Is Act 60 fair?

School tax: Is Stowe squeezed unfairly?

By Jesse Roman

Published:

Thursday, February 4, 2010 12:10 PM EST

Stowe residents have long chided state officials and anyone else who will listen about the demerits of Act 60/68, the state’s complicated school funding mechanism.

Stowe is squeezed, they say, by the state’s unfair and overbearing school tax policies.

Tax bills have skyrocketed. According to the state tax department, Stowe’s school taxes have risen about 164 percent since 1990.

Anger and frustration over the rising rates have been building for years, and nearly bubbled over earlier this month, when the Stowe School Board revealed that large tax hikes would occur unless the school budget was drastically cut — again.

Many residents wrote letters to the editor, raised their voices — and some broke down in tears at a recent school budget meeting. Some longtime residents have left town for cheaper pastures. More threaten to leave, saying they’ll soon be priced out of town.

But is Stowe alone? Is Stowe’s burden much worse than in other towns in Vermont?

Tale of two towns

If Morristown’s school budget proposal for 2010-11 is adopted, a resident who owns a $400,000 house will pay $4,328 in school taxes.

A Stowe taxpayer with a house worth $400,000 will pay $6,448.80 — or $2,120.80 more than the Morristown taxpayer.

Why?

It didn’t used to be that way. For many years, the roles were reversed. Before the 1997 enactment of Act 60, each town had almost complete control over how its schools were funded.

Once the school board set the budget and voters approved it, a property-tax rate was calculated to raise the money needed to finance the budget. The higher a town’s property value, the lower the tax rate had to be. In other words, a higher town tax base meant lower bills for individual taxpayers. A lean tax base meant a higher tax rate, and higher tax burden.

In 1990, a Stowe resident with a $400,000 house paid $2,400 in school taxes; a Morristown resident paid $3,800, according to the Vermont Department of Taxes.

What did Morristown taxpayers get for all that extra tax money?

Stowe spent $2,462 more per student than Morristown on education, despite receiving about $1.6 million less in state aid. The Stowe school budget in 1990 was about $4.3 million, while Morristown’s was $4.9 million. Stowe had 589 students K-12, while Morristown had 959. Although Morristown had 370 more students, it spent only $51,501 more in teacher salaries than Stowe.

The bottom line: Stowe spent more on education, but paid a much lower tax rate for it, thanks to an incredibly robust tax base.

In 1990, the value of all taxable property in Stowe, what’s called the grand list, was $437.8 million. Morristown’s grand list was just $234 million. The net result: Morristown residents were taxed 35 cents more per $100 of property value to raise enough money for schools — schools that were funded at levels well below Stowe’s schools. This, despite $1.7 million in state aid.

That pre-Act 60 dynamic was true throughout Lamoille County in 1990.

Of the county’s five most populous towns, Stowe residents paid by far the lowest property taxes, yet had one of the best-funded school districts in the county in 1990. Cambridge residents paid $4,160 in school taxes for a $400,000 house; Johnson residents paid $4,760; Hyde Park residents paid a whopping $5,320, according to state tax figures. Stowe residents paid $2,400 per $400,000 in property value that year.

In 1990, the owner of a $400,000 house in Stowe paid $1,687 less in school property taxes than the county average. In 2009, a Stowe resident paid $839 more than the county average.

The bottom line: Although Stowe is now shelling out more money than ever before, the disparity between its school tax burden and the burden of those in other towns has shrunk since 1990, according to state statistics.

But it’s not that simple, says Vermont Tax Commissioner Richard Westman.

“I think if you took a look at the increase in property values, I bet values in Stowe have gone up faster than the rest of the county,” Westman said in an interview. “So Stowe is forced to pay the same rate as everyone else, but at the same time their values have gone up faster than everyone else. You can’t just look at the rates; you have to look at the growth in communities, too.”

Despite all the other factors and complications tied to Act 60 and its offspring, Act 68, there is no formula that takes into account property value escalation rates in different communities. That’s a flaw, according to the commissioner.

“I don’t think the founders of Act 60 realized or thought about ‘What if values go up faster in some towns than others?’ That is a whole other factor you have to look at and consider,” Westman said.

Stowe’s grand list, the value of all taxable property in town, is about $1.9 billion, a 355 percent increase since 1990. Morrisville has a grand list of just $589.5 million, a 152 percent increase since 1990.

First-person perspective

Alice Angney ran schools in Stowe, Morristown and Elmore from 1981 to 2007. She probably knows more about school funding and school dynamics in Lamoille County before and after Act 60 than anyone alive.

In an interview, she said that, whatever the funding, the school boards she worked with had the same goal: “A fierce desire to provide high-quality education to all students within the financial resources of the town.”

As with any two towns, Stowe and Morristown had different dynamics, she said. And, despite Stowe’s robust tax base, “I do not remember a time when school budgets weren’t difficult.” How-ever, after Act 60, “the level of concern moved up a notch.”

Angney was reluctant to compare the school districts or compare how each was affected by the school funding law.

“I’m guessing across the state people are going to say there is less disparity (after Act 60) in the quality of education provided to students. But I can tell you, both communities (Stowe and Morristown) worked hard to provide quality education both pre and post Act 60,” Angney said.

“I found there was high-quality education in all three systems — Stowe, Morrisville and Elmore,” she said. There were differences between the districts, such as different types of programs, “and some of that was related to the funds available in each community.”

But “state aid was a considerable factor for towns that didn’t have the kind of robust tax base Stowe had.”

Did state aid made up for disparities in spending? “No,” Agney said. “It did not equalize spending.”

Those disparities are what led to passage of Act 60.

Unconstitutional

“The current system for funding public education in Vermont, with its substantial dependence on local property taxes and resultant wide disparities in revenues available to local school districts, deprives children of an equal educational opportunity in violation of the Vermont Constitution,” the Vermont Sup-reme Court ruled in 1997, in a lawsuit brought separately by a group of students, property owners and school districts.

The historic ruling found that property taxes varied by huge, unconstitutional degrees from one town to the next. Further, it said public education is a responsibility of the state government, not local communities.

Enter Act 60. Instead of each town raising money itself for its own schools, the state now sets a base rate and each town sends all the school-tax money it collects to Montpelier, to be doled out equally to schools on a per-student basis.

Whereas before Stowe needed only to raise the amount needed to fund its own schools, it now raises whatever the state tells it, plus whatever extra money it wants to spend on its schools.

As a result, Stowe sent the state $20 million more last year than it needed to cover its own school costs.

In 2008, the state did a study to find out the impact Act 60 has had on education and taxation equality. Its conclusions were mixed on education equality. Test standards had changed since the law was adopted, and educational improvement is hard to quantify, the study said.

On tax fairness, the study was much more conclusive.

“An examination of the trend over the entire period provides clear evidence that the level of equity in local education spending and education spending is increasing,” the study said.

Present and future

Despite huge tax increases since Act 60 was adopted, Stowe taxpayers have generously continued to fund the town’s schools at levels much higher than Morristown or the state average.

In 2009, Stowe spent $12,506 per equalized pupil, about $1,000 more than the state average.

Since 2006, Stowe has increased its education spending by 24.05 percent, compared to 16 percent in Morristown, according to a state study completed this month.

If spending trends continue, Stowe and Morristown will spend about the same on education by 2015, the study said.

The Stowe school budget proposal, firmed up two weeks ago by the Stowe School Board, asks voters for $12,736 per equalized student next year. Meanwhile, in Morristown, spending is proposed at $9,749 per equalized student. The difference is just a shade under $3,000 per student.

The extra funding is partially to pay Stowe teachers, who make an average of $9,407 more per year than Morristown teachers, according to the state study. Both school districts have student-teacher ratios of about 12.5 to 1.

That extra funding adds up fast. If education spending in Stowe were on par with Morristown’s, Stowe taxpayers would shave $1.9 million off the 2010-11 school budget.

Obviously, adjusting Stowe’s spending to a Morristown level would slash the tax rate considerably. A Stowe homeowner’s tax bill on a $400,000 house would drop to $4,936.40, about $600 more than a Morristown homeowner.

It’s not quite as simple as that, however, says John Pike, the Lamoille South Supervisory Union director of finances and operation.

“It’s very hypothetical,” he said. “It’s important to note, that it wouldn’t be as simple as cutting $1.9 million in expenses.”

Reducing education spending in Stowe by $1.9 million to bring it in line with Morristown’s per-pupil spending would mean revenues would also drop, meaning you might have to cut even more to make it equal, Pike said.

Also, since Stowe has a smaller enrollment than Morristown, it might not be possible to match the per-pupil spending without seriously compromising education, said Tracy Wrend, the school superintendent.

That Stowe is faced with cutting its budget every year is proof enough that Act 60 needs to be revisited, Westman says.

“They’ve cut budgets, or have zero-level budgets, and you still see the tax rate go up significantly,” Westman says. “It has caused real conflicts within the community and I don’t think that’s good.”