Education committee debates letting districts take less than full foundation, homestead cap study

At a May 30 Education Finance Committee meeting, committee members spent the bulk of the session debating tax and fiscal provisions of a school‑funding bill, including a proposal that would let local districts choose to accept less than 100% of the foundation formula (EOP), a cap on the homestead exemption, and related implementation details.

"I just wanted to really, sort of affirm the need for us, have people be better off on the other side of this," Speaker 2, committee member, said early in the discussion, framing the group's central test for tax provisions. The panel discussed how allowing districts to accept a lower percentage of the EOP would reduce local tax rates for those districts but could produce larger state fund shortfalls if many districts exercised the option.

The discussion explained how the underspend concept would work in practice: a district board would tell voters it planned to accept, for example, 90% of the EOP rather than 100%, and the district’s homestead tax rate would be adjusted proportionally. "If they spend 90% of the EOP, then their state...district tax rate would be 90% of the statewide homestead tax rate," Speaker 4, committee member, said. Committee members noted the December 1 letter that currently sets a statewide homestead tax rate and said locking an underspend percentage a year in advance would make budgeting easier for districts.

Several members warned the tax mechanics could be complicated and uneven across districts. Speaker 4 said preliminary analysis by the Joint Fiscal Office (JFO) shows that in many cases the revenue a district foregoes by taking a lower share of the EOP could exceed the property tax savings to homeowners in that district. "In almost all cases, if a district said we wanna spend 10% less...the foregone revenue would be far greater than the tax savings," Speaker 4 said. Members asked for more formal modeling from JFO before committing to language.

Committee members also discussed phase‑in options for any change. One member suggested a phased approach that would require progressively higher minimum spending levels each year (for example, 85% the first year, 86% the next, up to a target such as 90%), noting that phasing and timing will change outcomes and interact with district size and the statewide grant (grant list) mechanics.

The homestead exemption section drew detailed attention. The draft before the group reflected a House‑pass version modified to add a cap; members compared a $400,000 cap in one draft with a $425,000 figure in an earlier proposal and expressed a preference for $425,000. Speaker 2 said the package ties many amounts to an inflator and noted a provision asking the Department of Taxes to study raising an unspecified threshold to $175,000 to better capture middle‑income households. "The request to the Department of Taxes to study moving up to 175...we really want to understand that to make sure that we're bringing in middle class families," Speaker 2 said.

Members raised concerns that money routed to the School Construction Fund could create volatility in the education fund's bottom line if amounts varied year to year. The draft allocates excess revenue to stabilize tax rates the year it appears and then routes remaining funds to the School Construction Fund; some members said they would prefer a more reliable dedicated funding source for school construction.

Other sections flagged as resolved or close to resolved included regional assessment districts (committee members said there were no substantive differences between drafts) and miscellaneous tax technical provisions. Remaining open items the group listed before recessing for lunch were: tax classifications for non‑homestead property, supplemental (underspend) district spending mechanics, certain weights (CTE and high school weights), and two sections carried over from the prior day.

No formal votes were taken during the session. Members directed staff and counsel to draft more detailed language and asked JFO and the Department of Taxes for additional modeling and implementation options, including how to lock rates and how phase‑in schedules would affect different sizes of districts. The committee planned to reconvene after a lunch break to review updated language.

The meeting record shows extensive back‑and‑forth about mechanics, modeling and caps, but no final decisions or enacted changes were recorded at the session's close.