Vermont’s education fund, which funds state schools, is running a surplus of nearly $64 million.

But despite the flurry of income, largely due to lower-than-expected spending on special education and leftover funds from the previous year, Vermont’s property tax bills were It is expected to increase next year.

Vermont Tax Commissioner Craig Borio said in his “December 1 Letter,” an annual schedule of financial projections required by law, that all of the approximately $64 million surplus will be used to pay the tax rate. We predicted that both homestead and non-homestead tax rates would rise even if the .

These expected rate hikes are being driven by two factors, Borio said in an interview. Rising real estate prices across the state and increased local spending on education.

“If spending stays flat, a rise in property values ​​may not, by itself, increase bills,” says Borio. “But this guy puts pressure on interest rates in a combination of two factors.”

In Vermont’s complex education funding system, tax rates vary depending on local school spending. However, the school budget is paid through the State Fund, the Education Fund.

If the state’s education fund has surplus money, the legislature and governor can use the money to lower local tax rates or fund other programs.

States have different rates for homestead properties, which are primary residences, and non-homestead properties, which are second homes and commercial properties.

If the state used all surplus funds to offset property taxes, the average property tax rate (homestead and non-homestead rates combined) would increase by 3.7%. But if some of that money is used for another purpose, the tax rate could skyrocket even further, rising by an average of 8.3%, officials predict.

Average residential land interest rates are expected to rise from $1.50 to $1.57 per $100 of property value as the surplus is used to lower interest rates. The average non-homestead rate is expected to rise from $1.57 to $1.64 per $100 of property value.

Most homestead taxpayers pay based on income rather than property value. The average income rate – 2.31% – is expected to remain unchanged next year.

This year’s projected surplus of approximately $64 million in funds was driven by a number of factors, including $17 million carried forward from the previous year and $45 million in unspent education funding.

The latter amount is related to special education, officials said. In fact, the Department of Education has set aside large sums of money to pay for special education services in local schools, and the costs have turned out to be less than expected.

“It was canceled because there was more money than we needed,” Education Authority spokesman Ted Fisher said in an email.

Lawmakers and Governor Phil Scott will have the final say on what the extra money will be used for. During the most recent legislative session, lawmakers debated what to do with the roughly $90 million surplus, eventually settling on a compromise that would cut taxes, fund universal school lunches and remediate toxic chemicals. I was.

“Governor is recommending to Congress to apply all of this year’s surplus to lower property tax rates for the 24th fiscal year,” the letter read on Thursday.

Borio said that over the past three years, the fluctuations in tax rates and education funds have been “somewhat chaotic.” Meanwhile, Vermont’s education fund has enjoyed an extraordinary surplus.

In late 2020, officials predicted a near $60 million hole in the fund. Instead, federal pandemic relief and better-than-expected tax revenues generated a surplus of $18.6 million.

Last year, the fund recorded $90 million in windfall income.

By 2020, the education fund surplus will “at most” reach $15 million, Borio said.

“I think we should really think about what the future holds,” he said.

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