Governor Highlights Consequence of Legislative Inaction on Property Tax Rates

Montpelier, Vt. – June 26, 2008 – Governor Jim Douglas today released a Tax Department analysis of escalating property tax rates, and took the supermajority in the Legislature to task for their failure to take action on property tax relief.

The Governor recently asked to review Tax Department calculations of homestead and non-residential education property tax rates. What he found, he said, was everything he had repeatedly warned legislative leaders would happen if they took no action.

For the 194 municipalities calculated so far, the average change in the residential rate is a 7.48% increase and the average change for nonresidential rates is an increase of 8.66%. It is expected, when rates are set for all municipalities that weighted residential tax burdens will increase on average by 7.8%, including an average increase of 6.8% for those covered by income sensitivity. Nonresidential tax burdens are projected to increase by 9.83%.

“In my addresses to the Legislature, in several letters and in many meetings, we repeatedly reminded them that action was essential,” Governor Douglas said. “We repeatedly offered innovative ways to contain property tax increases and invited their ideas—but they did nothing. The view of the super-majority controlling our Legislature that somehow it is acceptable to knowingly and willingly allow this to happen to struggling families is supremely frustrating.”

As of June 24, Tax Commissioner Tom Pelham has established property tax rates for 194 municipalities. Approximately 60 others will be set in the near future after school budgets have been voted and/or local reappraisals finalized. Generally, as these rates are adjusted for local Common Levels of Appraisal (CLAs) and with the exception of towns experiencing a reappraisal in 2008, they reflect the change in tax burden that property taxpayers can expect.

Governor Douglas noted, “We repeatedly informed Speaker Symington, Senator Shumlin and other legislative leaders that this is exactly what would happen if they refused to take action. But their inaction is even more infuriating when you consider that they also know that from 1999 – 2009, property tax burdens have increased at a rate of 7.24% annually. During this 10-year period, the K-12 student population has dropped by more than 10% — from 105,120 students to 94,076. And the student population from 2008 to 2009 is projected to decrease by 1.85% or 1,730 students.”

In 2006, Governor Douglas proposed a cap on property tax growth—an innovative idea that was rejected by the Legislature. Ultimately, in 2007, the Governor and Legislature agreed on a “two vote/think-twice” provision to constrain property tax growth. While not as meaningful as the caps the Governor proposed, the Governor noted it was an important step in the right direction.

The two vote reform requires that in school districts where per pupil spending is above the state average and the proposed budget on a per pupil basis is above inflation plus 1%, then voters be presented with two ballot questions. The first is to approve the base budget inclusive of the inflation plus 1% increase. The second is to approve any amount above this level.

Under intense pressure from the education lobby, Speaker Symington last year reversed her support for this commonsense approach and encouraged and led the effort to repeal the two vote/think twice ballot system which she had advocated for in the prior session. Senator Shumlin, however, did not reverse course, saying he would keep his word on this issue.

Governor Douglas noted, “Everyone knew what would happen with property tax bills this summer if the legislature took no action. That’s why in my State of the State address, I proposed an innovative idea to lease the state lottery with $25 million of the proceeds dedicated to property tax relief this year—the transition year to the two vote/think twice ballot system—and the other $25 million in proceeds going toward school modernization. This would have reduced this property tax increase by 36% and put downward pressure on future increases. Both Speaker Symington and Senator Shumlin opposed my solution, yet failed to propose one of their own, again, despite my repeated private and public requests that they provide a real alternative.”

The Governor said he would continue to fight for property tax relief and reform.

“I will remain a voice for property tax relief and reform in Montpelier,” he said. “I’m not going to let them retreat from the two vote/think twice provision. And, I’m going to continue to fight to implement innovative new ideas—like my cap proposal—to make our increasing investment in education sustainable. With a legislative majority that understands the need for property tax relief, and who will be a willing partner in this important effort, I’m optimistic we can get the job done.”