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Education tax rate projected to jump: State officials eyeing 9.4-cent hike

MONTPELIER — Both the average Vermont business and average homeowner can expect a 9.4-cent increase in their education tax rate next year, based on preliminary projections from tax commissioner Kaj Samson.
Statewide, education spending is expected to reach $1.681 billion in fiscal year 2018-2019, an increase of $60.2 million over the current fiscal year.
For a homeowner with a $250,000 house, that means an increase of $235 in their tax bill.
Samson last week said the median tax bill for both businesses and residents, including those who pay education taxes based on income, will increase 7.2 percent.
The projections are based upon an anticipated 3.5 percent increase in education spending across the state and a $79.6 million deficit in the Education Fund.
In Vermont, all education taxes are paid into the Education Fund, although they are collected locally, and all schools then receive the funds they need to operate from the fund.
By law, the tax commissioner must provide the Legislature with an estimate of the yield — the amount the state could spend per pupil with a homestead property tax rate of $1.00 per $100 of assessed value — by Dec. 1 of each year.  The Tax Department must also provide an estimate of the non-homestead tax rate, that is the education property tax rate on businesses and second homes. That rate is projected to rise by 9.4 cents to $1.629.
The yield is expected to drop from $10,160 to $9,842. Even if every district spends exactly what it spent last year, the change in the yield would raise tax rates.
That’s because the tax rate is determined by comparing the yield to the district’s cost per pupil. If the cost per pupil is 25 percent larger than the yield then the tax rate will be $1.25. If per pupil spending is 50 percent larger than the yield, then the tax rate is $1.50 in that district.
Thus, the lower the yield, the greater the gap between the yield and per pupil spending. The larger the gap, the higher the tax rate.
Samson’s projections are not set in stone. Once local communities have approved school budgets for the upcoming year, the final yield and non-homestead tax rates will be set by the legislature. Those rates must be sufficient to collect the money needed to run all of state’s schools.
If voters approve smaller budgets, then the yield will be raised and the tax rates will then drop.
Education is the state’s largest single expense, Gov. Phil Scott noted in a speech to the Vermont Press Association Thursday.
Those costs continue to rise even as the number of students in the system decreases.
In a letter to legislative leaders, Samson said, “As we continue to lose an average of three students from our schools every single day, this rate increase is a sobering indication that the cost of our education system will not adjust to our demographic trajectory absent other efforts and interventions.”

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