COVID-19 impact on Vermont property taxes not clear, but big

YouTube Screen capture

A joint hearing of the House Committee on Education and House Committee on Ways and Means, as conducted on Zoom

By Rob Roper

The Legislature is supposed to set the “yield” rate for Vermonters’ property taxes, but the economic chaos set off by the COVID-19 response has left the bean counters shrugging their shoulders — there is a great deal of “we don’t know what we don’t know.”

What we do know, according testimony before the House Education and Ways and Means committees, is that the FY2020 education budget is suddenly looking at revenue downgrades of about $40 million. There is some confusion about whether $31 million in federal bailout money can be used for 2020 expenditures, which would go a long way toward filling that hole, or if it needs to be used for FY2021. Still, most of the property tax money needed to pay for the 2020 school year has already been collected, and we should be able to weather the storm in the short term.

However, FY2021 looks like a real nightmare. Almost all the local school budgets for 2021 have already passed, and these created a total statewide spending increase of $70 million — an expensive nut to crack even before the crushing loss of tax revenue brought about by shutting down the economy. The reserve fund, estimated in January 2020 at just under $13 million, is expected to be entirely wiped out this year dealing with the crisis, so we will start 2021 with nothing in it. Additionally, lawmakers changed the always controversial budgetary practice of requiring a transfer of money from the general fund to the education fund in favor of a system that filled the Ed fund with dedicated revenue streams — the sales & use tax, vehicle purchase and use tax, rooms and meals tax, and lottery sales. All of these sources are going to be massively down, which will put tremendous upward pressure on the property tax.

This will be particularly problematic for property taxpayers because they will not be able to claim income adjustments paying their property taxes until 2022, even if, in the meantime, they’ve taken a major income hit. There is an expectation that many Vermonters will simply not be able to pay their property taxes.

Schools in the meantime are not saving money despite being closed, and, as Brad James, Finance Manager at the Agency of Education, pointed out, aren’t likely to moving forward as most of the education dollars are locked up in salaries and benefits guaranteed in union contracts. The only option would be a reduction in force (RIF) or a re-votes on local school budgets — an option James says is possible as school boards have the power to call for new votes.

You can watch the committee discussion here.

Rob Roper is president of the Ethan Allen Institute. Reprinted with permission from the Ethan Allen Institute Blog.

Images courtesy of Flickr/401kcalculator.org and YouTube Screen capture
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9 thoughts on “COVID-19 impact on Vermont property taxes not clear, but big

  1. If our ‘quarantine’ is lifted, then schools should be in session throughout the summer to make up for time lost. Schools are funded by taxpayers to teach for a certain number of days – they need to uphold our contract.

  2. “COVID-19 impact on Vermont property taxes not clear, but big”

    Ya think.

    It’s not like any of the elected representives have clue one what to do in regards about it, perhaps watch another porno.

  3. So schools are not saving money even though they are closed……… So when did schools ever save any money of significant endurance that amounted to any impact in the statewide picture? One has to venture back to pre Act 60 days to find that being the case. This would be a perfect time to do the right things;

    Shut down the Montpelier AOE, put Districts in charge of everything educational, with the staff and leaders being the accountable ones to the voters, and eliminate this tag team match we are now in, with results getting worse, and worse. These people promoting status quo have lost track of the big picture, which in this case is synonomous with the definition of insanity.

  4. Keep in mind that Property Taxes are some of the most controversial for several reasons.

    First, they’re based on Chapter I, Article 9th of the Vermont Constitution and the so-called proportional contribution clause: “… every member of society hath a right to be protected in the enjoyment of life, liberty, and property, and therefore is bound to contribute the member’s proportion towards the expense of that protection“.

    The clause further states that: “… previous to any law being made to raise a tax, the purpose for which it is to be raised ought to appear evident to the Legislature to be of more service to community than the money would be if not collected.” This is a contract with the State, not only to protect our rights to “…the enjoyment of life, liberty, and property” in return for our taxes, but to provide ‘more service’ than we can provide for ourselves when the money is “… not collected.”

    So, as property owners continue to pay increasing taxes, the State continues to decrease the services it provides in return. While that’s a breach of the State’s contract, good luck enforcing it. As the State drives itself further into debt to special interest groups, forcing continually renegotiated contract terms upon us, it will, inevitably, take our property when we are unable to pay our taxes… for the services we don’t receive.

    Isn’t this kind of tyranny why the Founders declared independence, fought the Revolutionary War and created our American Republic?

  5. In 2018 the legislature abolished the annual Act 60 “general fund transfer” to the Ed Fund, and replaced it with mostly sales and use tax revenues, which are notoriously variable. That made residential property taxpayers the bag-holder for Ed Fund shortfalls, if and when they happened – like now. At the time I couldn’t figure out the appeal of this switch. I still can’t. Now let’s hear from the geniuses that thought that up, about what to do next….

  6. If taxes must go up, I would hope and expect that there would be identical budget cuts as well. Unfortunately, I wouldn’t bet on it. These folks love to spend other people’s money.

  7. Commented on another article, is pertinent here:

    What will be the reaction for the Dome crowd, not business as usual. Will they come out of their regimented mindset of taxing and regulating and realize that when businesses close, less employment, less taxable income, higher state expenses (health, welfare payments) property values drop, etc. OR will they keep to “business as usual”?
    Regarding this taxation chart by Wallet Hub and VT’s position, there’s plenty of room to return to the US norm as noted in other states. Perhaps, just perhaps the crises will force the them to get real about life. Times and factors change, they need to as well.
    Interesting article about second home ownership that I believe will who’s scenario will be increased. Then what? They prop up the local tax base of towns.
    Property taxes force second-home owner to give up on Vermont
    https://vermontbiz.com/news/december/property-taxes-force-second-home-owner-give-vermont
    Tax Burden by State
    https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494/
    Interesting times.

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