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).

Legislative report 5/17/2017 - Stuck in Session

As I write this late Friday afternoon on May 12th, I should be home in Charlotte. Instead, I am in a holding pattern in Montpelier. There are a number of bills that are still under negotiation, all of which deal in some way with money. The Budget cannot be passed until all the constituent parts are finalized. These parts include the capital bill that deals with the overhead required to run the state government, the fee bill that covers the expense of administering regulations and licenses, the transportation bill that maintains our transportation infrastructure, and the education tax bill that determines what the statewide property taxes will be. While the capital, fee and transportation bills, have already passed both the House and Senate, the education bill has become the sticking point over how to deal with the new health care plans being proposed for public school teachers.

The education tax bill, H.509, was close to being finalized until Governor Scott proposed his teachers' health insurance plan to capture an alleged $26M savings within days of adjournment. The fact that only $13M would apply to the FY18 budget, since the new insurance plans don't start until January 1, has not stopped him from repeating the $26M figure. The Governor insists that the only way the savings can be achieved is with negotiations between the administration and the statewide union. This runs counter to the right of workers, the teachers, to negotiate directly with their employer, the school board. With the backing of the Republican caucus, he has refused to compromise on this point. He also has proposed that only 30% of the savings should go for property tax reduction.

Meanwhile, the House and Senate have been working toward a way to realize the estimated savings while maintaining the integrity of the employer-employee relationship of teachers and school boards. The latest amendment passed by the Senate would require $13M to be saved in the second half of FY18 which would reduce the statewide homestead property tax by 3 cents. Based on the number of employees, each school district would be allocated a proportion of the savings which would be achieved by negotiations between the school board and its teachers, a process that is already taking place across the state, by the way. Any difference between what the district actually saves and the allocated amount would reduce the state's payment to the district. Since each action on a bill requires a 24 hour waiting period, the failure of the Governor to work with the legislature to find a solution guarantees that the session will run beyond the budgeted 18 weeks.

A couple of weeks ago the 2017 session seemed to be moving along nicely with no new taxes and a budget that got nearly unanimous support. Yet, here we are. Despite agreement on what could potentially be saved, the issue has boiled down to labor relations and how much should be applied to reducing property taxes. I hope that by the time you read this we'll have a solution and a budget that won't be vetoed.

I encourage you to let me know your concerns and opinions. I can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).

Who wouldn't want to save $26 million? (Front Porch Forum Issue No. 2767 May 10, 2017 )

I submitted a commentary on this topic that will be published in The Citizen this week and on my website (www.MikeYantachka.com).  However, I would like to add a few more thoughts here for your consideration since I have received many emails on the subject.

Sound bites are very simplistic. "Save the taxpayers $26M!"  Very easy to say, but another saying that applies is that "the devil is in the details."  The Governor's proposal relates to a change happening to teacher health plans throughout the State. This change is not dependent upon, nor due to the Governor in any way. It is the result of a redesign of the teachers' health plans by VEHI that offerss two high deductible and two regular plans that teachers may choose from, and that have lower premiums than the current plans.

The new plans are cheaper because they are less generous plans. The statewide savings estimate is $75 million. Of that, $48 million is anticipated to be needed to pay for the increased copay and deductible costs in the new plan. The remainder, if you believe the estimates, would be the $26 million which the Governor keeps talking about.

The Governor's plan, as embodied in the Beck amendment to H.509, was to return $8 million of the $26 million to property tax payers and to use the other 70% for other purposes, namely the General Fund and to cover the transfer of the liability for the state portion of current teacher retirement obligations to the Education Fund.  This transfer would lead to higher property taxes in the long run.
The issue of statewide bargaining has no impact on whether the savings occur.

What the House passed instead, the Webb amendment, was a provision that makes no change in bargaining, but directs 100% of the savings that actually occur in teacher healthcare to be returned directly to local communities in the form of reduced property taxes.  The money saved would be returned to a local school district only after a budget was voted upon and approved. It can go to only one place, and that is to directly reduce property taxes. All of the savings, rather than just the 30% in the Governor’s plan would come back to your property taxes. This is what property taxpayers want, and why I voted against the Beck amendment and for the Webb amendment.

The Word in the House 5/11/2017 - Teachers' Health Care Proposal

In the final week of the legislature bills move at a fairly rapid pace between the House and Senate as differences are resolved and agreement is reached. Some legislation, however, deals with highly controversial issues such as marijuana legalization, paid family leave, and education issues. These bills often generate much floor debate and take hours, if not days, to bring to completion. On two different days of the expected final week, legislators remained on the floor until nearly midnight before completing business.

One of the most contentious bills was the education financing bill, H.509. This bill was being amended to include the Governor's proposal that would create a statewide health insurance contract for teachers. While the proposal sounds like a good idea, it was offered so late in the session the legislature was not able to properly investigate the assumptions, tax implications and labor policy implications in the way the legislature conscientiously approaches all legislation. Issues like this are not black and white and require getting input from many sources and affected parties..

With that in mind, the House Ways & Means Committee did examine the proposal and determined that there may be up to $26M of savings to be realized, but only half of that in FY18. It is important to note also that the $26M figure is a “guesstimate” based on a presumed decreased use of health care services by teachers under the new plans. Furthermore, the Governor's proposal would direct much of the savings to be used for other purposes than reducing the property tax. Rep. Kate Webb of Shelburne offered an alternative proposal as an amendment that would use the same expected savings from the lower premiums of the new teachers' health insurance plans to go to the Education Fund and be funneled back to the individual districts according to the savings realized by the district.

The right of employees to unionize and bargain collectively with their employer is a fundamental right of American workers that was hard fought for and won over the last century and a half. Without unions we would not have a 40-hour work week, overtime pay, safety standards, workers' compensation, a minimum wage, and other employee rights we take for granted. The Governor's proposal would take the negotiation of health care contracts out of the hands of local bargaining units and districts and give it to a statewide union and the Department of Education. Since teachers are employees of individual districts and not of the state, the proposed arrangement takes both the employees and the districts out of the process. And if negotiations broke down and teachers went on strike, it would affect the entire state instead of being localized to a single district. This would not be good for Vermonters.

The Webb amendment keeps the negotiations local and guarantees that the savings will come back to the local districts. As a practical matter, since about 25% of teachers’ compensation comes in the form of health insurance, removing that huge piece from the local negotiation of teachers’ contracts takes a big piece off the table as the negotiators balance pay increases against health insurance benefits.

As you probably have heard, the vote ended in a tie, 74 - 74, on the Beck amendment, and the Webb amendment was subsequently passed. The bill went to the Senate, which will have its own say. Our hope is that the Governor and the legislature will come to some compromise agreement that will accomplish the savings in a mutually satisfactory manner and avoid a potential veto session. The expected May 6^th adjournment has been postponed as those negotiations take place and will resume the following Wednesday.

I encourage you to let me know your concerns and opinions. 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).

Legislative Report 5/20/2015 - End of Session

Remember the Rubik's Cube? I always had a hard time solving that 3D, 3-axis puzzle. The last week of the legislative session seemed like trying to solve a giant Rubik's cube of legislation. Fourteen bills were assigned to Committees of Conference because the House and Senate could not agree on details in the versions each chamber passed. In addition to those bills, the Immunization bill (H.98), the Water Quality bill (H.35) and the Energy bill (H.40) still had not been settled.

Early in the week the House Health Care Committee took a couple more days of impassioned testimony on whether to retain the philosophical exemption or to remove it before finally bringing it to the full House for a vote. The hours-long debate on the floor reflected the range of opinions heard in testimony. Several amendments were offered before the House voted to remove that exemption while retaining the religious and medical exemptions. The 85 to 57 vote crossed party lines as individual legislators made up their own minds on the legislation. Following the decision on vaccine exemptions, the House voted quickly to concur with the Senate on proposed amendments to the Water Quality bill, which will put Vermont on the path to reducing phosphorous runoff into its lakes and streams.

 

By Friday afternoon most of the conference committees reported agreement on all but the Budget, Revenue, Health Care, and Education bills, and the Senate was still debating amendments to the Energy bill. Earlier in the afternoon we passed the very important Child Protection bill (S.9) which requires any mandated reporter who reasonably suspects abuse or neglect of a child to report it to Department of Children and Families instead of to a superior, and it improves cross-agency communication for child welfare cases. Typical of the "hurry up and wait" character of the session's final days, the House was repeatedly recessed to await updates on the status of conference committee negotiations.

 

Friday evening we received from the Senate its amendments to the Energy bill, and the House quickly concurred in its passage. The Senate left the provisions adopted by the House and added provisions regarding siting of solar energy projects. They include giving municipalities automatic party status in Public Service Board hearings, defining minimum setback requirements, and allowing municipalities to define screening requirements. Passage of this bill satisfies the objections Connecticut and Massachusetts had regarding Vermont's double-counting of renewable energy credits (RECs) and avoids the loss of $50M in annual revenue for our utilities, thereby avoiding a potential 6% increase in electric rates.

 

Saturday brought the passage of the Education bill and the Health Care bill. The Health Care bill had been trimmed back considerably because of an inability to agree on funding. What remained was a 33 cent/pack cigarette tax increase and subjecting soda to the 6% sales tax. The package contains $3.2 million in new state health care spending, which is eligible for roughly another $3 million from federal matching funds. The money will be used to level-fund Vermont Health Connect subsidies for out-of-pocket costs, target increases to Medicaid rates, and invest in initiatives to strengthen the primary care system.

 

As late as Saturday afternoon negotiations were still going on among the House and Senate leadership and the Governor regarding how the agreed upon budget would be funded. $53M in program cuts had been agreed upon with the expectation that $30M in additional revenues would have to be found. This represents $3M more in cuts and $5M less in revenues than originally passed by the House. Finally, around 10 PM the final agreements were made and the House gave final approval to the Budget. After the traditional speeches from the leaders of the Progressive, Republican and Democratic parties, the Speaker of the House, and the Governor, the session was gavelled to a close just before 11 PM.

 

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

The Word in the House 4/3/2014 - The Budget

This is the part of the legislative session that becomes the most politically contentious and, for me, the most perplexing because we are dealing with very large sums of money.  Of the three money bills that are must-pass in every session of the legislature, the Transportation bill, the Miscellaneous Tax bill, and the Budget bill, the latter two were debated and passed during this last week in March.  Now they will be considered by the Senate, probably changed, and sent back to the House in the next couple of weeks. 

The revenues raised by the Miscellaneous Tax Bill presented by the Ways and Means Committee must balance with the expenditures in the Budget Bill presented by the Appropriations Committee.  These committees work very hard for three months with input from state government employees, legislators and citizens to craft bills that make investments in strategies that will reduce future costs, address poverty, tackle opiate addiction, spur job growth, fund needed programs for the elderly and the disabled, and drastically reduce Vermont’s reliance on one-time funds.  Not one legislator wants to spend money unnecessarily and everyone wants the money that is spent to benefit Vermont and its citizens.  The problem comes in trying to decide how to accomplish those competing goals. 

When these bills get to the floor they invariably divide the legislature along party lines.  While one side focuses on the size of the budget, the other focuses on what the budget can accomplish with the available resources.  Compounding the problem have been the federal cutbacks to food stamps and low income heating assistance. When the available resources are not sufficient to address the needs, a decision must be made to either find additional revenues or to ignore the needs.  Increasing taxes is always seen as a solution to be avoided unless the need is perceived to be great enough. This, however, can be a subjective judgment colored by political philosophies. 

Representative Martha Heath, Chair of the Appropriations Committee, stated what her committee tried to accomplish.  At the beginning of the session Governor Shumlin proposed a budget to support his goal of providing more effective intervention and treatment for opiate addicts.  He asked for $14M in revenue based on taxing health insurance claims.  This was unacceptable to the legislature because it would drive up health care costs at a time when we are trying to reduce them.  Instead, by making cuts to proposed expenditures and employing alternate funding strategies, the additional revenue needed was reduced to $3.3M. 

This year’s budget addresses the issue of homeless Vermonters by doubling the rental subsidy program, increasing funding for the Vermont Housing and Conservation Board, and increasing grants for homeless shelters.  It helps those who are living in poverty by increasing support to make high quality child care affordable and available so that parents can go to work.  In addition, substance abuse and mental health issues have been identified as the number one barrier to obtaining jobs for those served by the state’s Reach Up program.  Over $1M is appropriated to address this important issue.

The highly publicized opiate addiction problem facing our state and the toll it takes on our communities and our safety is also addressed. The budget invests over $10M in additional treatment and recovery capacity and expands statewide the successful rapid intervention program that moves addicted offenders into treatment prior to arraignment under certain circumstances because treatment is much more productive than imprisonment. The need is great, and these strategies, along with the efforts of our local communities, will reduce the number of Vermonters struggling with addiction.

While Vermont continues to do relatively well as we come out of the Great Recession, investment in job growth remains critical. The budget increases funding for Regional Development Corporations and Planning Commissions, invests in further capacity for the Employee Ownership Center, increases investments in our transportation infrastructure, and increases funding for the Working Lands Initiative to further spur this rapidly growing part of Vermont’s economy.

One of government’s most important roles is to insure that the disabled and the elderly are able to live with dignity and with as much independence as possible. This budget fully funds the caseload increases in Developmental Services and continues our investment in serving elderly Vermonters in their homes as they age through the Choices in Care program.   

This budget provides less funding than I would prefer for programs like low income weatherization and it fails to make whole the federal cuts to the food stamp program.  There is also a smaller increase in payments to home health care providers and to health care providers for Medicaid patients. But I support this budget because it is the best that could be accomplished at this time.

Legislative Report 3/26/2014 - More on Education Financing

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.

Legislative Report 3/28/2013 - Taxation Angst

This week and the next the House will be sending three big bills over to the Senate: the transportation bill, the tax bill, and the budget bill. Each of these bills touches on fundamental fiscal responsibilities that we in the legislature take very seriously.

You elected me to be your voice in the legislature, reflecting your concerns about the economy, our infrastructure, our education system, the environment, and how we support our own citizens by ensuring that our fiscal plan reflects your values. You want us to spend wisely and keep in mind that your budget is being stressed as well. By the end of this session we will pass a balanced budget that meets the financial obligations of state government in a fiscally responsible way.

Concerns about tax increases have been at the top of the list of emails and phone calls I’ve received in the past week.  At the statehouse we all share your concern about tax increases.  We have all been looking at cutting spending where appropriate within the areas of our committees' jurisdiction, as well as looking for efficiencies in state programs to avoid tax increases.  Misleading TV ads about "$70 million tax increases by Democrats" as well as misleading claims by special interests serve only to distort the reality we have to work with.  An example is the claim that fuel oil taxes were going to increase by 12 cents per gallon.  The reality is that a nominal 1/2% increase on the wholesale price (less than 2 cents/gallon) was ever considered, and that was dropped because of competing budgetary concerns.  If it had been adopted, it would have meant an increase of $15 to $20 to a household's heating bill for the entire heating season.  This would have helped more homes to get weatherization services to reduce the amount of heating fuel needed.  However, we on the Natural Resources and Energy Committee elected to depend only on current funding sources which will get us through the next heating season.  This means that we'll have to come back to this issue again next year since one of those funding sources resulting from the CVPS-GMP merger will eventually disappear.

This past week the House passed a Transportation Bill that restructures how gasoline taxes are assessed.  The bill is $4 million less than what was requested by the Agency of Transportation and $800,000 less than last year's budget.  The restructuring of the gas tax was essential because of the huge decrease in gas tax revenues leading to underfunding of needed road and bridge repair work and other transportation services.  About 39 million fewer gallons of gas were purchased in Vermont in 2012 compared to 2005 because of more efficient vehicles and fewer miles being driven.  While this is good for the environment, it does not produce the revenues needed to maintain our aging roads and bridges essential to keeping drivers safe.  This year’s Transportation bill has split the taxation of gasoline between a cents-per-gallon basis and a percentage of the price per gallon (minus state and federal per gallon taxes).   This will lead to a 6.9 cent increase in 2014, rising to 7.7 cents in 2015, and 8.8 cents in 2016 at current prices.  (In comparison, New Hampshire just voted to increase their gasoline tax by 12 cents/gallon.) It is also worth noting that 1/3 of our gas tax revenues are collected from out of state drivers.

A common criticism is that the Transportation Fund is being raided for other purposes.  While this may have been true in the past, it is no longer so.  Other than transportation infrastructure expenses, the only other programs receiving Transportation Fund money are a small percentage for Fish and Wildlife-related transportation expenses and $25 million for DUI enforcement by State Police.

I appreciate your concern about rising taxes and will seek to critically balance the needs of Vermont taxpayers with the needs to keep Vermont healthy, strong and everything that makes Vermont a great place to live and work.

You can reach me by phone (425-3960) or by email (myantachka.dfa@gmail.com).

Legislative Report 2/28/2013 - Reflections on the Cost of Education

Sticker shock!  This is the term that appropriately describes Vermonters’, including Charlotters’, reaction to the school budgets that are going to be voted on at Town Meetings across the state. The subsequent effect on property tax rates might make one wonder if their school boards and state legislators have gone off the deep end and just don’t care about the amount of taxes their constituents have to pay.  I would argue that, while that might be an understandable reaction, it is very far from the truth.

No one goes to Montpelier with the intention of raising taxes of any kind.  However, with the goal of providing every Vermont child access to a good quality education, the costs of education are spread across the entire state.  The Education Fund is funded mainly through the statewide property tax, but also through sales taxes, the lottery and transfers from the General Fund.  As your State Representative, I want to explain how and why the statewide property tax rate has increased. 

Since the amount of money that needs to be raised is determined by spending decisions at the local level, the legislature can only determine who pays, not how much to spend.  At the local level, school board members have deliberated long and hard over the Charlotte Central School budget.  If you don’t believe this, refer to the CCS Board meeting minutes and read the article by Board member Kristin Wright in the February 21st issue of The Citizen.  She describes in detail the decisions of the last several years to minimize and even eliminate budget increases.  Yet, this year external cost pressures, including declining enrollment, teachers’ health insurance increases and contracted salary increases, have forced a 6.4% increase in the budget.  When the 6.4% increase is divided among fewer students it results in an 8.5% education property tax increase in Charlotte.

The base statewide property tax rate of $.94 per $100 is based on the total proposed school spending for all Vermont school districts, the total number of students in the state, and the total grand list property value of the state.  Since district spending per pupil varies, a formula is used to adjust the tax rate proportionally.  For Charlotte per-pupil spending is $15,189 leading to a tax rate of .94 x 15189 / 9151 = 1.56.  Another factor is the CLA or Common Level of Appraisal, or how closely the assessed value of a property is to the fair market value.  Because Charlotte’s assessments are 2% higher than market, the final rate is adjusted downward to 1.52.

[Note: I only used the CCS numbers in this analysis.  I did not include the effects of the CVU budget. - MY]

But this is only half the story.  For those households with incomes below $90,000, property tax is based on income or ability to pay.  The base income rate is 1.8% of household income, and the same spending ratio determines Charlotte’s income sensitivity rate to be 2.99%.  This is the upper limit of education property tax on the first $500,000 of value of a house plus two acres that a household is subject to.  So, for a house site assessed at $500,000 for a household with an income of $90,000, the tax is limited to 2.99% x $90,000 = $2691.  Furthermore, the statewide education property tax subsidizes the Current Use program, which helps Charlotte maintain its rural character. 

Our School Board has worked hard to keep costs as low as they could while still maintaining the high standards CCS is noted for.  Just as we have no control over the price of gasoline or heating oil, there are costs that the School Board has no control over.  As you decide how to vote on the school budget, consider whether you are one of the 42% of homeowners who received an income sensitivity property tax adjustment last year or whether some of your property is in the Current Use program.  If so, you, too, are benefiting from our statewide educational funding formula. 

As always I welcome your feedback on any issue or topic of concern. You can contact me by phone at 425-3960 or email me at myantachka.dfa@gmail.com.

A Voter's Question - Taxes, Business & Job Creation

Q: With regards to promoting business and creating jobs in VT by retaining or attracting business to the state: Given that most small business owners (S-corps, LLC and Partnerships) pay income taxes at the individual rates, that Vermont income taxes are coupled to the federal tax rates, and regardless of whether the current income tax rates will sunset and revert to higher taxes;

1. What is your position on the current VT income tax structure?
2. Would you support a change in the Vermont income tax to support and promote business growth in Vermont?

 A: I can't really speak to how corporations are taxed in Vermont. My expertise covers only personal income taxes, which does include some small businesses that fall under self-employment, e.g. contractors, daycare providers, etc. Currently Vermont's personal income tax is not pegged to the federal tax rate. It only uses the federal taxable income as the starting point for determining the Vermont taxable income. After state-specific additions and subtractions are applied, the VT taxable income is taxed according to a graduated rate. I don't see any need to change this system. Since I don't know a lot about how the corporate tax structure differs, I am open to information and suggestions.

 

However, there are tax-related things that can be done to help businesses grow and create jobs in Vermont.

• I would favor tax credits for increasing the number of employees from one year to the next.
• I would favor creation of low-interest loans funded through bonding for startup businesses.
• I would also favor a temporary reduction of the statewide property tax on new businesses to help reduce startup costs.

 

Beyond tax policy, there are other steps we can take to improve conditions for economic growth.

• I believe that some type of public option universal health insurance program, possibly a single-payer system, would help reduce the costs of health insurance to both businesses and individuals. I'm looking forward to the proposals of the Health Care Commission created by S.88 this year.
• I believe that access to high-speed broadband throughout Vermont is essential if we want to grow 21st century businesses.
• I believe that we need to keep our education standards high so that we have a workforce with the skills businesses need.

Issues 2010

In these challenging economic times the most pressing problem for Vermont government is how to balance the state budget.  The 2009 budget was starkly reduced because of reduced revenues and passed only because the legislature overrode Governor Douglas' veto.  Revenues have once again fallen behind original projections and required the legislature and the Governor to try to find the proper balance between cuts and tax increases.  There is probably no one that has an definitive solution to the problem of balancing state revenues with expenditures.  This problem will continue to be an issue for the 2010 election and the elected officials who will have to deal with it in January, 2011.

As pressing as the budget problem is, there are other issues that are just as important and which are directly affected by it.  It is the responsibility of each legislator, whether in the House or the Senate, to weigh the pros and cons of each and every reduction in services as well as every tax increase that will be necessary to keep Vermont's government vital and viable.  In addition, there are policy decisions to be made that will affect the future direction of Vermont and our ability to maintain a healthy economy, a healthy environment and a healthy population.  Each of the issues below require attention and should be factors in your decision on whom to send to Montpelier in 2010.

• Taxes and Expenditures - To many the word "government" has become a bad word ever since President Ronald Reagan defined government as "the problem, not the solution." In fact government is ... more>>
• The Economy - The economic downturn of 2009 has not left Vermont unscathed, although our situation is certainly not as dire those of other parts of our country. Vermont has been ... more>>
• Energy - One thing is certain when it comes to developing an energy policy: we must reduce our dependency on oil and other fossil fuels. The reasons for doing so are ... more>>
• Health Care - After months of debate, compromise, misrepresentation, theatrics, and solid Republican obstructionism, it is not surprising that the resulting Healthcare reform legislation passed by the U.S. Senate does not satisfy anyone. Voices on the right object to any kind ...  more>>
• Agriculture - Agriculture is a significant part of Vermont's economy, culture and tradition, and dairy farming, which comprises 85% of Vermont agriculture, is probably the most iconic form. As such ... more>>

Taxes and Expenditures

To many the word "government" has become a bad word ever since President Ronald Reagan defined government as "the problem, not the solution."  In fact government is the superstructure of an orderly society.  Government is especially necessary in a complex society with competing interests and requirements.  We in Vermont are blessed with a state government that has a close relationship with us, the governed.  Few states can boast of the accessibility we Vermonters have to our elected officials. 

The role of government is to do collectively what we cannot do individually.  In order to operate, government needs revenues; and the only way it can get revenues is by assessing taxes.  So, the job of the decision-makers, i.e. the legislature and the governor, is to balance the operational needs against the ability to raise revenue.  In these challenging economic times there is probably no one that has a definitive solution to the problem of balancing state revenues with expenditures. But whatever steps are taken to resolve this problem, it will be necessary to be consistent with the idea that since government exists to serve the governed, it is in times of crisis that government must do the most to help those most affected by the crisis.  Unfortunately, those most affected by an economic crisis are usually those with the least amount of influence. It has always been the goal of the Democratic Party philosophy to represent this segment of the community.

When budget decisions are made, we must take into account the effects those decisions will have on our children and our elderly, on those who lost jobs in this economy, on the quality of our environment, on our farmers and our entrepreneurs, and on the future economic prospects of our youth. We cannot continue to cut services when more services are needed; nor can we ignore the burden of taxation on those who are barely keeping their heads above water. While I don't have any magic bullet solutions to these problems, I will work hard with other legislators to find them.

The closing of the Champlain Bridge between Addison, VT, and Crown Point, NY, points out the danger of being penny-wise and pound-foolish.  Studies show that 50% of Vermont's bridges are in need of repair.  Yet for decades there has not been sufficient support for raising gasoline taxes to help pay for transportation infrastucture improvements.  It is not until a bridge is declared too dangerous to drive across that we finally sit up and take notice and spend the money to fix it.  The bridge in Richmond was another example of that approach.

Another example is the way cuts were made to the state employee pool.  Instead of assessing the impact the loss of a given job would have, as the legislature requested, the Douglas administration made cuts across the board.  Case workers in the health department were reduced leaving many communities without assistance for families with newborns and children at risk of not being sufficiently prepared to enter school.  Many of our rural families depend on counseling to give their children a good start in school.  This is also being penny-wise and pound-foolish because children who start out behind will often stay behind and have a greater potential to get in trouble during their teen years.

The bottom line is that sufficient revenue must be generated to meet the requirements of effective government.  The only way to achieve greater revenues is to have a healthy economy.  Prosperity increases the ability of each of us to contribute our share to the tax pool.  Taxation should not create an undue burden on any one group compared to another, so we need to distribute the burden using a variety of sources, including income taxes, property taxes, sales and use taxes, and specialty taxes like those on alcohol, tobacco and gasoline.  Morever, we must create the jobs that will create the ability for people to pay those taxes.  And that is another issue for discussion.