a plan to restructure taxation and education funding Board of Trustees Florence County School District 3 February 28, 2013 Donnie W. Wilson Chief Financial Officer Kershaw County School District William F. (“Bick”) Halligan Childs & Halligan, P.A. 1

major problems! 1)property tax mess formula: FMV x assessment ratio = AV x millage rate = tax revenue (1) property tax produces local revenue and (2) assessed value of property (index) affects distribution of state revenue ($1.8 billion) all elements of formula changed in last decade 2

major problems! 2)fair market value (FMV) 100% homestead exemption ($175 billion FMV) – no school operating taxes reimbursements less than taxes ($100M) 15% reassessment cap 3)assessment ratio: fees-in-lieu-of-taxes (FILOT) and cars (10.5% to 6/4%) 4)assessed value (AV): impute index of taxpaying ability 3

major problems! 5)millage rate limit: CPI + all-age population growth estimate unrelated to decreases in state revenue low rate, low limit; high rate, high limit local legislation varies among 83 school districts 4

major problems! 6)property tax revenue $2.5 million minimum per county (Act 388 – Tier 3) FILOTs in multi-county parks ― abuse of economic development incentives: 100% property tax credits coupled with 100% diversion of school operating funds to county purposes 7)too complicated 70+ state revenue accounts mishmash of CPI/inflation/population/student formulas 5

major problems! 8)annual patchwork of provisos, special legislation, non-formula funding, and conflicting laws 9)result huge range (x2) of revenue ($3,889 to $7,802 per WPU) huge range (x 3) of property tax rates (90 to 302 mills) no correlation between revenue for the state’s system of free public schools and the actual cost of a minimally adequate education for each child 10)NO UTOPIA! 6

funding plan working group (September 2010) » finance officers from 16 S.C. school districts » Miley & Associates, Inc. (Dr. Harry W. Miley, Jr.) » Childs & Halligan » SCSBA staff » SCASA staff 7

As a package plan only, SCJET will: Simplify, equalize state K-12 revenue in reasonable, realistic manner Level and stabilize the tax burden Better way to generate and distribute tax revenue for the State’s public education program End result is simple and straightforward, but how to get there from here is complicated and tedious Base student funding (BSF) x weighted pupil units (WPU) = District’s base student funding 8

How it works: 9

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reduces about 70 separate state funding sources to 12 13

additional state dollars needed to balance the difference between what current millage rates generate statewide and what the 100-mill levy would generate Est. $611,646,420 14

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additional state funding to ensure no district gets less funds than what it currently receives – “hold harmless” Est. $334,946,457 16

all other funds for programs not distributed to districts on per pupil basis such as: » transportation related » national board certification » palmetto priority schools » retiree insurance » 4K programs 17

local school board authority to levy millage of up to 8% of the assessed value of taxable properties 18

local school boards can use either 8% flexibility or voter approval. If approved, funding applies to all property including homestead 19

local district examples … 20

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other major provisions… 23

» manufacturing assessment ratio from 10.5% to 6% » annual inflation factor:  state salary schedule, step and benefits increases » reserves: state – 5%district – 15% » EOC WPU: 1.0 with add-ons  poverty  limited English  remediation  gifted and talented  disabilities  adult (17-21)  vocational/career » transition  new revenue to low revenue districts – phase-in over 3 years  transition funds–phase-out over 25 years (4% per year)  if less than 105 mills–5 mill reduction; add 1 mill per year and no phase-out of transition until State Uniform Millage (SUM) 24

what it will cost to make SCJET a reality … 25

$334,946,457 + $ 611,646,420balancing funds $ 946,542,877total additional state funds needed to … grant $604,481,375 in tax relief for all business, industries,vehicles and all other property taxpayers 26

27  equal state funding for every student no matter where they reside  provides all school boards greater funding flexibility  gives every property taxpayer property tax relief in every district  simplifies state funding―reduces funding streams from 70 to 12  provides a more stable revenue source to better manage budgetary dips due to the economy  fixes the current broken state-local funding system

What is the alternative? 28