Town of Killington v. State
Annotate this Case
Town of Killington v. State (99-286); 172 Vt. 182; 776 A.2d 395
[Filed 20-Apr-2001]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
No. 99-286
Town of Killington Supreme Court
On Appeal from
v. Washington Superior Court
State of Vermont, September Term, 2000
Edward D. Haase, Commissioner of
Taxes and Marc Hull, Commissioner
of Education
David A. Jenkins, J.
Mark L. Sperry and Devin McLaughlin of Langrock Sperry & Wool, Middlebury, for
Plaintiff-Appellee.
William H. Sorrell, Attorney General, William E. Griffin, Chief Assistant
Attorney General, and Mary L. Bachman, Special Assistant Attorney General,
Montpelier, for Defendants-Appellants.
PRESENT: Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.
JOHNSON, J. In this appeal concerning a transition provision of
Vermont's school funding law, we confront a familiar dispute in which one
side claims the benefit of the common and ordinary meaning of the
statutory language, while the other side relies primarily on the
legislative purpose of the statute to give meaning to the term at issue.
The provision in question capped for a two-year period the anticipated
rapid rise in property taxes in the so-called "gold" towns resulting from
the passage of the Equal Educational Property Act of 1997 (hereinafter
"Act 60"). The statute saved
appellee Town of Killington (FN1) approximately $1,200,000 in taxes for the
first transition year after Act 60 became law. Killington claimed,
however, that it was entitled to roughly $500,000 in additional tax
savings because the State applied an incorrect methodology in calculating
Killington's increase in municipal expenditure growth during the first
transition year. The superior court agreed, ruling that the commonly
understood meaning of the statutory term "municipal budget" required the
State to calculate Killington's municipal expenditure growth in terms of
the increase in gross expenditures rather than the increase in
expenditures funded by taxes.
The State of Vermont and the Commissioners of the Departments of
Education and Taxes ("the State") appeal the superior court's grant of
summary judgment in favor of Killington. We reverse and enter summary
judgment in favor of the State based on our conclusion that the court's
construction of the statutory provision at issue leads to an irrational
result that is inconsistent with the spirit of the law and the legislative
intent underlying the provision.
The fundamental purpose of Act 60 is "to make educational opportunity
available to each pupil in each town on substantially equal terms." 16
V.S.A. § 4000(a). The Legislature sought to attain equal access to
similar revenues per pupil through a combination of state block grants and
local education spending that would allow each school district to "have
substantially equal capacity to raise and provide the same amount per
pupil on the local tax base." 16 V.S.A. § 4000(b). Act 60 represented
the Legislature's response to Brigham v. State, 166 Vt. 246, 692 A.2d 384
(1997), in which we held that Vermont's educational financing system, with
its wide disparities in per pupil spending and property tax burdens
necessary to fund that spending, violated the common benefits
clause, Chapter I, Article 7, of the Vermont Constitution. The Legislature
chose to respond, in large part, by redistributing property tax revenues
so that an equivalent tax rate in any town in Vermont produced the same
per pupil resources for educational spending. In some towns, the
maintenance of the historic level of educational spending would require
substantial, even dramatic, increases in property tax rates to fund
education. To reduce the shock of property tax increases in the property-
rich towns, the Legislature chose to phase in these increases over time.
This litigation is about one of those phase-in provisions.
To produce equality, a fully implemented Act 60 imposes a statewide
education property tax on all nonresidential and homestead property in
every town in the state at a rate of $1.10 per $100 of equalized education
property value. 32 V.S.A. § 5402(a). The law, however, contains a
phase-in provision aimed at easing the transition in fiscal years 1999 and
2000 to the $1.10 rate for towns that enjoy relatively low property tax
rates. See 1997, No. 60, § 50(a) (amended by 1998, No. 71 (Adj. Sess.), §
67(a)). The first component of that provision, which provides a three-year
phase-in toward the uniform statewide rate, is not at issue in this
appeal.
The second component, the one at issue here, caps at forty percent any
increase in a town's combined municipal, school district, and statewide
property tax rate from fiscal year 1998 to fiscal year 1999. (FN2) The
forty-percent-cap provision assured that no town's combined tax rate would
increase by more than forty percent in the first transition year following
the passage of the new education funding law.
The cap provision was intended to protect towns against immediate and
large tax increases created by Act 60. It was not intended, however, to
protect against tax increases brought about by extraordinary spending
increases. Indeed, if the cap provision allowed extraordinary spending, a
town facing a forty-percent property tax increase resulting from Act 60
could increase spending by
forty percent, thereby retaining the benefit of the entire tax increase
while avoiding a gradual increase in its burden under the statewide
property tax rate. Rather than use the phase-in period, as intended, to
gradually ratchet up its increased tax burden under the statewide rate, a
town could increase its spending to a level that would allow it to avoid
any increased payment under the statewide rate and Act 60's phase-in
provisions.
To prevent such a scenario but still allow towns a reasonable increase
in spending during the phase-in period, the cap provision included two
spending control provisions, one on education spending and one on
municipal spending. The former is not involved here. The latter provides
that any increase in the "municipal budget" from fiscal years 1998 to 1999
that exceeds ten percent may not be applied in calculating the forty
percent cap on the increase in the combined tax rate for fiscal year 1999.
In sum, the increase in the combined tax rate of towns from fiscal year
1998 to fiscal year 1999 was capped at forty percent, except that, in
relevant part, any growth in the municipal budget exceeding ten percent
would not be included in the calculation of the combined tax rate for that
year.
Looking at the specifics of this case, Killington is a property-rich
town that faces significant property tax increases under Act 60. Thus,
its increase in property tax rates during the phase-in period is limited
by the forty percent cap, however it is construed. The gist of the State's
claims is that Killington has improperly drawn from its forty percent
property tax increase for the first interim year by increasing funds for
municipal spending well above the ten percent limit and intentionally
generating a large surplus that can be spent in future years. Killington
responds that it is simply following the letter of the phase-in provision,
and that the State is distorting its clear language in pursuit of a
claimed legislative intent that it has invented.
The facts giving rise to the claims are these. Killington had a
municipal budget in fiscal year 1998 of $1,951,000. In fiscal year 1999,
Killington voted a municipal budget of $2,146,100, precisely ten percent
above the fiscal year 1998 budget. Because of different revenue
assumptions underlying the two budgets, (FN3) however, Killington voted a
thirty-eight percent increase in the municipal property tax rate to fund
the fiscal year 1999 budget. The ostensible reason for the large tax
increase was the assumption that the entire fiscal year 1999 budget would
be funded by property tax payments for current year billing; whereas, the
assumption in fiscal year 1998 and all prior years was that a substantial
part of the budget would be funded by delinquent tax payments and other
income not generated by current-year tax payments.
Not surprisingly, in determining how much Killington was required to
send to the education fund, the State noted the discrepancy between the
ten percent budget increase claimed by Killington and the apparent
thirty-eight percent property tax increase. It determined that the budget
figures from fiscal years 1998 and 1999 used by Killington to calculate
the ten percent increase were not comparable because they resulted from
different revenue assumptions. In the State's view, Killington simply
overtaxed itself in fiscal year 1999, thereby lowering its obligation to
the statewide education fund and, at the same time, allowing itself to
enjoy a surplus of municipal funds that could be used for future
expenditures.
In resolving the discrepancy resulting from the inconsistent revenue
assumptions in Killington's fiscal year 1998 and 1999 budgets, the State
chose to accept the assumptions made in the fiscal year 1999 budget and
contest the asserted fiscal year 1998 budget. To allow the municipal
budgets from fiscal years 1998 and 1998 to be compared so that the
ten-percent growth could be calculated, the State considered only that
part of those expenditures from the fiscal year 1998 budget covered by
current-year taxes. (FN4) The State might well have chosen instead to
contest the fiscal year 1999 budget on the ground that it did not include
non-revenue income and thus was incomparable to the previous year's
budget. In any event, either contest would have reached the same result.
In July 1998, Killington filed a declaratory judgment action in
superior court. The parties submitted competing motions for summary
judgment, and the superior court ruled in favor of Killington. The court
concluded that the common and ordinary meaning of the term "municipal
budget, " as defined in the forty percent cap provision, comported with
Killington's position, which construed the term to encompass the expected
expenditures and revenues projected for the coming year. As for the
intent of the Legislature, the court opined that if the Legislature had
intended municipal growth to be measured in terms of the increase in
taxes, it would have used the term "municipal tax rate," as it had in
other contexts throughout Act 60-including the forty percent cap provision
itself, rather than the term "municipal budget."
On appeal, the State argues that the superior court erred by focusing
exclusively on the term "municipal budget" and ignoring the purpose and
spirit of the education funding law in general and the forty percent cap
provision in particular. In the State's view, the term "municipal budget"
is susceptible to several different meanings, but, when examined in the
context of the forty percent cap provision, which is aimed at protecting
property owners from sudden and significant rate increases resulting from
the implementation of Act 60, the term can only refer to that portion of
municipal expenditures that are funded by taxes. According to the State,
a broader interpretation of the term would allow towns such as Killington
to manipulate the municipal tax rate so as to create a surplus of
municipal funds while lowering their liability to the statewide education
fund.
Killington responds that the plain and ordinary meaning of the term
"municipal budget" is the total town expenditures as approved by the
voters. Killington asserts that the plain meaning of the term is neither
irrational nor inconsistent with Act 60 and thus should be construed as it
is commonly understood. Killington further asserts that its budget
projections were made in good faith, and that, in any event, it would be
improper and impractical for this Court to examine the motives behind a
town's budgetary decisions.
In considering the parties' arguments, we bear in mind that the
paramount goal of this Court in construing a statutory provision is to
give effect to the intent of the Legislature. See State v. O'Neill, 165
Vt. 270, 275, 682 A.2d 943, 946 (1996) (there are many rules of statutory
construction, but the paramount one is "to discern and give effect to the
intent of the Legislature"). If the meaning of the disputed statutory
language is unambiguous and "'resolves the conflict without doing violence
to the legislative scheme,'" we accept the plain meaning as the intent of
the Legislature without looking further. In re Weeks, 167 Vt. 551, 554,
712 A.2d 907, 909 (1998) (quoting Lubinsky v. Fair Haven Zoning Bd., 148
Vt. 47, 49, 527 A.2d 227, 228 (1986)); see State v. Rafuse, 168 Vt. 631,
632, 726 A.2d 18, 19 (1998) (mem.) ("The ordinary meaning of [statutory]
language is presumed to be intended unless it would manifestly defeat the
object of the provisions."). On the other hand, we will not enforce the
common and ordinary meaning of statutory language if doing so would render
the statute ineffective or lead to irrational results. In re A.C., 144
Vt. 37, 42, 470 A.2d 1191, 1194 (1984). When the plain meaning of
statutory language appears to undermine the purpose of the statute, we are
not confined to a literal interpretation, but rather must look to the broad
subject matter of the statute, its effects and consequences, and the
purpose and spirit of the law to determine legislative intent. Merkel v.
Nationwide Ins. Co., 166 Vt. 311, 314-15, 693 A.2d 706, 707-08 (1997); see
Perry v. Medical Practice Bd., 169 Vt. 399, 406, 737 A.2d 900, 905 (1999)
(in determining legislative intent, court must look to words of statute,
legislative history and circumstances surrounding statute's enactment, and
legislative policy that statute was designed to implement).
The term "municipal budget," which is undefined in Act 60, is not a
term of art with a precise meaning. Rather, the word "budget" is vague
and can have different meanings in different contexts. The parties
themselves define the term in various ways that are not entirely
consistent. As Killington
points out, the State uses the term at times to mean tax rate and at other
times to mean expenditures funded by taxes. Killington alternately
defines the term to mean, on the one hand, the total expected expenditures
approved by town voters and, on the other hand, the total expected
expenditures as offset by the total expected revenues. Indeed, while
contending on appeal that the ordinary meaning of budget is total
expenditures as offset by total revenues, Killington asks this Court to
affirm the superior court's judgment on the basis that the plain meaning
of budget is gross expenditures.
Moreover, Killington's differing methods of calculating its municipal
budget before and after the passage of Act 60 indicate the vagueness of
the term. Before 1998, Killington's budget summary incorporated funding
not only from current year tax assessments, but also from prior year tax
collections and non-tax revenues. But after the passage of Act 60,
Killington removed its prior year taxes and its non-tax revenues from its
general fund budget calculation. The law provides that an increase of
greater than ten percent in the "municipal budget" of fiscal year 1999 over
the "municipal budget" of 1998 will not be included in the forty percent
cap calculation. And yet, in effect, Killington applies inconsistent
definitions to the same term "municipal budget" to calculate the increase
in spending from one year to the other. Killington then asserts that
neither the State nor this Court may examine the changed calculation to
determine if, in fact, a different methodology is being applied.
Rather, Killington would have this Court construe the term "municipal
budget" in isolation, without regard to the inconsistency in its use of
the term or the purpose of Act 60. Its argument is essentially that we
must adhere to the plain and commonly accepted meaning of the term because
those are the words chosen by the Legislature. In response to the State's
contention that construing the term broadly would undermine the purpose of
Act 60 by allowing property-rich towns to
manipulate their budgets to create a surplus of municipal funds while
reducing their liability to the general education fund, Killington asserts
that the Legislature's choice of the term "municipal budget" was the
result of a legislative compromise. According to Killington, the
Legislature chose the term "municipal budget" rather than "municipal tax
rate" or some other comparable term to appease the property-rich towns
across Vermont that strongly opposed Act 60.
We find no support whatsoever for Killington's claim that the term
"municipal budget" was the result of a legislative compromise. Killington
has not provided, and we are unaware of, any legislative history or other
evidence indicating that the term was the result of a legislative
compromise. Absent evidence to support such a view, we will not assume
that the Legislature intended a broad application of the term "municipal
budget" to allow property-rich towns to manipulate their budgets to take
the greatest advantage of the transition provision aimed at easing the
burden of the expected increase in taxes caused by Act 60. A word as vague
as "budget" is not plain enough for us to accept Killington's conjecture
concerning a legislative compromise that would undermine not only the
expressed primary purpose of Act 60 to achieve equal educational
opportunity, but also the purpose of the forty percent cap provision to
buffer the anticipated sharp increase in the taxes caused by the
implementation of Act 60.
We do not feel constrained by the commonly understood meaning of the
term municipal budget, assuming that there is one. See 2A N. Singer,
Sutherland Statutory Construction § 48.01, at 302 (5th ed. 1992) (plain
meaning rule cannot be used to thwart judicial inquiry into legislative
intent behind statutory language that may appear plain upon superficial
examination). Perhaps, if considered in isolation, the term "municipal
budget" would be most commonly understood to mean a balance sheet of total
expected receipts and expenditures. But words may have a more precise
meaning in the context of a special subject than they would otherwise have
in general usage. Id. § 47.27, at 242.
There is little dispute as to the purpose behind the statutory
provisions at issue here. From the broadest perspective, Act 60 is a
remedial statute designed to rectify the inequality in educational
opportunity in Vermont resulting from the state's heavy reliance on local
property taxes to fund schools. See Tarrant v. Department of Taxes, 169
Vt. 189, 197, 733 A.2d 733, 739 (1999) (legislative intent must be derived
from consideration of entire statute); In re Dexter, 93 Vt. 304, 312, 107 A. 134, 137 (1919) (remedial statute is one designed to cure mischief or
remedy defect in existing laws). Therefore, we must construe the statute
to accomplish that remedial purpose. State v. Therrien, 161 Vt. 26, 31,
633 A.2d 272, 275 (1993); see 3 N. Singer, supra § 60.01, at 147
("Remedial statutes are liberally construed to suppress the evil and
advance the remedy."); Viscup v. Viscup, 150 Vt. 208, 211, 552 A.2d 400,
402 (1988) (remedial purpose for which legislation was enacted requires
liberal construction so as to give full force and effect to legislative
intent).
If we narrow our focus, the forty percent-cap provision is intended to
limit, during a transition period, the expected increase in property taxes
incurred by property-rich towns as the result of Act 60. But if we narrow
our focus even further to the component of the forty percent cap provision
at issue in this case, that language allows no more than a ten percent
increase in municipal growth in calculating the forty percent cap on tax
increases resulting from Act 60. Plainly, the ten percent provision was
intended to allow reasonable municipal growth within the cap calculation,
but to prevent property-rich towns from reducing their liability to the
general education fund by increasing municipal growth beyond the
reasonable ten percent cushion.
Taken together, the focus of these provisions was on how to deal with
the expected increase in the assessment of taxes caused by Act 60's goal
of creating an equal educational opportunity for Vermont students. We
cannot discern from the record whether the term "municipal budget" resulted
from imprecise drafting or, as the State surmises, an attempt to prevent
confusion with other terms in the same provision that included the term
"tax rate." But we do know that the interpretation favored by Killington
is inconsistent with the obvious intent of both Act 60 in general and its
forty percent cap provision. See 2A N. Singer, supra § 46.05, at 103 ("A
statute is passed as a whole and not in parts or sections and is animated
by one general purpose and intent. Consequently, each part or section
should be construed in connection with every other part or section so as to
produce a harmonious whole."). Killington's interpretation would break
the link between tax rate increases and the effect of Act 60, and instead
would allow towns to create surpluses under the protection of the forty
percent cap while at the same time reducing their liability to the
statewide education fund. Accordingly, we reject Killington's
plain-meaning analysis of the term "municipal budget." See id. at 105
(legislature is presumed to have definite purpose for every enactment and
has formulated subsidiary provisions in harmony with that purpose, which
is limitation on meaning of general terms and touchstone for expansion of
narrower terms).
We conclude that the State's methodology for calculating Killington's
municipal budget growth from fiscal year 1998 to fiscal year 1999, which
applies a consistent definition for the term municipal budget from one
fiscal year to the next, comports with the Legislature's intent to limit
the amount of municipal budget growth that can be considered in
calculating the forty percent cap on increased taxes resulting from Act
60. Killington does not deny that its interpretation of the term
"municipal budget," in contrast, would allow towns to create such municipal
surpluses while
reducing their liability to the statewide education fund. Nevertheless,
Killington contends that it would be inappropriate and impractical for
this Court to examine the inner workings of municipal budgets to determine
whether local officials are acting in good faith regarding their
responsibility to the statewide education fund. We agree, but this is
merely one more reason why Killington's broad interpretation of the term
"municipal budget" outside of its statutory context would lead to
irrational results and would undermine the purpose of Act 60.
In upholding the State's interpretation of the forty percent cap
provision, we are following our well-established rule that "the
interpretation of a statute by the administrative body responsible for its
execution will be sustained on appeal absent compelling indication of
error." Mountain Cable Co. v. Department of Taxes, 168 Vt. 454, 458, 721 A.2d 507, 510 (1998); see Tarrant, 169 Vt. at 195, 733 A.2d at 738 (same).
Further, the State's interpretation of the provision has been, as least
implicitly, endorsed by the Joint Legislative Oversight Committee on
Restructuring Education, which was expressly created in Act 60 "to conduct
a continuing review of the actions and policies of the Department of
Education, Department of Taxes, school districts and other entities of
educational governance in the state in the implementation of the
provisions of this act." 1997, No. 60, § 90(b); see also id. § 90 (e)
("The Joint Committee shall also review and advise on agency and
departmental rules and policies relating to quality and funding of public
education and the implementation of the provisions of this act.").
In a November 1997 letter responding to questions on the forty percent
cap provision posed by the Town of Dover, the chair of the oversight
committee stated that "no matter how high the increase in municipal taxes,
only last year's municipal tax rate plus a 10% increase will be used for
purposes of [the forty percent cap] calculation." (Emphasis added.) The
chair also made this
position known to the members of the Senate Finance Committee in a February
16, 1998 hearing in which proposed amendments to Act 60 were being
considered.
Killington protests that the oversight committee was not directly
responding to a question concerning the meaning of the term "municipal
budget," and that it is impossible to tell what amendments were being
considered at the time the chair read portions of her letter to the Senate
Finance Committee. Killington also cites State v. Madison, 163 Vt. 360,
373, 658 A.2d 536, 545 (1995) for the proposition that the post-hoc
reaction of a committee of lawmakers cannot retroactively provide
legislative history for an earlier law.
We do not find these arguments persuasive. The official letter of the
committee established to oversee Act 60 plainly set forth an
interpretation of the forty-percent-cap provision that measured an
increase in the tax rate rather than an increase in gross
expenditures-essentially the same position taken by the agencies
administering the statute. Moreover, regardless of what amendments were
being considered at the February 1998 Senate Finance Committee hearing, its
members were at least made aware of the position taken by the oversight
committee, and yet no amendment was made to alter that position. Finally,
in Madison, we stated that "legislative intent does not necessarily become
apparent from the post-hoc reaction of a committee of lawmakers," holding
that "the inconclusive legislative history" relied on by the defendant was
"insufficient to overcome the plain meaning of the term" at issue. Id.
at 373-74, 658 A.2d at 545 (emphasis added). We also noted that, far from
creating an absurd result, applying the plain meaning of the statutory term
would produce a more reasonable result than that proposed by the
defendant. Id. at 374, 658 A.2d at 545.
The instant case is easily distinguishable. Here, unlike Madison, the
evidence of legislative intent is from an oversight committee established
by the very act being interpreted to implement the
statute and oversee the rules and policies of the administrative agencies
and school districts concerning the act. Thus, the contemporaneous
legislative history is entitled to greater weight. See Energy Action
Educ. Found. v. Andrus, 654 F.2d 735, 750 n.74 (D.C. Cir. 1980) (views of
later Congress generally form hazardous basis for inferring intent of
earlier one, but there is reason to give "greater weight than usual to the
views of a post-enactment oversight committee charged with responsibility
for supervising the administration of the Act"), rev'd on other grounds by
454 U.S. 151 (1981); cf. United Hosp. Ctr., Inc. v. Richardson, 757 F.2d 1445, 1451 (4th Cir. 1985) (regulations presented to oversight committee
by administering agency without disapproval are entitled to considerable
weight as expressive of legislative purpose); Fredericks v. Kreps, 578 F.2d 555, 561, 563 (5th Cir. 1978) (deference is especially warranted where
administrative practice in question involves contemporaneous construction
of statute with acquiescence of its construction by congressional
oversight committees). More importantly, in contrast to Madison, the
legislative history in this case is being offered to counter a proposed
plain-meaning interpretation that would create irrational results and
thwart legislative intent.
Killington also contends that the Department of Taxes, Division of
Property Valuation and Review's interpretation of the term "municipal
budget" to mean expenditures funded by taxes is inconsistent with the
Department of Education's interpretation of the term "education budget" to
mean gross expenditures spent for education. According to Killington, the
State's application of differing methodologies to calculate the increases
in education and municipal budgets demonstrates that the State is
ascribing different meanings to the same word ("budget") in the same
provision. We find no fundamental inconsistency in the methodology used
by the State to calculate increases in the municipal and school budgets.
Under Act 60, as amended by Act 71, the education budget of towns was
permitted to increase in fiscal year 1999, and still be within the forty
percent cap, by the amount of any increase in the index for state and
local purchases of goods and services. 1998, No. 71 (Adj. Sess.), § 67(a).
That increase was 2.78 percent. As Killington contends, the Department of
Education applied the 2.78 percent increase to Killington's gross
education expenditures. In the next step of its calculation, however, the
Department reduced the sum obtained in the first step by the amounts of the
general state support grant and the locally budgeted revenues, including
anticipated expenditures by non-tax revenues such as mainstream block
grants for special education and state aid for transportation. Thus, the
Department of Education's methodology, like the one applied by the Division
of Property Valuation and Review, ultimately calculated the allowable
growth under the forty percent cap provision by measuring the increase in
expenditures funded by taxes, albeit at a different step in the
calculation. Killington has not challenged the correctness of the
Department of Education's calculation with respect to the growth in its
education budget, and yet the methodology employed by the Department would
have yielded essentially the same result as that employed by the Division
of Property Valuation and Review with respect to its calculation of the
growth in Killington's municipal budget. (FN5)
In summary, the structure and purpose of Act 60 make it apparent that
the Legislature intended to protect, under the transitional forty percent
cap provision, a ten percent increase in municipal expenditures funded by
taxes. A calculation of the increase in municipal budget growth based on
expenditures funded by taxes comports with the Legislature's intent to cap
tax rate
increases only if related to the new educational funding law. Further,
such a calculation is straightforward and would not require the State or
the courts to speculate as to the propriety of a town's assessment of
future tax delinquencies or receipts from non-tax revenues.
In contrast, Killington's interpretation of the phrase "municipal
budget" in isolation would turn an inflation-protection measure into a
device for willing towns to accumulate a surplus of municipal funds at the
expense of the statewide education fund. Rather than follow this
interpretation simply because it applies a broad and common understanding
of the word "budget," we uphold the interpretation arrived at by the
administering agency and acknowledged by the legislative oversight
committee-one that plainly gives effect to the legislative intent behind
Act 60 in general and the specific provision at issue here. The State's
interpretation satisfies the purpose of the provision to assure that a
town's tax rate does not increase by more than forty percent as the result
of the new education funding law, but to limit the municipal growth that
can be applied in calculating that increase.
Reversed.
FOR THE COURT:
_______________________________________
Associate Justice
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Footnotes
FN1. After the filing of this lawsuit, the Town of Sherburne changed its
name to the Town of Killington.
FN2. For purposes of the Act, Killington's fiscal year 1999 is the period
from January 1, 1998 to December 31, 1998, and Killington's fiscal year
1998 is the period from January 1, 1997 to December 31, 1997.
The original forty-percent-cap provision in Act 60 provided as
follows:
No municipality shall be required to set a combined municipal,
school district and statewide property tax rate which is more
than 40 percent higher than its combined fiscal year 1998
municipal and school property tax rate, provided that any growth
in the municipal budget of more than 10 percent in that year
shall not be included in the calculation of the combined
municipal, school district and statewide property tax rate for
that year.
1997, No. 60, § 50(a).
This provision was later replaced, in relevant part, with the
following provision, which sought to add a limitation on the growth of the
education component of town budgets, in addition to the municipal
component, during the transition years:
If, in fiscal year 1999, in order to fund that portion of a
municipal budget which is no greater than 110 percent of its
fiscal year 1998 municipal budget and to fund that portion of an
education budget which is no greater than its fiscal year 1998
education budget adjusted by any increase in the index for state
and local purchases of goods and services and for any extenuating
circumstances as determined by the commissioner, a municipality's
combined municipal, school district and statewide equalized
property tax rate is more than 40 percent higher than its
combined municipal and education equalized tax rate in fiscal
year 1998, then the education property tax rates for fiscal year
1999 established by this section for that municipality shall be
reduced. The statewide education property tax rate shall be
reduced by an amount which will result in a combined municipal,
school district and statewide education equalized tax rate for the
municipality in fiscal year 1999 which does not exceed by more
than 40 percent the combined municipal and education equalized
tax rate of the municipality for fiscal year 1998.
1998, No. 71 (Adj. Sess.), § 67(a).
FN3. In each of its budget calculations before fiscal year 1998, the year
following the passage of Act 60, Killington included non-tax
revenues-delinquent tax collections, licensing fees, etc.-before arriving
at the total amount to be raised by taxes. Killington's estimated non-tax
revenue was $322,000 in fiscal year 1993 and gradually increased each year
until it reached $360,000 for fiscal year 1997, with an estimate of
$378,000 for the coming year. That year, the $378,000 in non-tax revenues
and $30,000 in excess cash was deducted from Killington's projected total
expenditures of $1,951,000 to arrive at the sum of $1,543,000 that needed
to be raised in taxes to pay for those expenditures. In fiscal year 1998,
however, Killington did not, as in past years, subtract the estimated
non-tax revenue (listed in the annual report at $458,364) from its
expenditures before arriving at the total amount needed to be raised by
taxes for either fiscal year 1998 or fiscal year 1999. Unlike previous
years, non-tax revenue was omitted from the budget summary and thus simply
not made part of the equation in reaching the figure for the total amount
of expenditures needed to be raised through taxes. In short, for the
first time, Killington set its tax rate to fund one hundred percent of its
projected expenditures, without reducing that amount to reflect the
collection of non-tax revenues. As a result, Killington set its total
municipal expenditures at $1,951,000 for fiscal year 1998 and $2,146,100
for fiscal year 1999, the latter figure being exactly 110 percent of the
former figure. The State believed that Killington was comparing apples and
oranges in calculating the ten percent increase in municipal budget growth
from fiscal year 1998 to fiscal year 1999. From the State's perspective,
if Killington was not going to include non-tax revenues in the 1999 fiscal
year budget, it should have calculated the permissible ten percent growth
in the municipal budget by adding ten percent to the amount of
expenditures from fiscal year 1998 that needed to be funded by taxes, not
to the amount of total expenditures from fiscal year 1998, including
non-tax revenues. Indeed, Killington's budgeted tax revenues increased
thirty-eight percent from fiscal year 1998 to fiscal year 1999.
FN4. The State multiplied $1,552,307, the amount of taxes assessed by
Killington in fiscal year 1998 to fund its gross expenditures, by 110
percent and arrived at the sum of $1,707,536. From that figure, the State
then calculated Killington's education tax rate and its liability to the
statewide education fund for fiscal year 1999.
FN 5. The State's calculations demonstrate that the methodologies employed
by the Department of Education and the Division of Property Valuation and
Review would have resulted in a difference in tax rates of less than one
half of one cent.
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