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  • County prevails in aid to public schools lawsuit against state

    May 24, 2016 | Read More News
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    Maricopa County Superior Court Judge Christopher Whitten today ruled that a 2015 state law requiring some local jurisdictions pay a portion of the property taxes due public school districts is unconstitutional. 

    Pima County sued the state and the state Legislature’s Property Tax Oversight Commission, arguing the law was an unconstitutional delegation of taxing authority to the commission. Judge Whitten agreed. 

    “The power and responsibility to tax is vested in the Arizona Legislature and may not be delegated by it,” Whitten wrote. “While the legislature may delegate the power to fix a tax rate to an administrative body, it may only do so if it prescribes a specific standard to be used by that body.  A.R.S. §15-972(K) fails to prescribe such a standard.”

    The new law had tried to transfer the state’s burden of additional aid to public schools to local jurisdictions by having the Property Tax Oversight Commission determine which entities in a county were responsible for exceeding a state cap on residential primary property tax rates and sending them the bill. 

    Additional aid for public schools is necessary because of a 1980 state constitutional amendment that capped the primary property tax for a residential property at 1 percent of its full cash value. In some parts of the state, overlapping jurisdictions funded with primary property taxes have total tax rates that exceed the 1 percent cap for some residential properties. When this cap affects school districts, the state, in order to hold school districts harmless, had paid to schools the amount over the 1 percent. The state had made those payments for 34 years. 

    Under the new law, the state only paid aid up to $1 million per county. If the amount over the 1 percent cap exceeds the $1 million, the legislation requires the Property Tax Oversight Commission use a poorly defined “peer jurisdiction” criteria to determine which taxing jurisdictions have to make up the balance. 

    The commission in March decided Pima County had to pay $15.8 million to Tucson Unified School District for the 2016 fiscal year, which ends June 30. That was despite Pima County, Pima Community College, Tucson Unified School District, the city of Tucson and the city of South Tucson all having tax rates that when combined were greater than 1 percent for some homeowners. Rather than apportion to each jurisdiction the relative amount due, the commission stuck Pima County with the entire bill. 

    To pay the bill, the Board of Supervisors in June raised taxes $8 million, with the rest of the cost, if necessary, to be covered by various cost savings in the budget. For the coming 2017 fiscal year, County Administrator Chuck Huckelberry has recommended to the board that it again raise taxes to cover the cost transfer associated with the new law. If not for this law, the county would not have raised the primary tax rate last year or be considering raising primary taxes this year. 

    The County Administrator may now recommend to the board a reduction in the property tax rate, but that may depend on whether the state appeals the ruling.  Whitten’s ruling is preliminary, with his final ruling to come before June 30. 

    The board was unable to come to a decision at today’s board meeting on setting the tax rate limit and budget ceiling for next fiscal year. It will take up the 2017 tentative budget and tax rate again on June 7. 

    “While I’m happy with today’s ruling, it’s bittersweet because these continuing cost shifts from the state to local jurisdictions are burdening local budgets and forcing local taxpayers to pay for state programs at the expense of local needs,” said Board of Supervisors Chair Sharon Bronson.