School systems expect financial hit from car tax changes

*If you purchase a vehicle from a dealer, the dealer is required to pay the title tax to the tag agent in the county where you reside.

*If you purchase a vehicle from an individual, you will pay the title tax to the tag agent in the county where you reside when you go to get your tag. This is a first. In the past, person-to-person sales were not taxed.

* After the title fee is paid on a new car, your cost in your birthday month will be about $20 a year.

Officials in some metro school systems don’t see the end of the “birthday tax” on vehicles as something to celebrate.

As they prepare budgets for the new fiscal year that starts July 1, they are forecasting that the law change could cost them hundred of thousands of dollars, if not millions, next year, and more down the road.

For example, officials in Gwinnett, the state’s largest school system, are projecting it will mean a net loss for them next year of $2.2 million to $4.2 million.

The law, which the legislature passed in 2012 and took effect March 1, requires new vehicle owners to pay a one-time, upfront title fee, currently 6.5 percent of the vehicle’s value, while owners of older cars continue to pay the annual tax. It also imposes the title fee on person-to-person vehicle sales and on out-of state vehicles being registered in Georgia.

State lawmakers say their intention was never to hurt schools, cities or counties. An auditor’s report given to them days before House Bill 386 passed, however, showed it would create a $58 million windfall for local governments this year, while costing them $45 million in the next fiscal year and $151 million the year after that.

Any negative forecasts, lawmakers say, are likely premature, given the complexity of the law and unknowns, such as how many Georgians will buy cars this year from dealers or individuals and how many people will be moving in from out of state, registering their vehicles and paying the title tax. Lawmakers also point out that they wrote into the law that they would help any localities that have been harmed by boosting their share of the money, though not until 2016.

The title fee is taking the place of both the sales tax, which was paid at the time of purchase, and the annual ad valorem tax, or property tax, that was due annually by the birthday of the vehicle’s owner. Both taxes add up to at least $1.2 billion annually for cities, counties and school districts. School districts have used some of their sales tax to build new schools and repair or replace old ones.

Officials in all school districts are worried, having dealt with years of budget cuts from the state and declining home values, which for them translate into fewer property tax dollars. But some, including Cobb, hadn’t, as of last week, made any predictions on the new law’s potential effects.

“We do know it will have a potentially serious negative impact on SPLOST (special purpose local option sales tax) collections,” said Jay Dillon, Cobb schools’ spokesman.

Republican legislators pushed for years to eliminate the tax, which they say was unpopular and an ill-timed hit to taxpayers’ wallets in their birthday month. Some went so far as to wear “Ax the Birthday Tax” stickers to local GOP conventions in 2007.

“All the bows that people took for eliminating the birthday tax are wonderful,” Frank Petruzielo, superintendent of Cherokee County schools, said last week. “But the net result is less and less money to pay the bills for public education at the local level.”

Cherokee expects to lose $500,000 to $700,000 next year, and Fulton $10 million.

“It’s not good news,” said Petruzielo, who expects his district to continue next year the eight unpaid furlough days for employees, large class sizes and a 175-, not 180-day school year, that it had this year.

House Appropriations Committee Chairman Terry England, R-Auburn, said he is surprised to hear some school systems are “showing that they’re coming up short.”

“My gut reaction is it is too early to tell,” he said.

Local officials are nervous, but “when all is said and done, I think they are going to come out better than they think they will,” England said.

If school districts can show they are taking a financial hit, lawmakers may tweak the law, said House Ways & Means Committee Chairman Mickey Channell, R-Greensboro.

“It was certainly not our intent [to hurt them] — just the opposite,” Channell said.

Rick Cost, chief financial officer for Gwinnett County Public Schools, said he projects his district will lose $10 million to $12 million in sales tax revenue next year, while picking up an additional $7.8 million from the title fee, for a net loss of $2.2 million to $4.2 million.

But he acknowledges that it is confusing.

“Everyone is using different assumptions since no one knows for certain yet,” Cost said. “We should all have a much better idea by the end of the month when we get our first check for March 2013 title fees collected.”

Robert Morales, chief financial officer for Fulton, said his district has already made plans to delay some of its SPLOST projects, based on forecasts that it could lose $10 million next year and $50 million over the life of its sales tax program.

School systems aren’t’ alone. Some county officials anticipate they’ll see shortages in sales tax revenues for capital improvements.

County tax commissioners collect all the money, give the state its share (about 57 percent), then cities, counties and school systems receive an amount equal to what they collected in ad valorem taxes on vehicles in 2012. The remainder of the money is split proportionately among local governments, based on their share of local sales taxes.

Former state Senate Education Committee chairman Fran Millar, R-Dunwoody, said he saw the potential that school districts could take a hit.

“But I didn’t see it as significant in the scheme of things,” Millar said.

For instance, in Gwinnett, with a $1 billion education budget, the projected loss “isn’t even a rounding error,” he said.

Petruzielo said he believes lawmakers “know exactly what they are doing.”

“It’s new math,” he said. “When people have these ideas, they never take the equation out to the sixth decimal point.”