A few days before Town Meeting, I wrote a post in Front Porch
Forum explaining what factors go into how the statewide property tax which
funds K-12 public education is calculated.
In the post I stated that school budgets, and therefore spending, are
determined by local school districts, and the state's role determined by Acts
60 and 68 is to fund the budgets approved by the voters. The local school districts receive targeted
revenues which include Federal Title I money, donations, and some categorical
state aid such as Special Education, transportation, technical education, adult
education, and Essential Early Education. The amount of the budget that remains
comes from the state Education Fund.
The
Education Fund has several sources of revenue: a) about 35% of sales tax
revenue, b) 100% of the lottery revenue, c) an amount transferred from the
General Fund and other sources, and d) the statewide property tax less the
Homestead Property Tax Adjustment. The
statewide property tax is calculated based on the projected value of all the
property in the state (the Grand List), how the assessments in a town compare
to fair market values (the CLA or Common Level of Appraisal), the per pupil
spending in the school district, and whether per pupil spending in the district
exceeds the state average by more than 23%. There are two tax rates, the Residential and
Non-Residential. Residential taxpayers
may get a tax adjustment based on their household income and house site value.
These tax rates have to be set to amounts that provide the revenues needed for
the Education Fund disbursements.
This year
saw school budgets increase by only a few percent, while property tax rates in
some towns went up by several more percent due to decreasing statewide property
values, fewer students, and reductions in federal education spending. Based on
projected school budget increases, a decrease in federal Special Education
funding, and $20M less of one time funds used last year, the Commissioner of
Taxes projected an increase of 7 cents in the statewide property tax rate this
year. The defeat of 35 school budgets
throughout the state drove home the contention that the formula for state aid
to education is not only too complicated to understand but has become unduly
burdensome on property taxes.
Since Town Meeting,
serious efforts have been made to rebalance the funding methodology by the Ways
and Means Committee, and last week they announced that the increase in the
Residential rate would be reduced from 7 cents to 4 cents, and the
Non-Residential rate increase would go from 7 cents to 8 cents instead. This will also result in an equivalent
decrease of 3 cents in the Residential rate for the CCS District from that
published in the Town Meeting school report.
Other suggestions have been considered including adjusting the current
use formula and transferring additional money from the General Fund to the
Education Fund. Since the legislature
always passes a balanced budget, if new revenues (taxes) cannot be found, then
cuts have to be made somewhere else if more money is to be transferred.
The legislature has to
address the education funding issue both immediately and strategically. The reduction of 3 cents is a start, but we
have to find a way to depend less on the property tax in the long term. The Education Committee is also working on a
plan to restructure the school system, but there are no guarantees that such a
plan would save money. There are still
several weeks before a final budget and tax package will be voted on. The committees are continuing to work to make
the hard decisions that will be acceptable to both the House and Senate as well
as to Governor Shumlin. They will
eventually strike a balance, but I predict that no one will be totally
satisfied.
