The Vermont Tax Department is projecting that property tax bills will increase by an average of 18.5% statewide in the next fiscal year, putting added pressure on property owners and those struggling to pay for housing. If the forecast comes to pass, the property taxes on a $250,000 home would increase by about $650 next year.
The increase is being driven by a forecasted 12% increase in year-over-year education spending, the Tax Department said. In addition, many districts are seeing changes in pupil counts due to implementation of the new pupil weights from Act 127 of 2022. Changes in pupil counts affect education tax rates, which are based on per pupil spending.
Other problems include the fact that Education Fund surpluses in recent years were used to push down rates (they dropped last year), but those surpluses are ending. In addition, the booming real estate market of the past three years means most school districts are in line for significant Common Level of Appraisal (CLA) adjustments, pushing up tax bills.
With the CLA adjustment included, the average homestead rate will rise from $1.54 this year to $1.80 next year, and the average non-homestead rate will rise from $1.60 to $1.86. For those who pay school taxes based on income, the average rate will increase from 2.33% to 2.67%, a 14.5% increase, the Department projects.
“I understand that this will not be welcome news for Vermonters,” said Commissioner of Taxes, Craig Bolio. “This forecast predicts an unprecedented property tax increase next year, with very real financial impacts at a time Vermonters are already struggling to pay for housing.”
Bolio said the 12% increase in school spending was primarily due to four factors:
The ending of one-time Federal ESSER funds – Many districts used those one-time funds to add new services and personnel to recover from the pandemic. A large portion of those districts believe these services continue to be necessary. That requires replacing those one-time federal dollars with state education funds.
A 16%+ increase in health care benefits – The vast majority of school employees receive health benefits. An increase of that magnitude in the cost of those benefits is approximately 3% in overall education spending for a district alone.
Overall inflation is increasing the price of operating, living, and working in Vermont – fuel, electricity, buses, equipment, supplies, etc.
Debt service to new capital projects or renovations – Vermont’s aging fleet of schools is becoming more expensive to maintain and repair as they continue to age.
The Montpelier-Roxbury school district has been struggling to understand and prepare for the impacts of Act 127, a law which changed pupil weighting in a manner that disadvantages the district. By FY2030, the adverse impact could be huge. With some cuts, however, the district may be able to avoid an astronomical tax increase this year. But Montpelier-Roxbury could still be facing a school tax bill increase close to the substantial 18.5% average predicted for all districts, depending on the district budget and final decisions by the legislature.