Vermont Legislature SmartTranscripts:

[Julie (Joint Fiscal Office Director)]: We're live.

[Sen. Seth Bongartz (Chair)]: Alright. Julie, if you could just come up and get set up. The Senate Education Committee on the afternoon of January 28, we're going to spend an hour or so with Rutland District from Dan Bo. Just really learning that I've never done in this committee but I can as I recall ran out of primitive on how the access gun negotiables and it's because it's possible it's something we'll be talking about as we go forward with systems change it's probably important for us to have the base understanding of how ACEs Bennington actually works. So with that some sort of introduction you would have we know everybody we all know each other so it's all yours.

[Julie (Joint Fiscal Office Director)]: I

[Sen. Seth Bongartz (Chair)]: know you have your stand you have a standard presentation meeting.

[Julie (Joint Fiscal Office Director)]: I do yeah so good to see you all. I'm the Fiscal Office. I'm Julie the director for the joint fiscal office. Been working with Zoom for years, but apparently, still already heard. So, yeah, so as the chair mentioned, there is a presentation on the excess spending adjustment on the committee page under my name. Chair Bongartz would you like me to share my screen or?

[Sen. Seth Bongartz (Chair)]: Yeah why don't you show yours. Okay. That way people get home see it.

[Julie (Joint Fiscal Office Director)]: So this presentation really is an overview of the excess spending adjustment that we have in current law. As you know, we are a nonpartisan fiscal office And so the way I've structured it and hope that it will help walk through sort of how we think about the excess spending adjustment is first, a review of how property taxes work under current law, and what I mean by under current law, pre Act 73, the education finance system that we are all operating in in this fiscal year. And then talking about the excess spending adjustment under current law. And then lastly, what is the history of the excess spending adjustment and threshold? So this is a reminder of what we spoke about, I think last year when we came in and did an education fund and education finance primer. Hold some of these slides from that. So we know that education tax rates, property tax rates are set to make sure the education fund is fully balanced. And what that means is we take all of the expenditures that we need to pay out of the education fund, all of the school budgets, all of the categorical aid, everything, and then we subtract down our non property revenues. Meals and rooms, a portion of that, sales and use, etcetera, and the remainder needs to be raised somehow, and it's raised by property taxes through the yield bill. Under current law, of course, absenteeism any three changes this, but under current law, there's two property tax groups or basis that are subject to an education property tax, and the rates associated with each of these classifications differ. There's the non homestead property, and then there's homestead property. Homestead is essentially where somebody lives, the house that they live in, and all of the surrounding acreage to that homestead. Non homestead is literally everything else that's subject to property tax. So that includes parking lots, apartments, second homes, business units, your cap, everything. So this is the non homestead property tax. So if it doesn't qualify as homestead, and it's taxable for education property tax, it's taxed at the non homestead rate. This rate is uniform across all towns at the equalized level, meaning that if that property were to be assessed at 100% fair market value, that's what we're charging the tax bill based off of. The rate is technically it's set in statute at $1.0.5 but every year that rate is annually not withstood in the yield bill session bond. And the amount that's raised on non homestead and the amount that's raised on homestead is a policy choice we will grapple with every year in the yield. Homestead property tax, so this is the tax that we're going be talking about when we're talking about excess spending adjustment. So this is that tax on real property that qualifies as a homestead, So that principal dwelling and surrounding land. And then tax rate for homestead properties locally adjusted tax rate based off of per pupil spending and divided by which varies by district, and then the state, divided by the statewide yield. Per pupil spending, that's a technical term, so that's education spending divided by the weighted pupil count. So education spending, you'll recall, is essentially a school district's budget minus all of its offsetting revenues. So minus the categorical aid it's receiving, minus any funds that they're pulling from reserves, minus tuition revenues they're receiving from another school district. Whatever's left over is called education spending, and this is the numerator of that per pupil spending calculation. The denominator? Can you just say that once more? Yeah. Sure. How education spending is calculated? So education spending is calculated by taking the school district's entire budget and subtracting all of its offsetting revenues. Offsetting revenues are essentially revenues that have a specific reason that they are coming to the district. Offsetting revenues includes special education grants. It includes the transportation reimbursements. It includes flexible pathways funding. It includes some federal categorical aid. It also includes tuition revenues that another school district kind of paid in. All of those revenues that are associated with something specific are our offsetting revenues. The remainder is education spending.

[Sen. Seth Bongartz (Chair)]: Yeah. So if we had a million dollar budget and 100,000 coming in from all these other, we're gonna work out $900,000 for our education budget. For education spending, yeah. Education spending.

[Julie (Joint Fiscal Office Director)]: So education spending, and this is where I know people get frustrated in education finance with all of the technical terms. In Vermont Ed Finance, education spending is technical term that is capturing exactly what you just said. The budget minus those offsetting revenues, that 900,000.

[Sen. Seth Bongartz (Chair)]: So this would take almost, to your question, like when you have somebody paying tuition and that gets knocked off in that first, then how do we know that the, is that tuition accounting for improvements in that to update? Because we had one superintendent say, when we do any improvements, it's in the tuition cost.

[Julie (Joint Fiscal Office Director)]: I can't comment to that specific testimony because I didn't hear it. Broadly, say we have two school districts, School District A and School District B. School District A sends students to School District B and sends tuition also to School District B to cover the education of those students. That means that District A, who's sending the students, we also call that the spending district, those tuition costs will be included in their education spending, their budget, and there's not a specific revenue Of A. Of A, exactly.

[Sen. Seth Bongartz (Chair)]: So they don't lose those dollars when they're doing their budget? They don't subtract them because

[Julie (Joint Fiscal Office Director)]: In District A, they don't because it's an education cost. It's sitting in their school district budget, and there are no specific revenue. Sure, there might be specific revenue for, like, special education or something, but just for the general education, there's not a specific offsetting revenue to pay the tuition of that student. So that's district a. District b, who is receiving those students, we call that receiving district, they're receiving those tuition revenues for educating those students, and those tuition revenues are sitting in their offsetting revenues. That's what they are classified as. So they're being subtracted from the budget as offsetting revenues to get to education spending. That answer the question?

[Sen. Seth Bongartz (Chair)]: It does. It has another question in there, but you've answered the question, so.

[Julie (Joint Fiscal Office Director)]: Okay. Okay. So that's our numerator when we're calculating the per pupil spending or per weighted pupil spending. The denominator is the long term weighted average daily membership, LTWADM, which essentially is the total weighted pupil count. The way to think about it is, on average, over two years, the number of kids in that school district, or the number of kids that school district is responsible for, plus all of the weights applied to those students. Recall, we've got those weights for students from economically disadvantaged backgrounds, English learners, and then we have grade level weights under current law, you implemented some other weights for the foundation. So then, I think this, yeah, so this is the last sort of reminder slide of homestead property taxes. So, I'm a person who thinks in equations, I know other people think in words, the equation and the word essentially succeeds thing. What we're looking at here is how is the homestead property tax rate calculated? So we see that the per pupil education spending varies by district, and we just spoke about how it's calculated, right? It's the education spending divided by the weighted pupil count. So that's varied by district. Then every district's per pupil's education spending is divided by the statewide property yield, which you all are sending annually in the yield bill. And that's how we are calculating the homestead property tax rate. So now when we start talking about the excess spending adjustment, we'll be talking about within this equation, how does the excess spending adjustment impact the property tax rates? Spoiler alert, it fits into the numerator, but we'll talk about it a little bit. Okay, so that was a quick review of homesick property tax. Are we good with that? Okay. Moving into the excess spending adjustment under current law. We have something called the excess spending adjustment under current law. People also refer to it as the excess spending penalty, some people refer to it as the excess spending threshold, so I'll talk about the same concept. Essentially what it does is it creates a double tax on the amount that a school district spends per weighted pupil above the excess spending threshold. So we look at the excess spending threshold, we look at how much a school district is spending above that, and then however much they're spending above that is double taxed. The threshold is calculated annually in fiscal year twenty seven, so the fiscal year we're looking forward to setting our property tax rates for, and that school districts are currently building their budgets for, the excess spending threshold is 16,470 per weighted people. And we'll talk about how the threshold is calculated and how the adjustment actually double taxes that amount.

[Sen. Seth Bongartz (Chair)]: So the threshold is set based on the spending the prior year?

[Julie (Joint Fiscal Office Director)]: Not the spending the prior year, this is how it's set. So this was a change a few years ago in, I actually don't remember, I don't remember which app, but this was a recent change where the excess spending threshold is now calculated by taking the average per pupil, per weighted pupil spending in fiscal year twenty twenty five, increasing that average spending by inflation, we use the NIFA index, and then multiplying that inflation adjusted average spending by 180%, and that's how we get to the excess spending threshold. What was it? I'm sorry.

[Sen. Kesha Ram Hinsdale (Member)]: Go ahead. No, was it before 01/1927?

[Julie (Joint Fiscal Office Director)]: It wasn't 01/1927. The latter half of the slide talks about what it was before. Was page 121% before. Challenge is, I would caution you all to directly compare what we have now for the excess spending threshold and what we had before, because it was applying to different funding schemes. So the prior excess spending threshold was the old weights, pre Act 127. Okay. And this is current weights, post Act 127. And because I changed the way that pupil weights are calculated, you probably remember equalized pupil, middleweight with the Plan ratio. Yeah. So it's it's not necessarily an apples to apples.

[Sen. Seth Bongartz (Chair)]: Okay. Okay.

[Sen. Kesha Ram Hinsdale (Member)]: I'm always amazed how much you paid more ahead. Oh,

[Julie (Joint Fiscal Office Director)]: Well, thank you. And it is one area, so would be easier to dive a little bit deeper. So that's how the threshold is calculated. So, when we're calculating the FY27 threshold, we're saying, okay, the $13,168 which is the FY25 per pupil spending, we're increasing it by inflation for two years because now we're looking forward to FY27 and then we're multiplying it back 18%.

[Sen. Seth Bongartz (Chair)]: What's that? So on our next slide, what the number of EPO?

[Julie (Joint Fiscal Office Director)]: It was it's right here.

[Sen. Seth Bongartz (Chair)]: So we go from 13 to 16? Mhmm. Okay. With the 118%. The plus 100

[Julie (Joint Fiscal Office Director)]: With the NIPA and the 180. Yep. So what is exempt from the excess spending adjustment? Under current law, there's only one exemption and this is all principal and interest payments for any voter approved bonds that were approved prior to 07/01/2024. So that date was set because it was essentially saying anything that's been approved prior to us adjusting the excess funding threshold, we're gonna exempt that, but anything approved after, we won't. I wanna note that this exemption of the principal and interest payments for voter approved bonds is only for the calculation of excess spending. It's not for the calculation of that per pupil spending we were talking about. So there still is that tax being calculated based off of those bond payments, but those bond payments are not subject to a double tax. This is how it's applied to a school district's tax rate. As we spoke about, if the per pupil spending is greater than the excess spending threshold, then we take the per pupil amount over the threshold after subtracting out those exemptions, and essentially they're counted twice. And that's done by adding them to the numerator of that property tax rate. So we have that original per pupil education spending, plus per pupil excess spending. We know that the excess spending is already sitting within that per pupil education spending. We're just adding it a second time to make sure it's double counted, and then divide it by the statewide yield. This is the mechanism for the assets that need to just spend.

[Sen. Seth Bongartz (Chair)]: Where? So do you sign That's hard. Translate to dollar per dollar if you're over?

[Julie (Joint Fiscal Office Director)]: No, not necessarily. Just thinking about the way that this works, and I do an example on the next slide, which might be helpful, but we're really looking at adjusting a ratio. The homestead property tax rate is essentially a ratio of the per pupil spending to the statewide yield. If the per pupil spending is double the statewide yield, then the tax rate will be equalized rate will be $2 because that's the way that the fraction works out. So we're adding in this, we're double counting the excess spending. Okay, that's the

[Sen. Seth Bongartz (Chair)]: right thing about what it's supposed to, okay. Yes.

[Sen. David Weeks (Vice Chair)]: On the previous slide, can you go back to the current law, the exemption is all principal and interest payments for any daughter approved bonds that were approved prior to July 21. Can you give me an example of the bond?

[Julie (Joint Fiscal Office Director)]: The top of my head, I don't have a specific school district bond. I can certainly follow-up with you about that. Okay. Like the general conceptual example.

[Sen. David Weeks (Vice Chair)]: So if we took a bond out in one of my district's schools for improving this as a high school or something. ADA or whatever, that's that's included in that calculation.

[Julie (Joint Fiscal Office Director)]: If it was approved prior to 07/01/2024. If it was approved yesterday? Nope.

[Sen. Seth Bongartz (Chair)]: So when you were up in King, they said they went over their spending because of a repair or something with them. Remember she said we It's gonna take a robin off. Right, they had to take a bond out for something after, so they got penalized. That's just because of the way we made the law, that we weren't able to, you know, because they're already struggling and then they got taxed even more, or penalized.

[Julie (Joint Fiscal Office Director)]: Yeah, so, is all a policy decision. Yeah. This is the law as it currently exists, and what this law says is, for every dollar that you spend below the threshold, you're taxed once. For every dollar you spend above the threshold, you're taxed twice, except for the and approved it doesn't matter as long as it's not, as long as the exemption, as long as it's not fitting into the exemption, it doesn't matter if that additional spending is for a new program or for a repair.

[Sen. Seth Bongartz (Chair)]: And I wanna say we ran into the same thing down at Woodstock too, correct? They had to do a repair which puts them above their s- s- suspended. And they were like, can't we get this detached so that if this comes up- Yeah, they're worried about that because they can actually do water pumping because that's what they're looking to do. So yeah. So that's something policy we could Yeah. And even had a lot of other things going on too that pushed them over. Right. But yeah.

[Sen. David Weeks (Vice Chair)]: So did we ever, I'm thinking Act 127 now, tell school districts as long as you don't spend more than 10%, we will penalize you. Did we ever do that?

[Julie (Joint Fiscal Office Director)]: Prior to act twenty twenty seven? Yeah. And the second, we have a couple more slides, then the second half of this presentation is exactly what we used to do. Okay. We get to move to the example? Yeah. Okay. I totally made this example up. I made up all of the numbers and tried to keep them nice and round and simple. So this is no specific district we're talking about. I made up two districts, District A and District B. And I assume that District B had a per pupil education spending of $15,000 and District B had one of $17,000 Remember, we would have calculated that by taking their education spending and dividing it by their rated pupils. That's how we would get these numbers. And then I said, let's just pretend the excess spending threshold is 16,000 because it's a nice round even number and kind of close to that by '27. So how do we calculate the excess spending threshold, the excess spending adjustment, and how does it work? Well first we need to look at how much are we counting, how much is above the threshold. In this case we're assuming that there was no voter approved bonds. So by subtracting row one from row two, we can see that District M, it's below the excess spending threshold, so there's nothing above it. And in district B, it's $1,000 per weighted pupil above the excess spending threshold. So we now know how much is sitting above the threshold. So now we need to add that excess spending back to the per pupil spending to double count it for the purpose of tax rates. So district A, it had zero over the threshold, we don't need to double count it, it still has a per weighted pupil spending of 15,000. District B had a thousand over the excess spending threshold per weighted pupil, so we need to add that thousand back to their original 17,000. So we've adjusted, I don't know what the technical term is for it, this per pupil spending now factoring in the penalty. And so then using this adjusted excess spending per weighted pupil spending, we then calculate the tax rate. So we can see district and I made up a yield of 10,000. District A would have a tax rate in this example, an equalized rate of $1.67 It's just their weighted per pupil spending divided by the yield. District B would have a homestead tax rate of $2 because we're taking that excess spending adjusted per pupil spending, dividing it by the yield. Then this final row is showing, well, what if there were no excess spending adjustment? We know that District A would have the same rate, because we're not double counting anything. District B would have a rate of $1.89 rather than $2 because we're not double counting that thousand. There's an important caveat here that's pretty weedy, but I'm gonna say it anyways, and say that if there were no excess spending adjustment, the yield would also need to be adjusted because we would be shifting which districts are raising more or less from their grant lists. So this is perhaps a little bit of a misleading example because I kept the yield the same, but it's a way to see directly how the rates would be adjusted. So that's how it works. And then I thought you might be interested in fiscal year twenty twenty six. So this the fiscal year that we are currently in. The excess spending threshold was 15,926. So this is per way, people. And there were six school districts that exceeded that excess spending threshold. Are we allowed to know

[Sen. Kesha Ram Hinsdale (Member)]: which district those are? It helps to look at all six and make sure that hypothesis is true, but I believe it should be true. The fewer number of students you have, the more likely you're going to get hit by this.

[Julie (Joint Fiscal Office Director)]: Poor

[Sen. Seth Bongartz (Chair)]: repair. You can't get the repair from sitting with that because it drives up your calls.

[Sen. Kesha Ram Hinsdale (Member)]: Oh, you mean like an after the fact repair, like you were saying?

[Julie (Joint Fiscal Office Director)]: Yeah. That's exactly it. Yeah. Per people spending, has two inputs, the education spending and the way your pupil count. And so either one or a combination of the two is how you have that go up.

[Sen. Kesha Ram Hinsdale (Member)]: Julie's very good at making people feel smart also. So how we're doing this conversation.

[Julie (Joint Fiscal Office Director)]: Oh, thank you. So I will follow-up with the six school districts. I just don't have it in front of me. And this the amount that those school districts exceeded the threshold really varied. And so what I put here is that district that exceeded the threshold by the lowest amount was exceeding by $429 per weighted people, and the school district that exceeded that threshold by the most exceeded it by fifteen eighty two per weighted people. So that's all I had prepared for the excess spending threshold under current law, and now you've had some questions about history of excess spending threshold. So, so here we go.

[Sen. David Weeks (Vice Chair)]: Yep, before you transition. Yeah. Where is the excess spending tax, the tax part, the excess spending itself, where does the tax go? The amount collected from this?

[Julie (Joint Fiscal Office Director)]: To the education fund. Okay. So that's a really interesting point that I was just alluding to on the prior slide about how the yield needs to adjust. We're only talking about homestead property taxes. So all homestead property tax at the state level goes to the statewide education fund. We talked about how the amount that needs to be raised on property taxes is determined after accounting for expenditures and non property revenues. We have some pie we have to fill. How we fill that, how you fill that pie is a policy decision, both within homestead and non homestead. And then within homestead, the way that the excess spending adjustment works is it's not raising additional revenue for the education fund beyond what it needs, because we're calculating the yield to make sure the ed fund is fully funded. Instead it's shifting which districts are paying a proportion to the Ed Fund.

[Sen. David Weeks (Vice Chair)]: So there was nothing, there was nothing, is nothing in Act 73 about directing excess spending to any specific program or benefit.

[Julie (Joint Fiscal Office Director)]: There is, kind of, which is different than this. I think what you're referencing is the supplemental district spending from Act 73. And that was essentially for school districts that want to spend above the foundation formula amount, the education opportunity payment, and it's approved by voters. That's called supplemental district spending, and that is raised locally on a supplemental district spending tax rate. And the way that that tax rate works is it is equalized to the district with the lowest grand list value per pupil. Meaning that in a school district that has the lowest grand list value per pupil, they're gonna just raise exactly what they need. That's how the tax rate is gonna be calculated. All of the other districts, they're going to only be able to keep the amount that the lowest district could raise at that tax rate for for their district, for their supplemental district spending, and all of the amount that's been raised on top of that, just because there's more property wealth in the district, goes to the state, it's recaptured, and goes to the supplemental district spending reserve, which Act 73 that says, and I don't know if this is, I think this is intent language, that it's to be used for the prior, find out the prior year, the following year's property taxes.

[Sen. Seth Bongartz (Chair)]: Okay. Thank you. Mhmm. Okay.

[Julie (Joint Fiscal Office Director)]: So on to the history?

[Sen. David Weeks (Vice Chair)]: So, you know, under Act 73, I thought some of that money went to the school construction. Did they form special funds?

[Julie (Joint Fiscal Office Director)]: So there so there was a school construction special fund formed, but there was no revenue source created for the special fund. At one point during the deliberations of Act 73, this is what you got from the house, and then was changed. That recapture that Senator Weeks was asking about was flowing to that school construction special fund, but that was changed before the Act was passed. So now it's no longer.

[Sen. David Weeks (Vice Chair)]: Yes, so there's an opportunity to I can't say that in a question.

[Julie (Joint Fiscal Office Director)]: Okay. History of access funding threshold. So this is a general history. I started with ACT 127 because where do you start with something like this? Prior to Act so Act 127 froze the excess spending threshold from FY '25 to FY '29. Prior to Act 127, it was frozen during the pandemic. So it was frozen during the pandemic, and then Act 127 continued the freeze through FY 2029. And then Act 183 in 2024, so this was that big, For those of you who are here, that was that big education finance yields bill. That was Act 183. It unfroze the excess spending threshold and then that additional regulation exemption. And that's what we have now, is what Act 183 created. And this is that piece I was speaking to earlier, that because the excess spending thresholds calculation and exemptions and the methodology for weighted pools have significantly shifted pre and post Act 127. Can't really compare the excess spending adjustment prior to Act 127 and post. So, with that caveat in mind, here's how it used to work. It was taking the FY15, twenty fifteen average education spending per equalized pupil, So already we're talking about a completely different figure because we're counting pupils differently. Taking that FY '25 adjustment, sorry, FY '15 adjustment, increasing it by inflation, and then multiplying that figure by 121%. And there are also a number of exemptions to the excess spending threshold, and Act 183 did away with all of these exemptions. Beth, Sandy James put together this amazing slide deck that lists out all of the exemptions prior to 07/01/2024, and this is a list of all of the exemptions prior that she identified. So there used to be a lot of exemptions to the excess spending threshold, and Act 183 did away with those. And I do have this as a, oh no. I've lost my slide alright. Let me pull up my slide deck again. I I have, like, one slide left. So I do have a hot link at the end of the I do have a hot link within this this slide two best. Great presentation. And then this is how that threshold looked prior to act 183. So this is what we were talking about, how the excess spending threshold or adjustment was first suspended in FY '22, and then continued to be suspended through FY '25. And prior to that, this is what the excess spending threshold looked like. So in FY '12, it was sitting down here around $15,000 up to FY '21, around $18,000 AOE has all of the data used for this chart available on our website, so if you wanna look at exact amounts, you could follow that link. And again, this is per equalized pupil. And that is all. And here are a few resources that I was referencing.

[Sen. David Weeks (Vice Chair)]: Yeah so the comment earlier about the the six districts those are districts that have access to it That would be a good list to see, just to give us a little bit of background where who would not or should do it.

[Julie (Joint Fiscal Office Director)]: As soon as I'm out of the witness, I'm gonna send that list to Daphne.

[Sen. Seth Bongartz (Chair)]: Thank you.

[Julie (Joint Fiscal Office Director)]: Yeah.

[Sen. Seth Bongartz (Chair)]: So the other thing that would be interesting to know perhaps is the 10 schools that are right below Mhmm. That are in a 115 to a 118 or whatever. That's an arbitrary number but you know give give an additional sense of who's close. How many are there a lot of schools in that zone between one hundred and one hundred and eighteen?

[Julie (Joint Fiscal Office Director)]: I don't know off the top of my head. I will say that the AOE publishes on their websites. I've heard people spending data for every year. And so you can see every school district and their per pupil spend, which per weighted pupil spending after that year, as well as a few characteristics like the size of the district and the operating structure of the district. So I'll send that link to Daphne too so that you can look through it into the full level of granularity.

[Sen. Seth Bongartz (Chair)]: That would be great. Thank you. That a that a really good presentation. Okay. Good. Most most.

[Sen. David Weeks (Vice Chair)]: Until it was.

[Julie (Joint Fiscal Office Director)]: Well,

[Sen. Kesha Ram Hinsdale (Member)]: You were kind of explaining to us in numbers what was about to happen in in 2024, and maybe you did the presentation in 2023. I'm like, I don't wanna say too much of the drug about exactly what it was, but it was like a it it basically showed us in advance why people were going to be mad in 2024.

[Julie (Joint Fiscal Office Director)]: I think I don't remember that testimony. I'll I'll I'll think about it. I had to think about what it may have Oftentimes we're looking at property tax rate changes compared to the prior year. And so the more one time money that is used in a single year to decrease property taxes for that year, sort of the more artificially low Right. Property taxes are in that year. So then the following year, assuming that one time money no longer exists Mhmm. You both have to make up for the prior year's increase Mhmm. That people didn't feel, and the current year's increase.

[Sen. Kesha Ram Hinsdale (Member)]: Right. And the denominator is still going up for Right.

[Julie (Joint Fiscal Office Director)]: So the yield is an inverse relationship. In the denominator. A higher yield, all else equal, means lower tax rate. However, we can't look at the yield just by itself, because you can have property tax rates going down and property tax bills going up if someone's property value is increasing. Right. Seen. Which we also saw in the same time period. Mhmm. So

[Sen. Kesha Ram Hinsdale (Member)]: I just I mean, one of the things I put in my email to you about things that are helpful for the committee to fully understand because we thought that property tax breakdown so many years in a row is exactly what happens when that stops. Like

[Sen. Seth Bongartz (Chair)]: yeah. Yeah. So I think everybody gets that. I think everybody understands that.

[Sen. Kesha Ram Hinsdale (Member)]: Oh, okay.

[Sen. Seth Bongartz (Chair)]: The donor's sensible. But

[Sen. Kesha Ram Hinsdale (Member)]: Numerically, do people understand?

[Sen. Seth Bongartz (Chair)]: Maybe not.

[Sen. Kesha Ram Hinsdale (Member)]: I think if you combine that this is what I tried to write to my constituents over and over again, they saw the largest increase in their home prices at the same exact Yep.

[Sen. Seth Bongartz (Chair)]: Yep.

[Sen. David Weeks (Vice Chair)]: So, yes. So I've heard you use the education fund surplus to pay down property taxes.

[Julie (Joint Fiscal Office Director)]: Where's that surplus going from? So to have used it in the past to buy down property taxes, it is a policy decision to do so. It's education fund monies that are unreserved and unallocated at the close of the fiscal year. So why would that happen? That usually happens if revenues perform more strongly than were forecasted and or if there are more monies reverted back to the education fund than were assumed. So every year, I've only been here, this is my fifth session. Each of those years, there has been an education fund surplus that has been used, at least in part, to lower property taxes. The amount that it's used, and if it's used in one year or more years, varies. When we had the huge education fund surpluses at the tail end of the pandemic, when sales and use was running really hot, you all, or the legislature at the time, put monies into a tax rate offset reserve to use in the following year anticipating that the surplus would be decreasing. So

[Sen. David Weeks (Vice Chair)]: if it's not used, If that is the only thing that we use to pay down property taxes, presumably, the rate would be not as we wouldn't pay it down as much. So the rate of property taxes, property tax would be lower. So last year I think we used education surplus plus another surplus from the general fund.

[Julie (Joint Fiscal Office Director)]: Yep, that's true. That last year there was a duty fund surplus and a one time general fund transfer used to decrease property taxes. This year, the December 1 letter, statutorily, there are certain modeling parameters we have to follow for the December 1 letter. Part of that is you is JFO and tax need to use the entirety of the education fund estimated Ed Fund surplus to to uniformly lower property taxes and so that was already included in that 11.9 estimated average bill increase. The use of the Ed Fund surplus was already used for that calculation. Great.

[Sen. Seth Bongartz (Chair)]: It's always used in the following year.

[Julie (Joint Fiscal Office Director)]: Solely for the purpose of the December 1 letter calculation beyond that it's up to you all that's something that I I go into finding a lot to talk through the different permutations. So

[Sen. Seth Bongartz (Chair)]: when you really can't logistically use it in the current invite because you don't know how much you do.

[Julie (Joint Fiscal Office Director)]: Exactly. So

[Sen. Seth Bongartz (Chair)]: it has to get carried

[Sen. David Weeks (Vice Chair)]: over at least one pair.

[Julie (Joint Fiscal Office Director)]: Yeah, I mean the way that the yield bill construct is currently modeled is that, this is also a policy decision, but typically the legislature tries to not leave any monies unreserved unallocated at the close of the upcoming fiscal year that they're budgeting for. So when we're solving for the yields, we're solving so that there's no money left on the bottom line. And if it's not in a deficit, but it also is not earning a surplus. And then inevitably, over the year, forecasts are not going to be down to the penny. They're either going be under or over, and then that's where the surplus or a deficit would arise from.

[Sen. Seth Bongartz (Chair)]: Yeah. Thank you. You're welcome. Have a a couple of minutes because we're we have two witnesses coming together. For one because the crimes, you know, have to be two thirty. Julie, that would really help. Yeah. Thank you.

[Julie (Joint Fiscal Office Director)]: Yeah, you're welcome. Always a pleasure. Always a pleasure. Is it?

[Sen. Seth Bongartz (Chair)]: So it is. And today's getting should we just want me to do a We got a

[Julie (Joint Fiscal Office Director)]: chance? Yep.

[Sen. Seth Bongartz (Chair)]: Back. Be right back. We're just waiting for a witness. So anybody watching, we're going out live, but we'll be back

[Julie (Joint Fiscal Office Director)]: in