This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0915 - Equal Fund. Formula For Sch./Replaces Prop. Tax w/Sales Tax
L.R. NO. 2598-01
BILL NO. SB 915
SUBJECT: Schools: Property Tax and Sales Tax
TYPE: Original
DATE: March 4, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue ($579,791) ($122) $0
Highway Funds $39,825,000 $98,475,000 $102,450,000
Total Estimated
Net Effect on All
State Funds $39,245,209 $98,474,878 $102,450,000
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government (UNKNOWN) to (UNKNOWN) to
$768,175,000 $328,525,000 $405,250,000
FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Economic Development-Divisions of Public
Service Commission, Professional Registration, Office of Public Counsel and
Tourism; Office of the State Courts Administrator; State Auditor's Office;
and Attorney General's Office assume the proposal would have no fiscal impact
on the departments.
Officials from the Coordinating Board For Higher Education assume the
proposal would have no fiscal impact on the agency; however, they assume the
proposal could impact public colleges and universities regarding refinancing
lease purchase agreements.
Officials from Central Missouri State University, Northwest Missouri State
University, Truman State University and University of Missouri assume the
proposal would have no fiscal impact on the institutions.
Officials from the State Tax Commission assume the proposal would not affect
them except that they would not certify assessment sales ratios, which is not
very time consuming anyway.
Officials from the Secretary of State's Office assume the proposal would
result in no fiscal impact to them. The Oversight Division assumes
publication costs for 17,200 words would be $498,000. Oversight assumes
advertisement costs for the proposal would be $1,220 per newspaper column
inch for the text of the proposal, the introduction, title, fiscal note
summary, and affidavit. The proposal would be on the ballot for the
November, 1996 election.
Officials from St. Louis County assume the proposal would impact the county
taxpayers significantly and redistribute the tax burdens. However, they
anticipate no direct costs or fiscal impact on St. Louis County government as
the result of the proposal, other than an obligation to make programming
changes to effectuate the new structure.
Officials from the Department of Revenue (DOR) state that because the
effective date would be November 5, 1996 for the sales/use tax rate increase,
forms would need to be revised and remailed for those accounts currently
using single location vouchers. The additional vouchers would be required so
the businesses could report sales taxes collected or use taxes due at two
different rates for a single filing period (prior to November 5, 1996, and
after that date). The form costs would be approximately $10,462. Also,
additional data entry duties to enter information for the additional location
would require approximately $15,000 in overtime moneys. These costs could be
eliminated if the effective date of the proposal would be changed to the
beginning of a calendar year.
DOR officials also assume the Division of Taxation and Collection would also
require $51,015 in notification costs to retailers. Postage costs for the
notification and the new vouchers would be combined for economy.
DOR assumes the Division of Motor Vehicles and Drivers Licensing, Motor
Vehicle Bureau, would anticipate rejects due to the change in tax rate.
Policies would need to be revised and notice of the increase would be mailed
to dealers and lienholders.
Officials from the Office of Administration-Budget and Planning assume with
an effective date of January 1, 1997, a one month cash flow lag, and revenues
based on sales tax estimates in the FY 97 executive budget with growth beyond
FY 97 at 4%, the proposal would generate approximately $1.8 billion in
regular sales tax (General Revenue Fund) and $.135 billion in highway sales
tax (Motor Fuel Tax and Highway Funds).
Officials from the Department of Elementary and Secondary Education (DESE)
assume the proposal would have no fiscal impact at the state level for their
department. At the local level, they made the following assumptions:
1. All sources of revenue to fund the formula would remain in place and
continue at the current appropriation level.
2. The increase to the sales tax would not impact total sales in Missouri.
However, in reality, sales could decline if consumers would reduce
purchases or purchase items in other states. An additional three cent
tax would add $1.65 billion to the formula.
The following taxes for "school purposes" (operational expenses) would
be eliminated:
Local property tax 1994-95 (current and delinquent) $1.403 B
Intangible tax (estimated) .012 B
Merchant and manufacturers .076 B
State assessed RR/U .097 B
Total $1.588 B
In addition, DESE assumes $550 million in Prop C revenues would be
distributed through the formula rather than being distributed on an eligible
pupil basis. DESE assumes the allocation per pupil would be about $3,700.
Based on the current cost per pupil, DESE assumes about two-thirds of the
districts would have to lower spending.
The Oversight Division assumes the property tax loss to school districts
would not occur until FY 98 because the effective date of the proposal would
be December 5, 1996, and property tax assessments and billings would already
be completed for 1996. However, the additional sales tax would go into
effect beginning December 5, 1996.
Officials from the St. Louis Public Schools assume the proposal would result
in a severe negative impact on the district, but were unable to estimate the
amount.
Officials from the Jackson County Executive's Office assume the proposal
would result in a loss of collector commissions of approximately $2 million
and assessment fees of approximately $1 million, for a total of $3 million
annually.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
GENERAL REVENUE FUND
Income-Department of Elementary and
Secondary Education
Sales Tax (additional three
cents) $701,800,000 $1,752,400,000 $1,822,500,000
Cost-Department of Elementary and
Secondary Education
Foundation Formula (additional
sales tax) ($701,800,000) $1,752,400,000) ($1,822,500,000)
Cost-Secretary of State's Office
Advertisement Costs ($498,000) $0 $0
Cost-Department of Revenue
Personal Service ($15,000) $0 $0
Expense and Equipment (66,791) (122) 0
Total Cost-DOR ($81,791) ($122) $0
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND ($579,791) ($122) $0
HIGHWAY FUND
Income-Highways and Transportation
Sales Tax (75% of additional
three cents) $39,825,000 $98,475,000 $102,450,000
ESTIMATED NET EFFECT ON
HIGHWAY FUND $39,825,000 $98,475,000 ($102,450,000)
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
Income-Cities
Sales Tax (15%) $7,965,000 $19,695,000 $20,490,000
Income-Counties
Sales Tax (10%) 5,310,000 13,130,000 13,660,000
Income-School Districts
Increase in foundation formula (additional
three cent sales tax) 754,900,000 1,883,700,000 1,959,100,000
Loss-School Districts
Elimination of taxes for school purposes
Local Property Taxes $0 ($1,403,000,000) ($1,403,000,000)
Intangible Tax 0 (12,000,000) (12,000,000)
Merchant and Manufacturers Tax 0 (76,000,000) (76,000,000)
State Assessed Railroads/Utilities 0 (97,000,000) (97,000,000)
$0 ($1,588,000,000) ($1,588,000,000)
Loss-Counties
Collectors' Commissions and
Assessment Fees $0 (UNKNOWN) (UNKNOWN)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENTS $768,175,000 (UNKNOWN) (UNKNOWN)
to to
$328,525,000 $405,250,000
Approximately $550 million in Proposition C revenues would be distributed
through the foundation formula, rather than distributed on an eligible pupil
basis.
DESCRIPTION
The proposal would raise the state portion of the sales tax from four percent
to seven percent of the purchase price. The amount going to the School
District Trust Fund would be raised from one cent on the dollar to four cents
on the dollar.
The proposal would eliminate local property taxes for school purposes.
The proposal would remove from consideration in the foundation formula the
district adjusted gross income per return, state adjusted gross income per
return, district income factor, district income ratio, district's tax rate
ceiling, free and reduced lunch eligible pupil count, guaranteed tax base,
operating levy for school purposes, and adjusted operating levy. The
"foundation formula payment amount per pupil" would be added to the formula
and would be the amount determined by DESE as the appropriation per pupil for
distribution for district entitlements.
The proposal would be submitted to the voters of the state for approval at a
special election in November, 1996.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
State Tax Commission
Department of Revenue
Coordinating Board For Higher Education
Department of Elementary and Secondary Education
Secretary of State's Office
State Auditor's Office
Office of Administration
Office of State Courts Administrator
Attorney General's Office
State Treasurer's Office
Department of Economic Development
St. Louis Public Schools
St. Louis County
Jackson County Executive
Central Missouri State University
Northwest Missouri State University
Truman State University
University of Missouri
NOT RESPONDING: Kansas City School Board, Collector of Revenue-City of
St. Louis, City of Kansas City