HB 0717

I. Provides for targeted aid grants to municipalities based on a revised cost calculation formula.

II. Provides for transition education grants to municipalities for fiscal years 2004-2008.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.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 Findings and Purpose. The general court finds that the present system of providing adequate education grants to support public elementary and secondary education does not sufficiently serve the objective of equalizing educational opportunity in the state, does not efficiently direct state resources to school districts based on fiscal need, and requires levy and collection of a statewide property tax that is divisive and unnecessary, if state resources are more efficiently directed. The purpose of this act is to direct state school aid more efficiently and effectively based on the relative fiscal need of local communities, and so better serve the objective of equalizing educational opportunity for pupils in the state's public elementary and secondary schools.

2 New Sections; Targeted Aid Grants; Transition Education Grants. Amend RSA 198 by inserting after section 41 the following new sections:

I. For the biennium beginning July 1, 2003 and every biennium thereafter, 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 amount of the targeted aid grant for a municipality as follows:

(a) A municipality's targeted aid grant shall be the difference between its education need less its fiscal capacity, as determined in accordance with this paragraph.

(b) Education need shall mean the sum of a municipality's education operating need plus education transportation need.

(c) Education operating need shall be $4,870 multiplied by the municipality's total weighted pupils. This product shall be multiplied by the county relative cost of living factor applicable to the municipality. As used in this paragraph:

(1) A municipality's total weighted pupils shall mean the number of its elementary school pupils, including kindergarten pupils, plus 1.1 times the number of its high school pupils, plus the number of its special education pupils, plus the number of its pupils eligible to receive free or reduced price lunch, plus the number of its pupils with limited proficiency in the English language, plus the number of its scale pupils. For the purposes of this calculation, "eligible to receive free or reduced price lunch" shall mean the percentage of a municipality's eligible elementary school pupils multiplied by the total of its elementary and high school pupils.

(2) The number of a municipality's scale pupils shall be determined by multiplying the number of its elementary pupils, including kindergarten pupils, by a scale factor as follows:

(A) 0.3, if the municipality's 2000 United States census population is less than 1,000 persons.

(B) 0.15, if the municipality's 2000 United States census population is at least 1,000 but less than 2,000 persons.

(D) zero, if the municipality's 2,000 United States census population is 3,000 or more persons.

(d) Education transportation need shall mean the sum of the municipality's number of pupils plus the number of its scale pupils, multiplied by $322. This product shall be multiplied by the county relative cost of living factor applicable to the municipality.

(e) Fiscal capacity shall mean the sum of the municipality's equalized property valuation as determined by the department of revenue administration as of April 1, 2001, excluding property subject to taxation under RSA 83-F, plus the municipality's total household income, divided by 2. The result shall then be multiplied by 0.01923. Total household income shall mean the municipality's median household income multiplied by the number of its households, as determined by the 2000 United States census.

(f) The calculation required under this paragraph shall be performed and distributed to school districts no later than November 1 of the year before the beginning of the biennium for which it is made.

II.(a) For the biennium beginning July 1, 2005, and every biennium thereafter, the department of education shall perform the calculations required under this section based on the most recent available data representing the number of elementary and high school pupils, special education pupils, pupils eligible for free or reduced price lunch, pupils with limited proficiency in the English language in each municipality, and the equalized property valuation, excluding property subject to taxation under RSA 83-F.

(b) For the biennium beginning July 1, 2005, and every biennium thereafter the amount of $4870 in the calculation of operating need and the amount of $322 in the calculation of transportation need shall each be adjusted according to the change in the consumer price index as calculated by the United States Department of Labor. Furthermore, the department shall recalculate a municipality's population, median household income, and number of households by reference to the most recently available data from the United States decennial census.

III. For municipalities where all school districts therein provide education to all of their pupils by paying tuition to other institutions, the amount of the targeted aid grant for each municipality shall be the lesser of the following:

(a) The amount calculated in accordance with paragraph I or paragraph II of this section, as applicable; or

(b) The total amount paid for education expense as determined by the department of education.

I. Notwithstanding the provisions of RSA 198:41-a, for the fiscal years 2004 through 2008, each municipality shall receive a transition education grant determined as follows:

(a) For fiscal year 2004, if a municipality's targeted aid grant calculated under RSA 198:41-a is greater than the adequate education grant it would be entitled to receive under the version RSA 198:41 in effect one day prior to the effective date of this section, the municipality shall be entitled to receive an amount equal to the amount of its adequate education grant. However, if a municipality's targeted aid grant is less than its adequate education grant, the municipality shall be entitled to receive 84.4 percent of the adequate education grant.

(b) For fiscal year 2005, if a municipality's targeted aid grant calculated for the fiscal year ending June 30, 2004 under RSA 198:41-a is greater than the adequate education grant it would have been entitled to receive for the same fiscal year under the version of RSA 198:41 in effect one day prior to the effective date of this section, the municipality shall be entitled to receive an amount equal to such adequate education grant, plus 15 percent of the difference, if any, between the amount of the fiscal year 2004 targeted aid grant and the fiscal year 2004 adequate education grant. However, if the municipality's fiscal year 2004 targeted aid grant is less than the fiscal year 2004 adequate education grant, the municipality shall be entitled to receive 84.4 percent of such adequate education grant.

(c) For fiscal year 2006, a municipality shall be entitled to receive a transition education grant in an amount equal to the amount it was entitled to receive for fiscal year 2005 under this paragraph, plus 25 percent of the difference, if any, between the amount of the targeted aid grant it would be entitled to receive in fiscal year 2006 under RSA 198:41-a and the amount it was entitled to receive in fiscal year 2005.

(d) For fiscal year 2007, a municipality shall be entitled to receive a transition education grant in an amount equal to the amount it was entitled to receive for fiscal year 2005 under this paragraph, plus 50 percent of the difference, if any, between the amount of the targeted aid grant it would be entitled to receive in fiscal year 2006 under RSA 198:41-a and the amount it was entitled to receive in fiscal year 2005.

(e) For fiscal year 2008, a municipality shall be entitled to receive a transition education grant in an amount equal to the amount it was entitled to receive for fiscal year 2007 under this paragraph, plus 50 percent of the difference, if any, between the amount of the targeted aid grant it would be entitled to receive in fiscal year 2008 under RSA 198:41-a and the amount it was entitled to receive in fiscal year 2005.

II. For fiscal years following 2008, a municipality shall be entitled to receive an amount determined in accordance with RSA 198:41-a.

3 Distribution Schedule and Appropriation. RSA 198:42 is repealed and reenacted to read as follows:

198:42 Distribution Schedule of Adequate Education Transition Education and Targeted Aid Grants; Appropriation.

I. The transition education grant determined in RSA 198:41-b, and beginning in fiscal year 2009, the targeted aid grant determined in RSA 198:41-a, 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 August 1, 20 percent on September 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-a or RSA 198:41-b 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, 1999, and every fiscal year thereafter the amount necessary to fund the grants under RSA 198:41 is hereby appropriated from the education trust fund created under RSA 198:39 to the department of education. 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.

III. The department of education shall certify the amount of each grant to the state treasurer and direct the payment thereof to the school district. When a payment of a grant is made to a school district, the municipality on whose behalf the payment is made, shall receive notification from the state treasurer of the amount of the payment made to its school district or districts.

4 Maintenance of Local Control. RSA 198:48 is repealed and reenacted to read as follows:

198:48 Maintenance of Local Control. Distributions under RSA 198:42 depend only on the provisions of RSA 198:41-a and RSA 198:41-b, 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. Transition education grants and targeted aid grants shall not be considered unanticipated funds under RSA 198:20-b.

I RSA 21-I:18, I(1), relative to the purchase of services by the department of administrative services for the administration of low and moderate income homeowners property tax relief.

IV. RSA 198:38, I, V-X, and XII, relative to certain definitions regarding state aid for educational adequacy.

VI. RSA 198:40-41, relative to determination of per pupil adequate education cost and adequate education grant.

VII. RSA 198:44, relative to duties of the department of education and the board of education.

VIII. RSA 198:46-47, relative to excess education property tax payment and forms.

IX. RSA 198:49, relative to the adequate education and education financing commission.

X. RSA 198:56-61, relative to low and moderate income homeowners property tax relief.

The Department of Revenue Administration indicates the bill, as amended by the House (House Amendment #2003-1115h), will reduce state education trust fund revenue by $638.8 million and $664.4 million and decrease education trust fund expenditures by $8 million and $8 million in FY 2006 and FY 2007, respectively. The Department of Education indicates this bill will decrease state education trust fund expenditures and local revenue, $683 million in FY 2006 and by $667.1 million in FY 2007. There will be no fiscal impact on county revenue or county and local expenditures.

The Department of Revenue Administration estimates the repeal of the statewide property tax will reduce education trust fund revenue by $638,825,588 in FY 2006 and $664,378,611 in FY 2007. The Department estimates the repeal of the Low and Moderate Income Homeowners Property Tax Relief Program will reduce education trust fund expenditures by $8,000,000 in FY 2006 and $8,000,000 in FY 2007.

In order to estimate the effect of this bill, which introduces a different calculation for adequacy, the Department of Education made the following assumptions:

· ADM-R numbers are used where pupils are referred to in this bill.

· All districts that tuition all students will not spend less than the calculated grant amount.

· Students with limited English proficiency are collected by district of attendance. The counts in multi-town districts were added to the pupil count of the largest town in the district. The same counts have been used for both fiscal years.

· The elementary ADM-R count was estimated to decline while the high school ADM-R count was estimated to increase.

· The calendar year Northeast consumer price index for all urban workers has been used to estimate increases in the consumer price index (CPI).

· Equalized valuation was estimated to grow 8%, 6% and 4% for the grant years FY 2005, FY 2006 and FY 2007, respectively.

The effect on the cost of an adequate education is summarized below:

Cost of Adequacy FY 2006 FY 2007

Current Law $1,125,318,724 $1,127,723,434

HB 717 442,297,326 460,601,107

Difference $ 683,021,398 $ 667,122,327