Public Assets Institute: No Homeowner Tax Relief in Governor’s School Budget Cuts

Paul Cillo of Public Assets Institute responds to Governor Phil Scott’s Budget Address.

Gov. Phil Scott said this week that property taxes were one of the biggest contributors to what he calls the state’s “affordability crisis,” and he called on local school boards to cut more than $50 million from the budgets they’ve prepared for next year. But if schools make the cuts the governor has asked for, Vermont homeowners won’t see lower taxes. Instead, school budget savings will be used to cover new obligations the governor wants to pay for out of the education funding pot.

The governor’s plan is to transfer some existing expenditures—for higher education and a portion of teachers’ retirement—from the General Fund to the Education Fund. He also wants to add new spending—additional money for early education and education “innovation”—to the Education Fund. While he is proposing to move additional General Fund revenue to the Education Fund, it is not enough to cover the additional expenditures.

Here’s the math:

EdBlog

At first glance, this appears to be a simple case of paying for public services out of a different pocket. But the taxes that go into the General Fund and the Education Fund aren’t the same. Most of the money in the General Fund comes from broad-based taxes: income, sales, rooms and meals, and business taxes. Property taxes supply the bulk of the money in the Education Fund.

So while the governor says property taxes are making Vermont unaffordable, his plan shifts $50 million in new costs onto the property tax. To avoid having to raise property taxes, the governor wants to cut the other expenditures covered by the Education Fund—payments to public schools.

Most school districts have completed work on the fiscal 2018 budgets, and the Agency of Education estimates spending will increase around $38 million next year. The governor said he was only asking local schools to level fund their budgets for the next school year. But his budget recommendation would require them to cut $55 million from what they determined they need next year.

And even if they did make those cuts, it wouldn’t reduce property taxes. The bottom line is that by shifting costs to the Education Fund, the governor’s plan will use 6 cents on the average homestead property tax rate to cover what have been historically General Fund obligations.

The governor’s new spending initiatives are laudable. Vermont does need to put more resources into higher education and early education. But instead of shifting costs onto homeowners or reducing opportunities for Vermont schoolchildren, the governor should look to those who have prospered the most during the recent economic recovery to help insure that others have the same chance.

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