Fiscal Note - SB 0400 - Challenge Scholarship Program
L.R. NO. 1597-01
BILL NO. SB 400
SUBJECT: Education, Higher: Schools and Teachers
TYPE: Original
DATE: March 3, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($3,327,518 to ($70,642,390 to ($102,473,170 to
$5,527,398) $117,700,144) $170,743,582)
Total Estimated
Net Effect on All ($3,327,518 to ($70,642,390 to ($102,473,170 to
State Funds $5,527,398) $117,700,144) $170,743,582)
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 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials from Harris-Stowe State College, Central Missouri State University,
North Central Missouri College, Linn State Technical College, East Central
College, Missouri Western State College and Truman State University assume
the proposal would have no fiscal impact on them.
Officials from Jefferson College assume the proposal would result in annual
costs of approximately $5,000 for supplies, computer reports, new programs
and clerical personnel (.2 FTE).
Officials from the Department of Elementary and Secondary Education (DESE)
assume the proposal would result in no fiscal impact to DESE, but the
deduction would apply to certain expenses for students attending public or
private postsecondary institutions.
Officials from the University of Missouri assume the proposal could be
divided into two cost areas for the university. The initial costs would
include one-time computer set up costs estimated to be $5,000 and $10,000.
The ongoing costs would include the cost of clerical time, computer run time,
postage and envelopes at less than $5 per student.
Officials from the Department of Revenue (DOR) assume the legislation would
require modifications to the income tax system, tax forms and increased data
entry requirements. The system modifications and tax form revisions would be
completed by existing staff and resources. The Information Systems Division
would need two Data Entry Operator IIs ($16,488 annual salary) for four
months of each tax processing to key enter the additional income tax data
needed for this reimbursement. The Division of Taxation would be responsible
for receiving the challenge scholarship reimbursement vouchers from an
eligible higher institution of learning. These vouchers would then be
processed on a remittance processor and down loaded to a personal computer
system. The information from the vouchers could then be matched against the
income tax system to verify the amount of reimbursement claimed on a
taxpayer's income tax return. The Division of Taxation would need one Clerk
II ($15,372 annual salary) for six months of each processing tax year to
batch, run and data correct challenge scholarship reimbursement vouchers.
One Tax Processing Technician II ($16,488 annual salary) would be needed for
each tax processing year to handle error corrections, telephone inquiries and
correspondence. One End-User Computing (EUC) Programmer ($26,544 annual
salary) would be needed for six months to create, test and implement the new
programs needed for the remittance processor. Because the additional
personnel would be hired for the tax season only, DOR officials assume no
additional costs for expense and equipment would be needed.
Officials from the Coordinating Board For Higher Education (CBHE) assumed
$200 per semester for books, and $100 per semester for fees. Information on
fees was obtained from the Comprehensive Fee Schedules: Public 4- and 2-Year
Institutions, Academic Year 1996- 1997, published by the CBHE.
Schools with similar tuition rates were grouped together by CBHE officials
and the number of first time freshman, Missouri residents were used to weight
the average. Students in the proprietary sector were grouped with the Other
privates because of similar costs. Tuition information was obtained from the
Missouri Higher Education 1995-1996 Statistical Summary and the Directory and
Statistical Summary: Proprietary Sector of Missouri Postsecondary Education,
1994-95. CBHE calculated average tuition amounts of $1,760.15 per semester
for public four-year schools; $4,982.90 for private sector/proprietary
schools; and $910.66 per semester for public two year schools.
CBHE officials assume the bill provides that state and federal financial aid
be subtracted in the credit calculation. CBHE assumed that the sources of
this are the Missouri Student Grant Program, the Missouri Bright Flight
Program, and the federal Pell Grant. CBHE officials calculated Missouri
Student Grant averages of $687 per semester for private institutions and $456
per semester for public institutions. For the Federal Pell Grant CBHE
calculated an average award of $686 per semester. For the Bright Flight
Program with an award of $1,000 per semester, CBHE calculated an average of
509 recipients in private institutions and 2,031 in public institutions.
Other state scholarship programs such as the Marguerite Ross Barnett
Scholarship and the Public Service Survivor Grant program were excluded
because of their relatively insignificant size.
For all three programs, the total number of participants was multiplied by
0.4 so as to include only freshman and sophomore students (those within the
first 60 hours). The Bright Flight and Missouri Student Grant Programs are
available for up to five years. The Pell Grant is available to all
undergraduates for an unlimited period of enrollment.
In the Pell calculation it was assumed that non-Missouri residents are
represented in the Pell program in the same proportion in which they are in
overall enrollment. Thus the number of Pell recipients was multiplied by
0.81 to include only Missouri residents.
Information on the Missouri Student Grant and Bright Flight programs was
obtained from the Grants and Scholarships database maintained at the CBHE.
Pell Grant information was compiled from the DHE-14 forms completed by all
Missouri schools and submitted to the CBHE. Information on residency
percentages was obtained from the Missouri Higher Education.
1995-1996 Statistical Summary.
Enrollment numbers used by CBHE are identical to those used in fiscal note
1139-03n for SB 287. Year 1 total enrollment is off by 35 because of a
transposition error on 1139-03n. As on 1139-03n, students were divided
according to whether they would be enrolled in one or two semesters for the
relevant tax year. Enrollment information was obtained from the Missouri
Higher Education 1995-1996 Statistical Summary.
CBHE incorporated the $5000 yearly limit on eligibility. The totals are
multiplied by 0.75 to reflect the high proportion of part-time students in
the 2-year sector. This mirrors the use of 9 hours per semester in 1139-03n
(12 hours typically considered full-time). Full-time participation is
assumed, on average, for the entire 4-year sector, as was done for 1139-03n.
In year one, CBHE officials estimated enrollment at 80,707, in year two
enrollment was estimated at 88,168 and in year three enrollment was estimated
at 96,520.
One final assumption by CBHE is that no refunds will be reduced under
subsection 3 (based on Missouri adjusted gross income). Subsection 1.5, the
definition of eligible claimant, eliminates only students under a certain age
from claiming the credit. All other persons who are Missouri residents and
citizens of the United States are otherwise eligible to claim a credit on
behalf of an eligible student. Therefore, it was assumed that people will
act, within the law, in their own financial best interests. There is nothing
preventing a student, or a parent, from having someone else who makes less
than $25,000 per year to claim the credit on their behalf.
CBHE estimated the following calendar year scholarship amounts:
1998 $58,658,759
1999 $128,970,652
2000 $212,381,410
CBHE officials assume they would need Senior and Research Associates ($50,000
and $40,000, respectively) who would develop an education campaign for the
Challenge Scholarship Program, respond to citizen requests for information,
coordinate the implementation of the program on the various campuses, and
implement new monitoring and data collection activities for the program. An
administrative assistant FTE ($20,277) would support the new and existing
personnel in grant and scholarship administration.
The Oversight Division assumes that the proposal requires the CBHE to provide
a list of eligible institutions to DOR, receive a report of scholarships from
DOR and prescribe rules and regulations. Oversight assumes CBHE could
provide the list to DOR and prescribe rules and regulations with existing
resources. Oversight assumes the administrative assistant included by CBHE
could assist existing staff and maintain the data of scholarships received by
DOR. Therefore, the Oversight Division has only included the administrative
assistant in the fiscal impact for CBHE.
The Oversight Division recalculated CBHE estimates to allocate from calendar
years to fiscal years. Oversight estimates a loss to General Revenue of
$3,299,819 to $5,499,699 for FY 98 due to the possibility of reduced
withholding and estimated income tax payments for five months of calendar
year 1998 (January through May, 1998), since the proposal is effective for
education credits earned after January 1, 1998. Oversight assumes 25% of
eligible taxpayers would adjust their tax payments in FY 98; however, this
amount could be less, depending on taxpayers' awareness of the new credit and
their desire to adjust tax withholdings or estimated tax payments. The
Oversight Division has ranged the scholarship costs from 60% to 100% in FY
1998 ($3,299,819 to $5,499,699), FY 1999 ($70,586,632 to $117,644,386) and FY
2000 ($102,405,619 to $170,676,031) to allow for claimants within the income
limitations and actual utilization of the scholarships.
The proposal would result in a decrease in Total State Revenues since income
tax collections are included in the calculation of Total State Revenue.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE FUND
Cost-Coordinating Board For Higher Education
Personal Service (1 FTE) ($17,313) ($21,304) ($21,837)
Fringe Benefits (4,939) (6,078) (6,230)
Expense and Equipment (5,447) (309) (318)
Total Cost-CBHE ($27,699) ($27,691) ($28,385)
Cost-Department of Revenue
Personal Service (2.25 FTE) $0 ($21,837) ($30,472)
Fringe Benefits 0 (6,230) (8,694)
Total Cost-DOR $0 ($28,067) ($39,166)
Loss to General Revenue Fund
Challenge Scholarship Program ($3,299,819 ($70,586,632 ($102,405,619
to to to
$5,499,699) $117,644,386) $170,676,031)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND ($3,327,518 ($70,642,390 ($102,473,170
to to to
$5,527,398) $117,700,144) $170,743,582)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
0 0 0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of
this proposal.
DESCRIPTION
The proposal would create the Challenge Scholarship Program. The scholarship
would be claimed on individual income tax returns for credit hours completed.
The proposal would establish student eligibility requirements.
The amount of eligible expenses would be the lesser of the actual costs of
tuition, books and fees or five thousand dollars. The scholarship would be
reduced by any federal or state financial aid and would be multiplied by a
fraction as determined by the claimant's adjusted gross income. The actual
amount of the scholarship would be one-third for calendar year 1998,
two-thirds for calendar year 1999 and the full amount for calendar year 2000
and thereafter.
Every eligible educational institution would furnish the students a form
prescribed by DOR showing the credit hours completed by the student for the
calendar year. Claims for the scholarship would be filed with the filing of
the income tax return for the year the scholarship is being claimed. All
claims for a particular year would be filed by December 31 of the succeeding
year. Challenge scholarship claims could only be filed for the calendar
years beginning on or after January 1, 1998. The proposal would only apply
to credit hours accrued after January 1, 1998.
The Coordinating Board For Higher Education would provide DOR with a list of
eligible institutions for the calendar year by December 31. The Director of
Revenue would provide annually to CBHE a report showing how many eligible
students claimed a scholarship, the dollar amount of the scholarship and
other information requested by the CBHE.
This legislation is not federally mandated, would not duplicate any other
program, would not require additional capital improvements or rental space,
and would affect total state revenue.
SOURCES OF INFORMATION
Coordinating Board For Higher Education
Department of Elementary and Secondary Education
Department of Revenue
Office of Administration
University of Missouri
Central Missouri State University
Truman State University
Missouri Western State College
Harris-Stowe State College
North Central Missouri College
Jefferson College
East Central College
Linn State Technical College
This Fiscal Note is not an official copy and should not be quoted or cited.