2011 state budget plans raise property taxes

Vermont property taxpayers will be taking it on the chin this year. Given the rhetoric they’ve been hearing all year from Montpelier, they have reason to be upset.

First, the governor repeated his (erroneous) claim that education spending was out of control, and proposed a plan he said would reduce property taxes. What he didn’t mention was that for his plan to work local school districts would have to make dramatic cuts to their school budgets, and most of the savings would accrue to the state to help balance the General Fund budget.

Next came the Legislature and endless discussions about school consolidation and improved efficiency. Lawmakers were starting to hear from local school boards that taxes were going up despite their efforts to curb spending. Legislators wanted to appear to be doing something, even if they couldn’t quite articulate the problem they were trying to solve.

What the proposed fiscal 2011 budget will do—in contrast to what people have been saying—is raise property taxes. The state property tax rate may or may not go up for next year. The House version of the budget keeps the rate the same as this year; the Senate increases it a penny, to 87 cents per $100 of assessed value.

But the bigger problem is that both the House and Senate are underfunding the Education Fund again. Both are withholding almost $25 million that should have been transferred from the General Fund to the Education Fund. And the Senate is diverting almost $9 million more that should have gone into the Education Fund but now is going to be used to balance the General Fund.

Local school boards and local voters did their part this year. There will be essentially no growth next year in education spending, which is the important number because it determines the tax rate. Many districts actually reduced their education spending, but overall it’s up a small fraction of one percent.

That’s not easy. Even in this recession, schools are facing cost increases for health care, fuel, and salaries. Despite what the bean counters think, reducing staff to match declining enrollments is not a simple exercise. To even just level fund their budgets, school boards had to make cuts to programs, which diminishes the quality of education.

Local communities, therefore, will have to suffer the consequences of these cuts, but they are not being compensated with lower school taxes. Education spending will be flat next year, but residential and non-residential taxes are projected to increase almost $6 million in the House-passed budget or more than $22 million in the Senate version.

Property taxes should be going down, and they would be if the House and Senate weren’t short-changing the Education Fund. However, to meet their obligations to the Education Fund, the Legislature would have to raise some other broad-based taxes or make even more damaging cuts to the General Fund. It’s good they ruled out additional cuts. But once they acknowledged that they would need more revenue, there should have been an open debate about which taxes to raise.

They avoided such open debate because it’s an election year. But make no mistake, they decided to raise property taxes when they chose to short-change the Education Fund.