Shifting costs to property taxes

By WILLIAM J. MATHIS
here are four solutions for the state's fiscal crisis: cut spending, raise taxes, run up debt and shift state costs to hidden property tax increases. Unfortunately, the cost-shift option is being played at an unprecedented level.

Since 1915, whenever economic times got tough, dour-faced governors, legislators and commissioners (of both parties) proclaimed education spending "out of control." Gov. Douglas has been no exception. The attacks always chastise voters, school boards and educators for their spendthrift ways to justify shifting costs to the property tax. Politically convenient, they can present themselves as fiscally conservative while claiming they didn't raise taxes or cut popular programs.

Whether it was the Hunt-Simpson, Miller, Morse-Giuliani, Foundation, Act 60 or Act 68 funding formulas, the refrain was always the same. And, of course, each time the state underfunded or reduced education appropriations, the formula would be pronounced "broken." (What "breaks" any formula is underfunding).

In today's verse of this Golden Oldie, the governor and former tax commissioner Tom Pelham claim that the citizens are voting too much money for education. Commissions, both official and nonofficial, have met and declared the funding system "broken." Following the tune, our education commissioner has said that "education is inherently inefficient."

These curious statements are contradicted by our uniformly high test scores (whether compared nationally or internationally) and our high ratings on child well-being. The gross state product and the state General Fund budget have both increased at faster rates than school spending in recent years.

The process plays out through a number of smaller, near invisible cost-shifts — that have a huge cumulative impact on property taxes. For example, Education Commissioner Armando Vilaseca was joined by Tax Commissioner James Reardon in proposing that costs for wards of the state be shared by local school budgets. Costs for high-needs children would also be shifted to the local school budget. The teachers' retirement fund (historically paid from the General Fund) would be transferred to the Education Fund.

Two additional commissioner proposals simply punish the victims. Towns that have the misfortune of having few students would be penalized by having their small school state aid eliminated. This would increase taxes in at least 100 towns. Additionally, towns that happened to have a recent decline in enrollment would have their "hold-harmless" state aid scaled back. This would aggravate taxes in 120 school districts. The injustice is that neither of these factors is within the control of local citizens.

Further, the tax commissioner proposed increasing the statewide property tax by 2.2 cents in the same year as the per-pupil base amount is frozen. (The decline in property values drives this arithmetic.) If teachers' retirement is transferred to the Education Fund, the statewide property tax needs another 2.5 cent increase to cover the tab. All of this is on top of the continuing $50 million cut from education funds this year.

Astonishingly, the governor, commissioners and many legislators lament the harsh burden of the property tax. Yet their proposals dramatically drive up property taxes. Conservatively estimated, these cost-shifts exceed $95 million, or more than 7 percent of education spending.

In disjointed distraction, school consolidation, vouchers and charter schools are proposed as economy measures despite clear, scientific evidence they do not save money or improve education.

The solution may be much easier and far more obvious. It is demonstrated by the 2 percent increase in education spending last year (90 districts had level or negative budget numbers) and in the fact that increases in school budgets have steadily declined over the past five years.

Why don't we let local democracy work?

School boards fight to balance a solid educational program with fiscal realities. They reduce positions and strive to do this through attrition. Yet, layoffs are still required — and harm our communities with greater unemployment. Negotiated increases are coming down.

Student enrollments, economic cycles, staffing levels, and school costs historically adjust themselves. Vermont's tax burden for education has consistently self-adjusted and remained steady, at 5 percent income, since 1992. As shown by the fact that 93 percent of school budgets pass, these local measures have the confidence and support of the people.

In these difficult fiscal times, the saying "I'm from the state and I'm here to help you" should strike fear in the hearts of Vermonters. Resolving the state's financial crisis through shifts to the property tax and local school budgets is destructive of the schools, the funding system and, ultimately, the economy itself.



William J. Mathis of Goshen is managing director of the Education and Public Interest Center (epicpolicy.org). He previously taught education finance at UVM.