Committee researchers present homestead-exemption models; draft costs about $45 million more than current law

The Ways & Means committee heard a technical briefing on a proposed homestead exemption that would reshape property-tax relief by household income and house-site value, with Joint Fiscal Office analyst Julia Richter presenting modeling that compares the administration’s plan with the draft 1.1 exemption language in the education finance proposal.

The models use FY 2025 data and, Richter said, are intended to be comparable across structures: "we're nonpartisan, legislative office against unbiased fiscal analysis," she told the committee as she explained assumptions and data coverage. The draft homestead exemption in ed finance draft 1.1 is estimated in the JFO analysis to cost approximately $45,000,000 more annually than the current property tax credit system, assuming that the additional cost is not recouped by raising the homestead property tax rate.

Why this matters: the committee is weighing how to make property-tax relief more income-sensitive while balancing state fiscal impact and municipal effects. Under current law, a property tax credit is applied in many cases to limit a household’s share of property tax; the homestead exemption would instead exclude a portion of a household’s property value from taxation, lowering assessed value before the tax rate is applied.

The briefing compared two main structures. The administration’s proposal ties exemption percentages and a maximum exemption amount to income bands (for many incomes, a maximum of $200,000 in house-site exemption was modeled, decreasing at higher incomes). The draft 1.1 exemption maintains a similar stepped-percent structure by income but removes a statutory maximum and does not include a separate senior-specific exemption. JFO’s presentation included tables and a visualization showing how average bills would change for households across income bands and equalized house-site value bands.

Key findings from JFO’s modeling (FY25 base data): households with incomes below roughly $90,000 would often see estimated bill decreases under the draft 1.1 exemption (many blue cells in JFO’s table); some lower-income cells had small average decreases (for example, an estimated $130 average decrease for households with incomes between $0 and $25,000 and house-site values up to $100,000). Certain groups just below the $90,000 threshold produced a visible white "L" in the impact table, indicating average increases or smaller decreases compared with current law. Richter attributed that pattern both to features of current law (the property tax credit applies more broadly below $90,000) and to the exemption’s step structure in the draft language.

JFO stressed data limitations and assumptions: the modeling uses FY25 tax-year data and includes households with reported household income up to $115,000 (JFO excluded households above $115,000 for modeling because those taxpayers typically do not file the paperwork used to compute the property tax credit, leaving the top end of the distribution incomplete). Richter told the committee that, "we're looking at households with incomes without household income under 115,000," and that missing the top end makes some comparisons mathematically harder.

Committee members asked for additional visualizations and alternative parameterizations. Representative Volker and others asked whether smaller step increments (for example, 5% changes) or different maximums would smooth the white L-shaped impact area; Richter said she could run custom scenarios and provide counts (Ns) for each cell. The chair closed the presentation urging members to "please sit with this. It's a big deal. It's a big part of the work we're doing," and said the committee would return to the issue at a later meeting with more time for modeling and discussion.

What was not decided: the committee received the technical brief and asked for follow-up modeling; there was no formal vote on the homestead exemption language during the session. JFO and the tax department offered to provide one-on-one walk-throughs of the statutory language and the spreadsheets for members who want them.

Ending: staff said they will re-run and expand the scenarios and provide further materials to the committee; the chair scheduled more committee time to continue the discussion.