HB 650-FN-LOCAL – AS INTRODUCED
2005 SESSION
04/09
HOUSE BILL 650-FN-LOCAL
AN ACT revising education funding and distribution and establishing needs-based matching grants.
SPONSORS: Rep. Carter, Hills 3
This bill:
I. Repeals the education property tax.
II. Requires municipalities to spend at least the per pupil adequacy cost.
III. Revises the formula for distributing aid to municipalities and uses a municipal wealth calculation which considers the median household income and equalized property valuation, and an adjusted municipal wealth calculation based upon the number of pupils in a municipality.
IV. Distributes needs-based matching grants to the 200 municipalities with the lowest adjusted municipal wealth.
V. Provides state funding for catastrophic aid.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
05-0632
04/09
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Five
AN ACT revising education funding and distribution and establishing needs-based matching grants.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 School Money; Definitions. RSA 198:38 is repealed and reenacted to read as follows:
198:38 Definitions. In this subdivision:
I. “Adjusted municipal wealth” means municipal wealth divided by the average daily membership in residence as adjusted by adding to the average daily membership in residence one of the following:
(a) 1.0, for each educationally disabled pupil in a municipality; or
(b) 0.5, for each pupil in a municipality receiving a free or reduced price lunch; or
(c) 0.5 for each pupil in a municipality receiving programs or services for English as a second language; or
(d) 0.1, for each high school pupil in a municipality.
II. “Average daily membership in attendance” means average daily membership in attendance, as defined in RSA 189:1-d, III, as of September 30th of the second school year preceding the year in which the calculation is made.
III. “Average daily membership in residence” means the average daily membership in residence, as defined in RSA 189:1-d, IV, as of September 30th of the second school year preceding the year in which the calculation is made, provided that no kindergarten pupil shall count as more than 1/2 day attendance per calendar day.
IV. “Average per pupil adequacy cost” means the amount as determined in accordance with RSA 198:40.
V. “Commissioner” means the commissioner of the department of education.
VI. “Department” means the department of education.
VII. “Elementary school” means a school with any of the grades kindergarten through 8.
VIII. “Municipal wealth” means the number of households in a municipality multiplied by 2.25 times the median household income in that municipality, as determined by the office of energy and planning under RSA 4-C. To this product is added the total equalized valuation in a municipality, according to the most recent data from the department of revenue administration.
IX. “Municipality” means a city, town, or unincorporated place.
X. “School district” means school district as defined in RSA 194:1 or RSA 195:1.
2 School Money; Education Trust Fund. Amend the introductory paragraph of RSA 198:39, I to read as follows:
I. The state treasurer shall establish an education trust fund in the treasury. Moneys in such fund shall not be used for any purpose other than to distribute [adequate education] grants to municipalities’ school districts pursuant to RSA 198:42[, and to provide low and moderate income homeowners property tax relief under RSA 198:56-198:61]. The state treasurer shall deposit into this fund immediately upon receipt:
3 School Money; Needs-Based Matching Grants to Municipalities. RSA 198:41 is repealed and reenacted to read as follows:
198:41 Needs-Based Matching Grants to Municipalities. In addition to moneys available to municipalities under RSA 198:40, beginning July 1, 2005, and no later than July 1 of every biennium thereafter:
I. The commissioner shall calculate the municipal wealth and the adjusted municipal wealth for each municipality in the state.
II. The commissioner shall publish a list which ranks each municipality in order from highest to lowest adjusted municipal wealth.
III. The commissioner shall identify the 200 municipalities with the lowest adjusted municipal wealth.
IV. The commissioner shall divide the list of 200 municipalities into 20 groups of 10 and rank such municipalities in descending order based on a municipality’s adjusted municipal wealth. Needs-based matching grants shall be available to such municipalities as follows:
(a) A municipality which is ranked 1st through 10th in terms of adjusted municipal wealth shall receive a grant equal to 2.5 percent of the total amount appropriated in the municipality to fund school district expenses in a fiscal year.
(b) A municipality which is ranked 191st through 200th in terms of adjusted municipal wealth shall receive a grant equal to 50 percent of the total amount appropriated in the municipality to fund school district expenses in a fiscal year.
(c) Needs-based matching grants shall be distributed to each of the remaining 18 groups of municipalities in increasing increments of 2.5 percent of the total amount appropriated in the municipality to fund school district expenses in a fiscal year starting with a municipality which is ranked 11th through 20th in terms of adjusted municipal wealth which shall receive a grant equal to 5 percent of the total amount appropriated in the municipality to fund school district expenses in a fiscal year, and ending with a municipality which is ranked 181st through 190th in terms of adjusted municipal wealth which shall receive a grant equal to 47.5 percent of the total amount appropriated in the municipality to fund school district expenses in a fiscal year.
V. No municipality shall receive a needs-based matching grant, or portion thereof, under this section which would result in spending per pupil in such municipality that exceeds the statewide average per pupil adequacy cost in a fiscal year as determined under RSA 198:40.
4 Special Education; State Aid. Amend RSA 186-C:18, III(a) to read as follows:
III.(a) The state board of education through the commissioner, department of education, shall distribute aid [available] under this paragraph as entitlement to such school districts as have a special education pupil for whose costs they are responsible, for whom the costs of special education in the fiscal year exceed 3 1/2 times the estimated state average expenditure per pupil for the school year preceding the year of distribution. [If in any year, the amount appropriated for distribution as catastrophic special education 186-C:18 aid in accordance with this section is insufficient therefor, the appropriation shall be prorated proportionally based on entitlement among the districts entitled to a grant.] If there are unexpended funds appropriated under this paragraph at the end of any fiscal year, such funds shall be distributed for court-ordered placements under RSA 186-C:19-b. In addition, the state may designate up to $250,000 [of the funds which are appropriated as required by this paragraph,] for each fiscal year, to assist those school districts which, under guidelines established by rules of the state board of education, may qualify for emergency assistance for special education costs. Upon application to the commissioner of education, and approval by the commissioner, such funds may be accepted and expended by school districts in accordance with this chapter; provided, however, that if a school district has received emergency assistance funds for certain educationally disabled children, it shall not receive catastrophic special education aid for those same educationally disabled children. If any of the funds designated for emergency assistance under this paragraph are not used for such emergency assistance purposes, the funds shall be used to assist school districts in meeting catastrophic cost increases in their special education programs as provided by this paragraph.
5 School Attendance; Compulsory Attendance of Pupil. Amend RSA 193:1, I(c) to read as follows:
(c) The relevant school district superintendent has excused a child from attendance because the child is physically or mentally unable to attend school, or has been temporarily excused upon the request of the parent for purposes agreed upon by the school authorities and the parent. Such excused absences shall not be permitted if they cause a serious adverse effect upon the student’s educational progress. Students excused for such temporary absences may be claimed as full-time pupils for purposes of calculating state aid under RSA 186-C:18 and [adequate education] any grants distributed under RSA [198:41] 198:42.
6 School Money; Distribution Schedule. Amend RSA 198:42, I-II to read as follows:
I. [The adequate education grant determined in RSA 198:41] Grants shall be distributed to each municipality’s school district or districts legally responsible for the education of the pupils who attend approved public schools within the district or in other districts or who attend approved programs for educationally disabled children, as the case may be, from the education trust fund in 4 payments of 20 percent on September 1, 20 percent on November 1, 30 percent on January 1, and 30 percent on April 1 of each school year; provided that for a dependent school district, the grant determined in RSA 198:41 shall be distributed to the municipality, which shall appropriate and transfer the grant funds to its dependent school department.
II. For the fiscal year beginning July 1, 2004, and every fiscal year thereafter, the amount necessary to fund the grants under [RSA 198:41] this subdivision is hereby appropriated to the department from the education trust fund created under RSA 198:39 [to the department]. The governor is authorized to draw a warrant from the education trust fund to satisfy the state’s obligation under this section. Such warrant for payment shall be issued regardless of the balance of funds available in the education trust fund. If the balance in the education trust fund, after the issuance of any such warrant, is less than zero, the commissioner of the department of administrative services shall inform the fiscal committee and the governor and council of such balance. This reporting shall not in any way prohibit or delay the distribution of adequate education grants.
7 Charter and Open Enrollment Schools; Funding. Amend RSA 194-B:11, I to read as follows:
I. There shall be no tuition charge for any pupil attending an open enrollment or charter conversion school located in that pupil’s resident district. Funding limitations in this chapter shall not be applicable to charter conversion or open enrollment schools located in a pupil’s resident district. For any other charter or open enrollment school authorized by the school district, the pupil’s resident district shall pay to such school an amount equal to not less than 80 percent of that district’s average cost per pupil as determined by the department of education using the most recent available data as reported by the district to the department. For any charter school authorized by the state board of education, the pupil’s resident district shall pay tuition beginning July 1, 2004 and every fiscal year thereafter, in an amount per pupil equal to the amount determined in RSA [198:40, I] 198:42. Tuition amounts shall be prorated on a per diem basis for pupils attending a school for less than a full school year. To the extent permitted by law, tuition payments shall coincide with the distribution of [adequacy] grants under RSA 198:42 or on such other terms as are mutually acceptable.
8 Charter and Open Enrollment Schools; Funding. Amend RSA 194-B:11, IX(a) to read as follows:
IX.(a) The pupil’s resident school district or department of education shall pay tuition in cash or may issue reimbursement anticipation notes as set forth in RSA 198:20-d for each year in which a resident pupil attends a charter school. Unless otherwise agreed upon, cash payment shall coincide with the schedule for grant payment set forth in RSA 198:42. The reimbursement anticipation note shall be in the amount specified for the year of attendance at the charter school, and shall be issued to the charter school prior to the beginning of the school year of the charter school. Each reimbursement anticipation note issued shall be for a term of 3 years from the date of issue or may be redeemable by the charter school at such time as the charter school or the pupil’s resident school district receives [adequate education] a grant [amounts] pursuant to RSA 198:42.
9 Cooperative School Districts; Certification of District Taxes. Amend RSA 195:14, I (c)-(d) to read as follows:
(c) The commissioner of revenue administration shall certify to the state department of education the total amount to be apportioned among the pre-existing school districts. [Such total shall include the adequate education cost for the district under RSA 198:38, VII, and the amount above the cost of an adequate education to be assessed and collected as local educational taxes.]
(d) The state department of education shall determine the proportional share of the costs [above adequacy] to be assessed as local education taxes as follows:
(1) First, the department shall determine each pre-existing district’s proportional share of the total amount to be apportioned based on the cooperative school district formula.
(2) Second, the department shall then deduct each pre-existing school district’s [adequate education cost under RSA 198:38, VII] grant under RSA 198:40, from its proportional share of the total amount to be apportioned.
(3) Third, the department shall notify the commissioner of revenue administration of its determinations.
[(4) If the amount determined in subparagraph (2) for any pre-existing district is less than zero, the department shall reduce the adequate education grant payable to the cooperative district under RSA 198:42 by the difference between the amount determined in subparagraph (1) and the pre-existing district’s adequate education cost under RSA 198:38, VII.]
10 Cooperative School Districts; State Aid. Amend RSA 195:15 to read as follows:
195:15 State Aid. The state aid to which a cooperative elementary and/or secondary district shall be entitled shall be the total of those shares of the aid to which the pupils attending the cooperative district would have entitled the pre-existing districts, had they remained in the pre-existing districts. For the purposes of crediting the cooperative district’s [adequate education] cost to the pre-existing districts, each such pre-existing district shall have [its adequate education cost under RSA 198:38, VII] the amount of the grant received under RSA 198:42 credited against its share of the cooperative school district budget. However, cooperative school districts formed by 2 or more pre-existing districts whose boundaries approximate those of a single township in which they are located shall be treated as a single school district for the purposes of this section.
11 Maintenance of Local Control. Amend RSA 198:48 to read as follows:
198:48 Maintenance of Local Control. Distributions under RSA 198:42 are [based on adequate education costs determined in RSA 198:40 and are] independent of how the municipalities decide to spend the distributions or other funds they may raise for education. Notwithstanding any other provision of law, nothing in this subdivision is intended in any way to limit or control how school districts operate or spend their budgets except that [adequate education] grants must be expended for educational purposes. [Adequate education] Grants distributed under RSA 198:42 [and hardship grants] shall not be considered unanticipated funds under RSA 198:20-b.
12 Alternative Kindergarten Programs. Amend RSA 198:48-a, VII-VIII to read as follows:
VII.(a) Upon the effective date of this paragraph, and for each fiscal year through June 30, 2003, [an adequate education] a grant of $1,200 per pupil shall be distributed to school districts, from the education trust fund created in RSA 198:39, for the education of its resident kindergarten pupils enrolled in an approved alternative kindergarten program established under this section.
(b) Once pupils enrolled in an approved alternative kindergarten program have been counted in the average daily membership in residence, school districts shall receive, for each such pupil, [an adequate education] a grant calculated in accordance with [RSA 198:40 through] RSA 198:42.
VIII. Notwithstanding the provisions of this section, alternative kindergarten programs which were approved and in effect prior to April 29, 1999 may continue to operate and shall continue to receive [per pupil adequate education] grant amounts in accordance with [RSA 198:40 through] RSA 198:42.
13 State Treasurer; Application of Receipts. Amend RSA 6:12, I(b)(65) to read as follows:
(65) Money received under RSA 77-A, RSA 77-E, RSA 78, RSA 78-A, RSA 78-B, RSA 83-F, [RSA 198:46,] and from the sweepstakes fund, which shall be credited to the education trust fund under RSA 198:39.
14 Apportionment, Assessment, and Abatement of Taxes; Commissioner’s Warrant. Amend RSA 76:8, I-II to read as follows:
I.[(a)] The commissioner shall annually determine a municipality’s tax base [for the statewide enhanced education tax] by subtracting from the total equalized valuation of all property, as determined under RSA 21-J:3, XIII for the preceding year, property that was then taxable under RSA 82 and RSA 83-F. In determining the tax base, the value of any utility property that was not taxable under RSA 83-F in the preceding year but is taxable under RSA 83-F in the current year shall also be subtracted, provided the sum value represents at least 5 percent of the total equalized value of all property, except property taxable under RSA 82 or RSA 83-F in the preceding year.
[(b) The commissioner shall calculate the portion of the statewide enhanced education tax to be raised by each municipality by multiplying the uniform education property tax rate by the municipality’s tax base.]
II. The commissioner shall issue a warrant under the commissioner’s hand and official seal for the amount computed in paragraph I to the selectmen or assessors of each municipality by December 15 directing them to assess such sum and pay it to the municipality for the use of the school district or districts [and, if there is an excess statewide enhanced education tax payment due pursuant to RSA 198:46, directing them to assess the amount of the excess payment and pay it to the department of revenue administration for deposit in the education trust fund]. Such sums shall be assessed at such times as may be prescribed for other taxes assessed by such selectmen or assessors of the municipality.
15 Repeal. The following are repealed:
I. RSA 21-I:18, I(l), relative to the purchase of services by the department of administrative services for the administration of low and moderate income homeowners property tax relief.
II. RSA 76:3, relative to the education property tax.
III. RSA 76:9, relative to the commissioner’s report on education property tax warrants.
IV. RSA 83-F:9, relative to exemption from the education property tax.
V. 2004, 195:3 and 2004:195:6, II, relative to the education property tax.
VI. 2004, 200:16-200:23; 2004, 200:25; and 2004, 200:28, relative to contingent applicability.
VII. 2004, 200:6, relative to the introductory paragraph of RSA 198:40, I, effective July 1, 2005.
VIII. RSA 198:39, I(g), relative to deposit of excess property tax payments.
IX. RSA 198:46-47, relative to excess education property tax payment and forms.
X. RSA 198:49, relative to the adequate education and education financing commission.
XI. RSA 198:56-61, relative to low and moderate income homeowners property tax relief.
16 Effective Date. This act shall take effect July 1, 2005 at 12:02 a.m.
LBAO
05-0632
Revised 2/7/05
HB 650 FISCAL NOTE
AN ACT revising education funding and distribution and establishing needs-based matching grants.
FISCAL IMPACT:
The Department of Revenue Administration indicates this bill will decrease state education trust fund revenue by $371,302,034 and education trust fund expenditures by $7,400,000. The Department of Education indicates this bill will decrease state education trust fund expenditures and local revenue by $581,898,848 in FY 2006, $568,423,529 in FY 2007, $595,923,406 in FY 2008 and by $545,898,653 in FY 2009. There will be no impact on county and local expenditures or county revenue.
METHODOLOGY:
The Department of Revenue Administration indicates this bill repeals the statewide property tax and also the low and moderate income homeowners property tax relief program. The current amount raised with the statewide property tax is $371,302,034 and the Department estimated the reduction in tax relief payments using the FY 2004 amount of $7,400,000.
The Department of Education indicates this bill will reduce the cost of adequacy as shown below.
FY 2006 FY 2007 FY 2008 FY 2009
CURRENT
Statewide Property Tax $371,302,034 $371,302,034 $371,302,034 $371,302,034
Net Grants 488,679,117 497,172,300 548,376,191 555,332,286
Cost of Adequacy $859,981,151 $868,474,334 $919,678,225 $926,634,320
PROPOSED
Cost of Adequacy $278,082,303 $300,050,805 $323,754,819 $380,735,667
Change in Adequacy 581,898,848 568,423,529 595,923,406 545,898,653
Change in Tax ($371,302,034) ($371,302,034) ($371,302,034) ($371,302,034)
Net Change $210,596,814 $197,121,495 $224,621,372 $174,596,619
When determining the fiscal impact, the Department of Education assumed the following:
• Technical corrections in the current law relative to the consumer price index were made and the per pupil cost is $3,580.
• The Department assumes catastrophic aid will be fully funded in FY 2006 through FY 2009, and therefore, the removal of the prorata reduction will have no fiscal impact.
• A headcount by district of ESL students has been used since ADM-R and residence information is not available.
A headcount of Free and Reduced Lunch students has been used since AMR-R is not available.