Legislative staff on the Joint Appropriations Subcommittee on Education spent a work session reviewing Montana’s K‑12 funding system, walking members through constitutional responsibilities, the role of property taxes and the state’s equalization mechanisms, including Guaranteed Tax Base (GTB) aid and the new School Equalization and Property Tax Reduction (SCEPTER) account.

The session opened with Pat McCracken, deputy research director in the Legislative Services research office, and Julia Patton, the committee’s lead fiscal analyst, describing the legislature’s constitutional duty to provide a basic system of public schools and to “fund and distribute in an equitable manner” the state’s share of K‑12 costs. McCracken cited statute 20‑9‑309 as establishing the decennial study requirement that guides periodic review of the funding formula.

Those constitutional and statutory frames matter because Montana’s funding blends state, local and federal revenue; state staff described three primary state funding sources used to support district budgets: the Guarantee Account (state special revenue tied to school trust lands and permanent trust earnings), the SCEPTER account (which receives revenue from the statewide 95‑mill school equalization levy), and the state general fund. Patton said the Guarantee Account totaled about $64 million in fiscal 2024 (noting that $50 million is more typical), SCEPTER brought roughly $430 million in fiscal 2024 with estimates closer to $510 million annually for the 2027 biennium under current assumptions, and the state general fund supported roughly $450 million in fiscal 2024.

The analysts walked members through how property taxes are calculated: assessed value set by the Department of Revenue, class tax rates set in statute (residential example cited: 1.35% for structures under $1.5 million), taxable value, and then mills (the unit of levy). Pat McCracken explained the mill unit plainly: “a mill is 1/1,000th of a dollar,” meaning a mill on a sample parcel equates to a few dollars in tax. The statewide 95 mills for school equalization were emphasized as a major component that flows into the SCEPTER account and ultimately is returned to districts by statute.

A central piece of the briefing focused on GTB aid, the state equalization mechanism that subsidizes districts with lower local tax capacity so they can meet budget limits. Patton used district examples to illustrate how taxable value differences change local mill levies: Ennis (with high taxable value from places such as the Yellowstone Club) showed little or no GTB need and low local mills, while Superior (with much lower taxable value) received substantial GTB and would otherwise require many more mills to raise the same revenue.

Pat McCracken described SCEPTER’s trigger mechanism: a statutory formula directs portions of increased revenue from the 95 mills to reduce local property taxes through county retirement equalization first; once caps are reached, excess can flow to major maintenance aid and then debt service assistance. Patton and McCracken emphasized that the 55% trigger percentage and other dials are legislative choices and can be changed by the Legislature.

Committee members pressed on federal funding, particularly Impact Aid and federal grants. Senator Wendy Boy asked how Impact Aid is delivered and what accountability exists for those funds. Nancy Hall of the Office of Public Instruction (OPI) clarified, “The money comes directly from the feds to the tribes. It doesn't come through the state. OPI does some reporting and we gather data, but the money doesn't come to OPI and then back out to the tribes.” Later in the discussion staff clarified that Impact Aid is deposited into a distinct Impact Aid Fund in district budgets and that the statewide interactive tools allow members to view district Impact Aid amounts.

Members also asked about administrative set‑asides for federal funds that OPI manages. Patton and OPI staff stated OPI currently reports an indirect/administration cost rate of about 17% on federal funds (and referenced proposed language in House Bill 2 to authorize a 19% indirect rate). The committee chair directed Patton to ask OPI for a written breakdown of administrative costs, including organization, positions funded and reporting mechanisms, when the committee reviews OPI’s program 6 (administration) appropriation.

Committee members asked how one‑time federal sources such as pandemic (COVID) funds affect district budgets going forward; staff reiterated those funds were intended as one‑time revenues and that districts that used them for ongoing purposes face budgeting choices when they expire.

The training also outlined the many district funds that receive property tax levies (required, permissive/nonvoted and voted levies) beyond the general fund, including retirement, debt service, transportation, building reserve, technology, tuition and adult education funds, and how those levies contributed to growth in local property tax revenue over recent years.

Ending with next steps, the committee asked staff to return with additional detail on impact aid reporting and OPI’s administration of federal funds when the committee takes up OPI’s budget and asked OPI to provide the requested administration/indirect cost detail in advance of program 6 deliberations.