(5/20/01) It is difficult to agree on a solution to Act 60 when there is so much disagreement on what the problem is. Many people want to reduce reliance on the property tax to fund education. Others want to eliminate the shark pool and still others want to reduce taxes period. However, there is consensus that Act 60 needs to by simplified. Vermont has only limited resources and to reduce the property tax burden, money has to come from some other major funding source, the sales or income tax.

Some members of the senate and public want to shift education financing to the income tax. The Governor opposes this plan, as does the senate. Also, economic development data shows the income tax is the major impediment to job creation and Vermont’s marginal rate is one of the highest. Whatever is considered for Act 60 reform must help and not hinder our state’s economy.

The senate looked at modifying Act 60 by raising the block grant to $6200 and statewide property tax to $1.33. They did cap sharing for some towns, but capped private donations to $200 per student. The 2-acre homestead size was also increased to 27 acres. Some view that as a sprawl booster. Income sensitivity and homestead values were increased, as was the local yield for the local share property tax. These fixes are only Band-Aids that reinforce Act 60.

However, prebates would be simplified and easier to file under the senate bill. The student income cap included in household income would increase and Roth pensions would not be doubled taxed. A commission is proposed to look at statewide administration of special education and another to look at ways to lower the cost of education in Vermont. These are good changes.

Major reform is required and not the stopgap plan the senate proposed. We can work with the senate to simplify Act 60 this year but the goal should be to reform Act 60 in a way that supports education excellence under a sustainable funding system with less reliance on the property tax.

A few months ago, the house ways and means committee proposed a major reform plan that shifts the burden from the property tax to the sales tax. Vermont’s sales tax per capita is 15% below the national average so it could be increased.

The house plan called for each student to receive a block grant ($6666) close to the state average cost per pupil. 240 towns would see an average 10% drop in their property tax rate and 51 property rich towns would send $53 million to Montpelier to fund education. South Burlington would not be sharing and our tax rate would decrease 18% compared to 2% in the senate plan.

In analyzing Joint Fiscal Office spreadsheets to this plan, the sales, room and meals tax collected in South Burlington today amounts to $24 million a year, the 2nd highest revenue source in Vermont. On a per pupil basis that equals $9,838.

Everyone seems to agree that if prior education plans were fully funded, there would never have been an Act 60. House members fear that if property tax burdens are lowered by using the sales tax and increased education spending outpaces sales tax growth, property taxes would increase again in a few years to current burdensome levels. W

isconsin addressed this problem by requiring the first draw on the state treasury each year to be education funding. Our house bill includes similar language and indicates the state’s financial commitment will be 50% of education spending a year compared to the current level of less than 40%. This language implies education will be the highest state spending priority in the budget. The senate plan has no such language and their plan will require another fix in FY05.

Members of the house indicate we need to look at more than financing when we address a comprehensive reform to Act 60. They want a plan to also include the following:

Promote local control and eliminate the disconnect between voters and budgets

Eliminate mandates and provide help in labor negotiations.

Reduce special education and health care costs on school budgets

Eliminate the state-wide property tax on working farms

Improve the quality of our schools

There’s criticism the Republican house didn’t pass major reform this year. However, the house is committed to lower property taxes by shifting this burden to another revenue sources and to end the sharing pool. Our financial problems with Act 60 didn’t develop overnight and it would be imprudent to rush through a major fix in a few months.
 

Thank you for your calls and notes. I can be reached at 658-3975 (home), 228-2228 (State House) and via e-mail

Rep. Frank Mazur
South Burlington