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.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB140 Relates to SB147

SOURCES OF INFORMATION

State Department of Public Education (SDE)

SUMMARY

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment changes the effective date of the provisions of this act from July 1, 2001 to July 1, 2000.

Synopsis of Bill

House Bill 256 amends the Public School Capital Outlay Act to remove the requirement that a school district be indebted at not less than seventy-five percent of the total debt authorized by law and 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. These changes would be effective July 1, 2000.

Significant Issues

The purpose of the Public School Capital Outlay Act is to meet critical school district capital outlay needs which cannot be met by the school district after it has exhausted all available sources. Applications for assistance by local school districts to the Public School Capital Outlay Council are made in accordance with requirements of the council.

Currently, seven requirements must be met in order to qualify for assistance, one of which is that a school district be indebted at not less than seventy-five percent of the total debt authorized by law. According to SDE, approximately thirty-five school districts qualify under current requirements. Removal of the this requirement will allow all eighty-nine school districts to participate and receive assistance for critical capital outlay needs.

The formula proposed in this bill applies a sliding scale local match requirement so school districts with above median property valuation per membership can participate in the Public School Capital Outlay Act. To ensure equity, the state match would range from 100 percent for a school district that has a low assessed valuation per membership and has exhausted all local resources, to a minimum 10 percent match for districts with a high assessed valuation per membership.

FISCAL IMPLICATIONS

MGT of America, the independent contractor chosen to conduct the capital outlay study gathered data from 170 schools located in 35 districts and through an extrapolation process applied to the other districts, MGT of America estimated the total capital outlay needs for public schools to be $1,486 billion. With this proposed formula, the state would fund approximately $830 million of the total identified need over a ten or fifteen year period and local school districts would be responsible for $656 million over the same period.

The Public School Capital Outlay Equity Task Force has identified several sources of revenue for this program.

This formula was reviewed by the LFC Chief Economist and indicates two factors worth noting. First, capacity is multiplied by a .5 share factor, meant to allocate financial responsibility between the state and school districts. For example, a district with capacity equal to the statewide average would share costs with the state on a 50-50 basis, prior to adjusting for local effort. Currently, school districts with capacity equal to the statewide average are most likely assuming 100 percent of school capital costs. The second factor worth noting is the relative weights. Both factors are somewhat arbitrary thus changing them can significantly alter the local and state match requirements.

ADMINISTRATIVE IMPLICATIONS

Included in the Public School Support request is $185.5 for additional staff, 2 at SDE and 1 at Department of Finance and Administration (SDE), to maintain and operate a capital outlay database. The LFC recommended the request for additional staff and funding is included in the SDE and DFA budgets.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

Senate Bill 140 relates to Senate Bill 147. Senate Bill 147 increases the maximum millage that may be levied under the Public School Capital Improvements Act to 2.5 and increases the program guarantee dollar multiplier to $50.00 per mill.

House Bill 256 duplicates Senate Bill 140.

OTHER SUBSTANTIVE ISSUES

This bill implements some of the recommendations of the Public School Capital Outlay Equity Task Force.

CTF/gm:njw