Wonky Word Wednesdays: Guaranteed Tax Base

Sep 17, 2014

Part three of our back-to-school series is Guaranteed Tax Base. If you want to be cool, just call it GTB.

To begin, let me be clear - GTB is very complex. It includes formulas, averages, areas, and much more to fully explain it. However, this is an important part of how schools are funded, so today we are going to give a simple explanation for a complicated issue. If you want to have a more in depth understanding, the Office of Public Instruction has this document (page 12-14) and the Legislative Fiscal Division has this document and this document to help as well. Don't worry fellow wonks, after reading this you will still understand more than most on this topic.

To understand GTB, we first need to understand BASE budget.  A school district’s BASE budget is made up of 4 components:(1) A portion of per-ANB and basic entitlement; (2) Special education cost payments; (3) BASE Mill Levy (levies needed to get a district to a basic funding level); and (4) The Quality Educator Payment, Indian Education for All Payment, American Indian Achievement Gap Payment, and At-Risk Payment. Check out the chart from OPI below.

Screen Shot BASE

School districts do not have to run a levy for mills needed to get to the minimum or BASE level of funding (see above).  In general, a district must ask the voters for support of the budget between the BASE and the max.

However, some communities have lower taxable values to generate sufficient revenue to get to the base. In this case, the state will pitch in funding to ensure equalized funding of the schools across the state. This is where GTB comes in. Remember it stands for Guaranteed Tax Base, so GTB aid is the amount the state kicks in to get a school district to its minimum (BASE) funding level – i.e. guaranteed. GTB is there to help communities with less wealth meet basic needs of the district.

Well, you asked for wonk and we gave you wonk this week. We’ve got our last installment next week so get ready. If you have additional questions or suggestions for future wonky words, post them to our Facebook page.

Montana Budget & Policy Center

Shaping policy for a stronger Montana.

MBPC is a nonprofit organization focused on providing credible and timely research and analysis on budget, tax, and economic issues that impact low- and moderate-income Montana families.