Gov. offers property tax plan; speaker says it lacks substance

MONTPELIER, Vt. --Gov. Jim Douglas offered a plan Wednesday that he said would save $35 million a year in property taxes by imposing caps on how much a local school budget could increase each year.

The Legislature's top Democrat, House Speaker Gaye Symington, said she was glad the governor was willing to discuss reducing property tax burdens but she said his idea lacked the kind of substance needed to make progress on the issue.

Douglas' proposal and Symington's response showed how far apart Republicans and Democrats are on how to address the rising costs of paying for schools, guaranteeing that it is going to be a powerful political issue during this fall's campaigns.

The Department of Taxes said that average property taxes have gone up 7.4 percent annually since 1999, double the roughly 3.5 percent rate of inflation. Taxes have risen even more dramatically in many individual towns.

Douglas said that was the motivation for his proposal. "As a simple matter of principle, taxes should never grow faster than the paychecks of working Vermonters," he said.

His solution is to hold increases in town school budgets to no more than 4 percent per year. Towns that wanted to raise spending higher than that would have to win 60 percent approval from voters. By 2009, the cap would be 3.5 percent.

"Our objective is to put education spending and property taxes on a sustainable track," the governor said.

Additionally, he would cap the refunds that individual taxpayers get when they pay more than 2 percent of their income to support the basic per-pupil education block grant. So far this year, the state has sent 53 property tax refund checks -- known in the parlance of education finance as "prebate checks" -- of more than $10,000 and they went to property owners with an average house value of $952,000, said Tax Commissioner Thomas Pelham.

"There's a loophole in the law," Pelham said. "We ought to close that loophole."

For anyone who didn't get the message that the administration considers this an issue that voters should take into account when voting for lawmakers, Douglas underlined it. He noted he had tried to fix that and other issues in the education property tax system and Democrats who control the House and Senate wouldn't go along with him.

"The current legislative majority, despite my repeated overtures, refused to close these loopholes," Douglas said.

Symington believes Democrat have a strong message on property taxes, also. She said it was the Democratic majorities who derailed several Douglas budget proposals earlier this year that she said would have raised property taxes $22 million.

Nonetheless, she said, Democrats were happy to debate how to control property taxes as long as there are substantive ideas for dealing with the issue. Douglas' latest plan, she said, did not meet that test.

"It sounds great and we'll listen, but they're not really substantive," she said. "The issue is what's driving the costs."

She especially objected to what she said appeared to be the punitive nature of the town school budget spending cap. Local school boards, she said, are struggling, too. "They don't need to be blamed as if they're not paying attention," she said.

Douglas' opponent in the governor's race, Democrat Scudder Parker, adopted the same tone, saying the state should help school boards. "You don't do that by hitting them with a hammer," he said.

Symington and Parker argued that the governor should be open to more comprehensive health care reform and energy planning initiatives offered by Democrats because those are what's behind rising costs.

Both Symington and Douglas agree that other factors also are driving costs, such as the state's declining student population, small class sizes and per-pupil spending levels. But neither offered ideas for addressing those directly, except to endorse Education Commissioner Richard Cate's proposal to study whether school districts should be consolidated.