by Timothy McQuiston, Vermont Business Magazine The Legislature today overrode Governor Phil Scott's veto of the property tax "yield bill" (H.887). The House voted 103-42 and the Senate voted 22-7, both comfortably exceeding the two-thirds requirement. With the bill now becoming law, property tax bills will increase by an average of 13.8%.
In today's "veto session," lawmakers also overrode the Renewable Energy Standard bill (H.289) and the Act 250/Housing bill (H.687), as well as the restorative justice legislation H.645, the bill banning the use of neonicotinoid pesticides H.706, and H.72, An act relating to a harm-reduction criminal justice response to drug use, but failed to override H.121, an act relating to enhancing consumer privacy and the age-appropriate design code.
Lawmakers overrode the long-debated Act 250/Housing bill (H.687). The vote in the House was 107-38 and, in the Senate, 21-8. The governor had said in his veto message from June 13 that, "H.687 is heavily focused on conservation and actually expands Act 250 regulation. And it does so at a pace that will slow down current housing efforts. Vermonters need us to focus on building and restoring the homes communities desperately need to revitalize working class neighborhoods, reverse our negative demographic trends, and support economic investment in the future."
Senate President Pro Tem Phil Baruth today issued the following statement on the enactment of H.687, the Act 250 reform bill:
“Act 250 has been a significant part of shaping the Vermont we know and love today. However, Vermont’s chronic housing shortage has made it abundantly clear that this fifty-year-old land use law must be reimagined in order to identify necessary reforms to promote housing development while also protecting Vermont’s natural resources. I’m proud to say the Legislature achieved this goal. The enactment of H.687 represents unprecedented consensus among diverse stakeholders who share a commitment to promoting necessary housing development while protecting Vermont’s beloved and essential natural resources. I’m grateful to the Senate for doing the hard work of revisiting and reimagining Act 250, something that has never successfully been done before, and overriding Governor Scott’s veto of legislation to accelerate the end of Vermont’s housing crisis.”
On the property tax bill, Baruth said of the enactment of H.887, the public education funding bill:
“In Vermont, local school boards determine the level of spending necessary to educate our children - and voters approve those budgets. The legislature then sets property tax rates accordingly to fund those budgets. In December 2023, when the Tax Department projected an average rate increase of 18.5%, the Legislature worked day and night to implement every responsible solution to lower property tax rates for the coming fiscal year. And we made real progress: we were able to decrease the property tax rate by nearly five percent. In addition, we were able to implement significant cost-containment measures and a plan to address long-term structural reform to Vermont’s education finance system. H887, the public education financing bill, represents serious, fiscally responsible property tax relief.
“The Governor’s veto, however, put all of that responsible property tax relief at risk. The implications of not enacting a yield bill are serious: Vermonters would actually face property tax increases of up to 30%, and an $82 million deficit in the Education Fund. The Governor's last-minute ideas for reducing rates further are all fiscal non-starters, and they would finally hurt – not help – Vermonters and their local schools. His plan would guarantee even more dramatic spikes in property tax rates going forward and would threaten the State’s credit rating, causing significantly higher borrowing costs for the State, municipalities, and school districts, further contributing to higher property tax rates.
"Not a single member of the Legislature would choose to raise property taxes if it could be avoided. But our local districts have sent us the bill that reflects all of the rising costs they face – and pretending that bill doesn't exist, or putting it on the credit card, won't help any of us. My profound thanks to the hard-working members of the House and Senate who faced those facts squarely and did the hard work to provide property tax relief and support our children and our schools."
In his veto letter, Scott said: "We must provide property tax relief now. This can’t wait for another study before implementing cost containment strategies."
On H.289, the renewable energy standard, Baruth said: "The renewable energy standard will put Vermont on track to achieve 100% renewable electricity by 2035, dramatically reducing planet-warming carbon pollution and saving Vermonters money over time. With his veto of the Renewable Energy Standard, Governor Scott attempted to continue a pattern of rejecting critical progress on climate action. However, while Vermonters continue to face the impacts of recent climate disasters, the Senate has made clear that the status quo is unacceptable and will continue our unwavering commitment to addressing the climate crisis.”
The House overrode the H.289 veto 102-43 and the Senate did so 21-8.
Speaker Jill Krowinski issued the following statement following the roll call votes:
“Today, the House reiterated our commitment to the future of our public education system, the need for new tools to combat the overdose crisis, the needed changes to streamline our development process and bring housing opportunities online rapidly, and update our Renewable Energy Standard.
“Throughout the session we had success in working with the Governor and his administration to have legislation signed into law. Unfortunately, and despite repeated efforts, we were unable to find a compromise on these bills that would guarantee immediate success and long-term stability in our education, health care, and community development systems. Overriding these vetoes ensures that Vermont children have access to a quality education, those battling addiction have access to a new resource to get support, communities will be able to bring on housing and reduce the impact of the housing crisis, and we have access to clean, low cost electricity.
“H.887 (vote 103-42), the bill to fund our public education system, represents a collaborative and forward-thinking piece of legislation to address the current and future needs of our education system and the affordability issues facing many Vermonters. The bill contains nearly $100 million dollars in immediate tax relief to lower the property tax bills facing Vermonters. Additionally, it puts us on a path to find ways to lower the cost of education while ensuring our teachers and students have the resources they need and deserve.
“H.687 (vote 107-38), the bill to modernize Act 250, is a critical step in developing more housing and helping our state through the housing crisis before us. The bill streamlines housing development while preserving our Vermont landscape and was crafted by a variety of stakeholders from business, housing, and environmental organizations. I am so thankful for their collaborative work and the bi-partisan support this bill received in the House. We need to do all we can to make sure that Vermonters have access to affordable housing options, and this is a big step forward in making that happen.
“H.289 (vote 102-43), the bill updating Vermont’s Renewable Energy Standard, is crucial to meet our climate change goals, create high paying jobs, and protect Vermonters from the volatile price increases of the global fossil fuel market. Vermont currently has the lowest electricity rates in New England and this will support our work to increase the reliability of our electric grid while also ensuring we are doing so with clean energy. Our state is incredibly reliant on the climate, from farming to skiing to maple syrup, and we need to do all we can to help lower our reliance on fossil fuels and set us up for success for years to come.
“I take no pleasure in having to override vetoed bills. The Governor and I have a respectful working relationship and we are able to find legislative compromises often. However, it is our responsibility as a legislative body to do what is right for our state and ensure that Vermonters have access to the programs and systems they rely on. Throughout the session we passed legislation that received support from Democrats, Republicans, Progressives and Independents, a strong indication of broad consensus. Passing legislation that affirms the voices of Vermonters — from across the state and across party lines — is incredibly important to our democratic process and is incredibly important to me personally.
“I remain committed to continuing to work with the Governor and his administration to make Vermont more affordable, healthier, and a place for working families and businesses to thrive.”
Override bill that would ban the use of neonicotinoid pesticides and restorative justice bills, sustains data privacy
The Legislature also overrode the governor’s vetoes of restorative justice legislation, a bill that would ban the use of neonicotinoid pesticides, and a nation leading data privacy and consumer protection bill. Additionally, the House passed a right to repair bill which provides the documentation, parts, and tools to allow independent repair shops and owners to perform repair on farm and agricultural equipment. Speaker Jill Krowinski issued the following statement following the votes:
“This afternoon, the House continued our work to reimagine our justice system, make our food system healthier, protect Vermonters' data, and give access to resources that our agricultural community desperately needs.
“The restorative justice legislation is a key The expansion of restorative justice, as proposed in H.645, comes at a critical time for Vermont. With increased community concerns regarding public safety and the challenges of court backlogs, along with mounting financial pressures in all areas of state services, it is essential that we invest in public safety measures that are both effective and timely. This bill is critical in making sure Vermonters have timely access to justice and there are adequate resources available to keep our communities safe.
“H.706 bans the use of neonicotinoid pesticides which is necessary to protect the pollinators that are integral to our agricultural community. This legislation takes an evidenced-based approach to restrict these highly toxic pesticides, but also includes a timeline and waiver process designed to protect Vermont farmers from undue harm. Vermont has an incredible history of agriculture and working lands and this bill will help preserve this rich history for years to come.
“Our data and online identities are increasingly bought and sold for profit, most of the time without our knowledge. That is exactly why I am so proud of the work that went into H.121, an act relating to enhancing consumer privacy and the age-appropriate design code (sustained in the Senate 14-15 after override in the House 128-17). While many other states have data privacy bills, this bill is specifically tailored for Vermonters, is right-sized for Vermont businesses, and aligns with regional standards.
“This bill not only ensures comprehensive data privacy but specifically sets strict guidelines to prevent physical, financial, or emotional harm to kids and bans manipulative design practices like notifications that promote addictive behaviors.
“Like I have previously said, the Governor and I have a respectful working relationship and we are able to find legislative compromises often. Unfortunately, we were unable to find agreement on these bills. It is our responsibility as a legislative body to do what is right for our state and ensure that Vermonters have access to the programs and systems they rely on. Throughout the session we passed legislation that received support from Democrats, Republicans, Progressives and Independents, a strong indication of broad consensus. Passing legislation that affirms the voices of Vermonters — from across the state and across party lines — is incredibly important to our democratic process and is incredibly important to me personally.
“Again, I remain committed to continuing to work with the Governor and his administration to make Vermont more affordable, healthier, and a place for working families and businesses to thrive.”
Governor says it's a 'sad day' as Legislature overrides vetoes
In do-over, Legislature overrides veto of H.72, safe injection sites bill
See Joint Fiscal Office report below on the property tax bill.
Joint Fiscal Office
May 10. 2024
H.887 – An act relating to homestead property tax yields, nonhomestead rates, and policy changes to education finance and taxation
As passed by the General Assembly
Bill Summary
This bill sets the property dollar and income dollar equivalent yields for the purpose of setting homestead tax rates. It also sets the nonhomestead property tax rate. The bill expands revenues to the Education Fund by repealing the sales tax exemption for prewritten software accessed remotely. It also imposes a 3% surcharge on short-term rentals, with all revenues dedicated to the Education Fund. The bill establishes the “Commission on the Future of Public Education in Vermont,” and the “Education Fund Advisory Committee.”
Fiscal Impact
The Joint Fiscal Office (JFO) cannot estimate the overall impact of the bill on the Education Fund in future fiscal years. The following sections may have a fiscal impact on the Education Fund:
• Sections 1 establishes the “Commission on the Future of Public Education in Vermont.” To fund the costs associated with the Committee and the Commission, the bill expands the allowable uses of a fiscal year 2024 $200,000 General Fund appropriation.
• Section 2 sets the property dollar equivalent yield, income dollar equivalent yield, and nonhomestead property tax rate for fiscal year 2025. JFO estimates that these yields and rates would correspond to an average increase of approximately 13.8% for homestead property tax bills, income education tax bills, and nonhomestead property tax bills. The section also includes a one-time increase of 13.0% to each claimant’s property tax credit for fiscal year 2025.
• Sections 3 and 4 repeal the sales tax exemption for prewritten software accessed remotely. JFO estimates this change would generate $14.7 million in additional revenue for the Education Fund in fiscal year 2025.
• Section 5 imposes a 3% surcharge on short-term rentals and dedicates the revenue to the Education Fund. JFO estimates this surcharge would generate $11.8 million for the Education Fund in fiscal year 2025.
• Sections 9 and 10 repeal the suspension of the school budget ballot language requirement and amend the language itself. JFO can neither estimate the impact of this on voter behavior nor the corresponding fiscal impact.
• Section 11 creates an “Education Fund Advisory Committee” to monitor Vermont’s education finance system, conduct analyses, and make recommendations for the Education Fund.
Sections 13 through 17 adjust calculations regarding the application of the local common level of appraisal (CLA). JFO estimates this will have no impact on property tax rates after the application of the CLA, so long as a district’s per pupil spending is greater than the property yield. JFO cannot estimate if this section will impact voter decisions or district budgeting.
• Section 18 establishes an excess spending threshold for per pupil education spending in fiscal years 2026 and 2027 to be included in tax rate calculations. JFO cannot estimate the fiscal impact of this section on the Education Fund because total education spending is ultimately determined by local votes.
• Section 24a transfers a total of $97,356 in fiscal year 2025 from the Education Fund to towns that overpaid education taxes in fiscal year 2024. This section is estimated to have a de minimis impact on the Education Fund in fiscal year 2025.
Background and Details
Sections 1 and 1a.: The Education Finance Study Committee and the Commission on the Future of Public Education in Vermont
Section 1 through 1c create the “Education Finance Study Committee” and the “Commission on the Future of Public Education in Vermont.”
Section 1: The Commission on the Future of Public Education in Vermont
Section 1 creates the “Commission on the Future of Public Education in Vermont” to study and make recommendations for a statewide vision for Vermont’s public education system.
The Commission will be comprised of 13 members. Members of the Commission not employed by the State will be entitled to per diem compensation and reimbursement of expenses under 32 V.S.A § 1010 for a maximum of 30 meetings. The Secretary of Education will call the first meeting of the Commission to occur by July 5, 2024, and the Commission will cease to exist on December 31, 2025. It will have the support of Agency of Education (AOE), which is charged with contracting with an independent consultant to provide technical and legal assistance to the Commission.
Section 1a: Adjustment of allowable uses of fiscal year 2024 appropriation
To fund costs associated with the Commission on the Future of Public Education, the bill expands the allowable uses of a $200,000 General Fund appropriation to AOE in fiscal year 2024. Additional appropriations may be required in fiscal year 2026 to continue to support the work of the commission.
Section 2: Yields, Property Tax Rates, and Property Tax Credits for Fiscal Year 2025
Section 2 sets the property dollar equivalent yield at $9,893, income dollar equivalent yield at $10,110, and the nonhomestead property tax rate at $1.391 for fiscal year 2025.
JFO estimates that these yields and rates will correspond with an average increase of approximately 13.8% for homestead property tax bills, income education tax bills, and nonhomestead property tax bills. These yields and rates are set at a level estimated to be sufficient to fully fund the Education Fund.
This section also includes a one-time increase of 13.0% to each claimant’s property tax credit for bills
issued for fiscal year 2025. JFO estimates this will cost the Education Fund $20.6 million in fiscal year 2025.
Sections 3 and 4: Sales and Use Tax on Prewritten Computer Software Accessed Remotely
Under current law, the retail sale of tangible personal property – including prewritten software – is subject to the sales and use tax. However, Act 51 (2015) created an exemption for prewritten software accessed remotely, otherwise known as cloud software.
Sections 3 and 4 would repeal the exemption and subject sales of these programs to the 6% Vermont sales and use tax. The repeal of the exemption would primarily apply the sales tax to Software as a Service (SaaS) cloud applications and custom software or IT services would continue to be exempt. JFO estimates this would generate $14.7 million in additional revenue in fiscal year 2025 and $16.0 million annualized, beginning in fiscal year 2026. Revenue may increase year over year due to the strong projected growth in the cloud-based services market.
Section 5: Short-Term Rental Surcharge
Section 5 imposes a 3% surcharge on short-term rentals, which are defined as a “furnished house, condominium, or other dwelling room or self-contained dwelling unit rented to the transient, traveling, or vacationing public for a period of fewer than 30 consecutive days and for more than 14 days per calendar year.” This includes both entire units and single rooms if the rental is for less than 30 consecutive days. Currently, these rentals are subject to the 9% rooms tax (10% in towns with a local option tax), which is allocated to the General Fund (69%), Education Fund (25%), and the Clean Water Fund (6%).1 The rooms tax allocation would remain the same but the entirety of the surcharge would go to the Education Fund.
AirDNA data from the Vermont Housing Finance Agency (VHFA) website, which aggregates information from major booking platforms like AirBNB and VRBO, showed that during fiscal year 2023 the monthly number of entire units available as short-term rentals ranged between 9,378 and 10,358. Average monthly revenue was approximately $4,000. In the same period, 1,400 rooms were available and had an average monthly revenue of approximately 25% of that for entire units.
JFO estimates that 3% of overall revenue from these rentals will generate $11.8 million for the Education Fund in fiscal year 2025 and $14.7 million annualized, beginning in fiscal year 2026.
An important consideration is the extent to which the surcharge leads to fewer bookings due to price increases or changes in the dynamic pricing model used by major platforms to account for changes in demand. However, a surcharge of 3% is unlikely to substantially change behavior in many cases. For example, on a $400 rental, the surcharge would be $12.
Section 6: Technical Clarifications to Education Fund Statute
Section 6 puts all revenue sources to the Education Fund in the same place in statute. It does not change revenue sources to the Education Fund.
Section 7: District Quality Standards for Maximum Reserve Fund Accounts
Section 7 requires AOE to undertake rulemaking to update District Quality Standards rules to include recommended reserve fund account standards. Any fiscal impact of this section would depend on the rules established.
Section 8: Creation and Funding of One Position of Education Finance Data Analyst
Section 8 establishes a new permanent classified education finance data analyst position at AOE. Funding for this position is included in the Big Bill.
Section 9 and 10: School Budget Ballot Language
Sections 9 and 10 amend the school budget ballot language requirement and repeal its suspension. JFO can neither estimate the impact of the ballot language on voter behavior nor its corresponding fiscal impact.
Section 11 and 12: Education Fund Advisory Committee
Section 11 creates the “Education Fund Advisory Committee” to monitor Vermont’s education finance system, conduct analyses, and make recommendations on multiple considerations of Vermont’s Education Fund.
The Committee will be composed of 12 members. Members not employed by the State will be entitled to per diem compensation and reimbursement of expenses under 32 V.S.A § 1010 for a maximum of four meetings per year. The Commissioner of Taxes will call the first meeting of the Committee to occur by July 15, 2025, and the Committee will cease to exist on July 1, 2034. It will have the support of the Department of Taxes and AOE.
Section 13 – Section 17: Common Level of Appraisal
Sections 13 through 17 adjust calculations regarding the application of the CLA. These changes will have a de minimis impact on the revenue raised by districts and will solely reduce the difference between the tax rates pre- and post- application of the CLA.
JFO estimates this will have no impact on property tax rates after the application of the CLA, so long as a district’s per pupil spending is greater than the property yield. JFO cannot estimate if this section will impact voter decisions or district budgeting.
Section 18 – Section 20: Excess Education Spending
The excess spending threshold is a provision that adjusts tax rates so that districts spending above it are taxed a second time on the excess spending amount. Section 18 amends the excess spending threshold so that it is calculated as the statewide average per pupil spending in fiscal year 2025, increased for inflation, multiplied by 118%.
This section repeals all exclusions in current law for the calculation of excess spending threshold. The section adds an exclusion for increases in voter-approved bond payments year over year.
Districts with education spending above the threshold see a more significant increase in their local tax rate. However, JFO cannot estimate the fiscal impact of this section on the Education Fund because total education spending is ultimately determined by local votes.
Act 127 (2022) suspended the excess spending threshold through fiscal year 2029. Section 19 repeals that suspension and makes the threshold effective as of July 1, 2025, meaning that it will be used for the calculation of tax rates starting in fiscal year 2026.
Section 21: Report on Property Tax Credit Claims and Asset Declarations
Section 21 requires that the Commissioner of Taxes recommend improvements for property tax credit claims, including the use of an asset declaration, in a report to the House Committee on Ways and Means and the Senate Committee on Finance on or before December 15, 2024.
This section is not estimated to have a fiscal impact.
sssSections 22 and Section 24: Act 127 Conforming Amendments
Sections 22 through 24 amend statute to align it with Act 127 and will not have a fiscal impact.
Section 24a: Compensation for Overpayment
Section 24a transfers a total of $97,356 in fiscal year 2025 from the Education Fund to towns that overpaid education taxes in fiscal year 2024 due to erroneous accounting of certain students for the purposes of calculating average daily membership (ADM).
This section is estimated to have a de minimis impact on the Education Fund in fiscal year 2025.
1 In Burlington, short-term rentals also charge a 9% gross receipts tax.
Source: 6.17.2024. Montpelier, Vt. - Legislature
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