In Rhode Island, increases in property tax levies are capped at 4 percent but, according to RIPEC, towns and cities have hiked residential taxes by only 2.5 percent, even as commercial property owners have grappled with higher taxes. Landlords have then passed those higher taxes on to renters, RIPEC noted in the report, increasing costs for people who do not own their own homes.
For homeowners with a property valued at $425,000 – which is the median price of a single-family home sold in Rhode Island in 2023 – the median tax across all of Rhode Island’s 39 cities and towns was just $5,650, according to the report. Towns with lower property taxes had the highest property values per capita, the report noted, and, “therefore the greatest capacity to fund local services by way of property taxation without imposing large property tax burdens on homeowners.”
The bulk of education funding in Rhode Island comes from property taxes — and cities and towns have also kept residential taxes low by not funding their schools, said Michael DiBiase, president and CEO of RIPEC.
Having such an important source of revenue decline could impact how schools finance education in their communities, RIPEC said.
Over the last few years, pandemic relief dollars contributed to the funding of local school districts, but that funding has ended.
Meanwhile, state aid has also been outpacing local education funding 3 to 1. The state should participate more in the funding of schools, DiBiase said, but the current structure still relies on local funding.
In its report, RIPEC showed that in 2012, state funding of K-12 schools went from about $700 million to $1.28 billion in 2023, while local aid only grew from $1.27 billion to $1.57 billion during the same period.
“Even if you want the state to participate more, you can’t have the local contributions so low because the whole system is still more built on local aid than on state aid,” he said.
DiBiase said that school districts could face financial challenges going forward as a result of slowing in local aid funding.
“We had a period where property values went up a lot and there could have been an opportunity to rebalance this a little bit,” he said. “But instead, the communities have favored… resident homeowners, and kept their taxes pretty low.”
RIPEC is not advocating for higher taxes but is arguing for towns and cities to fund their schools, DiBiase said. If taxes must be raised, they they should be fairly distributed, he said.
RIPEC is urging the state to direct resources to areas that have lower property wealth, to supplement local funds.
“That is part of our recommendation. So, the increased state aid to K-12 schools focused more on those districts that need it is a good thing,” Oliva said. “It’s just that the local aid component also needs to be a part of it.”
Omar Mohammed can be reached at omar.mohammed@globe.com. Follow him on Twitter (X) @shurufu.
