Pima County officials see legal trouble in desegregation tax

Pima County officials say a new state law dictating how to collect taxes for desegregation funding in Tucson puts the county at legal risk.

A provision in the budget signed by Gov. Doug Ducey shifts the burden of a tax that provides funding for desegregation and student achievement efforts at public schools from all Arizona homeowners to only the homeowners in the 18 school districts that utilize the funding. The new policy provides a savings to the state. Prior to the change, desegregation taxes were levied as a primary property tax, which means the state picks up the bill above the constitutionally mandated 1 percent cap on property taxes.

Programs funded by desegregation taxes are 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.

A memo from Deputy Pima County Attorney Regina Nassen, first reported by the Arizona Daily Star, details how the new law that shifts the tax burden may contradict Arizona’s Constitution, which states that homeowners’ property taxes may not exceed 1 percent of their property’s value. The exceptions are for local taxes that residents get to vote on, such as bonds and overrides.

The budget, approved in May by lawmakers, classified the desegregation levy as a secondary tax. But, unlike bonds and overrides, voters get no say in whether they are taxed for it.

The Pima County Board of Supervisors voted on May 22 to release the memo publicly. The board is also seeking an opinion from the Attorney General’s Office to determine whether the county should follow the new law or if it violates the Constitution.

If it’s the latter, levying the tax could put the county at legal risk, Nassan wrote.

Though the tax would only apply to homeowners within the district boundaries of the Tucson Unified School District, the county is responsible for administering property taxes, and the county will be liable for repaying taxpayers if the tax is later deemed illegal, she wrote.

That’s a legitimate factor for the county, the state, and perhaps the school district to consider, according to Chuck Essigs, a lobbyist for the Arizona Association of School Business Officials. Effectively, legislators decided to alter what voters were told decades ago when the Arizona Constitution was changed to implement the 1 percent cap on how much homeowners pay in property taxes: For every $100,000 in assessed value, a homeowner only pays $100.

The exceptions are bonds and overrides, and Essigs said the Legislature has changed people’s tax situation with the stroke of a pen as a way to free up roughly $18 million from districts that use desegregation levies, including $16 million from TUSD.

With this precedent, legislators could make future changes to balance the state budget that would mean higher taxes for some Arizona homeowners without them getting a say in the decision, according to Essigs.

“A lot of times people refer to a slippery slope. Well, this is a slippery slope,” Essigs said. He added that people may not understand the legal issue as much as they understand the philosophical issue, which is when voters are told something, “do you stick to it?”

Kevin McCarthy, president of the Arizona Tax Research Association, said seeking an opinion from the attorney general isn’t going to have an impact on whether Pima County officials must follow the new law.

“Is someone going to enjoin the county (from administering the tax)? Shy of that, I don’t know any way that the county could legally argue they shouldn’t follow the law that was just passed,” McCarthy said.

A spokesman for Attorney General Mark Brnovich confirmed that any opinion from the office would be just that: an opinion. And as of April 30, Pima County officials have made no formal request for an opinion.

“There is nothing that is legally binding about the opinion. It is truly guidance,” said spokesman Ryan Anderson.

Essigs agreed that the matter may require a legal battle to settle. In the meantime, TUSD could be left short on the funding necessary for its desegregation programs if Pima County officials decide it’s in their best legal interest not to levy the desegregation tax.

“It would appear to me what happens is the district will spend that money as if it was there, and pretty soon they’re going to reach a point in the year where they don’t have any more revenue to cover their expenditures,” Essigs said.

TUSD Superintendent Gabriel Trujillo did not return calls for comment.

If they levy the tax, county officials could find themselves in the crosshairs of outraged TUSD homeowners. State budget analysts estimate that the new taxing mechanism will increase the average property tax bill within the district by $176 to recoup the $16 million supplement the state will no longer provide.

That’s not something that will be lost on those TUSD residents, according to Sen. David Bradley, D-Tucson. Perhaps, he said, the governor will bear the brunt of homeowners’ ire.

He suspects people will hear about how Ducey increased their taxes by $16 million, he said.

“I think that narrative will not go away,” Bradley added.