By Lola Duffort/VTDigger
An unexpected surplus in tax receipts is not just good news for the state’s coffers. It’s a boon to Vermont’s schools and to property owners, whose education taxes might otherwise have skyrocketed next year.
With the state’s revenue upgrade in hand, the House Ways and Means Committee last week green-lighted legislation that would raise the average education property tax bill an estimated 3% for the next fiscal year. That’s a far cry from the 9% increase that was forecast as recently as early December, before the state had a clear picture of the revenues it could expect.
The legislation has a ways to go before it’s signed into law, but it provides a sense of the Legislature’s approach.
Given the dire predictions laid out to the public two months ago, Rep. Janet Ancel, D-Calais, who chairs the House Ways and Means Committee, said her panel felt endorsing this bill was “a really important signal to send.”
The December forecast, she said, “was written with a very different set of facts. And we wanted to say, OK, those facts have changed. This is what we think is the most likely outcome based on what we know right now.”
The news is unlikely to influence school boards’ spending proposals for the next school year, because many have already sent their budgets to the printers. But it will go a long way toward helping those budgets win the approval of voters come Town Meeting Day, March 2.
Brad James, Agency of Education finance manager, put it bluntly. “This will make the field deliriously happy,” he told the Ways and Means Committee, Jan. 27.
The $1.8 billion Education Fund, which pays for pre-K-12 school, gets its revenues from property taxes, plus a mix of sales, meals & rooms, and purchase & use taxes.
The fund is built to essentially self-correct on the back of the property tax. If non-property tax revenues stagnate, for example, while school spending increases, the Legislature can adjust the “yield” (a number upon which local tax rates are calculated) to raise property taxes and make up the difference.
The pandemic’s fiscal impacts have been difficult to predict accurately, but consumption tax revenues were predicted to plummet in the economic downturn. As recently as December, financial analysts for the state projected the Ed Fund would need to plug a $58 million shortfall this year.
But remarkably, the state’s number crunchers now expect an extra $70 million in non-property tax revenues, and that predicted deficit has turned into a projected $18.6 million surplus.
December’s forecast had the benefit of tax data only through August, Chloe Wexler, an analyst with the Legislature’s Joint Fiscal Office, told lawmakers. With an extra five months of data available by January, she said, it’s become apparent that sales and use taxes are actually “performing quite well in the current economy.”
That’s almost certainly thanks to the federal government’s unprecedented stimulus spending, which has supercharged certain sectors of Vermont’s economy. Meals and rooms revenues are still significantly down, for example, but online sales tax revenues have been robust.
“People are buying stuff,” Wexler said.
