Lawmakers Say Shumlin Budget Would Spike Property Taxes

Feb 6, 2015

In his budget address last month, Gov. Peter Shumlin insisted that lawmakers abandon any bills that might put pressure on property taxes. But legislators say the Democratic governor isn’t following his own advice.

It’s a tough budget year for the governor, who has to figure out how to deal with a more than $100 million shortfall in the fund that pays for general government activities. But Shumlin’s plan to shore up what’s known as the “general fund” is riling lawmakers, teachers and school boards.

They say the governor is raiding the education fund to fill gaps in the general fund. And they say the governor’s proposal will serve to ramp up property tax rates in towns already suffering from high tax bills.

“It’s very simple. Every penny that is diverted from the education fund is a property tax increase on local Vermonters,” says Darren Allen, communications director for the Vermont-NEA.

Lottery money, for instance, has always gone to the education fund. But Shumlin’s proposal uses $2 million in lottery revenue to cover budgetary shortfalls in the general fund. The lottery money would specifically be used to solve budgetary shortfalls at a residential home for veterans in Bennington.

"It's very simple. Every penny that is diverted from the education fund is a property tax increase on local Vermonters." - Darren Allen, Vermont-NEA communications director

Shumlin’s plan also makes nearly $2 million in cuts to a high school program for incarcerated juveniles. But while the budget for the Community High School of Vermont comes from the education fund, Shumlin wants to use those savings to pay for items in the general fund.

Steve Dale, head of the Vermont School Boards Association, says elected officials had vowed coming into this session to make property tax relief a top priority.

“So our assumption has been that there will at least be some measure of property tax relief, since that is front and center,” Dale says. “So the notion that actions that we take this year would actually increase property taxes, or increase the demands on the education fund, don’t make a lot of sense.”

Administration Secretary Justin Johnson says the governor’s plan uses a holistic approach to mitigating the state’s budget troubles.

“It’s pretty simple. We have an education funding challenge, we know that. We also have a pretty significant general fund challenge. And what we’re doing is working to try and address both of those,” Johnson says.

"We have an education funding challenge, we know that. We also have a pretty significant general fund challenge. And what we're doing is working to try and address both of those." - Administration Secretary Justin Johnson

Johnson says that while the governor’s budget plan might not relieve pressure on property taxes directly, it also doesn’t exacerbate the problem.

The lottery money being allocated to the general fund comes from a new game being introduced in bars. And Johnson says it won’t affect existing lottery revenues going into the education fund. Johnson says the other measures aren’t depleting the education fund, because they’re using savings that would have accrued to the education fund for other purposes instead.

“And I don’t know anybody who thinks the best answer for that is to just find more money to put in the ed fund. It may well be that the ed fund needs more money at some point,” Johnson says. “But rather than just keep bringing in new money from wherever we can get it, adding new sources of money to the ed fund, we need to look at the way we’re spending the money in the ed fund.”

But Senate Majority Leader Philip Baruth says the proposals violate the spirit of the challenge that Shumlin laid before lawmakers last month.

“He’s telling us as the education committee … that he would like us to accept a moratorium on unfunded mandates,” Baruth says. “But if you going to say that, you can’t then as the administration begin reducing your general fund deficit by millions of dollars by dipping into the education fund yourself.”

"The mantra has been ... 'All proceeds go to the education fund.' And I would say it's a significant departure to say we're going to start generating funds for other purposes." - Steve Dale, head of the Vermont School Boards Association

Dale says he’s especially worried about the precedent of using lottery money for anything other than public schools.

“The mantra has been … ‘All proceeds go to the education fund.’ And I would say it’s a significant departure to say we’re going to start generating funds for other purposes,” Dale says.

An economist for the Legislature says sales from the new lottery game will likely cannibalize other lottery revenue.

Shumlin’s budget plan also would make changes to the Current Use program, changes that would likely result in additional revenue flowing into the education fund. But Shumlin would divert that new revenue away from education, and toward the general fund.

All told, legislative analysts estimate the governor’s plan could serve to redirect more than $5 million away from the education fund, enough to reduce statewide property tax rates by about half a penny.