Legislative research and fiscal staff delivered a detailed briefing to the House Taxation Committee on the structure and mechanics of Montana’s K–12 school funding during a scheduled training session following committee executive action.

Presenters and purpose

Pat McCracken, deputy research director in the legislative research office, and Julia Patton of the Legislative Fiscal Division presented background on constitutional duties, state and federal revenue sources, and the statutory funding formula that underpins the District General Fund. Staff said the briefing was intended to help committee members understand the layered funding system and the administrative mechanics that affect revenue flow to school districts.

Funding sources and shares summarized by staff

- Federal funds: About 13% of K–12 revenue (FY2024 figures cited), including Impact Aid, school meals, IDEA and Title I programs; Impact Aid supports districts with federally non-taxable lands.
- State funds: Roughly 41% of K–12 revenue (staff figure), supplied by the guarantee account (earnings from the Common School Permanent Trust), the 95-mill statewide mechanism (now routed to the SCEPTER account), and the State General Fund (largely income tax).
- Local funds: The remainder (around 42% in staff figures) is generated locally, primarily through district and county property tax levies; staff cited roughly $682 million in property tax levies for schools in FY2024.

GTB, SCEPTER and the trigger mechanism

Staff described Guaranteed Tax Base (GTB) aid as Montana’s principal equalization mechanism. GTB reduces the disparity in revenue-generating capacity between property-wealthy and property-poor districts by subsidizing districts with low taxable values. Presenters used side-by-side examples (Ennis K–12 and Superior K–12) to illustrate how two similarly sized districts can have vastly different tax bases and therefore different levy mill rates to raise similar sums of local revenue.

The briefing covered the SCEPTER account (School Equalization and Property Tax Reduction), established in 2023 to receive revenue from the 95 mills. Staff explained the statute’s trigger language: when revenues from the 95 mills increase, 55% of the incremental revenue flows to reduce local property taxes through a defined sequence (first retirement GTB up to a cap, then major maintenance aid, then debt service assistance). Staff noted the mechanism can work in reverse: if 95-mill revenues drop, the state GTB supports can be dialed back and costs shift back to local taxpayers.

Timing and cash flow

Presenters explained cash-flow timing: counties collect property taxes in November and May; school payments to districts are disbursed across an 11-month schedule (August–June). Because of timing differences, the State General Fund often covers payments early in the school year, and later the SCEPTER and guarantee account receipts affect payments as those revenues arrive.

District general fund and the funding formula

Staff walked members through the district general fund formula, which sets a base (basic entitlement) and a maximum budget for each district and then shows how the state share and local revenues fill that budget. Key teaching points: small districts rely relatively more on the basic entitlement (fixed cost allowances); GTB is a per-mill subsidy and does not entirely eliminate local contribution; over-base levies (amounts above formulaic base) are voted levies and impose widely varying mill burdens depending on a district’s tax base.

Tools and resources

Presenters pointed members to an interactive School Funding Library and online tools maintained by the Legislative Fiscal Division, including a one-page District General Fund handout; staff said materials and the presentation were placed in the committee’s Teams folder for review.

Questions and examples raised by members

Committee members asked about how mills translate to dollars for median homeowners, how Impact Aid is treated (it generally flows to a separate Impact Aid Fund rather than the district general fund), and what happens when natural resource or residential valuations change. Presenters provided specific FY2024 figures in response and said some flows and triggers had been ‘‘hard-coded’’ into statute for fiscal year 2025 and beyond (notably adjustments to retirement GTB), producing a notable change in county retirement levy rates for some taxpayers after the 2024 reappraisal cycle.

Staff emphasized the complexity and recommended members use the online tools and contact legislative staff for follow-up technical questions.