Lawmakers are now talking about replacing a controversial cap on homestead property tax rates with a new tax “discount” that would apply only to districts losing tax capacity.

“Five percent cap is over,” Rep. Emilie Kornheiser, chair of the House Ways and Means Committee, said in a joint hearing with the House Committee on Education on Tuesday. 

She also said that lawmakers were drafting language “to allow districts to move their budget votes out a little bit to give them time to redraft their budgets,” ​​now that lawmakers are again planning to adjust the details that govern the state’s education funding system. 

The specifics of the new proposal are expected to be made public on Wednesday, Kornheiser said. Voters typically consider school budgets on Town Meeting Day, which is four weeks away.

The latest tax discount idea would give districts a one-cent discount on the homestead property tax rates — prior to being adjusted by the Common Level of Appraisal — for every percent decrease in their “taxing capacity” since the implementation of Act 127. 

That discount would gradually fade out over the next five years, much like the original 5% cap.

Act 127, which encompasses the latest changes to Vermont’s education funding system, was meant to direct education money toward students who need it by providing schools with more money to educate students who are more expensive to teach. Ideally, that change in “pupil weighting” would create a more equitable funding structure.

Districts who relatively lost “pupil weights” also lost “taxing capacity,” a phrase that refers to the relative portion of weighted students a district has compared to Vermont as a whole. To smooth that transition, Act 127 capped increases to the homestead property tax rates at 5% for the next five years. But that cap applies to all districts, not just those that lost tax capacity. 

Article continues after...

Yesterday's Most Read Articles

Homeless Upper Valley couple faces ‘a very tough situation’

Lebanon’s Jewell back from auto accident, more aware of ‘drowsy driving’ dangers

Plan on track to ship Upper Valley mail to Connecticut for sorting

West Lebanon crash

Crane crash on Interstate 89

Claremont woman pleads guilty to hindering investigation into attempted robbery, shooting

Responding to the law, some districts added money to their budgets with the understanding that local taxpayers wouldn’t directly feel the full burden of that extra spending. 

Lawmakers and school leaders alike bemoaned the “unintended consequences” of the tax cap, leading the house tax committee to rethink the cap entirely.

State economists, using the latest available school budget projections, have predicted that education spending could increase almost 15% next year. As a result, the latest modeling indicates the average Vermonter could expect education property tax bills to increase 20%, assuming lawmakers go forward with the new discount — roughly the same increase expected with the 5% cap.

School officials say a variety of factors have compounded soaring budgets this year, from disappearing federal dollars, increasing health care costs, school construction needs, teacher salaries, special education costs and more. 

Kornheiser, who is leading the push to change Act 127’s cap, said the new cent-on-the-dollar property tax discount for fewer districts “better” fit with the original intent of transitioning into Vermont’s new pupil weighting system. 

According to the modeling from the Joint Fiscal Office, the newly proposed discount would cost approximately $30 million.

But legislators repeatedly reminded those listening that if districts are given the time and opportunity to redraft their budgets, they might reduce spending now that the Legislature plans to remove the 5% cap. If so, an overall reduction in education spending would drive down property taxes to some degree.