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Panel reviews bill to add building-fund mills to in-lieu funding formula
Summary
Lawmakers reviewed an amendment that would include school building-fund mill levies when calculating how in-lieu-of-tax payments affect school construction funding, a change supporters say would steer more local in-lieu revenue to capital projects and reduce a portion of state aid.
The Appropriations — Education and Environment Division examined a bill (referred to in committee as 11:30) that would change how in-lieu-of-tax revenue is counted when state funding for school construction is calculated. Representative Richter, the bill’s presenter, said the amended version adds building-fund mills to the existing sinking-and-interest calculation.
Representative Richter, District 1, Williston, told the committee: "So that's what this bill does." He explained that current Century Code takes sinking-and-interest mills out of the in-lieu calculation, and the amendment would add a district’s building-fund mills to that same deduction so more in-lieu money could be available for capital projects.
The change would alter the percentage of in-lieu revenue a district may apply toward capital debt repayment. Representative Richter said sinking-and-interest levies “most of them are somewhere between 6 and 10 mills for schools,” and that a few districts have substantially higher levies. He said the amendment narrows the bill’s focus to capital projects and noted the most recent amendment reduced the bill’s fiscal note by about $2,000,000.
Adam Tesher, School Finance Officer at the Department of Public Instruction (DPI), explained the policy mechanics: "The idea behind the amendment was to start to be able to use that for capital projects." Tesher said the amendment ties the in-lieu calculation to what voters have authorized the district to levy: if voters have not approved a building-fund or sinking-and-interest levy, property value from in-lieu sources would not produce capital-project revenue. He told the committee the change would reduce the amount counted toward the $11,000 per-student funding calculation and that "the state would make up that additional, I think it's 10,500,000.0 in the fiscal note." Tesher warned some districts that have been using funds for operations may be required to shift money into capital spending.
Committee members asked whether the amendment would create a carve-out benefiting a small set of districts and how many districts would be affected. Senators and representatives noted the update narrows earlier versions that produced larger fiscal notes and that eligibility turns on whether a district has previously passed a bond (sinking-and-interest authority). Supporters described the change as an attempt to equalize how districts with differing in-lieu valuations are treated in the school-construction funding formula.
No formal action or vote was taken; members directed continued work between sponsors and stakeholders. The committee agreed to take the bill up again at a subsequent meeting for further refinement.
Ending: Committee members said they will continue negotiations and return to the bill at the next meeting.
