Elected officials across the political spectrum have vowed to deliver property tax relief to Vermonters next year, and they’re about to find out how difficult it’ll be to keep that promise.
Next week, the Department of Taxes will issue a highly anticipated letter that will give lawmakers, school boards and the public their first look at how much property taxes are expected to rise next year. That projection will figure heavily in the upcoming legislative debate over how to contain education costs that led to a nearly 14% increase, on average, in property taxes this year.
“Preliminary estimates suggest projected property tax rate hikes could again be in the double digits,” Senate President Pro Tem Phil Baruth said this week. “We in the Senate are deeply concerned about this potential repeat of last year’s spike.”
If the cost drivers are not addressed, we’re going to be in a situation where districts are receiving less funds and having the costs increase. And that is only going to hurt students.Sue Ceglowski, Vermont School Boards Association
The Department of Taxes, Agency of Education and fiscal analysts for the Legislature have been working together in recent weeks to try to gauge where property taxes may be headed. Their findings are based on preliminary budget numbers from school districts, as well as known increases in fixed costs, such as teacher health care plans, which are expected to jump by 12% next year.
The annual consensus estimate — known in Montpelier as the “Dec. 1 letter” — is required by statute. And Tax Commissioner Craig Bolio said it’ll be an especially important document for school boards as they try to figure out how the local budgets they’ll put to voters on Town Meeting Day are going to impact property tax obligations.
“Districts are working sort of in a vacuum on doing their budgets right now,” Bolio said. “But because we have a statewide education fund, inputs all around the state have an impact on what happens to yields and statewide tax rates.”
Brattleboro Rep. Emilie Kornheiser, the Democratic chair of the House Committee on Ways and Means, said school boards will play a key role in determining what happens to education spending and the property taxes that help pay for it. But she said elected officials will be devoting much of the upcoming legislative session to more systemic cost-containment initiatives.
“There isn’t just one thing we can do. There isn’t a magical solution,” Kornheiser said. “If this was easy we would’ve done it years ago. We’ve been sort of slowly moving towards the point that we’re at for a long time, and it’s going to take significant work to unwind it.”
Education costs in Vermont have risen even as student enrollment has declined. In 2016, Vermont spent about $1.5 billion on the K-12 education system. This year, that figure will top $2.3 billion. In the last two fiscal years alone, property tax revenue collected from homeowners, businesses and other payers has surged by about $265 million.
Kornheiser said the Legislature established a special commission earlier this year to get a better sense of what’s driving those costs. That commission will deliver recommendations to the House and Senate in January.
“And what can we do about it in order to make sure that kids have quality education, families are supported, and we have a system that we can all afford?” Kornheiser said.
Republican Gov. Phil Scott has proposed a number of cost-containment measures during his eight years in office. Those include imposing a hard cap on staff-to-student ratios in schools and requiring school employees pay a greater share of their health care benefits. Earlier this year, Scott suggested getting rid of universal free school meals, which would shave about $25 million a year from the education fund.
Democratic lawmakers haven’t embraced any of those proposals. And because they’ve had a supermajority in the Legislature, even when Scott vetoed the bills that set statewide property tax rates, lawmakers overrode him.
Democrats have since lost those supermajorities, largely because of a revolt on Election Day over the issue of property taxes. Senate President Pro Tem Phil Baruth said he’s now ready to hand the policy reins over to Scott, and let the governor lead the way on a serious property tax reform plan.
“I am trying my level best to indicate to the governor that I want to work with him on the large scale of things, so not a couple of tweaks here or there and then we try to get out of the session,” Baruth said. “Let’s address this problem together at the beginning and show people that that’s possible.”
Sue Ceglowski, executive director of the Vermont School Boards Association, said her members are paying special attention this year to the intersection between school spending and property tax rates. And she said the Dec. 1 letter will inform their budget deliberations.
“It provides them with a forecast of key numbers in the tax rate calculation for their district based on the budgets that they have under consideration,” Ceglowski said.
More from Vermont Public: How does Vermont pay for schools? A video explainer and glossary of terms
But Ceglowski said districts are contending with intense student needs, inflation, skyrocketing health care costs and deteriorating facilities that need hundreds of millions of dollars in improvements.
The spending increases Vermont saw last year, according to Ceglowski, are a symptom of deeper root problems. And she said if elected officials in Montpelier enact top-down mandates that force districts to cut spending before solving that problem, then the consequences could be severe.
“If the cost drivers are not addressed, we’re going to be in a situation where districts are receiving less funds and having the costs increase,” she said. “And that is only going to hurt students.”
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