SB462 — Version 100

2000 SESSION

00-2814

04/09

SENATE BILL 462-FN-A-LOCAL

COMMITTEE: Education

ANALYSIS

This bill:

I. Establishes a two-tiered public school financing system comprised of (i) the existing state aid for educational adequacy (renamed "baseline assistance for educational adequacy") and (ii) state aid/alternative state aid to guarantee educational adequacy which are based on the previous foundation aid and alternative aid formulas for determining state aid to education.

II. Modifies the formula for determining baseline assistance for educational adequacy.

III. Reduces the education property tax rate from $6.60 to $6.10 on each $1,000 of the value of taxable property.

IV. Makes an appropriation of $200,000,000 from the education trust fund for the fiscal year ending June 30, 2001 to the department of education for the purpose of funding the distributions required by RSA 198:58 and RSA 198:65, as inserted by this bill.

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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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

00-2814

04/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Findings, Purpose, and Legislative Intent.

I. Findings on the Basis for a Successful Public Education System. The legislature finds that the overall quality of a public education system - curriculum, facilities, teachers, and administration - is enhanced if it is created and financed in the first instance through democratic processes carried out through local governments. This finding is based on the following conclusions:

(a) Local administration and local financing for public education will generate a successful education for children because local decision-making vests parents, teachers, administration, and the local community in the operation and outcome of the schools in a direct and personal way.

(b) A principally state-financed public education system will undermine the generation of a successful education for children because (i) resources devoted to public education will be reduced over time due to the fact that the state budget and appropriation process is more complex and competitive than the local government budget process, and (ii) state financing will reduce parental involvement in the development of local public school programs.

(c) A public education system should be based on a mix of state resources and local resources in order to enhance the opportunity for generation of a successful education for children, and that mix should be generally consistent with historical and current data concerning public education in New England. New England states are generally financed with local revenues first and with state revenues second, with local revenues constituting between 50 and 70 percent of the total public education budget.

II. Findings on the Status of the Current Public Education System. The legislature makes the following findings concerning the status of the current public education system in this state.

(a) The legislature finds that the public education system in existence before the enactment of chapter 17 and chapter 65 of 1999 NH Laws, and the public education system adopted pursuant to such laws, presented and continues to present, unreasonable risks that children in poorer communities are at risk of receiving a less-than-constitutionally-adequate education. This finding is based on the following conclusions:

(1) The mix of state resources and local resources generally established in the public education system in New Hampshire in 1998, whereby over 90 percent of the total annual cost of public education was financed by local property tax resources, generated too great a risk that the state's obligation to guarantee funding to ensure that all children will receive an adequate education would not be fulfilled.

(2) The mix of state resources and local resources established in the public education system in New Hampshire under chapter 17 and chapter 65 of 1999 NH Laws, whereby over 65 percent of the total annual cost of public education is financed by state resources that are distributed on a weighted per pupil basis, regardless of need, generates too great a risk that the state's obligation to guarantee funding to ensure that all children will receive an adequate education would not be fulfilled.

(3) The legislature finds that the public education system established under chapter 17 and chapter 65 of 1999 NH Laws, whereby the state education aid is distributed among communities on a weighted per pupil basis regardless of any determination of need for such state aid, and local communities are then encouraged to utilize their local property tax resources to supplement such state aid, risks exacerbating educational inequities that exist among "property rich" and "property poor" districts.

(b) The legislature finds that the operation and financing of the public education system established by chapter 17 and chapter 65 of 1999 NH Laws threatens to undermine the ability of the state to finance its non-public education obligations. This finding is based on the following conclusions:

(1) The state financing obligation established by the remedial legislation is $827 million for the fiscal year ending June 30, 2000. This amount is computed by reference to the number of pupils in the entire state, regardless of whether the students attend a school district that is at risk of providing a less than adequate education. This obligation, without amendment, could grow at an annual rate of at least 9 percent.

(2) The state financing obligation established by chapter 17 and chapter 65 of 1999 NH Laws, and its estimated growth, will soon double the state's appropriations from the general fund (approximately $1 billion for the fiscal year ending June 30, 2000).

(3) Over the past 10 years, the state's appropriations from the general fund have increased at an average annual rate of approximately 3 percent. The legislature finds that the state's ability to continue to meet these non-public education general fund obligations will be materially jeopardized by the growth of the state financing obligation established by chapter 17 and chapter 65 of 1999 NH Laws.

(4) Any attempt to continue to meet the state financing obligation established by chapter 17 and chapter 65 of 1999 NH Laws, and its estimated growth, would require the enactment and expansion of taxes of various forms, including the state education property tax, which will together undermine and jeopardize the economy of the state.

III. Findings on the Public Education Financing System Established by This Act.

(a) In order to protect and secure the future of this state's public education system consistent with the findings stated above, the legislature hereby establishes an integrated public education financing system which:

(1) Encourages the generation of a public education system that is constructed principally upon the foundation and investment of local parental, teacher and school administration resources, which is consistent with the legislature's finding that the best format for ensuring that no child receives a less than adequate education is a locally-created, locally-financed and locally-maintained system;

(2) Significantly increases the aggregate amount of state financial assistance for public education in a manner that causes the state contribution to the total cost of public education to be over 60 percent, which is well above the average within New England, which is consistent with the legislature's findings that the prior system relied too heavily on local property tax resources; and

(3) Provides the state public education assistance to school districts through 2 separate methods, one which distributes "baseline assistance" to each community in accordance with a weighted per pupil formula, and the other which distributes "adequacy guarantee assistance" among communities based on their relative abilities to utilize local property tax resources to build a successful public education system.

(b) The legislature finds that the combination and integration of financing methods established in this act, comprised of local property tax resources, state "baseline assistance" and "adequacy guarantee assistance," establishes a public school system that will satisfy the constitutional obligation of the state (i) to provide an adequate education throughout the state, and (ii) to guarantee funding to ensure that no child shall receive less than a constitutionally adequate education.

(c) The legislature finds that the act's establishment of a 2-tiered state public education financial assistance program, which distributes "baseline assistance" to every community on a weighted per pupil basis, and which distributes "adequacy guarantee assistance" on a basis which takes into account the relative abilities of communities to utilize local resources to create and finance public education, is much more precisely targeted than a system that provides state aid based on a "cost of adequacy per pupil" methodology to satisfy the state's obligation to ensure that no child receives a less than constitutionally adequate education.

(d) Given that each component of the financing system established by this act (local property tax resources plus state "baseline assistance" and state "adequacy guarantee assistance") serves a fundamental and special purpose articulated by the legislature, the legislature finds that no one of these financing mechanisms would be sufficient, by itself, to pay for the provision of an adequate education anywhere in the state, but all together accomplish this constitutional mandate for every child throughout the state, and that the provision of "adequacy guarantee assistance" to needy communities will satisfy the state's obligation to guarantee funding to ensure that no child receives a less than constitutionally adequate education.

(e) The legislature finds that each and every resource used to fund the "baseline assistance" and the "adequacy guarantee assistance" distribution mechanisms is a state-imposed resource that has been raised by taxes that are imposed on a proportional and reasonable basis throughout the state or through other state general fund resources.

(f) The legislature finds that the integration of such state financial assistance with the local democratic processes of utilizing the local property tax to fund public education throughout the state in the manner required by this act achieves and fulfills the state's obligation to guarantee funding to ensure that no child receives a less than constitutionally adequate education.

2 State Aid for Educational Adequacy; Subdivision Heading Amended. Amend the subdivision heading immediately preceding RSA 198:38 to read as follows:

State [Aid] Baseline Assistance for

Educational Adequacy; Education Trust Fund

3 Education Trust Fund; References Amended. 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] state baseline assistance for educational adequacy under RSA 198:42 and state aid to guarantee educational adequacy under RSA 198:58 and RSA 198:65 to municipalities' school districts [pursuant to RSA 198:42], and to provide education property tax hardship relief under RSA 198:55. The state treasurer shall deposit into this fund immediately upon receipt:

4 Determination of Per Pupil Adequate Education Costs and Adequate Education Grants; Reduction Factor for Grants Deleted. Amend RSA 198:40, I (b) (3) to read as follows:

(3) The department of education shall calculate the average base cost per pupil of an adequate education at the elementary school level by multiplying the base expenditure per pupil of each school district identified in subparagraph I(b)(2) of this section by the average daily membership in attendance at each of the selected school districts, and add the results across all districts selected. This sum shall then be divided by the total average daily membership in attendance at the elementary school level in all of the selected school districts [and the result shall be multiplied by .9025].

5 Determination of Adequate Education Grants; Multiplication Factor Added. Amend RSA 198:41, I (c) to read as follows:

(c) Subtract from the sum of subparagraph (b) the amount of the education property tax warrant to be issued by the commissioner of revenue administration for such municipality reported pursuant to RSA 76:9 for the next tax year[.];

(d) Multiply the result obtained in subparagraph (c) by .3009.

6 New Subdivisions; State Aid to Guarantee Educational Adequacy; State Alternative Aid to Guarantee Educational Adequacy. Amend RSA 198 by inserting after section 55 the following new subdivisions:

State Aid to Guarantee Educational Adequacy

198:56 Statement of Policy. It is hereby declared to be the policy of the state of New Hampshire to share in the costs of public elementary and high school education of the local school districts of the state to the end that:

(a) The more needy school districts may be assisted in providing an adequate education program; and

(b) Education throughout New Hampshire may be improved.

198:57 Definitions. As used in this subdivision:

I. "State average equalized valuation per weighted pupil" means the equalized valuation within the state divided by the current number of weighted pupils within the state, as calculated by the department of education, using the weighted pupil figures and the equalized valuation as published by the department of revenue administration for the second preceding fiscal year.

II. "Local equalized valuation per weighted pupil" means the equalized valuation within the school district divided by the current number of weighted pupils within the school district, as calculated by the department of education, using the weighted pupil figures and the equalized valuation as published by the department of revenue administration for the second preceding fiscal year.

III. "State per capita income" means the state per capita income as calculated by the United States Bureau of the Census, from the most recent available data.

IV. "Local per capita income" means the per capita income of the municipalities whose boundaries correspond with those of the school district, as calculated by the United States Bureau of the Census, from the most recent available data.

V. "State average revenue per weighted pupil" means the total assessment for schools within the state divided by the total number of weighted pupils within the state, as calculated by the department of education.

VI. "Local revenue per weighted pupil" means the local assessment for schools divided by the local number of weighted pupils, as calculated by the department of education.

VII. "Local equalized school tax rate" means the local equalized school tax rate, as calculated by the department of education.

VIII. "State average equalized school tax rate" means the state average equalized school tax rate, as calculated by the department of education.

IX. "Weighted pupil" means a resident pupil who has been assigned to one of the following classifications, based on the type of education the pupil received. The weights assigned to a high school pupil and to a high school pupil enrolled in a state approved vocational program reflect the differences in educational costs between these classifications when compared to the average current operating expenditure to educate a resident elementary pupil. The weights assigned to an educationally disabled child reflect the differences in education costs among the classifications of educationally disabled children when compared to the average current operating expenditure to educate a resident pupil in grades kindergarten through 12 who is not educationally disabled and not a high school pupil enrolled in a state approved vocational program. The following classifications of pupils shall carry the following weights:

(a) An elementary pupil, not educationally disabled as defined in RSA 186-C:2, I, which shall include kindergarten pupils, 1.0.

(b) A high school pupil, not educationally disabled as defined in RSA 186-C:2, I and not enrolled in a state-approved vocational program, 1.21.

(c) A high school pupil enrolled in a state-approved vocational program, 2.01.

(d) An educationally disabled child as defined in RSA 186-C:2, I, in one of the following types of programs:

(1) In-district, placed within a self-contained special education classroom, 2.57.

(2) In-district, without placement in a self-contained special education classroom, 2.12.

(3) An out-of-district day placement, 7.08.

(4) A residential placement, 8.72.

(5) A pre-school day placement, 3.37.

X. "Local education program cost" means the local number of weighted pupils multiplied by the state average cost of elementary pupils as determined by the department of education based on the school year in which the weighted factors are computed and shall not include the costs of special education.

198:58 State Aid to Guarantee Educational Adequacy; Calculation; Distribution.

I. The total number of weighted pupils for a school district shall be calculated by first multiplying the number of resident pupils in each of the classifications listed in RSA 198:57, IX by the weight factor for that classification in order to determine the number of weighted pupils in each classification. The numbers of weighted pupils in each of the classifications are then added together to determine the total number of weighted pupils for the school district.

II. An equalization factor shall be determined for each school district by the following formula:

State average equalized State per

valuation per weighted pupil X capita income X the average of

Local equalized Local per

valuation per weighted pupil capita income

Local equalized school tax rate State average revenue

Local per capita income per weighted pupil

__________________________________ + _________________________

State average equalized school tax rate Local revenue per

State per capita income weighted pupil

equals the equalization factor.

III. Beginning with distribution for fiscal year 1992, in no case shall a district's equalization factor, as determined in paragraph II, be greater than 9.

IV. For the purposes of calculating aid to cooperative school districts, each pre-existing district shall have its equalization factor, as determined in paragraph II, calculated separately. In calculating that equalization factor, the weighted pupils in vocational education in cooperative school districts and the weighted pupils in special education in cooperative school districts shall be apportioned to each pre-existing district in direct proportion to the pre-existing district's 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.

V. A district percentage shall be determined for each school district by the following formula:

District Percentage = Equalization factor

as determined by paragraph II X .08

VI. State aid to guarantee educational adequacy for each school district shall be calculated as follows:

State Aid to Guarantee

Educational Adequacy = District Percentage X Local education program

program cost per fiscal year

VII. For the purposes of distributing state aid to guarantee educational adequacy, a cooperative school district shall be entitled to the total amount of aid to which the pupils attending the cooperative district would have entitled the pre-existing districts, had they remained in the pre-existing districts. Each such pre-existing district shall have its state aid to guarantee educational adequacy 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.

198:59 Adjustment Constant. If the total of the funds computed initially to be distributed in accordance with RSA 198:58 does not match the total of the funds appropriated for distribution under RSA 198:58, then the department of education shall determine the constant to be subtracted from each district's percentage as calculated in RSA 198:58, V; however, in no case shall a district percentage be less than zero. This constant shall assure that the funds computed for distribution equal the funds appropriated for distribution.

198:60 Administration.

I. State aid to guarantee educational adequacy shall be paid to the school district legally responsible for the education of the pupils who attend approved public schools within the district or in other districts, as the case may be. Payment of state aid to guarantee educational adequacy shall be made during the state fiscal year for which such aid is due.

II. State aid to guarantee educational adequacy shall be distributed in 3 approximately equal payments per year. The sweepstakes portion of state aid to guarantee educational adequacy payments shall each be based on sweepstakes revenues earned 2 payment periods previous to the period of distribution. Third period distribution of sweepstakes revenues shall therefore represent revenues earned in the first period and calculated in the second period. The first payment of state aid to guarantee educational adequacy, to be made during the month of September, shall be approximately 1/3 of the total annual payment, plus or minus any adjustment required from a prior distribution based on sweepstakes revenues exceeding amounts estimated during the prior period of calculation. The other 2 payments, to be made during the months of January and April, shall make adjustment for any overpayment or underpayment made in the September payment. Such adjustments shall be calculated based upon any sweepstakes revenues earned during the period of calculation in excess of estimated revenues. In no event shall such distribution of sweepstakes revenues be made which amounts to less than the amount appropriated for the purpose of funding state aid to guarantee educational adequacy in the operating budget for the fiscal year.

198:61 Time of Computation of State Aid to Guarantee Educational Adequacy. Before April 1 of each year all school districts shall submit to the commissioner of education the average daily resident membership of that district for the school year which ended in the preceding July. The resident membership information shall categorize each of the pupils into one of the classifications in RSA 198:57, IX. Before October 1 the department of education shall estimate the amount of state aid to guarantee educational adequacy which each school district shall receive for the fiscal year which begins the following July 1. The department of education shall notify the school districts of the estimated amount of state aid to guarantee educational adequacy to which they are entitled for the following fiscal year by November 1.

198:62 Authority of Department of Education. The department of education shall have the following duties:

I. To calculate the state average equalized valuation per weighted pupil.

II. To calculate the local equalized valuation per weighted pupil.

III. To calculate the state average revenue per weighted pupil.

IV. To calculate the local revenue per weighted pupil.

V. To calculate the local equalized school tax rate, based on the assessment as determined by the department of revenue administration.

VI. To calculate the state average equalized school tax rate, based on the assessment as determined by the department of revenue administration.

VII. To determine the local education program cost.

VIII. To calculate the equalization factor as determined by RSA 198:58, II.

IX. To calculate the state aid to guarantee educational adequacy for each district as determined by RSA 198:58, VI.

X. To determine the constant to meet the appropriations as directed in RSA 198:59.

State Alternative Aid to Guarantee Educational Adequacy

198:63 Statement of Policy. It is hereby declared to be the policy of the state of New Hampshire to share in the costs of public elementary and high school education in order to assist the more needy school districts in providing an adequate educational program.

198:64 Definitions. In this subdivision:

I. "Local equalized valuation per weighted pupil" means the total equalized valuation within the school district divided by the current number of weighted pupils within the school district, as calculated by the department of education.

II. "Local equalized school tax rate" means the local equalized school tax rate, as calculated by the department of education.

III. "Local harmonic estimate of fiscal capacity" means the quotient of the number 2 divided by the sum of the multiplicative inverse of the local tax estimate of fiscal capacity added to the multiplicative inverse of the local income estimate of fiscal capacity, as calculated by the department of education.

IV. "Local income effort" means the local revenue per weighted pupil divided by the local per capita income, as calculated by the department of education.

V. "Local income estimate of fiscal capacity" means the local per capita income multiplied by the state average income effort, as calculated by the department of education.

VI. "Local per capita income" means the per capita income of the municipality whose boundaries correspond with those of the school district, as that income is determined by the department of revenue administration from the most recently available data.

VII. "Local revenue per weighted pupil" means the product of the local equalized school tax rate multiplied by the local equalized valuation per weighted pupil, as calculated by the department of education.

VIII. "Local summary estimate of fiscal capacity" means, for a school district, the local harmonic estimate of fiscal capacity, as calculated by the department of education.

IX. "Local tax estimate of fiscal capacity" means the local equalized valuation per weighted pupil multiplied by the state average equalized school tax rate, as calculated by the department of education.

X. "State average equalized school tax rate" means the sum of the products of the local equalized school tax rate multiplied by the local number of weighted pupils, which sum is then divided by the total number of weighted pupils within the state, as calculated by the department of education.

XI. "State average income effort" means the sum of the products of the local income effort multiplied by the local number of weighted pupils, which sum is then divided by the total number of weighted pupils within the state, as calculated by the department of education.

XII. "Weighted pupil" means a resident pupil who has been assigned to one of the following classifications, based on the type of education the pupil received. The weights assigned to a high school pupil and to a high school pupil enrolled in a state approved vocational program reflect the differences in educational costs between these classifications when compared to the average current operating expenditure to educate a resident elementary pupil. The weights assigned to an educationally disabled child reflect the differences in education costs among the classifications of educationally disabled children when compared to the average current operating expenditure to educate a resident pupil in grades kindergarten through 12 who is not educationally disabled and not a high school pupil enrolled in a state approved vocational program. The following classifications of pupils shall carry the following weights:

(a) An elementary pupil, not educationally disabled as defined in RSA 186-C:2, I, which shall include kindergarten pupils, 1.0.

(b) A high school pupil, not educationally disabled as defined in RSA 186-C:2, I and not enrolled in a state-approved vocational program, 1.21.

(c) A high school pupil enrolled in a state-approved vocational program, 2.01.

(d) An educationally disabled child as defined in RSA 186-C:2, I, in one of the following types of programs:

(1) In-district, placed within a self-contained special education classroom, 2.57.

(2) In-district, without placement in a self-contained special education classroom, 2.12.

(3) An out-of-district day placement, 7.08.

(4) A residential placement, 8.72.

(5) A pre-school day placement, 3.37.

198:65 State Alternative Aid to Guarantee Educational Adequacy; Calculation; Distribution.

I. The total number of weighted pupils for a school district shall be calculated by first multiplying the number of resident pupils in each of the classifications listed in RSA 198:64, XII by the weight factor for that classification in order to determine the number of weighted pupils in each classification. The numbers of weighted pupils in each of the classifications are then added together to determine the total number of weighted pupils for the school district.

II. For the purpose of calculating aid to cooperative school districts, each pre-existing school district shall have its local summary estimate of the fiscal capacity calculated separately. In calculating the local summary estimate of fiscal capacity, the weighted pupils in vocational education in cooperative school districts and the weighted pupils in special education in cooperative school districts, shall be apportioned to each pre-existing district in direct proportion to the pre-existing district's share of the cooperative school district budget. However, cooperative school districts formed by 2 or more preexisting districts whose boundaries approximate those of a single township in which they are located shall be treated as a single school district.

III. Each school district whose local summary estimate of fiscal capacity is less than the foundation amount shall receive state alternative aid to guarantee educational adequacy equal to the product of the district's total number of weighted pupils multiplied by the difference between the foundation amount and the district's summary estimate of fiscal capacity.

IV. The state alternative aid to guarantee educational adequacy shall be $5,373.87 per weighted pupil.

V. For the purposes of distributing state alternative aid to guarantee educational adequacy to a district, a cooperative school district shall be entitled to the total amount of aid to which the pupils attending the cooperative district would have entitled the preexisting districts, had they remained in the preexisting districts. Each such preexisting district shall have its state alternative aid to guarantee educational adequacy credited against its share of the cooperative school district budget. However, cooperative school districts formed by 2 or more preexisting districts whose boundaries approximate those of a single township in which they are located shall be treated as a single school district.

198:66 Time of Computation of State Alternative Aid to Guarantee Educational Adequacy. Before April 1 of each year all school districts shall submit to the commissioner of education the average daily resident membership of that district for the school year which ended in the preceding July. The resident membership information shall categorize each of the pupils into one of the classifications in RSA 198:64, XII. Before October 1 the department of education shall estimate the amount of state aid to guarantee educational adequacy which each school district shall receive for the fiscal year which begins the following July 1. The department of education shall notify the school districts of the estimated amount of state aid to guarantee educational adequacy to which they are entitled for the following fiscal year by November 1.

7 Education Property Tax; Uniform Rate Adjusted. Amend RSA 76:3 to read as follows:

76:3 Education Property Tax. An annual education property tax at the uniform rate of [$6.60] $6.10 on each $1000 of the value of taxable property is hereby imposed on all persons and property taxable pursuant to RSA 72 and RSA 73, except property subject to tax under RSA 82 and RSA 83-F.

8 Appropriation. The sum of $200,000,000 is hereby appropriated, for the fiscal year ending June 30, 2001, from the education trust fund established under RSA 198:39, to the department of education for the purpose of funding the distributions required by RSA 198:58 and RSA 198:65 as inserted by section 6 of this act. The governor is authorized to draw a warrant for said sum out of any money in the treasury not otherwise appropriated.

9 Effective Date. This act shall take effect July 1, 2000.

LBAO

00-2814

3/15/00

SB 462-FN-A-LOCAL - FISCAL NOTE

FISCAL IMPACT: