Is it the Tax Bill or the Education Bill? This is a rhetorical question, but it does raise some questions about how we are spending the surplus money. Tax credits and deductions always sound like a great idea until you realize the state has to “buy” them. This is real money that is not available for education.
The House Taxes Committee passed a very generous $2 billion tax bill (HF 848) this week which contained $285 million in tax cuts and credits for preK-12 education related provisions. If you add in higher education credits and exemptions, the total is $634 million. The question becomes: would this $240 million be better used on the basic education formula to provide services to the students in Minnesota?
Below are the highlights of the education provisions as they appear in the tax bill.
Income and Franchise Taxes (Article 1):
- Extends the preK-12 education credit to nonpublic tuition and adds inflation.
- Extends both preK-12 education credit and subtraction to preschool education programs.
- Increases the maximum education deduction from $1,625 to $2,500 for each child preK-6, and from $2,500 to $3,750 for each child in grades 7-12.
MSBA’s Grace Keliher testified during the hearing and shared her displeasure with including the education credit for nonpublic students. “These credits will have inflationary increases,” Keliher said. “But you don’t do that for public education.”
Two new refundable individual income tax credits:
- PreK-12 teachers that complete master’s degrees in their field of licensure.
- Contributions to 529 college savings plans.
Property Tax (Article 2): Requires elections on city, county and school district referendum questions related to spending be conducted on the first Tuesday after the first Monday in November – to coincide with the annual general election date.
NEW: Requires elections for school districts to levy for a capital project related to spending be held on the first Tuesday after the first Monday in November — to coincide with the annual general election date instead of a date set by the school board. This also provides an exemption for a referendum to finance a district’s response to a disaster or emergency. This provision does not include election of persons.
“We’ve been told making this move would save money, we don’t find that to be true,” Keliher told committee members. She added that school districts would have a harder time getting their message across about their referendums if they have to compete with general election races.”
NEW: Requires a school district to state on both its referendum ballot and on its notice to taxpayers the amounts of any board-approved local optional revenue (currently up to $424 per pupil), board-approved referendum authority (currently up to $300 per pupil) and previous voter-approved referendum authority.
“This is not a wise move,” Keliher said. “These should go in the Truth-in-Taxation statement or first-class mailings.”
Property Tax (Article 3): The State General Levy would be phased out over the next six years. Also exempts the first $500,000 of each commercial and industrial parcel and the first $250,000 of each seasonal-recreational parcel from the state general levy, with a levy reduction so that it is not shifted to other properties. This eliminates inflation.
Aids and Credits (Article 9) (NEW) Provides for a property tax credit on all property classified as agriculture equal to 50 percent of the tax on the property attributable to school districts bonded debt levies.
The school building bond credit would need to be noted on the Truth-in-Taxation statement. Provides for the credit to be shown on the property tax statement.
This provision simplifies the process for the sales tax exemption when building materials are purchased by contractors for constructing public infrastructure owned by school districts and local governments.
The contractor, subcontractor, or builder must pay the sales tax at the time the materials are purchased and the owner of the facility must apply for the refund as provided.
Keliher and Minnesota Association of School Administrators Executive Director Gary Amoroso both appealed to the committee for additional funding for education.
Amoroso told the committee that since 2003, schools are $1,200 per pupil BELOW the rate of inflation on the basic formula. He said he hoped that the state’s nearly $2 billion surplus would lead to additional funding for schools.
“We have a long way to go toward (adequately) funding our public schools,” Amoroso said. “I would love to have tax relief, but we are almost creating the concept that if we have tax relief, public schools cannot be funded. We need to come together and meet the needs of public schools and all Minnesotans.”
“We came (into this session) with a rosy outlook and thought we’d have our inflation covered,” Keliher said. “This clearly looks like it is going to be a tough fight. This lack of funding will lead to more teacher layoffs. This is going to hurt the teachers, the families and the kids that go along with it. It is an unfortunate outcome of what is going on here at the Capitol.”