Home News and Features Education Department Clarification Improves Chances of Avoiding Massive Homestead School Tax Increase

Education Department Clarification Improves Chances of Avoiding Massive Homestead School Tax Increase

Roxbury Village School students head up to the woods on Forest Friday recently. Photo by Carla Occaso.
A clarification from the state’s Agency of Education that came after the Nov. 1 Montpelier Roxbury Public School board meeting indicates the district should use a calculation that gives the district a bit more room to increase its budget before running into a state tax rate review that could lead to an astronomical homestead tax increase, MRPS Superintendent Libby Bonesteel told The Bridge Nov. 10.

Based on its understanding of Act 127 as of Nov. 1, the school administration had calculated the district could increase its budget by $800,000 before triggering the state review. That figure appeared almost impossible to meet, as the district is facing a budget increase of more than $2 million just based on the 8% raise teachers are getting next year, the increases teachers receive for years served, and a 16.4% increase in healthcare costs. In recent years, budget increases have been in the $1 million to $1.2 million range, Bonesteel said.

With the clarification, it now appears MRPS could afford an overall FY25 budget increase of $2.4 million before hitting the 10% increase in spending per equalized pupil that would trigger a state review and the possibility of losing a 5% annual tax rate cap that is built into the law, Bonesteel said.

The 5% cap is designed to cushion the impact on homestead property taxes of the new education finance formula, which puts MRPS and some other districts at a disadvantage but benefits others (non-homestead rates are not directly affected by local budgets). As long as annual spending increases per equalized pupil are less than 10%, the 5% annual tax rate cap applies through fiscal year 2029.

However, in fiscal year 2030 the cap disappears and MRPS could be hit with a huge homestead tax increase then if the budget is not cut by as much as $5 million from the FY24 budget level of $28.5 million. At the school board meeting, Bonesteel said such a cut was “unfathomable. I can’t wrap my head around that.”

“We will need to be very careful between now and fiscal year 2030,” Bonesteel told The Bridge. “The clarification from the education department does not alleviate the long-term challenge.”

Bonesteel said the impact of Act 127 is much greater than she expected when the law was being debated in the Legislature. Two things about the law’s actual impact surprised her: a bigger change in the finance formula’s “yield” than expected, and the fact MRPS does not qualify for a small school “weighting” credit, even though the district has a small school in Roxbury. 

The small school weight only applies in districts where the number of persons per square mile is 55 or fewer. When the population and size of Montpelier and Roxbury are combined, the district does not qualify.

Residential taxpayers should be aware that even if the district is able to keep next year’s school equalized tax rate increase to 5% or less, the actual tax rate increase could be higher because of the way the state calculates the Common Level of Appraisal (CLA) around the time of a reappraisal. The CLA is a method of adjusting Grand List property values to ensure that each town is paying its fair share of the state education property tax.