Homeowners in a handful of school districts are in for a nasty surprise because of some changes state lawmakers made in education finance laws in the name of “fairness.”
A provision buried in the budget enacted earlier this year changes how the state calculates the rebate it provides to homeowners. The net result will be tax hikes on residents in the 2011-12 school year, some of them quite sharp.
In the Mesa Unified School District, for example, the owner of a home valued for tax purposes at $100,000 will pay an extra $18.21 per year. That is on top of combined primary property taxes including city, county, school and community college levies that, depending on exactly where in the district they live, range from $842 to $873 a year. In Tempe Elementary, that figure rises to $30.17, according the Arizona Association of School Business officials.
But those increases are far less than other areas of the state. In the Tucson Unified School District, the owner of a similar home would pay an additional $73.82 a year.
And residents of a few very small districts are in for sticker shock.
In the Ash Fork Elementary School District taxes will go up close to $190 a year. But that pales in comparison with the tiny Valentine elementary district in Mohave County where the owners of those $100,000 homes will find an extra $339 tacked on to their tax bills of $531 a year.
Shifting those taxes back to local homeowners will save the state $70 million a year.
Proponents, however, say the main reason is fairness: They say the current law gives residents of these districts a financial leg-up over homeowners elsewhere who end up picking up the difference in the form of their state sales and income taxes.
Central to the issue is the whole concept of the rebate.
State lawmakers, facing a 1980 initiative to cap rising property taxes, crafted their own changes. One of those requires the state to pick up a percentage of the primary property taxes homeowners pay for public schools.
Primary taxes cover the basic maintenance and operation of schools. These do not include voter-approved changes like bonds.
What has happened, according to Rep. Rich Crandall, R-Mesa, is that various changes in state laws about what districts can raise in primary taxes has distorted the process.
One big difference is funding for desegregation programs.
That is the case in Tucson where state law was amended more than two decades ago to allow the district to spend -- and tax -- more than its limit to pay for the court-ordered programs. While the court order has gone away, the current costs are pegged at $63.7 million a year.
But under current law, Tucson homeowners pay only a portion of that, with the state picking up the rest in the form of the 40 percent rebate.
The new law effectively recomputes the rebate to disallow that $63.7 million. Crandall, who chairs the House Education Committee, said the change is justified.
"It's not fair to make everyone in Arizona pay for deseg in Phoenix Union and TUSD, or, for that matter, Mesa, that has a high deseg number,'' he said. "So if only a few districts have it, why would you charge the rest of the residents of the state of arizona for that?''
Sen. Ron Gould, R-Lake Havasu City, said the issue goes beyond fairness. He said the current system allows school officials to hike taxes without provoking an outcry because homeowners bear only a part of the burden.
"If you believe in local control, the closer that you put the taxation, the closer to the spenders of those tax dollars that the collectors and the spenders are together, the better off it is for people, rather than having the state collect the money and then reimburse it in an unfair manner like they normally do,'' he said.
Mesa also is in the same situation, with desegregation costs approaching $8.8 million a year. So is Flagstaff to a much smaller extent with nearly $2.3 million in such costs.
For other districts, the problem is elsewhere.
Many of the smallest school districts get to raise taxes by virtue of their size. The presumption is that they cannot achieve the economies of scale of the larger ones.
That adjustment, too, is being taken out of the formula.
Ash Fork, for example, has more than $1.4 million in small school adjustment that will no longer qualify for that 40 percent rebate.
Other extras being taken out of the formula range from high transportation expenses to the extra cost some districts incur through "career ladder'' programs which provide additional pay for teachers who show outstanding performance. The additional charges for homeowners in the Amphi and Sunnyside districts, for example, fit into that "other'' category.
Rep. Chad Campbell, D-Phoenix, said Democrats, who were not part of the budget-crafting process in the Republican-controlled Legislature, said they only learned of the change right as the measure was being adopted.
Campbell, the House Minority Whip, conceded that the fairness argument is a strong one. But he said a better solution to the issue might have been to do a major revamping of the whole method of funding schools rather than "another piecemeal approach to our tax policy.''
"Instead of doing a cut here or an increase here or shifting the burden from one school district, or from the state to a school district or whatever it may be, we need to sit down and reform our entire tax code because it's broken and it's not working,'' he said.
Campbell and some other Democrats have instead been pushing for what they call "a comprehensive tax reform package.'' That specifically includes subjecting more transactions to the state sales tax, many of these in the form of services that are now exempt.
"You can actually lower the burden for the average family in the state and close those loopholes and actually make it easier for people to make ends meet,'' Campbell said.
If nothing else, he said the timing of the change is lousy.
"I think springing this type of tax increase on certain homeowners without any type of forewarning in this type of economy is probably not the wisest thing to be doing either,'' Campbell said.
A curious side-effect of the change is that those who own the most expensive homes -- those in the $500,000-plus range -- will see little or no increase in what they pay. That's because both current and future law limit the rebate to just $600 a year.
School districts affected by changes to homeowner rebate law
Annual cost to owner of $100,000 home
|Ash Fork Unified||$189.68|
|Mammoth-San Manuel Unified||$12.29|
Source: Arizona Association of School Business Officials