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