2001 SESSION

01-2211

04/09

HOUSE BILL 1317-FN-A-LOCAL

COMMITTEE: Ways and Means

ANALYSIS

This bill:

I. Establishes a homestead exemption from the education property tax assessment for 20 percent of the first $200,000 of equalized assessed value.

II. Adjusts the formula for determining the average base cost per pupil of an adequate education by including state-mandated transportation costs, certain staff costs, and capital costs calculated at $150 per pupil per fiscal year.

III. Adjusts the cost of an adequate education by the percentage change in the Consumer Price Index for the northeast region.

IV. Adjusts the calculation and distribution of adequate education grants in the second year of each biennium beginning July 1, 2005.

V. Revises the weighted pupil formula for pupils eligible to receive a free or reduced price meal.

VI. Provides for supplemental assistance to needy school districts.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

01-2211

04/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand One

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

1 Findings:

I. It is to the benefit of this state to:

(a) Revise and improve the formula for funding an adequate education;

(b) Provide for supplemental assistance, above and beyond adequacy funding, to needy school districts to help them achieve excellence in education without excessive local school tax burdens through a supplemental assistance program; and

(c) Implement a circuit breaker on the total property tax burden on homesteads so that citizens of modest means do not pay an unreasonable and excessive portion of their income in total property taxes.

II. In addition to funding an adequate education, it is appropriate and in the public interest to expand the use of the education trust fund to include supplemental assistance for needy school districts in New Hampshire.

III. The general good, benefit, and welfare of the state is advanced by promoting home ownership and that an exemption of 20 percent of the first $200,000 of equalized value of primary residences (homesteads) from the statewide education property tax is reasonable.

IV. It is reasonable to exempt 20 percent of the first $200,000 of equalized value of homestead property from the statewide education property tax as that amount represents a reasonable price or value limit within which residents can obtain and maintain a reasonable amount of shelter and comfort from a home, and that homestead value, which includes the land on which the home is situated, in excess of 20 percent of the first $200,000 for each primary residence may reasonably be considered to be in excess of basic shelter and comfort requirements for a home and as such should be subjected to the statewide education property tax that applies to all other property beyond basic homestead requirements.

2 New Chapter; Homestead Exemption. Amend RSA by inserting after chapter 76 the following new chapter:

CHAPTER 76-A

EDUCATION PROPERTY TAX HOMESTEAD EXEMPTION

76-A:1 Definition. In this chapter, "homestead" or "homestead property" means the dwelling owned by a claimant or in the case of a multi-unit dwelling, the portion of the dwelling, which is used as the claimant's principal place of residence and the claimant's domicile for purposes of RSA 654:1. "Homestead" shall not include land and buildings taxed under RSA 79-A, 79-B, or 79-C or land and buildings or the portion of land and buildings rented or used for commercial or industrial purposes. In this paragraph the term "owned by a claimant" includes a vendee in possession under a land contract, one or more joint tenants or tenants in common, and a trustee of a grantor trust pursuant to sections 671-679 of the U.S. Internal Revenue Code.

76-A:2 Homestead Exemption.

I. Twenty percent of the first $200,000 of equalized assessed value of homesteads of qualifying taxpayers shall be exempt from the education property tax due under RSA 76:3.

II. A qualifying taxpayer is an individual who:

(a) Is subject to the education property tax as a resident individual under RSA 76:3, or has been granted a local property tax exemption under RSA 72:39-a.

(b) On April 1 owns a homestead or interest in a homestead subject to the state education property tax; and

(c) Files a claim certifying under the pains and penalties of perjury that such taxpayer qualifies under subparagraphs (a) and (b) with the selectmen or local assessing official on or before July 31 of the tax year for which the claim is made. Claims filed after July 31 each year shall not be considered timely for the current year, but shall be considered filed for the following tax year. The selectmen or local assessing official may waive the filing of a claim and list the homestead exemption for a taxpayer who has been granted a local property tax exemption under RSA 72:39-a and who is reasonably believed to currently qualify for that exemption.

III. Upon receipt of a claim for a homestead exemption under this section, the selectmen or assessing officials shall review the claim and shall grant or deny the claim in writing by September 1 following receipt of the claim. Failure of the selectmen or assessing officials to respond shall constitute acceptance of the claim. Accepted claims shall continue from year to year without necessity for refiling unless there is a change in ownership or use of the property, and except as provided for in subparagraph V(d). Accepted claims may at any time be revoked for any tax year or portion thereof following the occurrence of one or more of the following events:

(a) The claimant fails to file a return as required under this section within one year following the close of the tax year for which the exemption is claimed; or

(b) The claimant is no longer qualified for the local property tax exemption under RSA 72:39-a; or

(c) The claimant is no longer qualified under the definition of homestead in RSA 76-A:1 due to a change in ownership or use.

IV. Claims shall be made on forms prescribed by the commissioner and provided to each municipality.

V. The following shall apply to the determination of the amount of property value exempted relative to a homestead which is part of a single tax parcel upon which is located other dwelling units not owned or occupied by the taxpayer or significant non-residential use of the property:

(a) If the tax parcel includes property used for business or other nonresidential use, the exempt homestead amount shall include, in addition to the actual homestead, the lesser of 1,000 square feet of floor area of such non-residential use property or $25,000 of equalized value, except that family owned and operated farms which are not owned by a business entity or held in the name of a non-natural person shall be eligible for the full homestead exemption on all property not assessed under RSA 79-A, 79-B, or 79-C.

(b) If the tax parcel includes other dwellings or dwelling units, the value of the homestead exemption relative to the claimed homestead shall be determined by the assessing official as follows:

(1) Divide the value of the tax parcel by the number of dwelling units; or

(2) If the square footage of each dwelling unit is known, multiply the value of the tax parcel by a fraction consisting of the square footage of the claimed homestead divided by the total square footage of all dwelling units in the parcel; or

(c) In lieu of the methods of determining the amount of homestead exemption in subparagraph (a) or (b), a taxpayer may present competent evidence of a greater proportion of exempt value to the assessing officials. In such instance the taxpayer bears the burden of proving the claimed exemption by the preponderance of the evidence.

(d) The procedure, or exclusion of value resulting from the procedure in subparagraph (b) shall be waived to the extent it pertains to a single additional dwelling unit on the homestead property that is occupied by a direct lineal ascendant or descendant, sibling, aunt, uncle, niece or nephew, by blood, marriage, or law, of the qualifying taxpayer who does not pay rent, other than for utilities, as annually certified by the claimant.

(e) In no case shall the total homestead exemption exceed a total equalized assessed value of $200,000.

VI. If a taxpayer purchases a homestead after April 1 for which no homestead exemption was claimed by the previous owner, the taxpayer may apply to the department for a refund of state education property tax previously paid on the homestead, but for which no application was made. The amount of such refund shall be apportioned according to the number of days in the tax year the taxpayer owned and occupied the homestead. Claims by taxpayers purchasing homestead property shall be filed with the inventory of property transfer required to be filed with the municipality pursuant to RSA 74:18. The selectmen or assessing officials shall, within 30 days of filing of the referral claim, accept or deny it and, if accepted, notify the department. The department shall certify the amount of such refund to the state treasurer for payment from the education trust fund created by RSA 198:39.

3 School Money; Definition of Weighted Pupil. RSA 198:38, VII (d) is repealed and reenacted to read as follows:

(d)(1) Additional weights based on pupils eligible to receive a free or reduced-price meal shall be calculated by multiplying each municipality's elementary average daily membership in residence by the fraction of the district's pupils eligible to receive a free or reduced-price meal multiplied by:

(A) If less than 15 percent of the district's pupils are eligible to receive a free or reduced-price meal, zero.

(B) If at least 15 percent but less than 20 percent of the district's pupils are eligible to receive a free or reduced-price meal, 0.11.

(C) If at least 20 percent but less than 25 percent of the district's pupils are eligible to receive a free or reduced-price meal, 0.22.

(D) If 25 percent or more of the district's pupils are eligible to receive a free or reduced-price meal, 0.33.

(2) Nothing in this subparagraph shall result in a decrease in the adequate education grant amount calculated and distributed under RSA 198:40 and 198:41 to a municipality in the fiscal year ending June 30, 2002, or any fiscal year thereafter.

4 School Money; Definitions. Amend RSA 198:38, X to read as follows:

X. "Average daily membership in residence" and "resident pupils" mean the average daily membership in residence as defined in RSA 189:1-d, IV except that no preschool or kindergarten pupil shall count as more than 1/2 day attendance per calendar day.

5 School Money; Definitions. Amend RSA 198:38, XI to read as follows:

XI. "Transportation costs" means the costs of transporting pupils to and from school and other school activities reported by school districts on the [MS-25] DOE-25 form.

6 School Money; Determination of Per Pupil Adequate Education Grants. Amend RSA 198:40, I to read as follows:

I. For the biennium beginning July 1, [1999] 2003, and every biennium thereafter, the cost per pupil shall be established using the following formula:

(a) The department of education shall calculate the base expenditure per pupil for each school district that operates an elementary school by subtracting from the total expenditures at the elementary school level, tuition to other school districts or approved educational programs, capital costs and debt service on such costs, special education costs, food service costs, transportation costs, adult/continuing education and community services costs, professional and administrative staff costs, and federal revenues not otherwise deducted. For each school district, this amount shall be divided by the average daily membership in attendance at the elementary school level to attain the base expenditure per pupil.

(b) The adequate education grant amount shall be calculated as follows:

(1) The department of education shall identify those school districts where [40 to 60 percent of the elementary pupils enrolled in the grades tested on the day testing began, achieved a scaled score, in the statewide educational improvement and assessment program administered pursuant to RSA 193-C, in all areas tested, equivalent to performance at the basic level or above], for each of the 3 previous years, a minimum of 11 pupils were assessed in each subject area of the statewide assessment program administered to pupils in the third and sixth grades. For each grade and year, the department shall determine the average percentage of pupils performing at the basic level or above. The average shall be based on the number of pupils enrolled on the test date. A basic level or above percentage for each district shall be computed using the average of each grade and year. Districts where the 3-year average performance at the basic level or above is between 50 percent and 70 percent shall be selected.

(2) From the school districts [identified] selected in subparagraph I(b)(1) of this section, the department of education shall then identify those school districts that have the lowest base expenditure per pupil as calculated pursuant to subparagraph I(a) and which represent, as nearly as possible, [50] 25 percent of the average daily membership in attendance at the elementary level of the school districts identified in subparagraph I(b)(1) of this section.

(3) The department of education shall calculate an 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 be adjusted by the percentage change in the most recent available northeast region consumer price index as calculated by the Bureau of Labor Statistics, United States Department of Labor, and the result shall be divided by the total average daily membership in attendance at the elementary school level in all of the selected school districts.

(A) Seventy percent of statewide transportation cost as required under RSA 189:6.

(B) The cost of professional and administrative staff for each school district identified in subparagraph (b)(2) based on the average salary paid to a person in those districts holding a bachelor's degree with 7 years of experience.

(C) Capital costs and debt service for such costs for each school district calculated at $150 per pupil per fiscal year.

(4) The department shall calculate an alternative base cost per pupil by multiplying the base cost per pupil calculated in the immediately preceding biennium by an amount equal to one plus 2 times the average annual rate of inflation taken from the 4 calendar years immediately preceding the calendar year in which the calculation in this subparagraph is made. Inflation shall be measured by the northeast region consumer price index as published by the Bureau of Labor Statistics, United States Department of Labor.

(5) The base cost per pupil for the biennium shall be the lower of the base cost per pupil calculated in subparagraphs I(b)(3) and I(b)(4).

7 School Money; Determination of Per Pupil Adequate Education Grants. Amend RSA 198:40, III to read as follows:

III. For each fiscal year, the statewide cost of an adequate education for all pupils shall be calculated by multiplying the average base per pupil cost of an adequate education as determined in RSA 198:40, I by the statewide weighted average daily membership in residence of pupils [and then adding 70 percent of total statewide transportation costs] as determined in RSA 198:40, II less local transportation revenue.

8 New Section; School Money; Supplemental Assistance to Needy School Districts. Amend RSA 198 by inserting after section 40 the following new section:

198:40-a Supplemental Assistance to Needy School Districts. The state shall be responsible for providing supplemental assistance to needy school districts. The department shall determine the amount of supplemental assistance to be distributed pursuant to the following formula:

I. Divide each municipality's total equalized valuation by its average daily membership in residence. The result shall be the municipal valuation per pupil.

II. From the list of municipal valuations per pupil calculated in subparagraph (1) where the municipal valuation per pupil is greater than zero, determine the median. This result shall be the state median municipal valuation per pupil.

III. For each of the municipalities where the municipal valuation per pupil is less than the state median municipal valuation per pupil, subtract the municipal valuation per pupil from the state median municipal valuation per pupil and divide the result by the state median valuation per pupil. Multiply this result by the municipality's average daily membership in residence. This shall be the municipal valuation differential.

IV. Determine the sum of all municipal valuation differentials.

V. For each of the municipalities where the municipal valuation per pupil is less than the state median valuation per pupil, divide the municipal valuation differential by the sum of all municipal valuation differentials determined in paragraph IV and multiply the result by 75,000,000. The product shall be the amount of supplemental assistance distributed to each school district.

VI. Supplemental assistance distributed under this section shall be in addition to any adequate education grant amounts distributed to a school district.

9 New Paragraph; School Money; Distribution Schedule of Adequate Education Grant; Capital Costs. Amend RSA 198:44 by inserting after paragraph III the following new paragraph:

IV. The portion of the adequate education grant made to a school district representing capital costs and debt service for such costs shall be dedicated for the purpose of capital projects and debt service for such projects, and shall not be transferred or diverted to any other purpose.

10 School Money; Duties of the Department of Education. Amend RSA 198:44, I to read as follows:

I. The department of education shall, on or before September 30 of each year, collect from the school districts final data concerning all aspects of student attendance for the school year ending June 30 of that year necessary to establish the average daily membership, average daily membership in residence, and weighted average daily membership in residence, including the municipality of residence for each pupil for that year. The department of education shall submit a report by December 31 of each year to the speaker of the house of representatives and the senate president to be used for purposes of determination by the legislature of the appropriation to the education trust fund. A copy of such report shall, at the same time, be given to the department of revenue administration.

11 School Boards, Teachers; Definitions; Attendance Added. Amend RSA 189:1-d, I to read as follows:

I. "Attendance" means full-time participation in a program of instruction under the direction of teachers employed by the school district.

I-a. "Average daily attendance" means the aggregate half-day attendance divided by the number of half-days actually in session for a given school district in a given school year.

12 School Boards, Teachers; Definitions; Average Daily Membership in Residence. Amend RSA 189:1-d, IV to read as follows:

IV. "Average daily membership in residence" means the average daily membership of students [enrolled] in attendance in public schools within the district or students whose tuition is being paid by the district to another approved public or private school for a given school district in a given school year.

13 Procedure for Formation of Cooperative School Districts; Apportioning Operating Expenses; Exclusion of Home Education Pupils Deleted. Amend RSA 195:18, III(e) to read as follows:

(e) The method of apportioning the operating expenses of the cooperative school district among the several preexisting districts and the time and manner of payment of such shares. [Home education pupils who do not receive services from the cooperative school district, except an evaluation pursuant to RSA 193-A:6, II shall not be included in the average daily membership relative to apportionment formulas.]

14 Procedure for Formation of Cooperative School Districts; Apportioning Capital Expenses; Exclusion of Home Education Pupils Deleted. Amend RSA 195:18, III(g) to read as follows:

(g) The method of apportioning the capital expenses of the cooperative school district among the several preexisting districts, which need not be the same as the method for apportioning operating expenses, and the time and manner of payment of such shares. Capital expenses shall include the costs of acquiring land and buildings for school purposes, including property owned by a preexisting district; the construction, furnishing, and equipping of school buildings and facilities; and the payment of the principal and interest of any indebtedness which is incurred to pay for the same or which is assumed by the cooperative school district. [Home education pupils who do not receive services from the cooperative school district, except an evaluation pursuant to RSA 193-A:6, II, shall not be included in the average daily membership relative to apportionment formulas.]

15 Effective Date. This act shall take effect July 1, 2002.

LBAO

01-2211

Revised 3/15/02

HB 1317 FISCAL NOTE

FISCAL IMPACT:

METHODOLOGY: