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F I S C A L I M P A C T R E P O R T

SPONSOR:	Marquardt		DATE TYPED:	2-2-02		HB	161
SHORT TITLE:		Military Installation Within School District				SB
					ANALYST:		Baca

APPROPRIATION

Appropriation Contained

Estimated Additional Impact

Recurring

or Non-Rec

Fund

Affected

FY02

FY03

FY02

FY03

NFI

(Parenthesis) Indicate Expenditure Decreases)

Relates to Appropriation in The General Appropriation Act

SOURCES OF INFORMATION

State Department of Education (SDE)

SUMMARY

Synopsis of Bill

House Bill 161 amends Section 22-8-2 NMSA 1978 to provide that, beginning with the 2003-2004 school year, “federal revenue” does not include impact aid (commonly referred to as P.L. 874) received by a school district because of the location of a United States military base within the school district, and, thus, will not be considered in calculating the state equalization guarantee (SEG).

Significant Issues

Federal law (20 USCS, 7709(B)(1) allows equalized states to reduce state aid to a school district that receives a payment under section 8003(B), except for the amount calculated in excess of 1.0 under section 800e(a)(2)(b), according to the SDE. The payments generated by children connected to the military are eligible to be considered in calculating state aid.

As an equalized state, New Mexico has taken credit for eligible impact aid funds since the inception of the current public school funding formula in 1975. The state initially took credit for 95 percent of the eligible federal impact aid funds. The law was recently changed to allow the state to take credit for only 75 percent with school districts retaining 20 percent that may be expended only for capital outlay purposes. The bill strikes the capital outlay expenditure requirement from the law.

House Bill 161 – Page 2

Using the 2001-2002 school year as the base, SDE concludes that enactment of HB 161 would:

1. not have affected the state’s ability to take credit for impact aid funds in school year 2001-2003,

2. allow 4 school districts with military installation to retain an additional $2,278,693 of the impact aid monies received,

3. decrease state support to 85 school districts,

4. require SDE to reduce the SEG by $2,278,693 and reduce the unit value $2,647.56 to $2,643.68, a reduction of $3.88; OR

5. require the state increase the appropriation to public schools by $2,647,693 to hold harmless the 85 school districts that state support would otherwise be reduced.

(Attached is a copy of the SDE table showing the impact of HB 161 on school districts.)

FISCAL IMPLICATIONS

HB 161 carries no appropriation. However, the general fund would be affected if the state were to make up the operational funds no longer available to the 85 school districts that could see a reduction in state support. Using the 2001-2002 school year information provided by SDE, the amount need to hold school districts harmless would be $2,278,693.

TECHNICAL ISSUES

The SDE submits two key points regarding technical issues:

1. Impact aid is not generated “because of the location of a United States military installation within the school district.” Impact aid is generated in accordance with eligibility requirements set forth in federal law.

2. Federal regulatory and statutory schemes offer no support for legislation designed to treat school districts having children whose federal connection is with the military differently from school districts whose children reside on Indian lands, low rent housing or other federal property.

OTHER SUBSTANTIVE ISSUES

The New Mexico Public School Funding Formula was designed to ensure that the quality of a child’s education was not based on the wealth of the school district in which he/she resides. Any change in the flow of revenue to a school district raises the fear that “disequalization” will occur.

Any disequalization created by this bill would, initially, be minimal. The cumulative effects of the bill, however, are not known.

House Bill 161 – Page 3

RELATIONSHIP

House Bill 161 relates to House Bill 2 that contains the appropriation for public schools.

F I S C A L I M P A C T R E P O R T

SOURCES OF INFORMATION

House Bill 161 – Page 2

House Bill 161 – Page 3

LB/njw:ar

Attachment