COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 3335-01
Bill No.: SB 824
Subject: County Government; Cities, Towns and Villages; Elderly; Taxation and Revenue - Property
Type: Original
Date: January 4, 2002
FISCAL SUMMARY
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| General Revenue*
** |
$0 |
($43,791,000) |
($46,004,000) |
| Blind Pension ** | $0 | ($219,000) | ($230,000) |
| Total Estimated
Net Effect on All State Funds* ** |
$0 |
($44,010,000) |
($46,234,000) |
*Does not include possible increased cost to fully fund Foundation Formula
**Subject to appropriation
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 5 pages.
| FUND AFFECTED | FY 2003 | FY 2004 | FY 2005 |
| Political subdivisions ** | $0 | $0 | $0 |
| Local Government | $0 | $0 | $0 |
**Offsetting costs from reduction of tax revenues, and state reimbursements.
Numbers within parentheses: ( ) indicate costs or losses.
ASSUMPTION
Officials from the Office of Administration and the State Auditor's Office assume this proposal would have no impact on their organizations.
Officials from the Department of Revenue assume no administrative impact on their organization.
Officials from the State Tax Commission assume residential property assessed valuation is $30 billion. In the year of reassessment statewide increase of residential property is 8%. 70% of residential properties are owner occupied and 24% of residences contain a member who is 65 years and older. Statewide levy is $6 per $100 assessed valuation.
Calculations are as follows: $30 billion assessed valuation times 8% increase equals $2.4 billion increase. $2.4 billion times 70% owner occupied is $1.68 billion times 24% senior citizens equals $400 million times $6 levy equals $24 million in revenues the state would need to replace.
Oversight estimated possible losses as follows.
Residential Property Tax paid in 2000 $1,725,846,000
Projected Tax 2001 $1,915,689,000
Projected Increase $ 189,843,000
Percent elderly x .269
Projected Increase for 64+ Occupied $ 51,068,000
Percent owner occupied x .70
Projected Increase for 64+ owner-occupied $ 35,748,000
Estimated CY 2002 Loss: $35,748,000 x 1.035 x 1.015 = $37,554,000
ASSUMPTION (continued)
The proposal would become effective for year beginning January 1, 2003, and Oversight assumes reimbursements for political subdivisions' calendar years would be from immediately following state fiscal years.
CY 2003: $37,554,000 x 1.11 x 1.035 x 1.015 = $43,791,000
CY 2004: $43,791,000 x 1.035 x 1.015 = $46,004,000
Oversight assumes there would also be losses to the Blind Pension fund of a little more than ½ of 1% of the losses to political subdivisions.
In response to a similar proposal in the prior session, Department of Elementary and Secondary Education officials noted that the proposal would decrease assessed values compared to current law, which would increase the amount needed to fully fund the Foundation Formula. They also noted that 1) "hold harmless" districts would recoup their losses through state payments, 2) state payments required by this proposal are not included in the Formula, thus allowing other districts a "double dip" consisting of reimbursements from the state and increased payments through a fully funded Formula, and 3) the effects of the proposal on the Formula should disappear after three or so years because reducing the guaranteed tax base reduces the inflationary adjustment in the Formula for districts to fund inflationary increases in expenses.
Oversight assumes the Foundation Formula issues, if any, would be addressed through the appropriation process.
| FISCAL IMPACT - State Government | FY 2003
(6 Mo.) |
FY 2004 | FY 2005 |
| GENERAL REVENUE | |||
| Cost - Reimbursements to Political Subdivisions* |
$0 |
($43,791,000) |
($46,004,000) |
| NET EFFECT ON GENERAL REVENUE FUND* |
$0 |
($43,791,000) |
($46,004,000) |
| *Does not include possible increase in cost to fully fund Foundation Formula. | |||
| BLIND PENSION FUND | |||
| Loss - Reduced Collections | $0 | ($219,000) | ($230,000) |
| NET EFFECT ON BLIND PENSION FUND |
$0 |
($219,000) |
($230,000) |
| FISCAL IMPACT - Local Government | FY 2003
(6 Mo.) |
FY 2004 | FY 2005 |
| POLITICAL SUBDIVISIONS | |||
| Income - Reimbursements from State* | $0 | $43,791,000 | $46,004,000 |
| Loss - Reduced Property Tax Collections | $0 | ($43,791,000) | ($46,004,000) |
| NET EFFECT ON POLITICAL SUBDIVISIONS* |
$0 |
$0 |
$0 |
| *Does not include possible increased distributions to school districts. |
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
DESCRIPTION
This proposal would exempt the principal residence of persons over sixty-four years of age from increases in property tax due to either increases in assessed values or increases in tax rates.
The state would reimburse political subdivisions for tax losses as certified by the State Auditor.
This proposal would apply to tax years beginning on and after January 1, 2003.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space. This proposal would affect total state revenue.
SOURCES OF INFORMATION
Department of Revenue
State Tax Commission
Office of Administration
State Auditor's Office
Mickey Wilson, CPA
Acting Director
January 4, 2002