SB 0356 - Fiscal Note

Fiscal Note - SB 0356 - Increases property tax withholdings and reduces state aid deduction for school tax

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 1448-02

BILL NO. SB 356

SUBJECT: Taxation and Revenue-Property: Education-Elementary and Secondary

TYPE: Original

DATE: February 8, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	($24,450,000)	($24,550,000)
Other	$0	(Unknown)	(Unknown)
Total Estimated Net Effect on All State Funds	$0	($24,450,000)	($24,550,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$21,250,000	$21,250,000

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 6 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the State Tax Commission estimate increased costs to the state for $7 per parcel reimbursement and 60% assessment cost reimbursement would be about $3,200,000 per year. They estimate increases of about $8,000,000 per year to county assessment funds.

Officials of the Department of Elementary and Secondary Education estimate increased costs due to changes in section 163.031 would be approximately $21,250,000 per year:

Because the county would be keeping a portion of the school district's local tax revenue, the district's state aid would be increased. Districts whose current Basic Formula and Line 14 amount per eligible pupil is greater than the 1992-93 amount per eligible pupil would have the Line 2 deduction reduced by .015. This reduction in Line 2 would increase the need for state dollars by approximately $16.6 million to maintain a Line 1 proration factor of 1.00. Hold harmless districts (those whose 1992-93 amount per eligible pupil is greater than the current year per eligible pupil) would receive an increase in the state payment by .0075 of the Line 2 calculation for the district. The increased state cost for the hold harmless districts is approximately $4.6 million. The total estimated cost is $21 million.

On a statewide basis this $21 million might neutralize the impact to school districts as whole of the increased collection fees. However, the impact would likely not be neutral when looking at individual district calculations. Districts in first class counties have an increase of 3/4 of 1 percent in collection fees. Non-hold harmless districts in first class counties probably will recover that through the reduced deduction on Line 2 of the Basic Formula. Hold harmless districts in first class counties might lose money. The increase in collection fees for districts in second, third, and fourth class counties is one and one-fourth percent. Non-hold harmless districts in these counties may recover that through the reduced deduction on Line 2 of the Basic Formula, but it will be very close. Hold harmless districts in these counties will lose money because the increased collection fee is one and one-fourth percent while the additional state payment is three-fourths of one percent of Line 2.

Methodology using 1998-99 formula calculations:

Sum of Line 2 for hold harmless (HH) = $613,507,335 X .0075 = $4,601,305

Line 2 all districts = $1,723,137,952

Less Line 2 for HH = $ 613,507,335

Line 2 non HH districts = $1,109,630,617

$1,109,630,617 X .985 = $1,092,986,157

ASSUMPTION (continued)

Reduction in Line 2 for non HH = $ 16,644,460

Total: $16,644,460

$ 4,601,305

$21,245,765 increased state cost if change had been in place in 1998-99

The Assessors of Cole, Audrain, and Cape Girardeau counties indicated that the proposal would increase income to their assessment funds but would not cause additional administrative costs.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
		(12 Mo.)
GENERAL REVENUE FUND
Cost-Department of Elementary and Secondary
Education
Increased distributions to school districts	$0	($21,250,000)	($21,250,000)
Cost-State Tax Commission
Increased per parcel matching of county
assessment funds	$0	($3,200,000)	($3,300,000)
NET EFFECT ON GENERAL REVENUE
FUND	$0	($24,450,000)	($24,550,000)
OTHER STATE FUNDS
Loss-Increased Collector Fees	(Unknown)	(Unknown)	(Unknown)
NET EFFECT ON OTHER
STATE FUNDS	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
POLITICAL SUBDIVISIONS
Income-General Revenue Funds
Increased Collector Fees	Unknown	Unknown	Unknown
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
(continued)	(6 Mo.)
Income-Assessment Funds
Increased Assessor Fees	$0	$4,850,000	$5,000,000
Income-School Districts
Increased Distributions from State	$0	$21,250,000	$21,250,000
Loss-Other Subdivision funds
Increased Assessor Fees	$0	($4,850,000)	($5,000,000)
Loss-Other Subdivision funds
Increased Collector Fees	$0	(Unknown)	(Unknown)
NET EFFECT ON POLITICAL
SUBDIVISIONS	$0	$21,250,000	$21,250,000
FISCAL IMPACT - Small Business
No direct fiscal effect on small businesses would be expected due to this proposal.

DESCRIPTION

This proposal would:

1) increase county collectors' fees;

2) add an additional fee which would go into a Tax Maintenance Fund for each county;

3) increase the percentage of property tax collections placed in county assessment funds by 25% (1/2% to 5/8%);

4) increase state reimbursement of assessors for reassessment from up to 50% of costs and expenses to up to 60% of costs and expenses;

5) decrease the amount counties have to spend from assessment maintenance funds in order to qualify for more than the minimum $3 per parcel reimbursement (from a dollar-for-dollar match to 2/3);

6) increase the per-parcel payment to assessors in 2000 to $7 (from a maximum of $6.20 per parcel under current law) and increase the per-parcel payment 3% per year with the proviso that

DESCRIPTION (continued)

the amount reimbursed by the state not exceed 60% of costs and expenses;

7) decrease reimbursement to counties which did not appropriate from county general revenue to their reassessment funds at least an amount equal to the average amount appropriated for the previous three years by the 25% increase in taxes going to county assessment funds;

8) require the State Tax Commission to certify equivalent sales ratios for each school district higher than thirty one percent (currently thirty-one and two-thirds) and allow the State Tax Commission to reduce the county's reimbursement by fifteen percent only if the equivalent sales ratio would be less than or equal to thirty one percent for three consecutive years (currently the cut can come after the first year);

9) establish a procedure to be followed when a county, a county assessor and the tax Commission cannot agree on an assessment plan (the new statute would incorporate the interpretation made by the state's Supreme Court);

10) change the state aid formula for school district entitlement by using 99% of the value on line 2 of the formula in FY 2001 and 98% in subsequent years (rather than 100% as in current law); and

11) give "hold harmless" districts additional payments of 1% of districts' deduction on line 2 of the formula;

Points 1) through 9) above have an effective date of January 1, 2000.

Points 10) and 11) above have an effective date of July 1, 2000.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space. This legislation would not affect Total State Revenue.

SOURCES OF INFORMATION

Department of Elementary and Secondary Education

State Tax Commission

Cole County Assessor

Audrain County Assessor

Cape Girardeau County Assessor

Jeanne Jarrett, CPA

Director

February 8, 1999