State Education Fund Report (2017)

The forecast for the State Education Fund and the level of General Fund appropriations needed to pay for school finance have changed from when the General Assembly adjourned in May 2016. Property values grew rapidly in 2016, and are expected to continue to grow over the next few years. The increase in property values, however, is expected to be offset by a decline in the residential assessment rate (RAR) per the provisions of the Gallagher Amendment. Thus, property tax revenue available for the local share of school finance will not be as much as previously anticipated. In addition, expectations for income taxes have fallen, decreasing projected deposits into the State Education Fund and the General Fund for FY 2017-18. This report assumes the 2017 supplemental school finance bill is adopted, the value of the negative factor is $828 million, and the balance in the State Education Fund is reduced to $100 million in FY 2017-18 and beyond. As a result, General Fund support for school finance will need to increase 10.7 percent and 5.8 percent, respectively, in the next two budget years. This entails year-over-year increases in General Fund support for school finance of $385 million in FY 2017-18 and $232 million in FY 2018-19.