Real property tax relief

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Peter Shumlin Governor of  Vermont

Peter Shumlin
Governor of Vermont

This week, we released an estimate that property taxes used to pay for public school education will increase once again this year to pay for a projected increase in school spending. While this year’s projected property tax increase of around two cents is half of last year’s, it is hardly good news. We all know that rising property taxes to fund education have put an unsustainable burden on Vermonters. Despite a steady decline in school enrollment over the last two decades, property tax payers have not seen a decline in their property taxes; they’ve seen the opposite. But while rising property taxes are one clear indication of the higher cost of education in Vermont, they are only the most visible aspect of the money Vermonters spend on our public education system.

We all know that property taxes go to fund education. But what is less widely known is about 30 percent of all General Fund revenue raised for Vermont (not including property tax receipts) goes to fund education spending. Also, about two-thirds of Vermonters pay for education based on their income, rather than directly on the value of their property, because of income sensitivity in our property tax laws. Even for those Vermonters who pay based on their property values, a portion of their income tax goes to fund education in addition to the property taxes they already pay.

Then there is the sales tax. Just over one-third of all sales tax collected in FY2014 went to fund education spending. Put another way, for every dollar in sales tax that a Vermonter paid, 35 cents went to fund education spending. For those Vermonters who bought a car or truck, one third of the purchase and use taxes collected on the sale of vehicles, about $30.6 million, also went to education.  And don’t forget about revenue from the lottery, because every cent of the over $20 million in proceeds went to fund education this year.

The bottom line is that we support our public education system through multiple revenue sources, not just the property tax. That is why we should not assume that we can solve our property tax problem by simply shifting collection to other sources. While we should certainly continue to look at the complexity and difficulties in our financing formula, we should focus our efforts on the primary problem:  education spending has continued to rise, faster than Vermonter’s ability to pay for it, even though our student count has declined and continues to do so.

To bring that trend into sharper relief, consider this:  Vermont had 103,898 students in 1997. Today that number is 82,523 – a decline of over 21,000, or nearly 20 percent. Underlining this trend is the fact that on average, Vermont schools employ one staff member for every 4.7 students and a teacher for every 10 students. Some schools have fewer than seven students per teacher, even though best practices cite optimal class size at about 15 students. These low ratios substantially raise costs, without any evidence to show that ratios this low are improving student outcomes.  If classes were slightly larger costing us less, how else could we invest those education dollars?  On other educational opportunities?  On property tax relief for Vermonters that could free them to spend for other economic activities?

All of this leads me back to one conclusion:  Without addressing our spending challenge, true tax relief will elude us.