House lawmakers in a key tax-writing committee advanced a bill Friday that would use a little over $118 million in surplus funds to offset school property taxes and keep rates nearly flat next year.
That will likely come as welcome news to property taxpayers, who saw bills rise an average of almost 14% this year. But the use of one-time funds is a risky move 鈥� and one that could set schools and taxpayers up for a financial cliff in the following year.
The tax bill advanced out of the Committee on Ways and Means on a 9-2 vote. Rep. Rebecca Holcombe, a Norwich Democrat, voted in the minority, and warned her colleagues that they were essentially putting property taxes on a credit card.
鈥淭his cycle of using tax rates to create buy-downs creates a state of constant crisis in our public schools,鈥� said Holcombe, a former Vermont Education Secretary. She added that it was particularly unwise not to squirrel away any of this surplus given the growing likelihood of steep cuts in federal aid.
Without an intervention 鈥� in this case, the use of $118 million in surplus funds 鈥� the average bill is on track to rise 5.8%. Buying down rates as lawmakers proposed to push that increase down to 1.1%.
Using one-time money to buy-down property taxes is a regular and bipartisan habit in Montpelier, although politicians on both sides of the aisle will frequently acknowledge it is bad practice. Still, particularly in the economic boom times of the post-pandemic era, lawmakers and Gov. Phil Scott have signed off on tax bills that used ever-larger surpluses to buy down rates.
The Republican governor鈥檚 proposal for this year鈥檚 property tax bill differs from what House lawmakers are proposing in only one respect: In addition to using one-time money, it would have also axed Vermont鈥檚 universal meals law, which requires schools to feed all students, regardless of income, for free. Democratic leaders have said they aren鈥檛 interested in telling schools they should once again begin charging for lunch.
As lawmakers prepare to set next year鈥檚 property tax rates, they are also at work debating a massive, soup-to-nuts overhaul of Vermont鈥檚 pre-K-12 system proposed by Scott. And his office has suggested that whether or not the governor will accept whatever property tax bill lawmakers send his way may be tied to their response to his larger reform ideas.
Democratic lawmakers have made clear they agree with Scott that big changes are needed 鈥� but also that they鈥檙e highly skeptical about key parts of his plan. What remains unknown at this point, however, is what their counter proposal will look like.
Leaders in the House have given themselves a deadline of next Friday to advance a reform bill. But one week out, much remains unknown about what its contents will include.
鈥淚 know things may be coming, but we still don鈥檛 have anything on the table that is going to yield the kinds of savings that we need to compensate for the kind of cliff that we鈥檙e creating for next year,鈥� Holcombe said.
Rep. Emilie Kornheiser, who chairs the ways and means committee, acknowledged Friday 鈥� as she has in the past 鈥� that buy-downs are not sustainable. But she characterized them as a necessary stop-gap measure, and expressed optimism about reform talks.
鈥淚 have a lot of faith in our ability to do transformation this year,鈥� she replied to Holcombe.
The tax bill that advanced Friday has a long way to go before becoming law. The full House will need to have its say, as well as the Senate. The Senate鈥檚 leader, Phil Baruth, a Chittenden County Democrat/Progressive, has already said he intends to buy down the rate to zero this year.
But the Senate鈥檚 top tax-writer, Sen. Ann Cummings, expressed some reservations about that idea Thursday. The Washington County Democrat emphasized that while lawmakers were committed to offering property taxpayers some measure of 鈥渟helter鈥� from rising rates, the extent to which they could do so might hinge on whether events in Washington, D.C., result in massive budget shortfalls in Vermont.
鈥淚t鈥檚 going to be a long session 鈥檛il we find out how things are going to shake out,鈥� she said.
