What Hoover, Wise have to say about a Clinton County Nickel Tax

Posted July 17, 2019 at 11:37 am

Ultimately, the matching funding coming from the state would be determined by the state of Kentucky, it’s budget and the leaders in the Kentucky General Assembly.

The NEWS also reached out to Kentucky Senator Max Wise (R-Campbellsville) and Kentucky House Representative Jeff Hoover (R-Jamestown), both of whom represent Clinton County as a part of their respective districts.

While both agreed that there was no longer a set guarantee, as per specific wording in each Kentucky budget, that the state would match funding raised through a secondary Nickel Tax, they both also agreed that in all likelihood, that the funding match would be realized by the state.

Max Wise

“There is no guarantee of equalization by the state. KRS 157.621(2)(b) states that equalization of any nickels passed after April 27, 2016 is subject to available funding provided by the General Assembly. We provided funding in 2018 through HB 200 under the SEEK appropriation unit, but I will note the last sentence of the budget section pertaining to the recallable nickel (Retroactive Equalized Facility Funding), which does state that it was the intent of the 2018 General Assembly to not equalize future nickels,” Wise explained. “This is just intent language though, so they could be equalized in the 2020 budget.”

As for a percentage that might be matched by the state, Wise added that while the match could be funded at the full rate of 1.53, it could also be matched at a lower rate, especially during the first two years of the tax being in place.

“The equalization of nickels is a formula based on a the taxable property value within a school district on a per student basis compared to the state average. The state essentially makes up the difference between what a district brings in from local taxes and that state average, thus the term ‘equalization’. Wise said in an email response to a series of questions on the issue last week. “Like all other school districts, Clinton County already has a nickel in place and their’s brings in about $248,000 per year in local taxes with another $400,000 in state equalization funds. So another nickel like the one just past would be expected to bring in about the same from both local and state sources if the state was equalizing at 100%. It is important to remember though that for the last eight years or so, new nickels are only equalized at 25% during the first two years. This can also be seen in the HB 200 budget language for nickels that were passed in 2016 and 2017. For Clinton County, this would mean approximately $100,000 in state equalization funds per year in the first two years, if the 2020 General Assembly chooses to follow prior practices.”

Jeff Hoover

Representative Hoover also responded to a series of email questions on the subject last week, and many of his answers were similar to the facts that Wise gave.

“There is no guarantee, but…..the state has always equalized the nickel which a local district has adopted which was subject to recall. The legislature always puts language in the budget that it is the intent of the General Assembly that no school district adopting a equalization Nickel Tax will be equalized,” Hoover said. “That is safety net language for the General Assembly should circumstances require those districts not receive equalization funding such as lack of funds, political makeup of the legislature, etc, etc. However, since the equalization tax was adopted, every school district in Kentucky that has adopted the so-called “second nickel” has received equalization funds. No statutory guarantee, but we always have funded or matched.”

Hoover did, however, give an estimate as to the odds of a Clinton County secondary Nickel Tax being funded.

“I would say the odds are 80 percent to 90 percent the funds will be equalized by the state if the Nickel Tax passes,” Hoover said.

Hoover also further explained the formula the state would likely use in matching the funding, noting that in year one and two, the matching would be much less than in year three and beyond for as long as the tax remained in effect.

“A second Nickel Tax, that district will receive approximately 25 percent of their normal funds the first two years (planning and pre-construction years) and then beginning in the third year and each year thereafter, the district receives 100 percent match,” he explained. “Each school district’s equalization rate is different based on many factors such as student makeup, property value in that district compared to state average, etc, etc.

“So, in FY 2019, Clinton County schools generated about $250,000 based on their local nickel. However, based on the district’s equalization rate, Clinton County schools received about $400,000 from the state in matching funds. As a general explanation, this shows the property tax values and the number of students in the Clinton school district are well below the statewide average, but we receive much more than is generated locally.

“Since Clinton County schools received $400,000 in state equalization in 2018 based on their numbers, the district could expect to receive about $100,000 in the first two years after the tax is adopted (25 percent of $400,000) and they could expect to receive about $400,000 (100 percent of current) additional state matching funds beginning in year three after the tax is adopted and each year thereafter.