State guarantee proposal would equalize local spending above foundation formula, presenters say

Department of Taxes presenters described a proposed State Guarantee on Tuesday that would pay a share of school districts' discretionary spending above a new statewide foundation formula, aiming to equalize differences in local property wealth per student across large multi-town districts.

"For the record, I'm Rebecca Samaroff, the Deputy Commissioner at the Tax Department," Rebecca Samaroff told the joint House Ways & Means and Senate Finance hearing before introducing the department's presentation. Jake Feldman of the Tax Department said the "State Guarantee is a mechanism to compensate for different property cap spaces between school districts, if they choose to raise funds beyond what the state provides through the foundation formula."

The proposal discussed by department staff would: create five regional districts for equalization purposes; calculate each region's taxable grand list per student and average daily membership; and provide a percentage match on any local spending above the foundation formula up to a chosen benchmark (the administration modeled matching up to the median and up to the maximum). Presenters said districts would receive their match rate from the Tax Department as early as January in the implementation year so they could plan budgets.

Why it matters: Under current law, school district tax rates and homestead yields are set after local town meetings and legislative actions; the proposed approach would front-load information for districts and change how district-level additional (discretionary) spending is equalized. Department staff said the mechanism shifts only the distribution of existing Education Fund resources and does not create a new income source.

Key clarifications and examples from the hearing

- Timing and scope: Presenters said the State Guarantee is intended for discretionary district spending above the foundation formula and that the administration proposes implementing the foundation formula and guarantee in fiscal year 2028. The Agency of Education (AOE) would define what counts as foundation-funded services and the weights that determine per‑pupil funding.

- Matching examples: Using illustrative numbers, presenters showed that a Northeast Region with relatively low grand‑list per student would receive a larger percentage match (example shown: 28.1%) on spending above the foundation formula, while a Southwest Region with higher property capacity would receive a smaller match (example: 7.5%). Using a hypothetical $10 million of local spending beyond the foundation formula, a 20% match example would yield $2 million from the state and $8 million raised locally.

- Cost estimates: Using FY 2025 spending as a baseline and capping discretionary spending eligible for the match at 5% above the foundation formula (a limit the presenters said AOE recommends), the Tax Department's example matched to the median would cost roughly $3.7 million to the Education Fund in that year. By contrast, matching up to the maximum taxable capacity instead of the median increased modeled state exposure in the presentation to about $24 million under the FY 2025 baseline.

- Funding source: Presenters repeatedly said the mechanism would be funded from the Education Fund's existing revenue streams (homestead and non‑homestead property taxes, sales tax, interest and other Education Fund receipts). As one legislator put it during questions, the effect is that everyone who contributes to the Education Fund would ultimately share the cost, not only towns that do not receive matching funds.

- District structure and local control: Several legislators pressed on governance and intra‑district equity. Presenters said the plan assumes large, consolidated districts for equalization, with a single district school tax rate adjusted by common local adjustments (CLAs). They explained a local vote would still be required if a district chooses to raise additional revenue beyond the foundation formula; presenters recommended directing detailed governance and operational questions to the Agency of Education and its consultants because AOE would administer what the discretionary spending can be used for and how local votes or school boards would interact with the new structure.

- Sensitivity to district design: Presenters modeled alternative configurations, including 5, 11 and 12 district groupings. They said the fewer, larger regions (five) reduce the variation in taxable grand list per student and cost less to equalize; more, smaller regions increase the state cost because differences in grand list per student are larger across those groupings.

What was not decided

No formal vote or legislative action was taken at the hearing. Presenters and legislators asked for additional detail on: (1) which specific expenditures would count as "beyond the foundation formula" (AOE to clarify); (2) exact FY‑28 projections using updated weights and pupil counts; and (3) governance mechanics for large consolidated districts (how local votes and school board decisions would operate in practice). Presenters offered to supply more granular district-level analyses, including by BDSA/SBA groupings, at future briefings.

Ending

Department of Taxes staff concluded that the State Guarantee is an "effective" mechanism to address tax‑base disparities for optional district spending above a foundation formula, but they emphasized tradeoffs: matching to the median costs less than matching to the max, and tighter caps on eligible spending (for example, 5%) limit state exposure. The joint committees closed the hearing and scheduled follow‑up sessions and materials to answer remaining operational and cost questions.