MONTPELIER — Vermont’s state tax commissioner is forecasting a 9 percent average increase in education property taxes in fiscal 2022, and calling on the Legislature to work with the Scott administration to lessen the blow of that projected increase.
“[Gov. Phil Scott] and [the] administration do not believe this is a tenable tax increase for Vermonters who are working hard to recover from the pandemic, nor for the Vermont economy which continues to struggle due to the pandemic-related disruption,” state Tax Commissioner Craig Bolio said in a letter to the Vermont Legislature.
By statute, the state tax collector’s office must provide the Legislature with “the property dollar equivalent yield, an income dollar equivalent yield, and a non-homestead tax rate” by December 1 of each year to help the state and school districts prepare budgets. Projections are made with the cooperation of the Agency of Education, the Secretary of Administration and the Joint Fiscal Office.
According to Bolio, the average homestead tax rate is forecasted to increase by 9.5 cents over the fiscal 2021 rate. The statewide base non-homestead tax rate is forecasted to increase by 10 cents. That works out to an average 9 percent increase.
The administration is committed to reducing that impact, Secretary of Administration Susanne Young said in a press release announcing the results.
“For fiscal year 2019, the forecast was similar, but due to the hard work of school districts as well as spending decisions made between the Administration and the Legislature, the average homestead rate did not increase at all and the non-homestead rate increased about 4 cents,” Young said. “Just like we did then, the Administration is committed to mitigating the impact of these uncertainties on property taxpayers, to the greatest extent possible.”
Bolio said the possibility of additional federal aid to states — or additional economic damage from a surge in cases — remain unpredictable variables.
While the most significant factor in property taxes is locally voted spending amounts, the projected tax increase stems from two main state sources, the letter said:
• The state has downgraded the forecast for non-property tax revenues that feed the Education Fund — sales and use taxes, meals and rooms taxes, purchase and use taxes, and lottery proceeds — a result of the pandemic. That downgrade, issued in August, accounts for 4 cents of the projected average increase.
• The projected contribution to the state teachers’ retirement fund is projected to rise by $6.9 million to $38.9 million, a 21 percent increase.
The tax rate projections do not include a $58 million deficit in the Education Fund for fiscal 2021. Usually, the tax rate calculation must account for any carry-over deficit in the Education Fund. But the Legislature, in the fiscal 2021 budget, directed the tax department to disregard the deficit for the FY22 rate calculation.
The letter also pointed out that the state faces competing priorities for spending — particularly from the Vermont State Colleges System — and that education spending has continued to increase as enrollment has decreased.
“While student enrollment trends downward in our K-12 schools, and in our state colleges, our education system as a whole continues to require unsustainable increases in spending, year after year. The Administration would welcome opportunities to collaborate with the Legislature on reforms to strengthen and transform the system, so more money is going directly to students and into classrooms, instead of underutilized overhead,” the letter said.