SCHOOLS - CONSTRUCTION;

You asked if there is any proposed legislation (1) regarding education cost sharing (ECS) grants or (2) that would reduce school construction reimbursement rates. You also wanted to know how many schools have paid “out-of-pocket” to build gymnasiums and auditoriums larger than the State Department of Education (SDE) approved.

SUMMARY

Two bills in the current legislative session involve ECS grants. The governor’s budget bill makes changes to the ECS formula, including (1) distributing aid to capped towns, (2) eliminating the density supplement, and (3) cutting all towns’ ECS funding by 3% for FY 2003-04. An Education Committee bill increases the foundation for ECS grants and reduces the property tax credit to help fund education. The governor’s school construction bill reduces the reimbursement rate on certain projects by 10 percentage points through 2006. SDE does not track districts’ out-of-pocket school construction costs incurred to build facilities larger than those it approves.

PROPOSED ECS LEGISLATION

HB 6548

The governor’s budget bill (HB 6548) contains several education provisions, including one addressing ECS grants. The bill makes several changes in the formula for distributing ECS grants to towns, although technical drafting problems nullify some of its effects.

The bill appears to:

1. require FY 2003-04 ECS grants to be calculated from each town’s FY 2001-02 base, excluding adjustments made for FY 2002-03;

2. distribute $ 50 million to capped towns for FY 2003-04, with each town’s share based on the difference between its capped grant and its “target aid” (what its grant, excluding density supplements, would be without the cap);

3. eliminate density supplements;

4. reduce each town’s FY 2003-04 grant as calculated under the bill by 3%; and

5. freeze each town’s grant at the FY 2003-04 level through FY 2004-05.

The bill’s effect is unclear because it fails to establish a foundation level for the next two fiscal years. It is impossible to calculate ECS grants without a foundation level. The current foundation of $ 5,891 per “need” student expires on June 30, 2003.

In addition, although it appears that the bill’s intent is to cap ECS grant increases, it does not specify what the cap is or how long it continues. The current cap of up to 6% is scheduled to expire on June 30, 2003, and the bill fails to eliminate the expiration requirement.

Under the bill, the density supplement would not apply after June 30, 2003. The density supplement gives towns with greater-than-average population density a supplemental grant equal to a percentage of their per-need-student foundation amount. The percentage is determined by multiplying the ratio of the town’s population density to that of the town

with the highest density by a density aid factor (currently 0. 006273) established in statute. The density supplement is not subject to the cap, and no town’s density supplement can fall below the level it received in the prior year.

SB 1162

The Education Committee’s bill (SB 1162) increases the foundation for ECS calculations to $ 6,000 per student per year for FYs 2003-04 and 2004-05, and increases it for each fiscal year thereafter by the percentage increase, if any, in the most recent calendar year average in the Consumer Price Index for Urban Consumers. Under current law, the ECS foundation expires at the end of the current fiscal year.

The bill reduces the property tax credit for primary residences and motor vehicles from $ 500 per year to $ 235 per taxable year. It maintains the current phase-out of the credit above $ 100 for higher income taxpayers. Under both current law and the bill, the maximum property tax credit is reduced by 10% for each $ 10,000 of a taxpayer’s Connecticut adjusted gross income (AGI) (10% for each $ 5,000 for married people filing separately) above specified levels. Under current law, the maximum credit is $ 500 so the phase-out applies to the first $ 400. Thus, at each step of the phase out, the credit is reduced by $ 40. Under the bill, the maximum credit is $ 235, so the phase-out applies to the first $ 135 dollars and at each step the credit is reduced by $ 14 (rounded from $ 13. 50).

The table below shows the property tax credit phase-outs under current law and the bill.

CURRENT AND PROPOSED PROPERTY TAX CREDIT PHASE OUT

The bill eliminates scheduled annual increases in the property tax phase-out threshold for single filers for tax years starting January 1, 2004 through January 1, 2009. Instead, it maintains the current $ 54,500 income threshold for starting the phase-out for single filers.

Starting with the 2003-04 fiscal year, the bill requires (1) the revenue services commissioner to segregate the increased revenue generated by the property tax credit reduction and (2) the Office of Policy and Management secretary to give those funds to SDE for ECS grants.

SCHOOL CONSTRUCTION REIMBURSEMENT RATES

The governor’s school construction bill, HB 6549, is the only bill currently before the General Assembly that would reduce school construction reimbursement rates. The relevant provisions of the bill reduce the state reimbursement rates for certain school construction project grants by 10 percentage points. The state normally reimburses between 20% and 80% of the cost of local school construction projects, depending on a district's wealth. Interdistrict magnet schools and regional vocational agriculture and special education facilities receive a 95% state reimbursement.

Under the bill, the lower reimbursement rate applies to (1) school construction projects on the 2004, 2005, and 2006 project lists and (2) any projects the education commissioner authorizes between July 1, 2003 and June 30, 2006 to remedy code violations, fix damage from fires or other catastrophes, or replace roofs. By law, the commissioner has authority to approve and make grant payments for such projects without express General Assembly authorization, as long as he stays within available grant authorizations and appropriations.

OUT-OF-POCKET SCHOOL CONSTRUCTION COSTS

SDE does not maintain data on out-of-pocket school construction costs and cannot determine the number of gymnasiums or auditoriums built with such funds. The statutes specify that the reimbursement rate for building (1) a gymnasium spectator seating area is one-half of the eligible percentage computed for the project’s eligible costs and (2) an auditorium is one-half of the eligible percentage for the net eligible cost of building an area to seat half of the school’s projected enrollment.

JG/JL: eh