On December 20, 2023

Sticker shock! 

 

Understanding the Dec. 1
property tax letter

By Kathleen James

Editor’s note: Rep. Kathleen James, D-Manchester, serves as assistant majority leader in the Vermont House. 

On the last day of November, the annual “Dec. 1 Letter” was published by the Vermont Department of Taxes. 

This year’s letter landed with a bang, as Tax Commissioner Craig Bolio predicted that Vermonters might see an average 18.5% increase in their property tax bills. 

Fueled by an accompanying press release from Gov. Phil Scott, the news caught fire on social media. And why wouldn’t it? Many Vermonters are struggling to stay afloat, and very few can afford that kind of tax hike.

While the letter created scary headlines, it’s important for Vermonters to understand what the Dec. 1 letter is — and what it isn’t.

Required by law, the annual memo provides a very preliminary take on property tax rates for the coming year. It’s based on early budget estimates submitted by school districts across Vermont. The memo also takes projected revenues into account, and it assumes that the legislature will do nothing — take no action whatsoever — to bring down the rates. 

To be blunt, the Dec. 1 letter can also be a political exercise, a chance for the administration to land a few punches and try to shape the public debate. It’s a memo that delivers some useful stats while kicking off a months-long policy conversation. But it’s not much more than that.

So how and when are property tax rates set? 

It’s a complicated process, but the first and most important factor is school budgets. These are controlled at the local level, and it’s up to Vermont voters — to all of us — to consider, debate and approve these budgets every March.

From district to district, this process is just getting underway. In my community, for example, the Taconic and Green board just held its first public budget discussion. Faced with rising costs — many of which are beyond their control — they’re considering cutting classroom teachers and instructional staff to hold the budget increase under 10%. That’s lower than many districts: Statewide, the Dec. 1 letter says school spending is estimated to go up by about 12%.

Why is school spending up? 

Several reasons, including a 16% increase in the cost of health care benefits for employees; inflation that’s increased the cost of everything, from fuel to equipment; and the cost of debt service and construction as communities are forced to replace, renovate and maintain Vermont’s aging school buildings. The updated “pupil weights” are also kicking in — a necessary, long-overdue and equitable update to the way we account for the cost of educating different kinds of students, including rural, low-income and English language learners.

Another key factor: Federal Covid relief funds are ending. Many schools used these one-time dollars to add new staff and services that kids needed during the pandemic and still desperately need today. Schools deliver much more than academics these days. Increasingly, they’re expected to provide a wide range of mental health, social and emotional supports that help our kids in complex times. 

District to district, school boards are facing these tough facts. They’ll be working hard to build responsible budgets that meet the very real needs of our students, families and schools while balancing that cost against Vermonters’ ability to pay. Now’s a good time for voters who care about schools, and care about taxes, to get involved.

So what happens after Town Meeting Day, when school boards and voters have all had their say? That’s when the legislature takes action. 

Every spring, we crunch the numbers and set property tax rates in the annual “yield” bill. We’re obligated to raise enough money to cover the sum total of Vermont’s voter-approved budgets, plus other Education Fund expenses like school meals, transportation and special education. 

Important fact: The tax rate we pass in April rarely matches the rate predicted in the Dec. 1 letter. That’s because we have a lot of legislative policy levers to pull, like using reserves or other revenues to bring down the property tax rates. (While property taxes are an important revenue source for the Education Fund, they only contribute about 67%. Schools are also supported by our state sales and use tax, rooms and meals tax, vehicle purchase tax and lottery revenues.) 

Vermont has a long tradition of local control. We trust our school boards to deliver budgets that balance competing needs, and we trust voters to decide on these budgets. As the 2024 legislative session unfolds, we’ll be taking a similar approach in the Statehouse. Our goal is to follow a path that supports taxpayers while also supporting schools … the heart and soul of our communities.

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