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Lawmakers, staff debate ramp-down of excess school-spending threshold, sequencing for Act 73 transition
Summary
Lawmakers and staff reviewed a JFO estimate that an Education Opportunity Payment and related grants would cost about $1.863 billion in FY26, debated a ramp-down of the excess-spending threshold (114% then 1% annual declines toward 105%), and raised concerns about protecting low-spending, disadvantaged districts during the transition.
Lawmakers and staff spent the session debating how to phase down the state's excess school-spending threshold and how revenue raised by any change should be used.
Julie, a staff presenter, told the group the Joint Fiscal Office's preliminary analysis shows that under Act 73 pupil weights the Education Opportunity Payment (EOP) combined with small- and sparse-school grants would cost approximately $1.863 billion in fiscal 2026. She said the Act 73 (foundation formula) pupil-weighted count for FY26 would be about 118,488 students versus roughly 142,564 under current-law weights, and that the difference drives the cost estimate.
The procedural proposal discussed would set the excess-spending threshold at 114% in FY28 and then reduce that threshold by one percentage point per year (113% the next year, 112% the year after, and so on) until reaching 105%. Presenters said the 105% figure is intended as the eventual statutory baseline if a new foundation formula is not implemented; without the foundation formula the schedule was described as beginning to decline annually around FY30 and reaching 105% by roughly FY2037.
Why it matters: the threshold determines which districts face an excess-spending penalty and how much additional local tax capacity could be created. Committee members cautioned that shifting money raised by lowering the threshold into grants for lower-spending districts could remove funds from the Education (ED) fund and leave some low-spending, economically disadvantaged towns short in the interim. "We were forecasting, you know, $100 million to buy it down," one committee member said, urging caution about tapping certain revenue streams.
Key details and disputed points
- What is included in cost estimates: Julie told the group the FY26 estimate for the EOP assumes Act 73 weights multiplied by the base amount (adjusted for inflation) and includes grants for small and sparse schools. Participants noted other components'transportation supplements, special education supplements and transition-year items'may be treated as grants or remain in education spending and that policy choices affect apples-to-apples comparisons.
- Weighted student counts: staff cited approximately 142,564 under current-law tax-cap weights and about 118,488 under Act 73's foundation weights for FY26; the JFO figure of roughly $1.863 billion maps to those weighted-count differences.
- Ramp schedule and timing: the discussed schedule is 114% (FY28), then 113%, 112%, etc., declining 1 percentage point annually toward 105%. Presenters said sequencing depends on whether the foundation formula takes effect (H955 referenced a possible FY30 implementation); if it does, some transition language would repeal or conform earlier provisions to avoid disrupting roll-out.
- Forecasting limits: staff said the state economist only provides forecasts through 2030, constraining multi-decade projections; several members requested a year-by-year display through 2030 to see how the threshold and base move together in the near term.
- Equity concerns: multiple members asked how low-spending but economically disadvantaged districts would be supported between now and any eventual foundation formula implementation. Members suggested interim funding mechanisms or targeted exemptions may be needed to avoid sudden harm.
- Exemptions and school-construction/legacy debt: the proposal discussed does not settle on changes to school-construction exemptions or legacy debt timing; participants agreed current-law exemptions (including the July 1, 2024 rule noted in the packet) remain relevant and will require explicit treatment.
Quotes
"JFO's preliminary analysis ... would cost approximately $1.863 billion," Julie said in the presentation describing the FY26 calculation. One committee member warned, "We were forecasting, you know, $100 million to buy it down," arguing for caution before reallocating revenue streams.
Next steps
Participants asked staff to produce clearer year-by-year projections through 2030 and to refine language on exemptions, sequencing, and which spending categories the EOP and grants are intended to cover. Members agreed to "talk amongst ourselves" and reconvene; a follow-up midday meeting was proposed for the next day.
Authorities cited in discussion: Act 73 (foundation formula changes) and H955 (Senate bill sequencing referenced by presenters).
