The Legislature is again considering using the property tax as a deterrent against high spending in Vermont schools.
Currently, school tax rates go up proportionally with per-pupil spending increases. The bill recently passed by the House would change the education funding system so that tax rates would rise faster than spending increases as a disincentive to higher spending.
Legislators say they understand the pressures on property tax payers and want to ease their plight. But in the name of cost containment, they’re proposing to make it more painful for Vermont resident homeowners who want to or have to spend more on their kids’ education.
That might make sense if towns were willfully or carelessly spending too much on education. But that doesn’t appear to be the case. An examination of the 25 towns with the highest per-pupil spending each year from fiscal 2012 through fiscal 2018 shows a lot of volatility. Few were consistently high spenders. Only five towns, with combined enrollment of fewer than 1,400 students, made the top 25 list every year.
Over the course of seven years, 65 individual towns appeared at least once on the top 25 list. Just under half were on the list for only one year. More than 60 percent made the list for just one or two years. Of the 65 towns, just over one-third pay tuition to send all or some of their kids to school, which means they have no or limited control over their spending. They simply pay the required tuition amount per pupil to the receiving school.
Some of the smallest tuition towns experienced the greatest volatility over the last seven years. These communities are vulnerable to large swings in per-pupil spending if new students move into town after the school budget has been set. Lemington and Victory, for example, went from being among the lowest spending towns to the highest in just a few years because of an influx of students.
Punitive tax rates aren’t going to force these towns to become more efficient. They only add insult to injury for taxpayers who already have seen a spike in their tax rates through no fault of their own. What’s the point of pushing their tax rates even higher?
Before the Legislature goes any further with the get-tough approach, it really needs to take a little time to understand why communities spend what they do – and that goes for below-average spenders as well as the high spenders.
As it turns out, the school consolidation law, Act 46, is more likely to help towns like Lemington and Victory avoid sharp tax increases than the House bill would. Ten towns have joined the Northeast Kingdom Choice School District. The single district will have a large enough enrollment so that a few additional students here and there shouldn’t cause spikes in the tax rates, as they sometimes do for individual towns.
The governor and the Legislature have a short-term problem of their own making for fiscal 2019. Last year, they agreed to use Education Fund reserves to artificially lower tax rates this year, and now that decision has come back to bite them with higher property tax rates projected for next year.
Rather than look for ways to punish local voters, Montpelier needs to come up with another short-term fix to bring down property taxes next year. Then over the summer and fall, it needs to study the causes of high and low spending before proposing more new cost-control policies.
It also needs to get serious about permanently reducing the pressure on property tax payers by eliminating the residential school property tax and moving to a system where school taxes for all Vermont residents are based on their ability to pay.
Written by Jack Hoffman, Public Assets Institute.