Joint Fiscal Office updates Education Fund outlook; holds 5.9% illustrative property-bill estimate

The Joint Fiscal Office on Jan. 23 presented an updated Education Fund outlook that incorporates the Emergency Board's January revenue forecast and changes in fiscal year 2025 appropriations, saying non-property revenues for the Education Fund are lower than the July forecast while the illustrative uniform average property-bill change remains 5.9%.

The outlook “can be thought of as the operating statement for the Education Fund,” Julia Richter of the Joint Fiscal Office said as she opened her presentation. The update reflects the Emergency Board's January consensus forecast for non-property revenues and adjustments from the governor's biennial appropriations act.

Richter told the Ways & Means Committee the economists' January consensus forecast reduced the Education Fund's non-property revenue projections by about $6,600,000 for fiscal 2025 and about $5,100,000 for fiscal 2026 compared with the July forecast. She said property-tax revenue estimates for FY25 and FY26 in the Emergency Board outlook were left unchanged because, for the Emergency Board forecast, yields and rates are held constant so members can see how other adjustments affect the fund.

“If these yields and this rate were to be implemented right now, our estimate would be that that would be a uniform bill change of 5.9%,” Richter said, describing the 5.9% figure as an estimate based on the yields and uniform property-tax rate used in the December 1 letter. She emphasized that the uniform average bill change is a policy decision to be made later in the yield bill process and that the December 1 assumptions are used to solve the model.

Richter said changes in FY25 appropriations included in the governor's budget adjustment act — most notably changes in the education payment line and an adjustment to the universal school-meals appropriation — are the other significant difference between the Emergency Board outlook and the December 1 letter. Combining the revenue downgrade and the appropriations adjustments, Richter said the Emergency Board outlook shows approximately $2,000,000 more on the Education Fund bottom line than the December 1 letter, while maintaining the stabilization reserve fully funded and leaving about $2.8 million unreserved and unallocated.

Committee members asked how the economists' downgrade squares with broader news of stronger revenues. Richter replied that the general fund and the Education Fund draw on different revenue streams and that the downgrade appears in the non-property revenues that flow into the Education Fund (sales and use, a portion of purchase-and-use, meals and rooms, and similar sources). “That’s where we’re seeing that downgrade,” she said.

Chair Conlon said Richter's explanation answered her question but noted a practical observation: “It does. Although, I just paid the use tax on buying a new car. I feel like the number really should be much higher because it was,” Conlon said.

On timing for more detailed school-budget information, Richter said the Joint Fiscal Office expects the Agency of Education to provide updates on row 11 (education payments) roughly every two weeks starting soon, but that the position at the Agency of Education that historically provided those updates is not filled and some details remain to be resolved.

Richter also said the committee will receive additional detail later in the day from APA, the consultants who did modeling work for the administration’s proposal; the consultants are in the state and will discuss the assumptions built into their model.

Next steps for the committee include additional modeling of scenarios the JFO can produce (for example, varying how unreserved, unallocated funds are applied or changing the ratio of homestead to non-homestead relief) and further updates as school budgets and other data are finalized before May.