Per-Pupil Education Spending and Tax Rates, Fiscal 2016
After the Vermont Supreme Court ruled that the state’s school funding system was unconstitutional in 1997, the Legislature re-built the system on a fundamental fairness principle: school districts that spend the same amount per pupil have the same tax rates.
The old system wasn’t fair. Some towns had extremely low tax rates, but easily raised more money per pupil than most communities in the state. Meanwhile, towns with the highest tax rates raised far less per pupil than the average school district.
The current funding system creates a single, statewide tax base that all towns and school districts draw on. All non-residential property is taxed at the one rate statewide. Tax rates for primary residences vary by town with spending per pupil.
Voters in each town decide how much to spend, so per-pupil spending varies from district to district as do tax rates on primary residences. But in any two districts with the same spending per pupil, tax rates on primary residences are the same. And where local voters choose to spend more per pupil, the tax rates are proportionally higher than in lower-spending towns.
The town2town map shows tax rates and per pupil spending amounts for each town in Vermont. The state’s funding system allows many homeowners to choose between paying a property tax on their primary home and up to two acres of land or paying a tax based on household income. But both tax rates—the income-based rate or the homestead property tax rate—are set based on the level of spending per pupil in a given town. The towns with higher per-pupil spending have higher tax rates and those with lower spending have lower tax rates. The differences are proportional. If one town spends 25 percent more per pupil than another town, its tax rates will be 25 percent higher.
As you hover your cursor over a town, you see four figures for fiscal 2016 for that town:
- “$xx,xxx.xx per pupil” — Education spending per pupil used to calculate the town’s property and income rates.
- “x.xx% income rate” — Percent of household income paid by those who pay school taxes based on their income.
- “$x.xx FMV prop. rate” — Property tax rate if all of the property in town were assessed at fair market value (FMV); also known as the equalized property tax rate. This rate is the same in all towns with the same per-pupil spending.
- “($x.xx actual prop. rate)” — Rate appearing on the local property tax bill, based on the locally assessed value of the property rather than its FMV. Because the grand list in many towns is above or below fair market value, these rates are not comparable in towns with the same per-pupil spending.
The tax rates and spending amounts shown on the map are for the current school year.1
As school boards develop their budgets for next year, fiscal 2017, many communities are finding that they are likely to have higher tax rates than neighboring towns that spend the same or even more per pupil. That is because in Act 46 of 2015 the Legislature set spending growth limits for each school district in the state. Residents of districts that exceed their state-set limit will have to pay a tax-rate penalty. Unless the Legislature acts to repeal or suspend this provision in early 2016, some voters will find they are spending less per pupil than some of their neighbors, but being taxed at a higher rate.
1A few years ago, the Legislature started offering tax incentives to encourage school districts to consolidate. Only a handful of towns are receiving incentives in fiscal 2016: Peru, Landgrove, Londonderry, and Weston in southwestern Vermont, and Bolton, Huntington, Jericho, Richmond and Underhill in eastern Chittenden County. Because of the incentives, the fair-market tax rates in these towns are lower than in towns with the same per-pupil spending that haven’t qualified for incentives. Act 46 of 2015 is designed to encourage many more school districts to consolidate and also offers tax incentives. The incentives are temporary; they phase out over four or five years. Because of these incentives over the next several years, a number of towns with the same per-pupil spending will not have equal tax rates.