Proposal for Education Funding
Prepared for House Ways & Means - H.480

 

FY2005

“Split” the Grand List          

Homestead Property = home of a Vermont resident and all contiguous land  

Non-homestead property = all other property

         Farm buildings enrolled in current use are exempt from all property taxes (starting FY04 –in BA bill)

 

Tax Rates

Homestead Property: tax rate depends on spending. The rate starts at $1.10 for spending at $7,000 and moves up proportionally with spending (e.g. 1% increase in spending means a 1% increase in tax rates)

 

         Income Sensitivity

- rate starts at 2% for spending at $7,000 and moves up proportionally with spending just like property rate

- current law income limit (income sensitivity for those under $75,000, $160,000 homestead cap for those over $75,000)

- total prebate/rebate amount capped at $5,000 (including renter and homeowner rebate)

- no $15,000 homestead exemption

- homestead property expanded from 2 acres to all contiguous property

 

Non-homestead property: uniform statewide rate of $1.59

 

Tax rate reduction: if the Ed Fund reserve is fully funded at 5% and there are additional undesignated revenues in the ed fund, the $1.59 and the $1.10 are reduced proportionally.

           

New Revenues

New revenues include expanding and increasing sales tax to 6% starting Jan 2004 (approx $70 million) and expanding sales tax to include beer and soft drinks

Increase GF transfer in FY04 by approx $20 million

Simplification of Taxes dedicated to Education Fund: Dedicate 1/3 of total sales tax and 1/3 purchase and use tax to EF starting in FY05 and move Act 60 taxes (e.g. rooms & meals, telecommunications, corporate, gas, car rental, etc) to GF and TF

Increase property transfer tax by 0.5% to 1.75% for nonresidential property

 

Other

Base education payment is $7,000 per pupil

Capital construction aid is 50% for school consolidation

Cost containment:

- for spending in excess of 135% of average in 2005, 130% in 2006, 125% in 2007 and beyond, 100% of excess is counted twice for tax rate calculation (school capital construction is excluded from this calculation)

- clear relationship between spending and tax rate: tax rate increases proportionally as spending increases

Collection fee: 1/8% of total property taxes (accrues to municipality as compensation for collecting tax)

 

FY2004

(as passed by the House in the Budget Adjustment)

Statewide property tax rate reduced to $1.07,  Predictable yield of $45.20, block grant of $5,651

Farm buildings enrolled in current use are exempt from all property taxes