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.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates/Conflicts with/Companion to/Relates to Duplicates SB147, Relates to HB256

SOURCES OF INFORMATION

State Department of Public Education (SDE)

LFC Files

SUMMARY

Synopsis of Bill

House Bill 230 amends the Public School Capital Improvements Act to increase the current state guarantee multiplier from $35.00 to $50.00 per mill per unit and increases the tax rate that districts may impose from 2.0 mill to 2.5 mills.

Significant Issues

The Public School Capital Improvements Act commonly referred to as SB-9 or the two mill levy must be voted on by local residents and currently, allows the district to impose up to two mills of property tax for capital outlay projects. The funds can be used for the following: to erect, remodel, make additions to, provide equipment for, or furnish public school buildings; to purchase or improve public school grounds; to maintain public school buildings or public school grounds; to purchase buses for transporting students to extracurricular activities; and to purchase computer equipment and software for classrooms.

The Public School Capital Improvements Act guarantees a minimum level of funding to school districts that have imposed, with voter approval, a tax levy (not exceeding two mills). Also included is a provision that school districts must have imposed this tax levy and must be funded to at least the minimum level guaranteed by the Act.

According to the State Department of Education, in school year 1977-78, the state match of the public school capital improvements fund constituted 60 percent of the total program funding. Assessed valuations and student membership have increased significantly, the "state match" has declined to approximately 12 percent of the programs. Local property taxes are the largest revenue source for this program, however, local property wealth varies widely among school districts.

SDE indicates that passage of the bill will increase the percentage of the total program funding from approximately 12 percent to 27 percent. The department also indicates that the program guarantee multiplier has not been adjusted since the program's inception in 1975.

FISCAL IMPLICATIONS

Pursuant to 22-25-8 NMSA 1978, the current program guarantee is based upon school district 40^th day total program units multiplied times the matching dollar amount of $35.00 multiplied times the mill rate stated in the voter approved resolution. The local revenue generated by the two mill levy is subtracted to determine the amount of matching funds the district will receive from the state.

According to SDE, increasing the multiplier will help to offset the individual differences in school district property tax bases. This bill will result in an increase in the number of districts that are eligible for state match from 54 to 68, assuming all districts have successful elections.

Using the current multiplier of $35.00 per mill and 2 mills, the cost of the state match would be $6,595.5. If the multiplier is increased to $50.00 per mill and 2.5 mills as proposed in this bill, the cost of the state match would be $23,029.8. The difference between this proposal and the current state match requirement is $16,434.3.

Included in the LFC recommendation for Public School Support is $6,595.5 to fund the current state match requirement.

ADMINISTRATIVE IMPLICATIONS

The State Department of Education (SDE) administers the Public School Capital Improvements Fund.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

This bill duplicates Senate Bill 147 and relates to House Bill 256. House Bill 256 amends the Public School Capital Outlay Act to remove the requirement that a school district must be indebted at not less than 75 percent. It also places provides a funding formula to be used by the Public School Capital Outlay Council to determine the state's share for capital outlay projects approved and ranked by the council.

CTF/njw