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  • County prevails, again, in school funding dispute

    Jul 03, 2019 | Read More News
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    A second attempt by the state Legislature to transfer part of the state’s school funding responsibilities onto local taxpayers has been rebuffed in the courts. 

    Arizona Tax Court Judge Christopher Whitten June 25 agreed with Pima County and Tucson Unified School District that legislation passed last year did not relieve the State of its obligation to provide “additional state aid for education” to TUSD.    

    State voters in 1980 amended the state constitution to cap the total property taxes for a parcel of residential property at 1 percent of its full cash value. Tax levies for debt service on bonds, and taxes approved by voters in override elections, are not subject to the limit. The constitutional amendment required the State Legislature to enact a property tax system that complies with this limit. The Legislature did that, shortly after voters approved the constitutional amendment, by enacting A.R.S. § 15-972. Under that statute, homeowners get a credit against their school district taxes for any amount in excess of the 1 percent limit. The statute then requires the state to provide “additional state aid for education” to the impacted district in an amount equal to the credits.

    The Legislature last year added a requirement that a school district must pay any expenses associated with running a federal-court-ordered desegregation program from a “secondary” property tax, in apparent effort to reduce the tax credits to which homeowners would be entitled, and hence reduce the state’s obligation to pay additional state aid to the school district. Pima County, recognizing that simply calling a tax “secondary” doesn’t remove it from the constitutional 1% limit, continued to give TUSD homeowners the credits to which they were entitled under § 15-972. When the State indicated that it would not pay TUSD the resulting $8 million of “additional state aid,” TUSD and the County sued. 

    In his ruling, Judge Whitten wrote, “ARS 15-972 was not amended by the Legislature and must be construed in a manner consistent with the Arizona Constitution. Since the ‘secondary property tax’ levy for desegregation expenses is not a voter-approved ad valorem tax, it is still subject to the constitutional 1% limit and must be included in the calculation under ARS 15-972.” 

    Which means the state still must fund the amount that exceeds 1 percent under the Additional State Aid for Education requirement. 

    Judge Whitten, coincidentally, is the same judge who ruled in the county’s favor in 2016 when the state tried to cap Additional State Aid for Education at $1 million and left it up to the Legislature’s Property Tax Oversight Commission to decide which local jurisdictions would pay to schools the remaining additional aid funds. If that law had remained on the books, it would have cost county taxpayers millions of dollars a year to fund some local school districts. Whitten ruled that change in state law unconstitutional.

    Read Judge Whitten's decision.