Legislative Report /Word in the House 5/16/2018 - Not Quite the End of the Session

The last two weeks of a legislative session are a whirlwind of activity. Dozens of bills that have been worked on during the previous 16 weeks of the session in both the House and the Senate reached final stages of passage. Most traveled back and forth between the two bodies as amendments were made to reflect the different concerns of the responsible committees. Twenty-eight bills this year required a conference committee made up of three representatives and three senators to resolve disagreements in language that couldn't be settled by amendments. 

The budget is the final bill passed in a session. Any bill that was still outstanding when the budget passed would be dead. As the session ended just after midnight Sunday morning, we managed to complete all of those bills as well as many more. The bills included raising the minimum wage, providing paid family leave, establishing toxic materials responsibility, protecting sexual harassment victims, funding clean water efforts, setting appliance efficiency standards, helping Vermont manufacturers improve energy efficiency and productivity, providing free tuition for National Guard members, several consumer protection and economic development bills, and an income tax reform and education funding bill as well as the budget.

Our legislative agenda reflected in the bills we passed promote a caring economy that makes Vermont more affordable for lower and middle income families, protects all Vermonters from various social and environmental impacts, and provides opportunities for economic growth. While we did not adopt the Governor's proposal for using one-time money to keep our education property taxes from increasing, the funding changes made by the legislature will hold the residential property tax rate increase to two cents in a sustainable way that avoids the need to find one-time money again next year. One-time money is just that. There’s no guarantee that it will be there next year, which just defers a tax increase. Instead, this year's one-time money will be used to pay for one-time expenses like fully funding our reserves and paying down the teachers' retirement fund obligation saving Vermont taxpayers $100M in future budgets. Our income tax changes will return $30M in extra tax revenue generated by the federal income tax changes back to Vermonters by lowering the income tax rates for everyone. Overall state spending increased less than 1 percent, significantly lower than the rate of inflation. Here are links to the details of the tax changes and to the budget.

Unfortunately, the Governor has stated that he plans to veto the budget as well as several other bills that address affordability and the health and welfare of Vermonters. The budget passed with a tri-partisan vote of 117 – 14. If he does carry out his veto promise, he will have to call the legislature back into session. There have been plenty of opportunities for the administration to engage with the legislature to work out a compromise, but that didn't happen. Now we are faced with the additional expense of an extended session.

Finally, I would like to make a correction. It was called to my attention that in my previous article about the minimum wage bill, I reference some total wage numbers that seemed to be based on different assumptions. The $15/hour total should have been $31,200 based on the same 40 hours/week and 52 weeks/year used for $10.50/hour.

As always, I can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).

The Word in the House 3/1/2018 - Proposed Education Funding Changes

As we approach Town Meeting Day the issue of how to fund our K-12 education system is once again in the news. The fact that we continue to have the discussion from one year to the next indicates that it is not easy to address all the concerns regarding property taxes, budgets and services that are needed. Moreover, the current funding system is nearly impossible for the average Vermonter to understand and for most legislators to explain. At a briefing I attended, the remark was made that the system could be simple or fair, but not both. This year the House Ways & Means Committee decided to take a fresh look at how we fund education with an eye toward making it easier to understand while maintaining fairness in application.

Before describing the proposed changes, it is important to review the roles of the municipalities and school districts, the voters and taxpayers, and the state. School districts decide what is needed to educate their children and put together a budget, with taxpayer input, to meet those needs. The budget is presented to the taxpayers who then either approve or disapprove it. The state, on the other hand, is responsible for raising the money to fund all the budgets passed across the state. Today, that funding consist of 36% of the sales tax revenues, 100% of the lottery revenues, a transfer from the General Fund, federal dollars, and a statewide property tax. The burden on taxpayers is reduced by adjustments to the property tax assessments based on household income, and a fixed rate is assessed on all non-residential property.

The new proposal, which has not yet been finalized, would keep the non-residential rate the same, but would change the other allocations significantly. The General Fund transfer would be eliminated, but 100% of the sales and use tax revenue as well as 25% of the rooms and meals tax would go to the Education Fund. The income sensitivity adjustment would be eliminated and be replaced by a direct school income tax based on adjusted gross income. Low income residents and property owners would continue to be assisted by creating a homestead exemption, by exempting the first $47,000 of income from the school income tax, and by retaining the renter rebate program. Also, responsibility for several programs that do not go directly to K-12 education will be moved to the General Fund. Together, these changes would reduce reliance on the residential property tax by moving to a tax that is more closely related to ability to pay and would more closely link decisions on school budgets to the actual homestead tax paid.

Finally, while the Common Level of Appraisal (CLA) adjustment would continue to be a factor on the local level, the per-pupil property tax yield would be reduced from $13,000 to about $5,000. Since the base statewide property tax would be reduced from $1.00 to $0.25, the Champlain Valley School District, which spends about $15,000 per pupil, would see an effective tax rate of $0.75, three times the base rate.

Final details remain to be worked out, as well as a decision as to whether the new funding system will go into effect this year or next. The legislature will continue to look for a fair, easy to understand funding formula that provides a quality education for all the children of Vermont. I can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).

The Word in the House 4/11/2016 - Education Funding and Property Taxes

A little over a month ago at Town Meeting we voted for our town budget, our local CCS school budget and our CVU budget. Together these budgets will determine the amount of spending that our property taxes will be based on. By far, the largest portion of those taxes will go to the school budgets. How our taxes get to the school districts is not a direct path, however, because we pay those school taxes to the State, which then allocates them to every budget voted in Vermont. This is because our Constitution requires every student to have an equal educational opportunity which cannot depend on how rich or poor their community is. This article seeks to explain this process and the effect it has on our local tax rates.

Our education property taxes along with 35% of the sales and use tax, proceeds from the Vermont Lottery and a transfer from the General Fund go into the Education Fund from which the school districts are financed. Every year the Vermont Legislature has to pass an education funding bill which sets the statewide property tax rate. This requires knowing the total amount of all school budgets, the total value of the statewide property grandlist, and the number of students. These variables determine how much $1.00 of property taxes or 2% of household income will yield in revenues and, consequently, the base yield per pupil. The income-based rate is for homeowners with household incomes less than $135,000. All these factors work together to determine what tax rates are required in order to fund all the school budgets in the state.

This year's education funding bill, H.853, sets the statewide residential homestead property tax base rate to $1.00 per $100.00 of valuation, up from $0.99 last year. This is called the “penny tax rate” and is applied to homesteads with incomes above $135,000. Also, the base income rate for households with income of $135,000 or less is set to 2% of household income, up from 1.8%. This may look like a tax increase, but we're not finished. The yield per equalized pupil for the penny tax rate this year is $9701, up from $9459, and the yield per equalized pupil for the income tax rate is $10,870, up from $9459.

To compute the local tax rates, the tax rates in the bill are multiplied by the ratio of the local spending per equalized pupil to the statewide per pupil yield. For Charlotte the CCS and CVU per pupil amounts are used to come up with a blended average of $15,477, up from $15,203 last year, so this year's ratio is 15477/9701 = 1.595. This is a slightly lower penny tax rate than last year's 1.607. Likewise, the income rate of 2% is multiplied by the ratio of the local spending to the income rate yield, or
2% x 15477/10870 = 2.848% compared to last year's 3.215%. Both of these rates are lower than last year.

However, another local factor, Charlotte's Common Level of Appraisal (CLA), has decreased from 105% to 102% year over year because the prices for homes that sold in Charlotte over the last three years are closer to their assessed values than before. The penny rate is divided by this factor causing the CLA adjusted penny tax rate to increase from $1.53 per $100 valuation last year to $1.56. The CLA has no effect on the income tax rate.

With per pupil spending up and the number of students dropping both locally and statewide from last year, we might ask why property tax rates didn't increase. There are 2 reasons for this. First, there was an increase in the General Fund transfer to the Education Fund by $2M above the $27M scheduled transfer. Second, statewide school spending increased less than expected and allowed $20M collected in the Education Fund last year to be carried forward to this year's budget. Act 46 will continue to improve the school funding situation as more districts consolidate.

Taxation is the most unpleasant responsibility of a legislator, but it is also necessary. When the legislature votes on an education funding bill, we are voting to pay for the education of the children of Vermont as determined by local school boards across the state. We have taken measures to control those costs with Act 46 and with measures we took in this year's budget, and the results we see this year have begun to move us in the right direction.

I welcome your thoughts and can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).