Budget includes property tax increase for some school districts

Ben Giles//April 30, 2018

Budget includes property tax increase for some school districts

Ben Giles//April 30, 2018

Gov. Doug Ducey (Photo by Katie Campbell/Arizona Capitol Times)
Gov. Doug Ducey (Photo by Katie Campbell/Arizona Capitol Times)douhg

Homeowners in more than a dozen Arizona school districts will pay additional property taxes after lawmakers approved Gov. Doug Ducey’s budget deal May 3.

Those 18 school districts levy additional property taxes to provide funding for desegregation and student achievement efforts. They include programs designed to meet the demands of federal court orders or agreements with the U.S. Department of Education’s Office for Civil Rights in districts found to have racial disparities in their schools.

In nine of those districts, the additional levy contributes to taxes that exceed Arizona’s 1 percent cap on residential property levies. The state supplements the difference to ensure that taxpayers don’t bear the cost of taxes exceeding $10 for every $100 of property value.

But a simple shift in how desegregation taxes are classified will absolve the state of an estimated $18.9 million in supplemental funding in places like Tucson Unified School District, one of the state’s largest school districts and also one of the largest beneficiaries of desegregation funding. Budget analysts estimate that state dollars supplement TUSD desegregation funding to the tune of $16.7 million.

A provision in the budget deal struck by Ducey and GOP legislators shifts taxes for desegregation programs from the primary to the secondary property tax levy.

The move frees the state from having to provide money to offset taxes that exceed the 1 percent cap – the cap only applies to primary, not secondary, property taxes.

That means that TUSD homeowners would see their property taxes increase – enough to cover the $16.7 million the state would no longer provide to protect them from paying taxes above the 1 percent cap.

That translates to a 9-percent hike in property taxes for homeowners within the district’s boundaries, according to a letter sent to legislators by TUSD Superintendent Gabriel Trujillo.

Secondary taxes are typically voter-approved measures like bonds for K-12 school construction and maintenance, or overrides to provide schools additional dollars to spend. But language in the budget is said to specify that the desegregation levy doesn’t require voter approval.

Other desegregation school districts are also affected, though to a lesser extent, because a portion of their homeowners rebate will no longer apply to the desegregation levy. That’s because the homeowners rebate, like the 1 percent cap, only applies to primary property taxes, according to Chuck Essigs, lobbyist for the Arizona Association of School Business Officials.

Initially, there was one district where homeowners were protected from a property tax increase: Maricopa Unified School District.

The shift in tax structure will cost the district $602,600 in funding that would have been provided by the state, but a supplemental appropriation of state aid matches that amount, which ensures that homeowners who live within the boundaries of Maricopa Unified won’t see their tax bills increase.

The key difference between Maricopa Unified and the eight other districts affected the most by the desegregation shift? It’s represented by Republican legislators, said Senate Minority Leader Katie Hobbs, D-Phoenix.

“It’s just partisan dirty tricks,” Hobbs said. “You’ve got six people representing the small town of Maricopa, and they’re all Republicans. Everybody in Maricopa County loves to hate Tucson, especially Republicans, and loves to screw them over. This is one more way to do that.”

Sen. Steve Smith, R-Maricopa, said politics had nothing to do with the effort to grant a reprieve for MUSD.

“The district that’s being exempted, they are the lowest per pupil funded district out of this group of deseg schools,” Smith said May 1 in a committee hearing. The extra aid for Maricopa was later amended out of the budget.

GOP lawmakers have for years tried to get rid of desegregation dollars for schools, arguing that segregation and racial disparities are no longer an issue in Arizona.

“I don’t think these are Bull Connor racist schools that need money to force themselves into desegregation,” he said. “This is about simply giving extra cash, and requiring taxpayers throughout Arizona to pay for extra cash.”

Other organizations, like the Arizona Tax Research Association, have argued that it’s unfair that some, not all, school districts get to levy taxes for more dollars than others. Kevin McCarthy, president of ATRA, said the maneuver in the budget deal appears to co-opt at least one of his gripes with desegregation funds – that all taxpayers in the state are subsidizing extra taxes in a handful of school districts.

At least now taxpayers in desegregation districts will be the ones responsible for paying those extra personal property taxes, he said.

Democrats like Rep. Ken Clark, D-Phoenix, likened that argument to “victim blaming.”

“This would effectively force those school districts that suffer the most from segregation to pay for desegregation,” he tweeted April 30.