Department of Audits and Accounts
270 Washington Street, SW, Suite 4-101
Atlanta, Georgia 30334
Honorable Chuck Hufstetler
Chairman, Senate Finance Committee
121-C State Capitol
Atlanta, Georgia 30334
March 17, 2023
SUBJECT: Fiscal Note
House Bill 504 (LC 33 9456S)
Dear Chairman Hufstetler:
This bill would require counties and municipalities with independent school districts to
report the value of level 1 freeport exempted property in their jurisdictions to the Department
of Revenue (DOR) annually. DOR would certify these values as correct, and then provide
them to the Department of Education (GaDOE). GaDOE would be required to subtract 40%
of the value of level 1 freeport exempted property from the county or municipality’s equalized
adjusted school property tax digest, which would affect the calculation of the local five mill
share and equalization grant portions of the Quality Basic Education (QBE) formula.
Department of Education Costs
GaDOE reported that the bill would cost the state an estimated $292 million. Because
reducing a school district’s tax digest reduces the amount it must contribute in local five mill
share, $93 million in additional state funds (Table 1) would be needed to make up the QBE
funding gap.
Reducing districts’ tax digests would also require the state to contribute an estimated
$199 million in additional QBE equalization grant funding (Table 1).
Table 1. Estimated FY 2024 Costs to State
1
Local Five Mill Share
2
Equalization
New (with level 1 freeport reduction) ($2,489,000,000) $955,000,000
Original (without level 1 freeport reduction) ($2,582,000,000)
$756,000,000
Total Cost to State $93,000,000 $199,000,000
1
Tax year 2021 data was used in these calculations.
2
Because the local five mill share represents local funding, it reduces the amount of funds the state must
contribute to education via QBE. Thus, the local five mill share is presented as a negative number.
Currently, 165 of the state’s 180 school districts have freeport exemptions. While most are at
40%, a few municipalities have exemptions at higher rates of 50% or 100%. If additional
counties or municipalities approve new freeport exemptions or if percentages are increased at
the local level, the cost to the state would subsequently increase.
270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone 404.656.2180 Fiscal Note for House Bill 504 (LC 33 9456S)
Page 2
A significant change in freeport exemption property values in tax year 2022 would also
impact state costs. The total value of level 1 freeport exemption property in all counties and
municipalities with independent school districts grew over 24% from 2017 to 2021, rising
from
$36.9 to $45.9 billion. Given the state’s recent economic growth, values may increase in
2022, which would further reduce districts’ local five mill share obligations and increase the
state’s QBE equalization grant burden. This would increase the estimates shown in Table 1.
For example:
If each district’s reported value increased 10% in 2022, $102 million in state funds
would be required to fill the local five mill share gap. An additional $202 million would
be required for equalization grant funding, making the total estimated cost to the state
$304 million.
Department of Revenue Costs
DOR reported no additional costs associated with collecting, verifying, and reporting
level 1 freeport exemption property values each year.
Respectfully,
s/GREG S. GRIFFIN s/KELLY FARR
Greg S. Griffin Kelly Farr, Director
State Auditor Office of Planning and Budget
GSG/KF/jm