(2)__Temporary interim nonadministrative space.

(a)__A school administrative unit with state- approved need for nonadministrative space may lease temporary interim space, with state support, for a maximum of 5 years.__A school administrative unit may appeal to the school board if this division presents an undue burden.__The board's decision is final.

(b)__A school administrative unit engaged in a lease-purchase agreement for temporary interim nonadministrative space is eligible for state support for a maximum of 10 years; and

(3)__Permanent small nonadministrative space that replaces or is converted from existing approved leased portable space.__The existing leased portable space will be eligible for state support until July 1, 2006.__ Once an existing leased portable space has been converted into a permanent nonadministrative space through an approved lease-purchase agreement, such space is eligible for state support for a maximum of 10 years.

The department shall adopt rules necessary to implement this paragraph.__Rules adopted by the department to implement this paragraph are major substantive rules pursuant to Title 5, chapter 375, subchapter II-A;

C.__The portion of the tuition costs applicable to the insured value factor computed under section 5806, for the base year;

D.__Purchase or cost of construction of portable, temporary classroom space as approved by the commissioner beginning January 1, 2011.__For the purposes of this section, "portable, temporary classroom space" means a project consisting of one or more mobile or modular buildings that are at least partially constructed off site and are designed to be moved to other sites with a minimum of disassembly and reassembly.__"Portable, temporary classroom space" includes, but is not limited to, space for regular classrooms, small

group instruction, libraries, clinics and guidance and administrative office space, including principal and superintendent offices.__ The department shall adopt rules for approving the purchase, construction or lease-purchase of portable, temporary classroom space, and for determining the amount includable for subsidy purposes. Lease-purchase agreements may not exceed a term of 10 years.__ Approved costs are those for the year prior to the year of allocation.__The department shall adopt rules necessary to implement this paragraph.__Rules adopted by the department to implement this paragraph are major substantive rules pursuant to Title 5, chapter 375, subchapter II-A; and

E.__Beginning in school year 2010-11, 1/5 of the aggregate amount of the approved leases defined in paragraph B and an additional 1/5 for each year thereafter may not be used to determine the debt service millage limit calculated under section 15611, subsection 1, paragraph A.__The local share for the 1/5 of the aggregate amount of the approved leases defined in paragraph B and an additional 1/5 for each year thereafter must be calculated as the same percentage determined under section 15609, subsection 1, paragraph A.__ The department shall adopt rules necessary to implement this paragraph.__Rules adopted by the department to implement this paragraph are major substantive rules pursuant to Title 5, chapter 375, subchapter II-A.

4.__Fiscal capacity.__"Fiscal capacity" means the ability of a municipality to raise property tax revenues as measured by the state valuation of property subject to property tax assessment on April 1st in the base year.__The fiscal capacity of a unit is the sum of the state valuations of its member municipalities in the base year.

5.__Foundation per pupil operating rate.__"Foundation per pupil operating rate" means the sum of operating costs in the base year for all units divided by the State's average pupil count.

6.__Nonsubsidizable costs.__"Nonsubsidizable costs" are not considered in the calculation of the total allocation.__ "Nonsubsidizable costs" includes the following:

(1)__Community service costs;

(2)__Major capital costs;

(3)__Expenditures from all federal revenue sources, except for amounts received under the United States Code, Public Law 81-874;

(4)__One-half of salary and benefit costs for superintendents, assistant superintendents and associate superintendents;

(5)__Transportation costs not associated with transporting students from home to school and back home each day; and

(6)__Costs payable to the Maine State Retirement System under Title 5, section 17154, subsections 10 and 11.

7.__Operating costs.__"Operating costs" means the reasonable and necessary costs of operating a school administrative unit excluding program costs, debt service costs, state direct costs and nonsubsidizable costs.

8.__Program costs.__"Program costs" includes the following:

(1)__Bus purchase costs as defined in section 15603, subsection 7;

(2)__Early childhood educational program costs as defined in section 15603, subsection 10;

(3)__Special education costs as defined in section 15603, subsection 22;

(4)__Transportation operating costs as defined in section 15603, subsection 29; and

(5)__Vocational education costs as defined in section 15603, subsection 30.

9.__Pupil count.__"Pupil count" means the total of resident pupils counted in accordance with sections 5104-A and 6004 educated at public expense in kindergarten to grade 12.

10.__State share percentage.__"State share percentage" means the following quotient expressed in percentage terms:__the numerator is the unit's operating cost subsidy calculated in accordance with section 15763, subsection 2.__The denominator is the unit's subsidizable operating costs.__For a unit whose subsidizable operating cost is zero, the state share percentage is also zero.

11.__Subsidizable operating costs.__"Subsidizable operating costs" means, for each unit, costs that are equal to the product of the foundation per pupil operating rate times the unit's average pupil count.

12.__Unit.__"Unit" means the school administrative unit.

13.__Year.__"Year" means a fiscal year starting July 1st and ending June 30th of the succeeding year.

§15763.__Operating cost subsidy

By March 31st of each year, the Legislature shall appropriate funds to subsidize operating costs for all units for the ensuing fiscal year.

1.__Default appropriation.__In the absence of timely legislative action, the operating cost subsidy for the ensuing year must be calculated and paid by the commissioner based on the appropriation and the operating cost mill rate in effect for the current year.

2.__How calculated.__The operating cost subsidy for each unit is the amount of that unit's subsidizable operating costs less its local share.__The local share is the product of the operating cost mill rate, under subsection 4, times the unit's fiscal capacity.

If a unit fails to raise and provide toward operating costs a level of funds sufficient to pay its local share, the State's subsidy must be reduced by an amount equal to what the unit fails to provide.__The reduction in state subsidy must be added to the commissioner's reserve fund and distributed in accordance with subsection 5.

3.__Minimum subsidy.__If a unit's subsidy when calculated under subsection 2 is less than 5% of its subsidizable operating costs, the unit shall, nevertheless, receive a subsidy that is equal to 5% of its subsidizable operating costs.

4.__Operating cost mill rate.__The operating cost mill rate is a single statewide property mill rate that is calculated each year by the commissioner to satisfy the following condition:__ when the operating cost mill rate is applied to the fiscal capacity of each unit eligible for subsidy under subsection 2, the subsidies that result under the rules of this section, including the rule for minimum subsidies in subsection 3, exhausts 99.5% of the amount appropriated by the State for operating costs.

5.__Commissioner's reserve fund.__One-half of 1% of the amount appropriated under this section plus subsidy reductions under subsection 2 must be held by the commissioner in a reserve fund that the commissioner may expend during the year to make

adjustments resulting from audits or necessary corrections to subsidy entitlements under this chapter.__At the end of the year, any balance then remaining in the reserve fund must be distributed to all units eligible for subsidy under subsection 2 in proportion to each unit's operating cost subsidy level.

§15764.__Program cost subsidy

By March 31st of each year, the Legislature shall appropriate funds to subsidize program costs for all eligible school units for the ensuing year.

1.__Default appropriation.__In the absence of timely legislative action, the program cost subsidy for the ensuing year must be calculated and paid by the commissioner based on the program appropriation and the program millage limit in effect for the current year.

2.__How calculated.__The program cost subsidy for each unit is the product of that unit's program costs times the state share percentage for that unit.

3.__Appropriation less than subsidy.__If the appropriation for program costs is insufficient to pay the subsidies calculated in accordance with subsection 2, the subsidy to each unit eligible to receive a program cost subsidy must be reduced in proportion to each unit's average pupil count.

4.__Appropriation exceeding subsidy.__If the appropriation for program costs exceeds the amount necessary to pay the subsidies calculated in accordance with subsection 2, then the excess must be distributed to pay that portion of each unit's program costs that exceeds its program circuit breaker.__A unit's program circuit breaker is the amount calculated by multiplying the program millage times the fiscal capacity of that unit.

5.__Program millage limit.__The program millage limit is a single statewide property tax mill rate that is calculated each year by the commissioner to satisfy the following condition:__ when the program millage limit is applied to the fiscal capacity of each unit, the subsidies that result under the rules of this section exhaust the State's program cost appropriation.

§15765.__Debt service subsidy

By March 31st of each year, the Legislature shall appropriate funds to subsidize debt service costs for all eligible school units for the ensuing fiscal year.

1.__Default appropriation.__In the absence of timely legislative action, the debt service subsidy for the ensuing year must be calculated and paid by the commissioner based on the debt service appropriation and the debt service millage limit in effect for the current year.

2.__How calculated.__The direct service subsidy for each unit is the product of that unit's debt service times the state share percentage for that unit.

3.__Appropriation less than subsidy.__If the appropriation for debt service is insufficient to pay the subsidies calculated in accordance with subsection 2, then the subsidy to each unit eligible to receive a debt service subsidy must be reduced in proportion to each unit's average pupil count.

4.__Appropriation exceeding subsidy.__If the appropriation for debt service exceeds the amount necessary to pay the subsidies calculated in accordance with subsection 2, the excess must be distributed to pay that portion of each unit's debt service that exceeds the unit's debt service circuit breaker.__A unit's debt service circuit breaker is the amount calculated by multiplying the debt service millage limit times the fiscal capacity of that unit.

5.__Debt service millage limit.__The debt service millage limit is a single statewide property tax mill rate that is calculated each year by the commissioner to satisfy the following condition:__when the debt service millage limit is applied to the fiscal capacity of each unit, the subsidies that result under the rules of this section exhaust the State's debt service appropriation.

§15766.__State direct costs

By March 31st of each year, the Legislature shall appropriate funds to pay state direct costs for all eligible school units for the ensuing fiscal year.__Funds for state direct costs are limited to the amounts appropriated by the Legislature for those purposes.__The commissioner shall prorate payments to units if the amounts appropriated are insufficient to make payments in full.

§15767.__Cushion subsidies

Hardship cushions as provided in subsections 1 or 2 must be paid from funds generated through setting a maximum allowable percentage of gain as provided in subsection 3.

1.__Cushions through June 30, 2007.__If the combined changes for operating costs and program costs subsidies calculated in sections 15603 and 15604 would represent a loss to a unit from fiscal year 2005-06 to fiscal year 2006-07, the commissioner shall distribute to each such unit an additional cushion subsidy sufficient to limit the unit's loss to 1/2 of what it would otherwise be.__There is no cushion for fiscal year 2007-08.

2.__Cushions for fiscal years beginning July 1, 2007.__For fiscal years that begin on or after July 1, 2007, if the combined changes for operating cost and program cost subsidies calculated in sections 15603 and 15604 represent a loss to a unit in excess of 5% from one fiscal year to the next, and if that unit's state share percentage in the first of the 2 fiscal years exceeds 30%, the commissioner shall distribute to each unit an additional cushion subsidy sufficient to limit the unit's loss to 5%.

3.__Maximum gain.__As necessary to fund the cushions in subsection 1 or 2, the commissioner shall determine a maximum allowable percentage of gain that units may receive from one fiscal year to the next in combined operating cost and program cost subsidies.__The commissioner shall set the maximum percentage for each year at a rate such that the excess funds generated equal the amount necessary to pay the cushions required under subsection 1 or 2.

Sec. 3. Supplements the Maine Revised Statutes, Title 20-A, chapter 606. This chapter supplements the Maine Revised Statutes, Title 20-A, chapter 606, whose provisions remain in effect except when in conflict with this chapter.

Sec. 4. Revisor's review; cross-references. The Revisor of Statutes shall review the Maine Revised Statutes and include in the errors and inconsistencies bill submitted to the Second Regular Session of the 120th Legislature pursuant to Title 1, section 94, any sections necessary to correct and update any cross-references in the statutes to provisions of law repealed in this Act.

Sec. 5. Effective date. This Act takes effect July 1, 2002.

SUMMARY

Effective for the fiscal year that begins July 1, 2002, this bill divides general purpose aid into its 4 component parts: operating costs, program costs, debt service and direct state costs, formerly called adjustments. The bill requires that all 4 components receive separate default appropriations to take effect

if the Legislature fails to appropriate new funds prior to March 31st of each year.

Income and cost-of-living factors are no longer included. Operating, program and debt service subsidies are all proportional to a school unit's fiscal capacity. The need for percentage reduction is eliminated. The first dollars available go to the poorest of school units. Program or debt service costs that exceed a circuit breaker amount are fully subsidizable. Circuit breaker levels are not fixed but float with the level of the annual appropriation.

The operating cost subsidy for each unit is calculated as follows:

Foundation per pupil = Statewide base Divided by State's

operating rate year operating average pupil

costs count

A unit's subsidizable = Foundation per x Average pupil

operating costs pupil operating count for the

rate unit

Local share of = Operating cost x Fiscal capacity

operating costs mill rate of the unit

"Operating cost mill rate" is a calculated figure that floats to meet the State's annual appropriation.

The state subsidy is equal to the unit's subsidizable operating costs less the local share, but not less than 5% of the unit's costs.

A school unit that fails to raise its local share of operating costs will lose a portion of its subsidy equal to what it fails to provide. No such reduction is necessary for program and debt service subsidies because they continue to be calculated on the basis of the school unit's own approved expenditures.

Pupil count averaging is extended over 3 separate dates, rather than 2 as provided in present law. Thus, changes in pupil counts will have a more gradual impact on subsidy changes.

The bill contains transition cushions to buffer the change from the Maine Revised Statutes, Title 20-A, chapter 606-A to chapter 607-A over a period of 2 fiscal years. For those school units who may lose subsidy under the law, only 1/2 the loss will be recognized in the first year with the remainder picked up in the 2nd.

Beginning July 2, 2004, a permanent cushion system goes into effect. Any unit that depends on state subsidies to fund 30% or more to its base year operating costs will be protected against losing any more than 5% in combined operating and program cost from one fiscal year to the next. Thus, the cushion will dampen net swings in the 2 major variables that impact the formula: valuation and pupil count.

The cushions are funded by a mechanism that clips off excess subsidies that would otherwise be given to those units whose gains exceed a maximum percentage, which is annually calculated by the Commissioner of Education at the rate necessary to pay the cushion subsidies.