2026 Property Tax Bill (H.491 / Act 24) - Overview & Analysis

The annual "yield" bill sets the statewide property tax rates for the following year (in this case FY2026).

Yields function as a threshold by which local school districts compare their spending in order to calculate their tax rate. For example, if the statewide yield amount is $10,000 and your district is spending $15,000 per student. Your local tax rate would be 50% higher than the statewide tax rate because your spending is 50% above the yield amount.

The yield amount refers to how much tax revenue per student a $1.00 statewide tax rate generates or "yields." In the example above, the local district's tax rate would be $1.50 per $100 of assessed value as a result of this formula. There are other factors playing in here as well such as the Common Level of Appraisal (CLA) that adjusts the final tax rate and the fact that the cost per student is weighted to account for students that the state thinks cost more to educate. These two adjustments can also wreak havoc on the stability of local tax rates.

The Details:

• The property tax yield is set at $8,596.
  • This will result in an average property tax rate of $1.595.
  • Last year's rate was $1.303 (however property values grew 14.1%).
    
    
• The income sensitized yield is set at $12.172.
  • This will result in an average 2.27% income tax rate.
  • Last year's average rate was 2.33%.
    
    
• The non-homestead property tax rate is set at $1.703 per $100 of assessed value.
  • Last year's rate was $1.391.
    
    
• This bill introduces a new concept of an "equalized" house site value. Essentially what this does is that instead of adjusting the property tax rate to account for differences in appraisal schedules between different towns, the CLA would instead be applied to the assessed value of the homestead in order to create this equalized house site value to apply the tax rate against.
  
  
• Technically not in this bill, but the modeling done here expects that the state budget will:
  • Transfer $77.2M from the General Fund to the Education Fund to buy down property tax rates.
  • Transfer $40.9M surplus from last year towards FY2026 property taxes.
    
    

Analysis:

All three tax groups (income, homestead tax, non-homestead tax) are expected to see a 1.1% increase in average property tax bills despite a 5.5% increase in spending. Inflation for 2026 is projected at 2.8%. The major concern here is that schools are essentially being insulated from their spending decisions when you have property taxes increasing at 1/5 the rate of spending.

The one-time monies used to accomplish this total over $118M ($77.2M from the General Fund + $40.9M in surplus). Aside from incentivizing more spending in FY2027, this also has the potential to create a hole in funding for that year. For example, if we enter a recession because of the federal government's erratic trade policies, those monies may dry up (or be needed elsewhere) and so too may a significant portion of the $619M in sales tax revenue that goes into the Education Fund.

If that sales tax revenue saw even a 10% reduction, this would result in a $180M deficit ($61.9M + $77.2M + $40.9M) in the Education Fund. That revenue would need to be made up by property taxes. Even if we assume schools level-fund (unlikely) we would be looking at a 11.9% increase in property tax rates for FY2027 in this hypothetical situation. If schools increased spending at over 5% again, the rate increase would likely be close to 20%.

The bright spot is the new "equalized" house site value concept which promises to make CLA's more transparent and understandable for taxpayers. The CLA is intended to account for differences in appraisals between towns. For example, if one town has did an appraisal last year but a neighboring down hasn't done a re-appraisal in a decade, their assessed values would be significantly different. Another example would be if two towns re-assessed in similar timeframes but property values in one of them are rising much faster. The CLA is meant to account for these differences to ensure fairness.

However, the current CLA system adjusts the property tax rate in specific towns in order to compensate for lower assessed values. This can be confusing to taxpayers and not very transparent that their tax rates are going up because of property values and not because of spending. The new proposal adjusts the actual house site value instead of adjusting the tax rate (makes sense right?!?).

Overall, however, this yield bill incentivizes additional spending from schools and assumes the best case economic scenario. The reality of our current political and economic climate is such that we should probably be planning for the worst-case scenario. In light of these things, this bill seems somewhat reckless.

Current Status:

The bill was signed into law by the Governor on 5/19/2025.

Last updated: 5/20/2025

DISCLAIMER: Generative AI used to assist in the production of this report.