We started this legislative session seeking property tax relief. Nearly half way through the first year, how are we doing?
Friday April 9, 2021, is crossover day in the NH Legislature. On that date any bill that originated in the House that is not passed on to the Senate is considered dead for this session. It is a little different for the Senate. The Senate can attach unrelated amendments to a live bill. It also has the advantage of having the last crack at the budget bill.
So let’s take a look at what’s going on that impacts our property taxes.
Direct Property Tax Relief Legislation
Democratic bills, HB 274 and SB 72, to restore 15% of the state’s 35% obligation to fund the police, firefighters, and teachers retirement program were killed on near party line votes. Retirement funding was zeroed out in the House budget.
SB 99, which would increase the municipal share of Meals and Rooms revenues, was passed by the Senate. However, the meals and rooms tax rate was lowered in the House budget. If SB 99 finally passes, municipalities would get a larger portion of a smaller pie. Go figure.
SB 118, which would provide a one-time $20 million bonus to municipalities with the proviso that 60% of it go to property tax relief, passed the Senate in a close vote. It was then laid on the table. Maybe it will show up in the Senate budget. But maybe not.
The House budget continues to zero out state revenue sharing with municipalities.
State Adequacy Aid for 2021-22 School Year
Education funding is the largest line item in any municipal budget. State adequacy aid to schools is based on student enrollment in the previous school year. It is increased by the number of students enrolled in the free and reduced lunch program. If we are lucky, state adequacy aid will remain at current levels.
Disruptions caused by Covid 19 caused enrollment in public schools and in the free and reduced lunch program to plummet. The House failed to pass HB 623, which would keep adequacy funding at its current level. Instead it restored funding based on the free and reduced lunch program enrollment only. It did not adjust for lower overall enrollment due to Covid 19.
The Senate may come to the rescue by attaching SB 135 to the budget. That would restore adequacy funding based on overall student enrollment in the 2019-20 school year to the Senate budget version.
These adjustments would not increase adequacy aid to schools. They only restore it to pre-Covid levels.
Education Trust Fund
The Education Trust Fund is used to fund local education programs and facilities. It is funded through a variety of revenue sources. However, business taxes and meals and rooms taxes are the primary revenue sources for the Fund. Cuts to these taxes, as provided in the House budget, will impact the revenue available for state support of local education projects.
House bills, HB 20 and HB 607, propose using some of the Fund to provide so-called education freedom account scholarships (vouchers) to private schools. Fortunately these bills appear to be dead. However, SB 130, which funds education freedom scholarships, remains alive and well in the Senate. Unlikely to pass the House as a stand alone bill, it is available to be added to the Senate version of the budget on the Senate floor. This is a tactic to avoid the scrutiny of an unfavorable fiscal statement review in the Senate Finance Committee.
Businesses continue to be able to claim a tax credit of 85% of their contribution to scholarship programs that can go to either public or private school students. As a result, the revenue available for state support for local public schools is decreased.
State Aid Grants (SAG) Funding
The House budget eliminates funding for state aid with respect to water pollution control and solid waste management. It continues to under fund municipal bridge aid. Many municipalities that have begun needed water protection projects based on previous promises of state help will be left having to pay the entire bill.
Overall, the House budget has reduced aid to municipalities by $40 million over the next biennium.
To add insult to injury, CACR 9 proposes limiting the amount a municipality can increase the property tax rate in any one budget cycle. The state shirks its responsibility to share revenues with the municipalities. Then it limits the amount of revenue the municipalities can raise to fill this gap.
So you see when it comes to money, it doesn’t much matter what policy committees do with a bill.
It is the budget bill that will determine its fate. From the looks of the House proposed budget bill, municipalities and property taxpayers are once again going to be left holding the bag.