Panel debates return of "swept" education property tax revenue; DRA and education differ on timing and warrant language

The Education Funding Committee spent a lengthy session on proposals to change how municipalities remit excess statewide education property tax — commonly called the "swept" amount — and how those funds should be handled in state accounting.

Why it matters: The bills would alter whether towns remit only ‘‘excess’’ statewide education property tax to the state or remit the entire tax amount and let the state reconcile and redistribute adequacy aid. Those choices affect municipal cash flow, the Department of Revenue Administration’s (DRA) billing and warrant timing, and the mechanics of how adequacy aid and education trust funds are reconciled.

Bruce Knueer, identified in the transcript as “supervisor, municipal bureau” at the Department of Revenue Administration, told the committee that one technical correction is needed in the analysis for one bill. "I think the analyst had noted just a small question about... it mentioned being deposited into the general fund, and I think the legislation called for as it would be, DRA depositing it with the treasury for the Education Trust Fund," Knueer said. He added he did not see other technical issues in the bill text and recommended that the committee correct the mistaken reference in the analysis so statutory language and the analysis match.

Committee members pressed DRA and the Department of Education on timing: when will the DRA know the amount that is legally defined as the excess that municipalities must remit, and how that timing aligns with towns setting tax rates? DRA staff explained that a preliminary adequacy estimate is available earlier in the budget process, but the most reliable numbers that feed the warrant are available after the department processes prior‑year Average Daily Membership (ADM) data; the committee was told a September 1 or October 1 step in the process is used to provide sufficient confidence for tax setting. The committee also heard that legislation under consideration in another bill (HB2) would freeze ADM after a date and give a petition process for adjustments, which is intended to stabilize that timing.

Members also asked for a statutory definition of “excess.” DRA and Department of Education staff said restoring prior law would make intent clear, but adding a definition in the bill could prevent future legal disputes.

Formal actions and dispositions in committee included: - HB734 (returning excess to state collection or changing local retention rules): The committee voted to retain HB734 for further work (vote recorded 17 yes, 0 no, 1 absent). - HB527 (change to statewide tax/local revenue contribution): The committee voted ITL on HB527 (15 yes, 2 no, 1 absent) after discussion that the bill’s intent was well‑meant but the committee preferred another vehicle. - HB739 was discussed as a narrowly targeted bill to address swept mechanics; the committee agreed to hold HB739 for amendment and to take it up again on March 4. Representatives Spilsbury and Luno were asked to work with DRA and DOE staff to craft warrant/timing language.

Committee members acknowledged municipal cash‑flow concerns and that relying on a model where every municipality remits the full statewide tax to the state would amplify those concerns. Several members described local finance experience indicating that municipalities routinely manage uncollected property taxes through liens and other treasury practices; others argued the state should not treat the statewide education property tax as a local revenue source.

Next steps: the committee asked Representatives Spilsbury and Luno to meet with Bruce Knueer and DOE staff to draft language clarifying deposit destination, the DRA warrant process, and a statutory definition of “excess.” The committee scheduled further action on HB739 for March 4 and directed staff to correct the analysis language that incorrectly said deposits would go to the general fund.

Ending: Committee members left the bills in play for the committee to draft technical corrections and timing language, and for DRA and DOE to propose clarifying statutory text before the next executive session.