HB 0518

AN ACT implementing changes to the amount of school building aid for school districts.

SPONSORS: Rep. Itse, Rock 80; Rep. Stritch, Rock 75; Rep. Introne, Rock 75; Rep. Packard, Rock 75; Rep. Dumaine, Rock 75

This bill establishes a fixed percentage of 45 percent for purposes of computing the amount of the annual school building aid grants to any entity eligible to receive such grant and provides that the state shall distribute grant moneys prior to the initiation of any bond or note at the local level.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

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

1 School Building Aid; Grant Percentages; Method of Distribution. Amend RSA 198:15-b, I and II to read as follows:

I. The amount of the annual grant to any school district duly organized, any city maintaining a school department within its corporate organization, any cooperative school district as defined in RSA 195:1, or any receiving district operating an area school as defined in RSA 195-A:1, shall be a sum equal to [30] 45 percent of the amount of the annual payment of principal on all outstanding borrowings of the school district, city, cooperative school district, joint maintenance agreement, or receiving district, heretofore or hereafter incurred, for the cost of construction or purchase of school buildings and school administrative unit facilities, to the extent approved by the state board of education, provided that any school district may receive an annual grant in the amount of [40] 45 percent for the construction of an educational administration building for school administrative unit, and provided that the amount of the annual grant in the case of a cooperative school district, joint maintenance agreement, or a receiving district operating an area school, shall be [40] 45 percent [~~plus 5 percent for each pre-existing district in excess of 2 and each sending district, in excess of one,~~] and provided further that no cooperative school district, joint maintenance agreement, or receiving district operating an area school, shall receive an annual grant in excess of [55] 45 percent.

II. For the purposes of computing grants hereunder, the amount of the annual payment of principal shall be increased by an amount equal to the amount of capital reserve or the amount raised by taxation which was actually expended for the project at any time[~~, divided by the number of years for which bonds or notes were issued to provide funds for such school building or school administrative unit facilities~~]; provided, however that funds transferred to capital reserve from trusts, bequests and gifts or money received from insurance policies shall not be eligible for computing grants hereunder. [~~When bonds and notes are issued for a period of less than 5 years, the amount of aid for which the district is eligible shall be paid in no fewer than 5 equal installments.~~]

2 School Building Aid; Method of Distribution. RSA 198:15-b, III is repealed and reenacted to read as follows:

III. The state shall distribute the full amount of the annual grant computed hereunder prior to the initiation of any bond or note at the local level.

The Department of Education indicates this bill will increase state general fund expenditures and local revenue by $76,496,228 in FY 2005, $76,006,500 in FY 2006, $75,963,399 in FY 2007 and will decrease local expenditures by $1,120,000 in FY 2006 and $2,240,000 in FY 2007. There will be no fiscal impact on state and county revenue or county expenditures.

The Department states this bill changes the percentage of a school district's loan principal paid by the state and requires the state to pay the percentage immediately rather than over the life of the loan. The Department made the following assumptions when estimating the fiscal impact of the bill:

· The changes in this bill will apply only to future projects.

· Construction costs will increase at a rate of 3% per year.

· This bill will encourage 10% more construction than the current system.

· The first year of impact will be FY 2005.

· The Department estimated the future principal eligible for reimbursement by taking an average of the prior three years and increasing that amount by 10%.

· Payments under the current system will increase at $1 million per year.

The Department compared the payments it will make under the existing program to the payments it expects to make under the provisions of this bill as shown below.

FY 2005 FY 2006 FY 2007

Payments under Bill $108,893,425 $109,403,697 $110,360,596

Current Obligations 32,397,197 33,397,197 34,397,197

Difference $ 76,496,228 $ 76,006,500 $ 75,963,399

The Department states local school district expenditures will decrease because the districts will not pay interest on the amount of principal paid up front by the state. The Department estimates the annual reduction to be a cumulative $1,120,000.