JFO presents yield models; committee debates buy-downs, reserves and property tax-credit options

Julia Richter of the Joint Fiscal Office presented multiple scenarios for setting the homestead and non-homestead yields and solving for a uniform average bill change under different assumptions.

Richter described a baseline model and several alternatives that factor in a $77.2 million one-time general fund transfer the governor recommended. Under different allocations of that transfer, the JFO models estimated a range of uniform average bill changes: one scenario with the full transfer produced an estimated 1.1 percent uniform average bill change; another scenario holding homestead and income average bill change to 0 percent produced a transition reserve; a half-buydown scenario showed an estimated 3.5 percent uniform average bill change when half of the transfer is applied to rates and half is placed in a transition reserve.

Specific figures Richter described included a $33 million transition reserve in one scenario and a $5.2 million cost to increase the property tax credit in another scenario that would shift some burden to the non-homestead rate. Richter said the models use the latest school-budget submissions received on March 10 and the standard parameters used for yield modeling, and she reiterated that yield guidance to districts varies by timing (districts often used the yield figure closest to when they warned their budgets).

Committee members debated the trade-offs. Several members urged setting aside money for a transition reserve because of federal uncertainty and expected implementation costs for any funding or governance change. Others argued the committee should use one-time money to buy down tax bills now to relieve taxpayers. Representative and senator members asked for additional JFO analysis on the distributional effects of increases to the property tax credit and for the revenue implications of proposals such as an income-tax surcharge as an offset.

Members also discussed the precedent from last year, when about $69 million of one-time money was used to buy down rates and $13 million was drawn from a reserve. Richter reviewed those prior flows and identified the $13 million previously reserved, a $25 million general-fund transfer used last year and about $31 million of prior-year unallocated money that supported last year’s buy-down.

No formal yield-setting vote occurred in the meeting. Members asked JFO and the AOE for further analysis, including the detailed impacts of each scenario on town-level bills, how increases to the property tax credit would be paid for and the timing of administrative implementation if statutory change is enacted.

Several committee members said they will await more detailed revenue updates and policy committee decisions on governance before endorsing a particular yield path.