NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB446 and HB558 Duplicates SB418

SOURCES OF INFORMATION

State Department of Public Education (SDE)

SUMMARY

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amendment directs school districts to budget and expend twenty percent of the total revenue receipts for capital outlay as defined in the manual of accounting and budgeting which amends previous language requiring school districts to budget and expend twenty percent of the total revenue to erect, remodel or make additions to public school buildings. This amendment also eliminates the Los Alamos adjustment, a section of the formula no longer necessary. With the amendment, this bill now duplicates SB418.

Synopsis of Bill

House Bill 124 amends the public school funding formula to reduce the percent of local and federal receipts (impact aid, federal forest reserve, and local .5 mill levy) which the state takes into consideration in calculating the state equalization guarantee from 95 percent to 75 percent and requires school districts to budget the 20 percent difference for erecting, remodeling, or making additions to public school buildings.

Significant Issues

According to SDE, because of its state funding formula, qualifies under federal requirements as an equalized state and is allowed to consider eligible federal and local revenue in determining the amount of state aid to public school districts. This proposal will not affect the state's ability to qualify as an equalized state to take credit for impact aid funds as the state will still be able to meet the stringent disparity and proportionate tests set forth in federal law.

Impact Aid - Impact Aid was initially designed and authorized to relieve local education agencies for the loss of local property taxes as a result of federal presence. During reauthorization in 1994, impact aid also recognized students residing on Indian land, students residing in federal low rent housing, and children whose parents live or work on federal property for the purpose of generating impact aid funds. Reauthorization of Impact Aid is currently under consideration by Congress, which may have an effect on this proposal.

In the 1997-98 school year, thirty-eight school districts received impact aid funds and SDE expects that twenty-eight districts will receive funds in 1998-99.

Forest Reserve Funds - Forest Reserve funds are generated as a result of federal forest reserve acreage in New Mexico. The forest reserve funds are received by Department of Finance and Administration, Local Government Division, and are allocated 50 percent to qualifying counties and 50 percent to school districts using the 40^th day student count. According to SDE, fifty seven school districts received forest reserve funds during the 1997-98 school year.

Local Half Mill Levy Funds - Local tax levy funds are the result of a statutorily mandated half-mill levy applicable to all 89 school districts. Taxpayers are assessed a half (.05) mill levy on their property base on their assessed valuation.

Eligible federal impact aid revenues exclude Indian add-on and Special Education set-asides.

Districts will continue to budget 5 percent of eligible local and federal revenue for general operational purposes.

FISCAL IMPLICATIONS

The table below indicates total credits budgeted in 1998-99, SDE projections at 95 percent in 1999-2000, SDE projections at 75 percent in 1999-2000 and amounts that would be dedicated to capital outlay under this proposal.

It should be noted that President Clinton's 2000 budget includes a proposal to reduce impact aid funding for New Mexico by approximately $23.4 million dollars below the current level. This proposal is contrary to the department's projection of $54,150.0 in federal impact aid revenue for 1999-2000 which is a 28.3 percent increase in federal impact aid revenue over the current year level of $42,179.3.

The difference between the projected revenues at 95 percent for FY2000 and projected revenues at 75 percent is $13,195.6. Both Senate Bill 3/aSEC and House Bill 3/aHEC, consider the credits at 95 percent. If this bill is enacted, an additional general fund appropriation of $13,195.6 would be necessary.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

Relates to SB446 and HB558; as amended in HTRC, now duplicates SB418.

TECHNICAL ISSUES

SDE indicates that the title of the bill should include both local and federal revenue.

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