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There are two types of school funding, Tier 1 and Tier 2, though the Foundation School Program (FSP). Wealthy school districts can raise their Tier 1 funding through local property taxes and consequently, are not eligible for FSP state funding, while less wealthy districts must receive matching state funding to make up the difference.
In 2005, the property tax relief brought school districts that were not taxing the maximal rate of $1.50 below the $1.00 threshold in Tier 1 funding, resulting in a compressed tax rate (CTR). SB 945 would allow school districts to decide if they want to convert their Tier 2 pennies that yield $31.94 to Tier 1 in order to bring the district back up to the maximum compressed rate (MCR) of $1.00 in order to receive 100% of matching state funding.
The bill would allow school districts to decide if they want to participate, and if so, would have to notify the commissioner no later than September 1 of the affected year.