The Short-Term Fix

There are three ways to reduce projected property taxes this year.

1. Get rid of the 5% cap so the system works as designed - We've done this (see below).

2. Reduce education spendings. 

   1. School boards will need to cut current budgets

   2. Programs currently paid for through the Education Fund can be paid for through the General Fund. (i.e. Universal school Meals, Behavioral and Mental Health services, etc,)

3. Increase revenue to the Education Fund

   1. Find other sources of revenue (i.e. Cloud tax, increase meals and rooms tax, sugar beverage tax, reduce tax expenditures, etc.)

Note that several of the above are "cost shifts." They might reduce the Education Property tax but they increase other taxes or take money away from the General Fund.

What Does H.850 Do?

H.850 is a bill to alleviate the problems caused by the 5% Cap on district homestead property tax rate increases. That bill is now law.

The 5% cap which is explained here was supposed to hit a few districts that had high increased in district tax rates due to the change in pupil weighting. H.850 repeals that cap. It still addressed the problem of some districts getting hit a lot harder than others by the pupil weighting change, but it does it in a different way.

It's interesting. First calculate each district's long-term weighted average daily membership using the 2023-24 method but with the 2024-25 pupil counts as described here. Then, for each district, divide that number by the total number of long-term weighted students which is just the sum of all the districts. That gives you each district's percentage share of the total of the State's weighted students. That percentage is called the district's taxing capacity.

Next do the same again, but use the new weighting rules. For each district, that gives you the difference in weighted students percent of the total generated by each system. That difference shows which districts were hit the hardest by the change.  A negative difference would mean that district's percentage of the total students dropped. Because such districts had fewer weighted pupils, their Per Pupil Spending increased and that increased their tax rates. That's the increase that was capped at 5%.

So instead of a cap, H.850 gives the districts that lost taxing capacity a break on their taxes. A penny is taken off the district tax rate for each percentage point of lost taxing capacity. A town may have lost 8% of taxing capacity, so, 8 cents is taken of the District Tax Rate. The amount of the decrease is phased out over the next five years at 20% per year: 8 cents off the first year, 6 cents the second (with rounding), etc.

This is better than the cap because it specifically target those districts that have lost taxing capacity, and it applies the fix in proportions tied to the degree of that lost capacity.

What does this mean?

The bottom line is that instead of there being $30 million hole in the Ed Fund, there is a $19 million hole. It also means that school boards may want to reconsider their budgets because the cap is gone. The added problem is that most towns have already set their budgets and have started printing ballots with those budget numbers. To deal with that, H.850 says they can change the budget and have another vote if they want, and the State will pay for the additional cost.

It's still a mess and projected tax rates are still too high, but by getting rid of the cap it gives the State the ability to make other changes that might help.