New this year, is also a helpful guide for understanding each line item in the outlook. Highly recommended for the data nerds out there.
The Agency of Education is projecting a 12% increase in education spending, resulting in an average 18.5% increase in property tax bills. While Legislators may be hoping this number comes down, the hold-harmless provision in Act 127 is likely to artificially inflate school budgets as districts spend up to the cap to capture “free money.”
One important note from JFO is that the 18.5% that has been reported on is an average bill increase, NOT an average rate increase. The actual rate, at least for property, will increase more slowly because of a 14.3% increase in statewide grand list values. Because of this, it will appear that the income-based rates will jump faster than property-based rates because the income base is not growing as quickly as property values.
NOTE: Legislators will be in a tight box this year. While there are a number of policy levers they can pull, few of them produce favorable outcomes. Almost $37M in surplus funds have already been applied to buy down property tax rates. There will be little (if any) revenues to spare from the General Fund to further buy down the rate. They could shift more of the tax burden onto the non-homestead property tax rate, but that will adversely affect renters and small business owners. Some sort of cost-containment mechanism might be possible, but would have to be implemented quickly in order for districts to respond by town meeting day. Aside from these, legislators are largely left hoping that school boards exercise restraint or that sales & use tax revenues produce a sharp uptick.