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Taxpayers didn't just fall off the turnip truck

05/10/2007

By Jim Parker

I wrote this to State Representative Carol Hosford in response to her comments about a spending cap.

Carol,

I recently read your comments with regard to the savings that might be expected from applying a spending cap on education to the rate of inflation. Using the rule of 72, at the current rate of spending we will double the cost of education again in another seven years (a total of nine years at the current rate of spending growth of 7.5 percent per year); while there is a continuing reduction, at the rate of 1 percent per year in the school population in Vermont. 

I suggested that this could happen four years ago when the Senate finance committee asked me, during one of my testimonies, what I though of increasing the sales tax by 1 percent, which they said would allow them to lower the property tax rate. I asked if they were going to adjust the CLA methodology and cap spending and they said no, so I said, I think you will get $60 million from the sales tax increase and property taxes will continue to rise and you will double the cost of education in the next four years. This is exactly what happened. But it didn't take a visionary to figure it out, it took common sense.

So I don't understand why you folks on the education committee think we just fell off the turnip truck and will fall for some meaningless penalty on the high spending towns, when the spending overall is going up at seven percent per year. We need to remove access to the money by limiting the growth in spending to the rate of inflation which is more in line with our ability to pay.

Like any government program, the spending increases to consume the money available. So unless we say there is less money, plan your budget accordingly, we continue to grow spending. This is particularly true of a politically sensitive football like educating our children.

The governor understands that no matter what formula you use to fund education, property taxes or income taxes, unless you cap spending to inflation, it will continue to increase the tax burden. So we need the cap, so that the governor can be more open to other funding formulas.

I favor the following: two to four percent of household income for residents in lieu of a property tax, then a fixed property tax rate for businesses and second home owners, all lottery profits, one percent from the sales tax and then the general fund contribution and of course there are other smaller revenues sources as well.

With this formula, we would immediately save $160 million, which is the cost of income sensitivity, it wouldn't be necessary. Plus all the cost of administrating the rebates and prebates goes away as well. Income sensitivity this year will cost all property taxpayers 27 cents per hundred of value and is part of education spending, not some credit. This is cash that has to be raised above and beyond the cost of education. This money will not help one school to offer better education to their students, so let's have a funding scheme that doesn't require it. Frankly, this one aspect of education funding drives up spending, because it desensitizes and insulates 65 percent of Vermonters from the real cost of education in their community.
 
I believe the governor's proposed cap will save more like $40 million, not the $10 million you suggest, and it will provide an opening for discussion of an income base spending formula for residents.
 
As it has been said, the Vermont education funding system is like an infant, a voracious appetite at one end and no sense of responsibility at the other. So we have to put this infant on a strict diet now.

Parker lives in Warren.
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