Mike Bitz: The legislature: funding schools and property tax relief
Last week, before adjourning for “crossover” the North Dakota House of Representatives passed an amended version of the Governor’s school funding plan, HB1319. This bill changes the way the state of North Dakota distributes money to schools and also includes a provision for some property tax relief.
The new North Dakota funding formula is complicated; HB1319 is 40 pages long. That being said, I will try to explain the funding and property tax relief highlights of HB1319 in the paragraphs below.
Under HB1319, all public schools in North Dakota would be guaranteed $8,810 per pupil during the 2013-14 school year. The state would assume that each school district is levying a minimum of 70 mills in their general fund. The money school districts receive from this local levy would be subtracted from the district entitlement. For example, if a district had 100 students the district would be entitled to $881,000 (100 students x $8,810 = $881,000). However, before the state actually sent this money to the district they would subtract an amount equal to what the district generated locally through the levy of 70 mills. In other words, if the district generated $2,000 per pupil by levying 70 mills in their school district, the actual state payment would be reduced from $8,810 to $6,810. The actual state payment would be $681,000 ($6,810 x 100 students).
In all likelihood every district in the state will receive a different per pupil payment from the state because no two districts have the same amount of property value and enrollment. Districts with lower property values will receive larger state payments, while districts with higher property values will receive smaller state payments, because they have a greater ability to raise dollars locally. In theory though, regardless of the amount of the payment from the state, each district should have $8,810 dollars to spend per pupil.
During the second year of the year of the biennium (2014-15), the guaranteed state payment would rise by 3.2 percent to $9,092 per pupil. The same 70-mill deduct would still exist in the formula.
Property Tax Relief
In his original proposal, Governor Dalrymple limited school districts to levying a maximum of 72 mills without a vote of the people authorizing a higher mill levy. The House of Representatives amended the Governor’s plan to allow districts to levy up to 92 mills without a vote of the people. Schools are currently capped at 110 mills, so under the bill passed by the House of Representatives taxpayers can count on at least 18 mills of tax relief (110 mills – 92 mills =18 mills). This reduction of 18 mills would equal a savings of $81 in property taxes per year on $100,000 worth of property. This amount is the minimum amount of tax relief provided for under HB1319. Some districts may not need to levy additional mills beyond the 70 mills required under the law. In this case taxpayers would see 40 mills of tax relief (110 mills – 70 mills = 40 mills). A reduction of 40 mills would equal a savings of $180 in property taxes per year on $100,000 worth of property. In others words, on every $100,000 worth of property, the minimum amount of property tax relief under HB1319 is $81, while the maximum amount that taxpayers could receive is $180. Please note the property tax relief mentioned above is only from HB1319. These savings will most likely be only a small part of the total tax relief package that the N.D. Legislature eventually approves.
HB1319 now moves to the Senate, where it likely will undergo further changes before it is approved by the full Senate. Then a Conference Committee made up of representatives from both the House and Senate Education Committees will negotiate a compromise between the two versions of the bill. Once the changes approved by the Conference Committee are approved by both the House and the Senate and the bill is signed by the Governor. It will become law and go into effect on July 1, 2013.
Hopefully, this article has been informative to you. If you have any topics or items that you would like me to discuss in future columns, or you would like to comment on this article, please feel free to call me at the school (751-6500) or email me at Mike.Bitz@msd1.org with your thoughts and ideas.