HB 649-FN - AS INTRODUCED
2023 SESSION
23-0158
02/10
HOUSE BILL 649-FN
AN ACT repealing the collection of the state education property tax.
SPONSORS: Rep. Schamberg, Merr. 6
COMMITTEE: Education
-----------------------------------------------------------------
ANALYSIS
This bill repeals the statewide education property tax and transfers that funding of adequate education costs to state general funds. The bill also repeals the low and moderate income homeowners property tax relief program for relief from the statewide education property tax.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
23-0158
02/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Three
AN ACT repealing the collection of the state education property tax.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Repeal of Statewide Education Property Tax. RSA 76:3, relative to the education tax, is repealed.
2 Education Trust Fund. Amend 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 and to approved charter schools pursuant to RSA 198:42, [to provide low and moderate income homeowners property tax relief under RSA 198:56-198:61,] to distribute school building aid to school districts and approved chartered public schools pursuant to RSA 198:15-b, to distribute tuition and transportation funds to school districts for students attending career and technical education programs pursuant to RSA 188-E:9, to distribute special education aid to school districts pursuant to RSA 186-C:18, to fund department of education operating costs for a state student data collection and reporting system, and to fund kindergarten programs as may be determined by the general court. The state treasurer shall deposit into this fund immediately upon receipt:
(a) Funds certified to the state treasurer by the commissioner of revenue administration pursuant to RSA 77-A:20-a, relative to business profits taxes.
(b) Funds certified to the state treasurer by the commissioner of revenue administration pursuant to RSA 77-E:14, relative to business enterprise tax.
(c) Funds collected and paid over to the state treasurer by the commissioner of revenue administration pursuant to RSA 78-A:26, II relative to the tax on motor vehicle rentals.
(d) Funds collected and paid over to the state treasurer by the department of revenue administration pursuant to RSA 78:24, relative to tobacco taxes.
(e) Funds certified to the state treasurer by the commissioner of revenue administration pursuant to RSA 78-B:13, relative to real estate transfer taxes.
(f) Funds collected and paid over to the state treasurer by the department of revenue administration pursuant to RSA 83-F:7, I, relative to the utility property tax.
(g) [Repealed.]
(h) All moneys due the fund in accordance with RSA 284:21-j, relative to sweepstakes and the lottery.
(i) Tobacco settlement funds in the amount of $40,000,000 or, for any year in which the total tobacco settlement funds received by the state is less than $40,000,000, the total amount of tobacco settlement funds received by the state.
(j) The school portion of any revenue sharing funds distributed pursuant to RSA 31-A:4 which were apportioned to school districts in the property tax rate calculations in 1998.
(k) Funds collected and paid over to the state treasurer by the lottery commission pursuant to RSA 284:44, RSA 284:47, and RSA 287-I .
(l) State general funds in the amount of $363,000,000 annually.
(m) Any other moneys appropriated from the general fund.
3 Local Property Taxes. RSA 76:8 is repealed and reenacted to read as follows:
76:8 Local School Taxes; Warrant. Municipalities are authorized to assess local property taxes under RSA 198:5 necessary to fund school district appropriations not funded by distributions from the education trust fund under RSA 198:39, or by other revenue sources.
4 Determination of Education Grants. Amend RSA 198:41, I-IV to read as follows:
I. Except for municipalities where all school districts therein provide education to all of their pupils by paying tuition to other institutions, the department of education shall determine the total education grant for the municipality as follows:
(a) Add the per pupil cost of providing the opportunity for an adequate education for which each pupil is eligible pursuant to RSA 198:40-a, I-III[,]; and [from such amount]
[(b) Subtract the amount of the education tax warrant to be issued by the commissioner of revenue administration for such municipality reported pursuant to RSA 76:8 for the next tax year; and
(c) [Repealed.]
[(d)] (b) Add the municipality's additional aid for relief funding pursuant to RSA 198:40-e[.] ; and
[(e)] (c) Add the municipality's extraordinary need grant pursuant to RSA 198:40-f.
II. For municipalities where all school districts therein provide education to all of their pupils by paying tuition to other institutions, the department of education shall determine the total education grant for each municipality as the lesser of the 2 following calculations:
(a) The amount calculated in accordance with paragraph I of this section; or
(b) The total amount paid for items of current education expense as determined by the department of education [minus the amount of the education tax warrant to be issued by the commissioner of revenue administration for such municipality reported pursuant to RSA 76:8 for the next tax year].
III.(a) For the biennium ending June 30, 2013, the department of education shall not distribute a total education grant on behalf of all pupils who reside in a municipality that exceeds that municipality's total education grant in the second year of the previous biennium.
(b) [Repealed.]
IV.(a) For fiscal year 2012, the department of education shall identify all municipalities in which the fiscal year 2012 total education grant will be less than the fiscal year 2011 total education grant. The department shall distribute a stabilization grant to each of those municipalities equal to 100 percent of the decrease.
(b) For fiscal year 2013, the department of education shall identify all municipalities in which the fiscal year 2013 total education grant, including any stabilization grant distributed pursuant to subparagraph (a), will be less than the fiscal year 2011 total education grant. The department shall distribute funds to each of those municipalities equal to 100 percent of the decrease.
(c) For fiscal year 2014 through fiscal year 2016, the department of education shall distribute a total education grant to each municipality in an amount equal to the total education grant for the fiscal year in which the grant is calculated plus the amount of the fiscal year 2012 stabilization grant, if any, distributed to the municipality.
(d) For fiscal year 2017 and each fiscal year thereafter, the department of education shall distribute a total education grant to each municipality in an amount equal to the total education grant for the fiscal year in which the grant is calculated plus a percentage of the municipality's fiscal year 2012 stabilization grant, if any, distributed to the municipality; the percentage shall be 96 percent for fiscal year 2017, 92 percent for fiscal year 2018, 88 percent for fiscal year 2019, and 100 percent for fiscal year 2020 and each fiscal year thereafter. No stabilization grant shall be distributed to any municipality for any fiscal year [in which the municipality's education property tax revenue collected pursuant to RSA 76 exceeds the total cost of an adequate education or to any municipality for any fiscal year] in which the municipality's ADMA is zero.
5 Reference Removed. Amend RSA 72:76 to read as follows:
72:76 Property Tax Exemption. An eligible municipality may, by vote of the local legislative body pursuant to RSA 72:77, adopt a new construction property tax exemption for commercial or industrial uses, or both. The exemption shall apply only for municipal and local school property taxes assessed by the municipality [which shall exclude state education property taxes under RSA 76:3] and county taxes assessed against the municipality under RSA 29:11, and shall be a specified percentage on an annual basis of the increase in assessed value attributable to construction of new structures, and additions, renovations, or improvements to existing structures. The exemption may run for a maximum period of 10 years following the new construction; provided, however, that the exemption for all years shall cumulatively not exceed 500 percent of the increased assessed value. Once adopted by the local legislative body, the percentage rate and duration of the exemption shall be granted uniformly within that municipality to all projects for which a proper application is filed.
6 Reference Removed. Amend RSA 72:81, I to read as follows:
I. An eligible municipality may, by vote of the local legislative body pursuant to RSA 72:82, adopt a new construction property tax exemption for commercial or industrial uses, or both. The intent of the exemption is to provide incentives to businesses to build, rebuild, modernize, or enlarge within the municipality. The exemption shall apply only for municipal and local school property taxes assessed by the municipality [which shall exclude state education property taxes under RSA 76:3] and county taxes assessed against the municipality under RSA 29:11, and shall be a specified percentage on an annual basis of the increase in assessed value attributable to construction of new structures, and additions, renovations, or improvements to existing structures, but which shall not exceed 50 percent per year. The exemption may run for a maximum period of 10 years following the new construction.
7 Utility Property Tax; Application. Amend RSA 83-F:9 to read as follows:
83-F:9 [Exemption From Education Tax] Application. [Persons and property subject to taxation under this chapter shall not be subject to tax under RSA 76:3; provided, however, that] Nothing in this chapter shall be construed to exempt [such] persons or property subject to taxation under this chapter from local school, municipal, district, or county taxation under RSA 76.
8 Repeal. The following are repealed:
I. RSA 21-I:18, I(l), relative to the administration of low and moderate income homeowners property tax relief claims.
II. RSA 198:56 through 198:61, relative to the low and moderate income homeowners property tax relief program.
9 Effective Date. This act shall take effect July 1, 2023.
23-0158
1/5/23
HB 649-FN- FISCAL NOTE
AS INTRODUCED
AN ACT repealing the collection of the state education property tax.
FISCAL IMPACT: [ X ] State [ ] County [ X ] Local [ ] None
|
| ||||
| Estimated Increase / (Decrease) | ||||
STATE: | FY 2023 | FY 2024 | FY 2025 | FY 2026 | |
Appropriation | $0 | $0 | $0 | $0 | |
Revenue | $0 | ($786,980) Decrease Education Trust Fund SWEPT | $0 | $0 | |
Expenditures | $0 | $363,000,000 Annual GF Increase to ETF ($28,134,946) Annual ETF Decrease - Education Aid ($1,400,000) Annual ETF Decrease - Low & Moderate Indeterminable GF Increase - One-Time DRA System Cost | |||
Funding Source: | [ X ] General [ X ] Education [ ] Highway [ ] Other | ||||
|
|
|
|
| |
LOCAL: |
|
|
|
| |
Revenue | $0 | ($28,134,946) - Annual Net Decrease Education Aid | |||
Expenditures | $0 | Indeterminable Decrease - SWEPT Collection Costs | |||
METHODOLOGY:
The Department of Education states the proposed bill would eliminate the Statewide Education Property Tax (SWEPT). The SWEPT is a revenue source for the state education trust fund that is assessed by the state but collected and retained locally. The act of retaining the SWEPT by the locality is recorded on both state and local financial ledgers as a state grant to localities. Therefore, this proposed legislation would impact both state revenue and state expenditures for education.
This bill would eliminate the SWEPT as a state revenue source for the education trust fund and thereby require the general fund to transfer the approximate equivalent amount to the Education Trust Fund. The impact would be the following:
| FY 24 Current Law | FY 24 Proposed | Net Impact |
SWEPT Revenue | $363,786,980 | $0 |
|
GF Transfer to ETF | $0 | $363,000,000 |
|
| |||
Net Impact to ETF* | $363,786,980 | $363,000,000 | ($786,980) |
Impact to GF | $0 | ($363,000,000) | ($363,000,000) |
* Under current law, SWEPT rate is set at the nearest 1/2 cent to generate $363,000,000 in revenue, which is why FY 2024 SWEPT revenue is anticipated to raise $363,786,980 (the $786,980 is essentially attributable to rounding).
Under current law, 100 percent of the SWEPT assessed is considered a state grant to school districts. Under the proposed bill, districts would not receive a SWEPT grant. However, all districts financially responsible for educating students would receive an adequacy grant. The adequacy grant is made up of several components, or sub-grants which include cost of adequacy, relief aid, extraordinary needs grant, and stabilization. Districts with a SWEPT greater than the cost of adequate education are excluded from stabilization grants and effectively excluded from relief aid and extraordinary needs grant. Below is a table to show how the components that make up the adequacy grant would be impacted.
| Current Law FY 24 | Proposed FY 24 | Net Difference |
Cost of Adequacy | $748,606,599 | $748,606,599 | $0 |
Excess SWEPT | 29,570,228 | $0 | ($29,570,228) |
Relief Aid | $17,500,000 | $17,500,000 | $0 |
Extraordinary Needs | $9,709,119 | $9,709,119 | $0 |
Stabilization | $157,040,163 | $158,475,445 | $1,435,282 |
Total | $962,426,109 | $934,291,163 | ($28,134,946) |
The Department of Revenue Administration states the fiscal impact of this proposed legislation to repeal SWEPT reallocates the funding of the $363,000,000 into the ETF that was currently sourced from SWEPT to being funded from the general fund. This will result in an increase to state expenditures by $363,000,000 annually in the general fund. Under current law, the SWEPT, sufficient to generate revenue of $363,000,000, is imposed on all persons and property taxable pursuant to RSA 76:8 except for property subject to the taxation of railroads or the utility property tax. Each municipality collects the SWEPT on behalf of the state and retains the SWEPT locally to fund public education. Although the SWEPT is locally retained, the total amount of SWEPT collected by the municipalities is still recognized by the state as revenue to the ETF. The proposed legislation repeals the SWEPT and, in its place, requires an annual deposit of $363,000,000 from the general fund to the ETF. The reduction in SWEPT revenue is offset by the general fund transfer of the same amount, resulting in a net zero impact to the ETF. Further, there is an indeterminable decrease related to local expenditures as municipalities will no longer collect the SWEPT on behalf of the state.
The Department of Revenue Administration states that these changes will require modification to the Department's Municipal Tax Rate Setting Portal (MTRSP), which is utilized by municipalities to input data necessary for the Department to set property tax rates. The MTRSP changes would have an indeterminable one-time cost, that would likely be incurred in FY 2025.
The Department is unable to determine the fiscal impact of the proposed legislation to repeal the low and moderate income homeowners property tax relief program. However, a repeal of the tax relief will result in an indeterminable decrease in state expenditures. A static analysis using data from tax year 2021 shows that the state paid tax relief in the amount of $1.4 million.
AGENCIES CONTACTED:
Department of Education and Department of Revenue Administration
| Date | Body | Type |
|---|---|---|
| Feb. 16, 2023 | House | Hearing |
| March 13, 2023 | House | Exec Session |
| March 13, 2023 | House | Floor Vote |
March 22, 2023: Inexpedient to Legislate: MA VV 03/22/2023 HJ 10 P. 14
March 16, 2023: Committee Report: Inexpedient to Legislate 03/13/2023 (Vote 20-0; CC) HC 16 P. 8
March 1, 2023: Executive Session: 03/13/2023 09:30 am LOB 205-207
Feb. 8, 2023: Public Hearing: 02/16/2023 10:00 am LOB 205-207
Jan. 12, 2023: Introduced (in recess of) 01/05/2023 and referred to Education HJ 3 P. 24