One of the most challenging issues for this year’s legislature will be to address the dissatisfaction over high and rising property taxes. Whatever plan they come up with, it’s important to understand how we got to the current situation.
Twenty years ago Vermont spent ten percent more than the average state to educate each student in our schools. By the mid 2000s, the gap had increased to 35%. Today Vermont spends about $18,000 per student, 70% more than the national average of about $12,000.
Over the past decade Vermont’s per pupil spending has grown faster than all but one other state. And our total education spending has also grown faster than almost every other state, so our high spending per student is not just a reflection of the 20% decline in the number of Vermont students.
The most important reason for the rapid growth in education spending was the passage of Act 60 nearly two decades ago. That law essentially put education on sale in Vermont by significantly reducing the impact of higher school spending on property taxes for a majority of homeowners. Not surprisingly, when the price of education went down, Vermonters bought more of it.
The housing boom of the early 2000s also contributed to spending growth. As housing values rose, property tax revenues increased without any tax rate increase - indeed just the opposite occurred. The legislature lowered statewide property tax rates and still got more tax revenues - a politician’s dream. When the housing boom ended, that free source of tax revenue died with it.
Today we’re seeing the combined effects of rising school spending and a stagnating property tax base.
If the legislature diagnoses the problem as one of high property taxes, it will only shift the problem to some other tax. If our representatives correctly diagnose it as a spending problem, the solution becomes much more complex.
If our high spending growth was caused by reducing Vermonters’ property tax burdens, then to effectively reign in spending Vermont taxpayers have to feel the full effects of what they are voting to spend on their schools. And that means higher property taxes, which in turn will put pressure on school boards to figure out ways to cut spending in ways that best suit local conditions.
That may be a non-starter politically. But cost controls imposed by Montpelier, a solution our politicians are likely to embrace, will only shift the spending problem to somewhere else. And that, in the long run, will cause all sorts of other problems.
