by Rep. Mike Yantachka
A little over a month ago at Town Meeting we voted for our town budget, our local CCS school budget and our CVU budget. Together these budgets will determine the amount of spending that our property taxes will be based on. By far, the largest portion of those taxes will go to the school budgets. How our taxes get to the school districts is not a direct path, however, because we pay those school taxes to the State, which then allocates them to every budget voted in Vermont. This is because our Constitution requires every student to have an equal educational opportunity which cannot depend on how rich or poor their community is. This article seeks to explain this process and the effect it has on our local tax rates.
Our education property taxes along with 35% of the sales and use tax, proceeds from the Vermont Lottery and a transfer from the General Fund go into the Education Fund from which the school districts are financed. Every year the Vermont Legislature has to pass an education funding bill which sets the statewide property tax rate. This requires knowing the total amount of all school budgets, the total value of the statewide property grandlist, and the number of students. These variables determine how much $1.00 of property taxes or 2% of household income will yield in revenues and, consequently, the base yield per pupil. The income-based rate is for homeowners with household incomes less than $135,000. All these factors work together to determine what tax rates are required in order to fund all the school budgets in the state.
This year’s education funding bill, H.853, sets the statewide residential homestead property tax base rate to $1.00 per $100.00 of valuation, up from $0.99 last year. This is called the “penny tax rate” and is applied to homesteads with incomes above $135,000. Also, the base income rate for households with income of $135,000 or less is set to 2% of household income, up from 1.8%. This may look like a tax increase, but we’re not finished. The yield per equalized pupil for the penny tax rate this year is $9701, up from $9459, and the yield per equalized pupil for the income tax rate is $10,870, up from $9459.
To compute the local tax rates, the tax rates in the bill are multiplied by the ratio of the local spending per equalized pupil to the statewide per pupil yield. For Charlotte the CCS and CVU per pupil amounts are used to come up with a blended average of $15,477, up from $15,203 last year, so this year’s ratio is 15477/9701 = 1.595. This is a slightly lower penny tax rate than last year’s 1.607. Likewise, the income rate of 2% is multiplied by the ratio of the local spending to the income rate yield, or 2% x 15477/10870 = 2.848% compared to last year’s 3.215%. Both of these rates are lower than last year.
However, another local factor, Charlotte’s Common Level of Appraisal (CLA), has decreased from 105% to 102% year over year because the prices for homes that sold in Charlotte over the last three years are closer to their assessed values than before. The penny rate is divided by this factor causing the CLA adjusted penny tax rate to increase from $1.53 per $100 valuation last year to $1.56. The CLA has no effect on the income tax rate.
With per pupil spending up and the number of students dropping both locally and statewide from last year, we might ask why property tax rates didn’t increase. There are 2 reasons for this. First, there was an increase in the General Fund transfer to the Education Fund by $2M above the $27M scheduled transfer. Second, statewide school spending increased less than expected and allowed $20M collected in the Education Fund last year to be carried forward to this year’s budget. Act 46 will continue to improve the school funding situation as more districts consolidate.
Taxation is the most unpleasant responsibility of a legislator, but it is also necessary. When the legislature votes on an education funding bill, we are voting to pay for the education of the children of Vermont as determined by local school boards across the state. We have taken measures to control those costs with Act 46 and with measures we took in this year’s budget, and the results we see this year have begun to move us in the right direction.
I welcome your thoughts and can be reached by phone (802-233-5238) or by email (firstname.lastname@example.org). You can find this article and past articles at my website: www.MikeYantachka.com.