MONTPELIER – Vermont state property taxes are going to go up by .02 cents, the first increase since the state implemented a state wide property based school tax in 1997.

Governor Jim Douglas has urged Legislative leaders to make property tax reform a top priority next session.

The Governor said that unless the legislature acts, rates will increase by $0.22, or more than 25% in the next three years.

Lawmakers learned last week that residential and non-residential property tax rates next year will increase $0.02. “During this difficult economic time, we cannot allow property taxes to continue to increase on the people of Vermont. We must act quickly to reform our education spending system,” said Governor Douglas. “The time for studies and hearings is over. We must act during the next session to address this economic crisis.”

In his statutorily required letter to lawmakers making the mandatory, formula driven, property tax rate change, Tax Commissioner Rich Westman echoed the Governor’s call for action,

Education funding is a fundamental state responsibility. . . It will be necessary for all of us to engage the very difficult decisions before us with speed and determination.”

Anne Donahue, R., representative from Northfield, Roxbury and Moretown, said that it will be very hard for the legislature to do anything.

Education funding has to be kept at a certain level, she said. Because property values have been decreasing in the current recession, this has affected the tax base, she said. This decreases the amount that can be raised from the grand list, she added.

The only way around it would be to require school boards to reduce their budgets.

As a result, if the legislature intervened to lower the tax rate, this would automatically require school boards to spend less, she said.

Act 60, which the Legislature passed in response to the pro-plaintiff verdict in Brigham v. State, Vermont's "equity" case in 1997, replaced local property taxes with a statewide property tax and provided a guaranteed tax yield on local taxes above the statewide level.

This equalized school funding across the state, but, while most Vermonters saw their property taxes decrease, residents of the so-called “gold towns,” property-rich communities with large numbers of vacation homes, paid higher property taxes.

Attempts to chip away at Act 60 have increased as the years have passed and significant portions of the 2001 and 2002 legislative sessions were consumed by debates over the law although no changes were approved.

The legislature and governor aimed again in 2003 to provide property-tax relief, but proponents of Act 60 feared that this would lead to the elimination of the state property tax and, therefore, to Act 60's primary means of reducing substantial school-funding disparities across the state.

Ms. Donahue said that though the tax rate will be discussed in this year’s legislative session, she just doesn’t think anything will happen to change the present rate.