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Committee advances foundation formula framework, homestead exemption and new property classification study
Summary
Conference committee guidance on H.454 circulated June 13 proposes a $15,033 per-pupil base, new weights (including a pre-K weight), a phased cap on supplemental district spending, replacement of the property tax credit with a homestead exemption capped at the first $425,000 of homestead site value, and creation of a new nonhomestead-residential tax classification.
Members of the conference committee walked through the finance and tax components of H.454 on June 13, presenting a consolidated draft that sets the base education amount, weights, transition rules and a redesigned property tax relief system.
The draft sets a base amount of $15,033 per pupil and converts future per-pupil funding to an Educational Opportunity Payment (EOP) equal to the base multiplied by weighted long-term membership. Weights would include special education categories, tiered English-learner weights, and a new pre-K weight of negative 0.54 that appears in the draft’s weights table. The bill requires periodic reevaluation of inputs to the foundation formula and calls for AOE (Agency of Education) and JFO work informed by a professional judgment panel.
On district spending and local control, the draft creates a supplemental district spending (SDS) tax and reserve. The SDS cap would be 5% of the product of the base amount and a district’s long-term membership once full transition is complete; the conference draft phases that cap in, starting with a higher transitional cap (10%) in earlier years and stepping down to 5% by fiscal year 2038. The draft also adjusts the education fund and reserve mechanics so unreserved funds at fiscal year end reduce next year’s statewide education property tax rate rather than being transferred to the school-construction special fund.
The tax-relief system in the draft replaces the current property tax credit (PTC) with a homestead exemption structure. The draft presents income brackets and an exemption limited to the first $425,000 of homestead site value; the Department of Taxes is directed to report back with recommended multipliers and implementation details, including options to use nonhomestead classifications to offset the exemption’s costs. The bill also establishes a new tax-classification category—nonhomestead residential—to capture second homes and short-term rentals and directs the Department of Taxes to propose rate multipliers for those classifications.
Conference counsel explained the homestead exemption table reflects negotiations to protect homestead taxpayers from tax increases during transition and asked the Department of Taxes to analyze income sensitivity measures with household incomes up to $175,000. The draft includes several reporting deadlines and transition letters, including a December 1 recommendation to set statewide education property tax rates and a December 15, 2027 report from the Department of Taxes with recommendations and an implementation plan to prevent increases in education property tax rates during rollout.
No formal votes were taken on June 13; counsel said the draft remains unedited and will be refined before final committee approval.
