HB2481 Reforming the Calculation of Primary School Tax Rates (Olson - 2016)

HB2481 is a landmark change for the manner in which school district tax rates are set, bringing stability
to taxpayers and new cash management tools for school districts. The bill proposes to annually set the
primary tax rate at the QTR plus any legal non-formula amounts. For districts who do not qualify for
state aid, they would levy the amounts necessary to fund their budget. No longer would districts adjust
their tax rate to offset for cash balances. Stored cash balances would not create additional budget
expenditure capacity, which is still determined by the school finance formula, but would create liquidity
for the purposes of cash management.
In addition, this bill removes the current 4% budget carryforward limitation. With the understanding that
districts will tax a statutory rate, a 4% budget carryforward limitation isn’t needed, meaning schools can
expend their legal capacity in the year they choose. This new flexibility allows long-range planning for
school districts, a provision only currently enjoyed by charter schools. This will also reduce the incentive
to expend remaining budget capacity (use or lose) at the end of the fiscal year.
For taxpayers, the ability to predict their tax burden is a critical budgeting tool. Stabilized tax rates for
the largest component of all property taxes will improve Arizona’s business climate. New cash
management tools will reduce the need for school districts to use expensive debt instruments. In an era
of rapid school choice and budgets based on current-year funding, it is important that all public schools
share similar financial treatment. Importantly, the bill does not raise taxes or impact state coffers.