Two days ago, Alberta’s lieutenant governor approved a recommendation from Adriana LaGrange, the education minister, to reduce the mill rates municipalities will collect as the education portion of property taxes.
LaGrange recommended that the mill rate be set to 2.55 for residential and farm land property and 3.75 for non-residential property. The previous mill rates were 2.56 and 3.76, set in 2018 by the NDP government, yet kept in place by the UCP government in November 2019.
These new rates are still higher than the 2.48 and 3.64 rates the NDP had set in 2016.
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The mill rates the province sets determines how much property tax municipalities will collect from taxpayers, which will then go into the Alberta School Foundation Fund. The mill rate is sometimes referred to by municipalities as the education portion of your property taxes.
Basically, what the new rates mean is that if you own a home or a farm, you’ll pay $2.55 instead of $2.56 for every $1,000 your property is worth. For businesses, it’s $3.75 instead of $3.76.
In other words, you’ll pay $1 less in education tax for every $100,000 of your home’s value. If your home is worth $300,000, for example, then you’d pay $765 each year instead of $768 for this portion of your property taxes. If you happen to own a $1 million home, you‘ll save 10 bucks.
Now, a tax reduction seems like a good idea, but there’s something you should know.
For the current budget year, the UCP government had planned on increasing how much they collect from municipalities for the Alberta School Foundation Fund by $102 million, for a total of $2.559 billion.
Tax revenue is forecast at $22.9 billion in 2020-21, 46 per cent of total revenue. This is $1.1 billion, or 4.9 per cent higher than in 2019-20, with increases of $747 million in personal income tax, $294 million in corporate income tax, $102 million in education property tax and $103 million in other tax revenue.Fiscal Plan 2020–23, p. 109
That increase was supposed to be based on population growth and inflation.
Education property tax revenue is forecast at $2.6 billion in 2020–21, an increase of $102 million from 2019–20. The requisition was set based on Alberta population growth and inflation, and will continue to be reviewed annually.Fiscal Plan 2020–23, p. 110
And increasing revenue to match population growth and inflation sounds worthwhile. Especially as costs to deliver education rise with population growth and inflation.
For some reason, however, the provincial government has decided to freeze the revenue collected this year to last year’s amount: $2.457 billion. This freeze means that the provincial government will now have $102 million less to use for spending in K–12 in this budget year.
The province had planned further increases to the Alberta School Foundation Fund for 2021–22 and 2022–2033, as well: an extra $93 million next year to bring this revenue to $2.62 billion and $114 million more the following year to bring it to $2.766 billion.
Had they followed through on all their revenue increases, the Alberta School Foundation Fund would’ve seen an extra $309 million between last year and the election year.
It’s unclear whether this year’s cancellation with jeopardize the increases of the subsequent years.
And remember, this cut is to revenue: how much the government planned to have on hand to pay for expenses. We don’t know how this will affect the expense side of the ledger this year.
The ministry of education, had budgeted a $100 million increase ($8.222 billion to $8.322 billion) to its budget for this fiscal year.
I should point out that only $6 million of that budgeted $8.322 billion was for ministry support services. The rest was planned for direct student support via schools, school districts, transportation, etc.
So does this loss of $102 million from education revenue threaten the planned $94 million increase to education spending planned for student instruction and support?
And that’s not even accounting for education spending not keeping up with inflation and population growth. That planned increase to $8.322 billion this year—if accounting for inflation and population—should’ve actually been $8.691 billion.
And if we’re already underfunding K–12 education by $369 million, will that mean this decision to cut $102 million from education revenue mean that K–12 education will be underfunded by $471 million?
Will this decision to help homeowners save 10 bucks on a $1 million home be worth it if we’re underfunding elementary and high schools by nearly half a billion dollars?