Note One: If you missed Wednesday’s post because you checked in early and it wasn’t there, scroll down to read it. The system disobeyed orders. It will have to be dealt with, but that can’t happen for another week or so.

Note Two: Because a few have graciously inquired, herewith policy: The News Guy does NOT want donations from public officials or candidates, those he may have to excoriate. But thanks for the thought.

Sound the Alarm! The statewide school property tax rate is going up. It’s unprecedented. Worse, the rate isn’t going up by a penny or two. No, by 2013, so projects the Tax Commissioner, sounding the alarm in a letter to the Legislature, the increase may total 22.2 cents.

In the property tax world, that could add up to a lot of money.

So the alarm has been sounded.

And sounded. So persistently that the average Joe/Jane minding his/her business might be forgiven for thinking that the world as we know it is doomed, or at least that their property taxes will drive them to either: (a) the poor house; or (b) another state.

Joe. Jane. Calm down.

Your taxes are not necessarily going up.

First of all, these projections are just that – projections, especially that 22.2 cents estimate, which is for Fiscal Year 2013, before which a great deal can change. Like all projections, these are based on certain assumptions. The assumptions in this case seem reasonable, but (details below) at least one of them might be a bit pessimistic.

None of which is to say that your taxes are likely to go down, or even not likely to go up, as they usually do. It’s to say that the going down and the coming up don’t depend only on the rate. Or in the words of Deb Brighton, one of the policy analysts who helped Commissioner Richard Westman work out the proposed new rates, “You might end up having exactly the same tax bill,” even with higher rates.

It’s also to say that (surprise!) there is a certain amount of politics behind the tax rate rhetoric. Right now, it’s from Republicans, but do not think that Democrats don’t sometimes indulge. They did last year when they assailed then-Tax Commissioner Tom Pelham for not reducing the rate as quickly as they thought he should.

So he reduced it.

And all your property taxes went down?

Uhhh, no. Mostly they went up because the value of your property went up more than the rate went down.

Next year your actual tax payments may stay the same or decline, even as the rate goes up, because property values are going down in Vermont as they are elsewhere.

In fact, they are declining faster in most other states, which helps explain why, though Vermont’s fiscal predicament is real enough, it is less severe than in about 45 of the other states. (Check in Monday for details and elaboration).

Now, this property tax business is complicated, so complicated that were one a cynic, one might suppose the powers that be made it complicated so that the average person would have a tough time understanding it.

No such cynicism will be expressed here. But just to clear up one complication, here’s how your property value can go down (for purposes of the statewide school property tax) even if your property is not reassessed: Every year the state adjusts the grand list based on the actual prices of recent home sales in your town. If those prices go down, so does your tax bill unless the rate is raised. Hence Westman’s decision to raise it (subject, of course, to Legislative approval).

Another complication: The property tax is not the only source of revenue for the Education Fund, which pays for the schools. That Fund also gets money from other sources, especially from the General Fund, into which go most income, sales, and other taxes, out of which most operations of state government are financed.

According to Mark Perrault of the Legislature’s Joint Fiscal Office , for Fiscal Year 2008 the Legislature determined that the General Fund would transfer $280.2 million to the Education Fund that year, increasing it annually to adjust for inflation.

That’s what happened for the next year, when $291.8 million was transferred. But for this year (FY 2010), the Recession had hit. The General Fund didn’t have enough money. So the lawmakers cut $18.4 from the transfer for this year, and the same for FY 2011. The Ed Fund, then, is slated get only $240.8 million from the General Fund, less than it got two years ago.

For these two years (2010 and 2011) the burden on the property tax was eased because the Legislature funneled $38.6 million of federal stimulus money directly to the towns, Perrault said. But unless more federal money comes next year, he said, “the problem comes in FY 2012.”

True, depending, again, on assumptions. One of them is that the Feds won’t cough up more money in 2011. Another is that the Legislature won’t fatten the General Fund by raising taxes. Yet another is that total school spending will continue to go up by two percent a year.

Those first two assumptions seem on the mark. The last is a bit more questionable. Deb Brighton said she and her colleagues learned that the most recent increase was “something like 1.96 percent,” and “we had to make some assumptions, so we just agreed to assume a two percent increase to make some sense of it.”

That does make sense, but there is some reason to suspect that school costs will go up more slowly over the next few years. With the number of pupils still falling, schools all over the state are reducing staff. There were slightly fewer teachers in FY 2008 than the year before (the last statistics available), and the decline might well continue.

In his letter to the Legislature, Westman made much of the school spending matter, noting the “uninterrupted growth” of school spending, mostly “personnel costs” despite falling enrollment. Here he echoed the steady refrain of Gov. Jim Douglas and his associates who regularly call for lower school spending.

It may have been mere coincidence that just days after Westman submitted his letter, Neale Lunderville, Douglas’s Administrative Secretary, noted the three percent pay cut negotiated by the state employees union and not-very-subtly suggested that teachers consider following that example.

Or it may have been, as Darren Allen of the Vermont National Education Association said, “an orchestrated effort into bullying teachers into taking a pay cut.”

Allen, needless to say, is hardly a disinterested observer. But if it wasn’t an orchestrated effort, it was a pretty good imitation.

Either way, it might be a bood idea. It would save money for the taxpayers, most of whom earn less than most teachers. On its face, it would be sensible budget policy.

But perhaps very bad fiscal policy. In a recession as serious as this one, economic policy should aim at getting people to spend more, which they cannot do if they earn less. Prices have fallen, but by about one percent according to official government figures. So if they ratify the contract with the pay cut, some 7,000 or so state workers will suffer “real” pay cuts of two percent.

That’s Vermont’s own anti-stimulus package.

And there are more teachers than state workers. All this salary reduction might be good for the state budget and the property taxpayers, but awful for Vermont’s economy.

At last month’s meeting of the Current Use Advisory Board, William Johnson of the Tax Department noted that “there will be a lot of bickering” about the Current Use policy in the Legislature next year.

The reason, he said, is that the policy costs a lot of money. It reduces property tax revenue by some $35 million. If that money all went into the Education Fund, Johnson said, the statewide school property tax rate might be some four cents lower. With legislators eager to keep residential tax rates down, Johnson said, “the debate will be on.”

Actually, the debate will be on before the Legislature reconvenes in January. The Legislature’s Joint Fiscal Committee meets next month, and Current Use is likely to be on its agenda.

As Johnson indicated, the debate could get heated, and his remarks illustrated why. On the one hand, almost everyone (certainly including Johnson) favors the policy, under which farmers and woodlot owners pay property tax based on the revenue potential of their land, not its full market value. The policy is credited for keeping Vermont’s working farms and forests economically viable, with financial and environmental benefits for everybody.

On the other hand, there’s that cost to the other taxpayers that Johnson mentioned. Keeping farm and forest property taxes lower makes residential property taxes higher.

And in most states, surely including this one, anything that tends to make residential property taxes higher is political dynamite. In fact, as some see it, there has been an intertwined relationship between Current Use and residential property taxes for more than a decade, and today’s Current Use controversy stems from an effort to alter that relationship.

Among those who see it that way is Sen. Mark MacDonald, a Williamstown Democrat, a member of the Finance Committee, and identified by defenders of Current Use as one of the lawmakers who wants to get more money out of the farm and forest owners.

Not that MacDonald opposes Current Use. That would be hypocritical because he owns farm and forest land and benefits from it, as, he said, do many other members of the Legislature. (And many members of the Current Use Advisory Board, including Chairman John McClain. In some circles, that would be considered a conflict of interest. In Vermont, it’s just the way things are).

But to MacDonald, Current Use in its present form was part of a political agreement reached in 1997 when the Legislature passed Act 60 and created three tax breaks: Eliminating the machinery and equipment tax paid by businesses into the Education Fund; expanding and guaranteeing Current Use (as opposed to subjecting it to the annual appropriations process); and “income sensitivity” (though Macdonald doesn’t like the term), allowing most homeowners “the right to pay school taxes based on income,” rather than the full market value of their properties.

The problem, according to MacDonald and his allies, most of them Democrats in the Legislature, is that in the last few years Gov. Jim Douglas’s Administration has upset the balance by fiddling with the tax break that goes to the home-owners.

“What the Administration has done in last several years is to say that some homeowners are not paying enough in property taxes based on their income,” MacDonald said, “Then when the Senate Finance Committee suggested the Current Use people kicking back in to share the burden, they suddenly showed up and said, ‘how come we’re being picked on?’”

To Ed Larson of the Vermont Forest Products Association, MacDonald is “listening to a populist constituency that has this vision of rich landowners from outside getting a tax break, coming up here, driving up our property values and posting the land.”

Indicating that to some extent this dispute, like so many Vermont political battles, is tribal, each side assuming the worst of the other based on its own stereotypes.

But it’s more than that, in part because Current Use is likely to grow as the full market value of rural property continues to rise, creating an incentive for landowners to enroll in the program.

Whether today’s Current Use enrollees feel picked on, they certainly oppose any change that might raise their taxes. In fact, Larson told the Advisory Board that, if anything, taxes on forest land owners should be lower because, with prices so low, their taxes eat up half the revenue they are getting from the timber.

In a later interview, Larson acknowledged that he’d be happy with the status quo.

He’s not likely to get it because even many of Current Use’s champions acknowledge that some landowners are abusing the policy and that it now is being exploited by some property owners who are not what the original designers of the program had in mind.

To be eligible for Current Use, land has to be actively farmed or logged. At the Advisory Board meeting, members talked about multi-acre chunks of farmland that had been taken out of production but was still being taxed at its “use” rate. Furthermore, nobody disputed Deb Kingbsbury of Vershire, the self-appointed gadfly of the Current Use issue, when she said that some property-owners were “just using the program as a tax break.”

Deb Brighton, the natural resource economic policy analyst from Salisbury, who was once director of the Current Use program, said it was initially intended to benefit “real farmers,” (and by extension, “real loggers”) meaning those whose livelihoods depend on their income from agriculture or stumpage.

Now she said, a good deal of the land is owned by people whose “income comes from somewhere else. “ They are still providing the valuable service of keeping the land from being developed. But, Brighton said, “that person would do the same thing if you only paid him $25 an acre,” rather than providing the full benefits of Current Use.

Easier said than done, she acknowledged. Deciding which land is being preserved as “an amenity value” as opposed to a “production value” is somewhere between difficult and impossible.

That doesn’t mean nothing can be done. In fact, it’s quite likely that something will be done to get more revenue out of Current Use land. Some means of accomplishing that have to do with the technicalities of implementing the policy, as tentatively recommended in a draft proposal worked out by some environmentalists who support Current Use, and who will discuss their draft at a meeting in Randolph next week.

The danger, in the view of many, is that, in Deb Brighton’s words, simply raising the “use value” on which the land is taxed, “wouldn’t work for people really using the land.”

In other words, it might put small and medium-sized farms and woodlots out of business, a result nobody wants.

Expect, as Bill Johnson said, “a lot of bickering.”