Fiscal Note - SB 0294 - Equal Funding Formula For Schools; Replaces Property Tax With Sales Tax
L.R. NO. 0405-01
BILL NO. SB 294
SUBJECT: School Funding: Sales and Property Taxes
TYPE: Original
DATE: February 17, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $0 ($1,700,000) $0
Highway Funds $0 $51,700,000 $108,500,000
Total Estimated
Net Effect on All
State Funds $0 $50,000,000 $108,500,000
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $918,550,000 (UNKNOWN) to
$106,500,000
FISCAL ANALYSIS
ASSUMPTION
Officials from the State Auditor's Office, the Coordinating Board For Higher
Education, Southwest Missouri State University, Linn State Technical College,
Missouri Western State College, Harris-Stowe State College and the University
of Missouri assume the proposal would have no fiscal impact on their
entities.
Officials from Central Missouri State University, Northwest Missouri State
University, and Truman State University assumed, in response to a similar
proposal introduced during the 1996 legislative session, the proposal would
have no fiscal impact on the institutions.
Officials from the State Tax Commission assume the proposal would not affect
but did note that two-thirds of the money going to county reassessment funds
under sections 137.720 and 137.722 came from school districts. In 1995, the
loss would have been over $12,000,000. They also noted property taxes
accounted for about $1.6 billion for school districts in FY 1995.
Officials from the Department of Revenue (DOR) state that because the
effective date would be December 3, 1998 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 December 3, 1998, 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.
DOR officials estimated based on FY 1996 taxable sales of $52,898,605,553
for non- motor vehicle related items, $1,131,286,012 for highway use tax,
$5,672,600,876 for sales tax on sales of motor vehicles, all terrain vehicles
and manufactured homes, and a five percent per year growth rate. Oversight
assumes six months of collections in FY 99.
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.
The Oversight Division assumes the property tax loss to school districts
would not occur until FY 00 because the effective date of the proposal would
be December 3, 1998, and property tax assessments and billings would already
be completed for 1998. However, the additional sales tax would go into
effect beginning December 3, 1998. Oversight assumes property tax
collections would rise an average of 2.5% per year.
Advertisement costs for the proposal would be $3,990 per newspaper column
inch for three publications of the text of the proposal, the introduction,
title, fiscal note summary, and affidavit. The proposal would be on the
ballot for the November 1998 general election.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
GENERAL REVENUE FUND
Income-Department of Elementary and
Secondary Education
Sales Tax (additional three cents) $0 $918,550,000 $1,930,000,000
Cost-Department of Elementary and
Secondary Education
Foundation Formula (additional sales tax) $0($918,550,000)($1,930,000,000)
Cost-Secretary of State's Office
Advertisement Costs $0 ($1,625,000) $0
Cost-Department of Revenue
Personal Service $0 ($15,000) $0
Expense and Equipment $0 (66,791) 0
Total Cost-DOR $0 ($81,791) $0
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND $0 ($1,700,000) $0
HIGHWAY FUND
Income-Highways and Transportation
Sales Tax and Highway Use Tax
(75% of additional three cents) $0 $51,700,000 $108,500,000
ESTIMATED NET EFFECT ON
HIGHWAY FUND $0 $51,700,000 $108,500,000
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
Income-Cities
Sales Tax (15%) $0 $10,300,000 $21,700,000
Income-Counties
Sales Tax (10%) $0 6,900,000 14,500,000
Income-School Districts
Increase Foundation Formula $0 $918,550,000 $1,930,000,000
Loss-School Districts
Elimination of taxes for school purposes $0 $0($1,810,000,000)
Loss-Counties
Reassessment Funds $0 $0 ($13,500,000)
Collectors' Commissions and
Assessment Fees $0 $0 (UNKNOWN)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENTS $0 $918,550,000 (UNKNOWN)
to
$106,500,000
Approximately $550 million in Proposition C revenues would be distributed
through the foundation formula, rather than distributed on an eligible pupil
basis.
FISCAL IMPACT - Small Business
Small businesses would be affected as a result of this proposal. They would
pay higher sales taxes on taxable purchases. They would pay lower property
taxes on taxable property.
DESCRIPTION
The proposal would raise the state portion of the sales tax from four percent
to seven percent of the purchase price and would eliminate local property
taxes for school purposes. 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 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, would not require additional capital improvements or rental space,
and would not affect total state revenue.
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
Harris-Stowe State College
Linn State Technical College
Southwest Missouri State University
Missouri Western State College
University of Missouri
NOT RESPONDING: St. Louis School Board
This Fiscal Note is not an official copy and should not be quoted or cited.