containment ideas this December, ahead of the upcoming legislative session. A final set of recommendations for a comprehensive overhaul of the state’s education system is due the following year.
“We know the field is ready like never before to have the tough conversations, to sacrifice the sacred cows and to do what it takes to have an educational system that brings people to Vermont — not drive them away due to the cost,” said Democratic Rep. Peter Conlon, who chairs the House Education Committee. “But the actions we decide are necessary must be done with stakeholders, not to them. And that is really the goal of the commission.”
The governor had proposed that lawmakers more aggressively buy down property taxes by using even more one-time money — and then ask school districts to repay some of it over several years. Lawmakers quickly set Scott’s idea aside, however, after Vermont’s treasurer testified that it would imperil the state’s credit rating.
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