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House of
Representatives
HB 2515
school district overexpenditures; correction; reduction
Sponsors: Representatives McLain: Goodale
HB 2515 reduces, by $500,000, the amount to be repaid by the Peach Springs Unified School District (PSUSD) as the result of overexpenditures, if PSUSD successfully conducts an election to exclude all real property not located on the Indian Reservation from PSUSD’s boundaries.
History
The State Board of Education (SBE) is required to review allegations of insolvency and gross mismanagement by a school district. If the SBE finds that a school district is insolvent or has engaged in gross mismanagement, the SBE must place the district into receivership and appoint a receiver to review and investigate the school district’s financial affairs. The receiver is required to submit a report and financial improvement plan to SBE within 120 days of being appointed and further submit quarterly progress reports until the school district is removed from receivership (A.R.S. § 15-103).
PSUSD is located in Peach Springs, Arizona (Mohave County). Its education facilities are located on the Hualapai Indian Reservation. PSUSD was placed into receivership by SBE on August 27, 2007 as the result of approximately $1.5M in overexpenditures. According to the 120-day report submitted by the receiver, the students served by PSUSD are exclusively Hualapai children. PSUSD closed their high school in June of 2008 because of low enrollment, disciplinary problems, poor test scores, and other issues. Currently, high school students in PSUSD are tuitioned out to the Seligman Unified and Kingman Unified school districts.
Under Arizona statute, school districts are required to repay amounts owed to the state in the next fiscal year. In the case of a hardship to the school district, the Superintendent of Public Instruction may allow the school district to correct errors over a two-year period (A.R.S. § 15-915). In 2008, the Legislature extended the payments, including principal and interest, over a nine-year period through FY 2016-17 as follows (Laws 2008, Chapter 111):
Ø 5 percent in the first two years (FY 2008-09 and FY 2009-10),
Ø 10 percent in the next three years (FY 2010-11 through FY 2012-13),
Ø 15 percent in the remaining fiscal years (FY 2013-14 through FY 2016-17).
Upon receipt of a petition by ten percent or more of the qualified electors residing in a school district to diminish the boundaries of the school district, the county school superintendent must prepare and transmit a report to the governing board of the school district. The report must include the future availability of educational programs in the area of the district to be detached and in the area which will constitute the remaining district, the availability of pupil transportation services, and the financial impact on taxpayers. The school district governing board is required to mail or distribute the report to all households in the district. The county school superintendent must then submit the question of the proposed boundary changes to the qualified electors of the school district. The question of redrawing the district lines must be approved by a majority of the qualified voters in the territory that will remain in the existing school district and by a majority of the qualified voters in the territory that will be excluded. If the change is approved, the new boundaries take effect on July 1 (the next fiscal year) following the election (A.R.S. § 15-460).
In 2008, a petition was submitted to the Mohave County School Superintendent proposing to diminish PSUSD’s district boundaries. The question of removing all real property not located on the Indian Reservation was put on the ballot at the General Election in November, but did not pass. Of the qualified electors in the area to be excluded from PSUSD’s boundaries, there were 88 votes cast for diminishing the boundaries and 3 votes cast against. Of the qualified electors residing in the area to remain in PSUSD’s boundaries, there were 66 votes cast for diminishing the boundaries and 85 votes cast against.
Fiscal Impact
PSUSD is currently funded with local property taxes and state equalization assistance. If PSUSD successfully conducts an election to exclude all real property from the district boundaries, the Legislature would be required to provide PSUSD with the monies that would otherwise have been collected through the local property tax. It is currently unclear if such an election would remove all taxable property from PSUSD’s boundaries. PSUSD has indicated there are two utilities that run through the Reservation in the district boundaries. Based on PSUSD’s FY 09 budget, if all taxable property is removed, the fiscal impact to the state General Fund would be about $400,000 in the fiscal year when the new boundaries take effect.
Some of the fiscal impact will be offset by property taxes collected from the area excluded from the district, which will be designated as an unorganized territory. Property located in an unorganized territory outside the jurisdiction of a school district is subject to 50% of the qualifying tax rate (QTR). This money is deposited into the General Fund and earmarked for the support of education (A.R.S. § 15-991.01). Additionally, the taxpayers residing in the area excluded from the district boundaries would continue to be obligated for PSUSD’s existing secondary property tax obligations resulting from a budget override and the sale of Class B bonds until the obligations have been satisfied.
Provisions
· Decreases, by $500,000, the amount required to be repaid to the state by PSUSD resulting from overexpenditures, if the qualified electors vote to exclude all real property not located on the Indian Reservation from PSUSD’s district boundaries by an unspecified date.
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Forty-ninth Legislature
First Regular Session 2 February 27, 2009
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