By Michael Stack
Until this year’s mindboggling property tax increase requests, Vermont taxpayers have rarely voted down school budgets en masse. Even in the face of declining headcount, declining relative academic results, and spending above the rate of inflation, we have essentially been complicit.
The Legislature’s education funding formula rivals the Mayan calendar in inscrutability. It lacks robust performance metrics. Even the top decision-makers can’t give concise answers to direction questions. In a recent Vermont Public radio interview, House Education Chair Peter Conlon was asked ”what additional programs have been added to the States $2B Education fund menu”? Even he couldn’t recall them all (teachers’ pension, other retirement benefits, special education funding, universal school meals).
It’s hard to fault Conlon. The education fund has become a dumping ground for every possible social cause with at least a tangential connection to schooling. “Political wins” without end dilute the core mission of the fund and taxpayers’ ability to understand what they are getting for their tax dollars.
This year’s 30% budget fail rate statewide is nothing short of historic. John and Jane Doe Taxpayer have exited the “complicit” phase and are now entering a more aware/active and, yes, skeptical “show me” phase.
While the Legislature will continue to attempt to shift attention away from our funding crisis, the hard capital ($7B in School building repairs) and soft capital (Students social/emotional needs) will continue to force this to the front of taxpayer minds as the State attempts to scour their pocketbooks.
WARNING – what I am about to explain may take a few minutes. Find a quiet place, first for comprehension; then when the screaming starts, you can do so with impunity.
As a Vermont resident, you are rewarded with a lower property tax rate (The Homestead rate). If your Income is low enough, you may also qualify for a Property Tax Credit. These credits are received by roughly 110k homesteads. The $154m credits distributed to taxpayers in 23/24 equates to roughly 10% of the $2B spent.
As one can see from the JFO chart below “projected revenue sources for Vermont Education fund in FY 23”, the education fund collects revenues from many pockets.
The Homestead property tax provides just 25% of the tax dollars that fund the $2B spend across the state. Who pays for the rest? Spoiler alert: you do. As we have outlined in past editorials “all the pockets on the pocket diagram turn out to be your pockets”.
With a little reverse engineering and some simplifying assumptions one can project that for the Homestead Taxpayer you can take the number you see on the righthand side (education portion) of your property tax bill and multiply that by three. Yes, if your bill says you are paying $1k take that number and multiply it by three. If you are paying $3k, again take that number and multiply by 3, or $9k.
How can this be, you ask? Stay with me.
The Homestead portion is simple if painful: you write a check and those funds are gone.
The Sales tax portion (28% of total funding) is also somewhat simple. According to the State’s bureau of tourism, 80% of all credit card receipts in the state are generated by in-state spenders. That’s us. That’s you. 80% of the 28% of funding attributed to in-state payers is 22%.
Non-Homestead taxes provide 39% of the source for the total Ed Spend. In Rockingham 63% of our Non-Homestead grand list are business based. Business do not eat property taxes; they pass them back on to you. When Green Mountain Power files a rate case they base their increase in-part on local property tax costs. Bottom line: the property tax they pay becomes a portion of your next power bill.
Bottom line: when you consider all forms of taxation, your contribution to the $2B Education fund is likely to be at least three times the number that you see on your property tax bill.
Here is where the screaming starts.
So, 2/3 of your total tax contribution is not income sensitized and as a result extremely regressive. They hit the lower income cohort hardest as they spend a larger portion of their income on purchasing the basics (Food, Shelter, Transportation, Energy).
Did I mention you are paying all of these varied taxes with post tax dollars? Most of us have already forked over 20-30% of our income to the State and the Federal government in the form of income tax before being required to pay these additional tax liabilities. This cold, hard reality is why so many people are living check to check, and some weeks they just don’t make it.
So why does all of this matter?
Essentially, John and Jane Taxpayer have hit the wall. Big change is triggered by big events. A series of bad laws and astronomical year-over-year budget increases has awakened the sleeping giant. Significant change will not come easy. Sharp elbows are already a’swinging. Some of the largest urban school districts are saying they are just now getting the funds they should have been getting all along.
We must insist our leaders reverse declining academic results without neglecting the bind they’ve put no-longer complicit taxpayers in. With an election just around the bend and new property tax bills hitting the mail by mid-July, I remain optimistic that this issue will only continue to move up the list of legislative priorities.