by Hilary Niles vtdigger.org Statewide base property tax rates might increase again ‘ by a nickel in 2015 ‘ to meet the rising cost of education. But in recommending the rate bump, Tax Commissioner Mary Peterson also suggests looking for a way to get schools to curb spending.
Mary Peterson, far right, at her appointment by Gov. Peter Shumlin, center, as tax commissioner in 2010.
Peterson issued her official property tax recommendation Tuesday afternoon: Base homestead property tax rates should go from 94 cents to 99 cents, she said; non-residential property tax rates should increase from $1.44 to $1.49. Peterson recommended no change to the homestead income tax rate of 1.8 percent.
The Legislature, which ultimately sets statewide tax rates, will consider Peterson’s recommendations when it reconvenes in January.
Lawmakers also might respond to Peterson’s urging that they consider ways to limit the growth of education spending from year to year. Her message echoes one she delivered to the House Ways & Means Committee at a recent pre-session meeting that focused on education finance.
Gov. Peter Shumlin on Tuesday also appealed to school boards to keep their budgets lean.
‘You have done your part to hold down spending levels in the past and I ask for your commitment to do so again,’ Shumlin said in a letter that accompanied Peterson’s.
He and others also have suggested that Vermont’s education funding structure has become antiquated. Student enrollment continues to decline at least 20 percent since 1997, he said. Yet spending continues to rise.
5-cent increase
Peterson’s suggested 5-cent increase is not just a matter of preference. If ever the nonresidential rate is eclipsed by the statewide average homestead rate, state law requires the tax commissioner to advise lawmakers on how to equalize the tax burden.
EDUCATION RATE’ LETTER See Shumlin letter below
That’s about to happen in 2014: After local homestead property tax rates are set ‘ usually higher than the statewide base rate, to match local education spending ‘ the average among them will catch up to the non-residential rate, which is unmoved by school budgets. The trend shows a clear convergence, which triggered Peterson’s intervention.
Sen. Tim Ashe, D/P-Chittenden, said the combination of continued school spending growth amid depressed property tax values creates a double whammy.
Sen. Tim Ashe, D/P-Chittenden, on the last day of the legislative session in May. Photo by Anne Galloway/VTDigger
‘The rate goes up in part because property values are still going down ‘ or at least the way they’re tabulated for the education grand list,’ Ashe said.
The discrepancy has left homestead taxpayers to make up the difference.
‘Consider the percentage of education taxes (versus total revenue) raised by the three types of payers,’ Peterson wrote.
In fiscal year 2005, nonresidential property owners contributed 60.3 percent of the state’s education taxes. Next year, they’ll account for less than 56 percent, while the portion paid by homestead property taxes has grown over time to 29.3 percent in 2014.
Income-sensitive Vermonters, who pay based on the money they earn rather than their property values, have contributed a steady 14 percent to 15 percent in recent years.
‘This year is a very opportune time to examine whether our funding formula is optimal, or whether it could be adjusted to better align spending with revenues, while still preserving equity, quality, and local control,’ Peterson wrote.
In addition to suggestions for savings through economies of scale and shared costs, Peterson noted that ‘level funding should be achievable in many districts,’ especially given enrollment declines and the falling state and local government price index.
She also suggested modifying Acts 60 and 68 through two mechanisms: accounting for inflation in the excess spending formula, and changing the incentive and penalty rates to stay below certain targets set by the Legislature.
Rep. Carolyn Branagan, R-Georgia, has sat on the Ways and Means Committee for 10 years, and was involved with local school boards for years before taking a seat in the Statehouse. She doesn’t expect reform to take hold in 2014, but she hopes lawmakers make headway toward a new plan.
‘History shows these things take time,’ Branagan said. She hopes conversation will gel around a plan that Statehouse candidates can float during the 2014 election season. ‘We need to get the opinion (of voters) and come back and take some serious action,’ she said.
Vermont School Boards Association executive director Steve Dale agreed that he doesn’t anticipate rapid restructuring of the education system, although he said he ‘wouldn’t be surprised if they get serious about it this year and do a few things.’
Dale credited Peterson’s letter, and the accompanying message from Shumlin, with setting a collaborative tone.
‘It basically says we’ve got a challenge here and it needs to be sorted out by state policy makers and local education officials,’ Dale said. ‘That’s a spirit in which we can work.’
He stressed that, whatever changes might come in 2014 or beyond, his priority is to uphold the fundamental element of the current structure that ensures equal access to education for all students.