Agriculture Minister Ralph Eichler concedes Manitoba farmers get a raw deal on farmland education taxes — but he also says relief won’t be immediate.
“We know there are a number of funding models that would look better,” Eichler said during a question period following his speech at the Keystone Agricultural Producers’ (KAP) 35th annual meeting in Winnipeg Feb. 5. “We know the model is flawed — basically farmland is carrying the largest part of that (in rural areas).”
Speaking to reporters later, Eichler agreed farmers are paying an unfair proportion of education tax. Asked if he’s taking that message to cabinet colleagues he replied: “Of course. Our base is rural Manitoba. Let’s be clear about it.”
He went on to say that the fundamental challenge will be to ensure that the funding model is fair and accurate.
Why it matters: Manitoba farmers have claimed for years local education taxes on farmland are unfair. KAP says the rapid increase in farmland values has shifted the tax burden to farmers and away from other property owners and is unsustainable.
The government announced Jan. 23 a nine-member committee will conduct a “comprehensive, independent review of the kindergarten to Grade 12 education system,” and report back by February 2020. But funding isn’t part of it, even though then Education and Training Minister Ian Wishart said in May 2017 it would be.
Eichler said the committee will likely make its recommendations before year-end, but he later told reporters farmers shouldn’t expect changes to education taxes until after the next provincial election Oct. 6, 2020.
KAP, which has been lobbying for changes in education taxation for decades, is disappointed.
Starbuck farmer Chuck Fossay asked Eichler to take KAP’s message to cabinet “and encourage that they do this funding review sooner rather than later because it’s really becoming a challenge for many producers.”
Eichler repeated Premier Pallister’s message that improving Manitoba’s education system is the first step.
“We have no idea what’s going to come out of the report — whether we’ll still have trustees, whether we’ll have more trustees, will there be school divisions amalgamated… we know there has to be a better model,” Eichler said.
Manitoba currently has the second-highest per capita public school funding in Canada, according to Statistics Canada, but ranks last in national student testing in reading, science and math, which has prompted the review.
The last three years most Manitoba farmers have seen big jumps in local education taxes — some in the double digits.
“We’re seeing as farmland prices appreciate much more quickly than residential or business properties that the farmers are picking up a larger and larger share of the rural education costs through property taxes,” Fossay, who chairs KAP’s taxation committee, said in an interview Feb. 6. “We were hoping that this review committee that’s looking at education would include funding.
“But we want to continue to remind government that farmers are taking on a larger and larger proportion of the cost. We really feel that it’s not fair to tax people on their assets rather than their income because an asset’s value has no relationship to ability to pay.”
About eight years ago Fossay paid around $10 an acre in property taxes — half to the municipality and half to the local school division.
“I did a local study and when you looked at what farmers were paying in the municipality versus residential and businesses it was a pretty even split,” he said. “Now, eight to 10 years later I am paying about $22 an acre property tax. Roughly about $10 is going to the municipality and $12 is going to the school division. So my taxes have more than doubled on that property for schools in the last eight to 10 years.”
Some farmers in the Winkler area are paying even more.
“We’re paying upwards of $40 an acre in municipal taxes, which includes your education portion of taxes and those taxes are running upwards of $25 an acre,” Winkler farmer Jack Froese said in an interview Feb. 6. “These taxes are not sustainable.”
And it’s getting worse, he added. Land that sold for $7,000 or $8,000 an acre in the last assessment is now $10,000, he said.
Having served as a school trustee seven years, Froese knows how complex education funding is.
“We need the government to fund a larger portion of that and in my estimation that will have to come out of general revenue so it’s not local assessment,” he said.
“It’s an unfair proportion that we are bearing and if you’re a smaller farmer it just isn’t sustainable.”
For example, a farmer who earns $60,000 a year from 2,000 acres could face an education tax bill of $15,000 (2,000 acres X $10 tax per acre – $5,000 through the provincial Education Tax Rebate program).
In comparison a homeowner in town earning the same might only pay $400 in education taxes on a house assessed at $250,000 after the property tax rebate, Fossay said.
“We don’t mind paying our fair share, but as the percentage of farmers making up the population shrinks we really feel there has to be an adjustment so we’re all paying our fair share… ” he said.
Eichler didn’t rule out removing education taxes from farmland and taxing farm homes the way non-farm homeowners are currently taxed for education. Changing how farmland is assessed, or the way the education tax is calculated, or funding education through income tax are other options.
“It’s very complicated the whole formula,” he said. “Income tax is part of the solution we might be able to look at.”
School divisions are funded by the provincial government, as well as by local taxpayers, adding to the complexity. The portion paid by each varies among divisions. Generally the provincial funding portion has declined over the years, resulting in local taxpayers having to pay more.
School divisions, which are governed by elected trustees, have taxing authority. If the province opts to fund education directly, it may also eliminate school boards and/or restrict or eliminate their power to tax.
While farmers would welcome tax relief, if local taxpayers no longer fund local schools they also may have less say in how they operate. That has implications for sparsely populated rural communities, KAP president Campbell said in an interview Jan. 24.
“They are the life blood of some communities.”
In the meantime, KAP will keep pressing the government for education tax relief.
“We will not let it be forgotten and we will bring it up in our conversation that it is part of the education review,” Campbell said in an interview Feb. 6. “We want to be sure it stays on the forefront.”