Most towns in Windsor County have received their education and municipal property tax bills by now. Many, not all, towns have big tax increases. Woodstock has yet to receive their bills but we can expect a 30% increase. These are increases none of us have budgeted for, and one that will be a challenge for many. So, I feel I need to address it head on. In this piece, I’d like to try to answer three questions:
Why has education costs increased this year?
Why are some towns increases particularly steep?
What is the Legislature is doing about it?
This year’s education tax bill, and the tax increases it contains, is unsustainable. We are all frustrated by the confluence of education finance challenges, which have resulted in such big increases in both spending and taxes this year. The question is: how to ameliorate it.
I think it’s important to map out how we got to this point.
First: How the costs get set. Local education districts prepare school budgets, which local voters vote on at Town Meeting. These budgets are developed and approved locally. The total of these budgets sets the education bill which comes to the Legislature to be funded.
Second: Why the bill/costs have increased so much this year. Costs have been increasing for some time, but over the past three years, the federal pandemic funding (ESSER funds) has helped us cover the increasing costs of education, thereby masking the impact of inflation on taxpayers. This year some key cost drivers have challenged our schools as they created their budgets: a 16.4% increase in teacher’s health care, the end of one-time federal Covid/ESSER funds, overall inflation, mental health and social service needs, PCB clean up, and the debt service on new capital projects or renovations. Without the federal funding we are seeing the cumulative impact of cost increases in education. All these factors resulted in a big bill this year.
In addition, the new weighting formula, Act 127, which went into effect this year gives more per pupil support to school districts with children living in poverty, learning English as a second language and living rurally. While Act 127 was well intentioned, it has resulted in unintended financial consequences which need to be fixed.
This increased bill is what the Legislature was sent and had to figure out how to pay.
Third, how the bill gets paid. Funding the education bill has traditionally been paid through property taxes. Because education costs have increased, the state has had to devote additional revenues to cover the bill (sales tax, the Lottery) and to buffer the pressure on property taxes. Unfortunately, other property related costs, like Current Use and TIFs (tax increment finance) continue to be included in the education fund even though they are unrelated to education.
In December the tax department predicted that taxes would have to increase 20% to cover education costs. As a result, school boards went back to work trimming budgets and the Legislature worked hard to lower the tax impact. Not great, but with adding revenue of the 3% increase on short term rentals and the cloud tax the state-wide increase was reduced to 13.8%. Again, not great for any of us but better than where we started.
Fourth, additional things which impact local residential taxpayers are local school spending choices and increases in house values. Woodstock area towns have experienced the impacts of Covid, climate refugees and seasonal sales on real estate prices — and, as a result, we have seen a rapid escalation of our house values. This is having a big impact on our taxes. If you are selling a home this has been a great benefit — but the increased valuation has had a terrible impact on our property taxes. Towns which have reappraised are seeing this big increase in values. In Woodstock it is particularly painful as our property values have risen so high, so fast and our CLA (Common Level of Appraisal) has fallen to 63% of fair market value. The CLA is the balancing lens which ensures all towns properties are valued at the state-wide market rate. However, now market value includes seasonal home sales which are having a profound effect on our house values and on our property taxes as a result.
Fifth, the governor’s proposal to artificially reduce the tax level seemed attractive — but it would have resulted in 30% higher taxes on our businesses and much bigger increases next year. He proposed using up all our reserves and borrowing to pay this year’s education bill — basically putting it on the credit card. The Legislature felt this was not responsible and would have caused more pain next year. We hope that in facing the challenge now, we will find solutions sooner rather than later.
So, we need to attack all the education funding factors — cost and revenue — this coming year. No Vermonter can afford further tax increases like this. The Legislature created the Commission on the Future of Vermont Education System to work this summer and fall reviewing all these issues and will make recommendations to the Legislature this January. We need to proceed with smart solutions — not just go at everything with a meat cleaver — tempting as that might be. The commission is already at work reviewing all the challenges our education system is grappling with and hopefully proposing thoughtful solutions to them. Getting this fixed will be a top priority in the next Legislative session.
Sen. Alison Clarkson can be reached by email: aclarkson@leg.state.vt.us.
