Effective for the fiscal year that begins July 1, 2000, this bill divides General Purpose Aid to Local Schools 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 appropriations that are no longer interdependent. In each case there is a default appropriation 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 administrative unit's fiscal capacity. The need for percentage reduction is eliminated. The first dollars available go to the poorest 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 school administrative unit is calculated as follows:

1. The foundation per pupil operating rate equals the statewide base year operating costs divided by the State's average pupil count;

2. A unit's subsidizable operating costs equal the foundation per pupil operating rate times the average pupil count for the unit; and

3. The local share of operating costs equals the operating cost mill rate times the fiscal capacity of the unit.

The "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 may not be less than 5% of the unit's costs.

A unit that fails to raise its local share of operating costs loses a portion of its subsidy equal to what it fails to provide. Such a reduction is not necessary for program and debt service subsidies because they continue to be calculated on the basis of the unit's own approved expenditures.