The vote: 138 to 0
It was an easy vote in the Vermont House on Friday. Fifteen years ago, it would not have been so.
Without a single nay, the House voted to use future budget surpluses to restore General Fund support for education. For the last three years, the Legislature has cut the annual transfer from the General Fund to the Education Fund, which covers all pre-K to 12 education costs in Vermont. The effect has been to push up property taxes even though local school boards have held the line on spending. Now the House wants to reverse that trend and dedicate half of any future budget surpluses to restore the transfer to pre-recession levels (with an adjustment for inflation).
Why the change of heart all of a sudden? And why was the vote so easy? Two reasons.
First of all, this is an election year, and no House member wants to be branded as voting against lower property taxes if he or she can help it. This amendment to the annual mid-year budget adjustment bill (H.558) sends a clear message: every representative wants to provide property tax relief.
Second, and more important, this action requires no increase in broad-based taxes, which are commonly defined in Montpelier as taxes that go to the state’s General or Transportation Funds—taxes on sales, income, rooms and meals, and motor fuels are examples, but not school property taxes. The only thing that our elected officials are more afraid of than raising school property taxes is raising broad-based taxes. Governor Shumlin has committed his administration to not raising them. Given the choice of increasing broad-based taxes or school property taxes over the past few years, the Legislature chose, more often than not, to raise property taxes.
So now legislators get to make a statement that they want to lower property taxes, and they don’t have to raise broad-based taxes to do it—because all they’re committing to is the use of any future General Fund surpluses. No surpluses, no property tax relief.
What may be most notable about this vote, though, is that it reflects a very different dynamic than existed in 1997. In those days, most General Fund aid to public education went to property-poor towns with insufficient tax base to pay for their children’s education at reasonable property tax rates. Most towns, however, did not qualify for this aid, so their elected representatives, not surprisingly, didn’t support the increases, which were often voted down.
Act 60 of 1997 and Act 68 of 2003 changed that. Now every town in the state gets a property tax break when General Fund support is increased, and every town sees higher property taxes when that support is cut. All state representatives and senators are in the same boat, so to speak. And on Friday they were all rowing in the same direction.
So, let me get this straight. In the past when we were fortunate enough to have a surplus, the Legislature would hear from Vermonters about what the needs of the state were in that year and make the sometimes very difficult choices about whose needs would get met and whose wouldn’t.
The Legislature described it as a waterfall. The analogy was a good one. The Legislature was required to deliberate about surpluses, to hear from towns about their flooded roads and homes, to hear from programs serving children and families, to hear from farmers whose crops got flooded, to hear from taxpayers pleading for lower taxes and decide whose needs would be met first, second and so on. The first in line were at the top of the waterfall. If there was enough in the surplus to help the second in line, then the Legislature would decide how much of their need would be met, and so forth.
With this horrific amendment, the House decided that regardless of the state’s various needs in a particular year, the need to provide property tax relief for second home owners and for those who pay their property taxes based on the value of their homes and not on their income (who are the real beneficiaries here), will always first in line at the waterfall. Theirs will always be more important than any other needs. And worse, they will always get fully half of whatever the surplus is in that year.
What ever happened to “people first”?
The comment from Floyd Nease assumes that non-residential property taxpayers (e.g. the “second home owners) and non-income sensitized property taxpayers would be the sole beneficiaries of this amendment.
As someone who sits on the Ways & Means Committee, and as the lead sponsor of this amendment, I can tell you that Mr. Nease is dead wrong on this issue.
The amendment proposes to take 1/2 of future General Fund surpluses and use them to restore the Education Fund transfer back to its original trajectory (the amount is supposed to increase at the rate of inflation every year). It says nothing about how the increased contribution to the Education Fund would be used – e.g. to reduce property tax rates, increase the base spending amount, reduce the income base amount, or some combination thereof. That is an annual decision that is made by the legislature, based on a recommendation from the Governor’s administration.
For example, many people would be surprised to know that the Governor proposed an adjustment to the tax rates and the base spending amount for this tax year that would result in a disproportionately higher tax burden for income sensitized homeowners vs. those who pay the full property tax rate. The Legislature is now wrestling with various options, just as it does every year.
In summary, the amendment would put more money into the Education Fund, and it would be up to future Legislatures to decide how best to apportion those extra dollars for tax relief amongst the various classes of property taxpayers.