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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
county aid; school districts; revisions
Purpose
Modifies property tax levy calculations for a common school district not within a high school district (Type 03 district). Outlines property tax reductions in TY 2024 for each Type 03 district that levied the minimum qualifying tax rate (MQTR) in TY 2023.
Background
Laws 2022, Chapter 285 eliminates the requirement for a Type 03 district to pay tuition for high school pupils who reside in the Type 03 district and attend another school district. Students who reside in a Type 03 district and attend another school district for high school are enrolled in the school district of the student's attendance for the purposes of: 1) determining student count and apportionment of state aid; and 2) providing a free and appropriate education under the federal Individuals with Disabilities Education Act (A.R.S. § 15-824).
A county board of supervisors (BOS) must annually levy, at the time of levying other taxes, an additional tax in each Type 03 district equal to the product of: 1) the countywide average per pupil equalization base for high school pupils; and 2) the number of the district's resident high school pupils during the prior school year. Monies collected by the property tax must be added to county aid for equalization assistance and distributed to school districts in the same manner as the state equalization tax rate.
Statute determines that a school district is not eligible for equalization assistance if the school district's equalization base exceeds the amount levied by the applicable qualifying tax rate (QTR). In each school district not eligible for equalization assistance, a county BOS must annually levy an additional tax referred to as the MQTR. The MQTR levy amount is determined based on the difference between the levy that would be produced by 50 percent of the school district's applicable QTR and its equalization base (A.R.S. § 15-992).
There is no anticipated fiscal impact to the state General Fund (state GF) associated with this legislation.
Provisions
MQTR and Additional Tax in Type 03 Districts
(Retroactive to Tax Years Beginning on January 1, 2024)
1. Modifies the MQTR levy amount in a school district not eligible for equalization assistance by subtracting the amount levied by the additional tax in Type 03 districts.
2. Replaces the requirement to levy an additional tax in a Type 03 district equal to the countywide average per pupil equalization base for high school pupils multiplied by the number of resident high school pupils in the Type 03 district during the prior school year, with a requirement to levy an additional tax in a Type 03 district that is equal to the lesser of:
a) a rate that is equal to the applicable QTR; or
b) a rate that would result in a levy that equals the countywide average per pupil equalization base for high school pupils multiplied by the student count of resident high school pupils in the Type 03 district during the prior school year.
3. Redirects monies collected from the additional tax levied in Type 03 districts from county aid for equalization assistance to the State Treasurer for deposit in the state GF to aid in school financial assistance.
4. Requires the ADE to annually provide each county BOS with the countywide average per pupil equalization base for high school pupils and the student count, rather than number of, high school pupils in the Type 03 district during the prior school year.
School District Primary Property Tax Cap
5. Excludes the MQTR and additional tax in Type 03 districts from the criteria that the Property Tax Oversight Commission (PTOC) uses to determine whether a school district's primary property tax rate exceeds the prescribed maximum permissible primary property tax rate.
Type 03 District Property Tax Reductions
6. Requires each county BOS that levied the MQTR in TY 2023 in one or more Type 03 districts to:
a) in TY 2024, reduce the tax levy in each Type 03 district by an amount determined by the county BOS and approved by the PTOC; and
b) direct the county treasurer to distribute any unexpended and unencumbered monies that were collected by the MQTR in TY 2023 to each Type 03 district to offset the reductions determined by the county BOS and approved by the PTOC.
7. Repeals the Type 03 district property tax reduction requirements on January 1, 2027.
Miscellaneous
8. Allows ADE, in FYs 2025 and 2026, to use the most recent data from ADE's annual open enrollment report to provide the information a county BOS requires to levy the additional tax in a Type 03 district.
9. Resolves conflicting statutes retroactive to July 1, 2023.
10. Makes technical and conforming changes.
11. Becomes effective on the general effective date, with retroactive provisions as noted.
House Action
ED 1/30/24 DPA 10-0-0-0
3rd Read 2/22/24 58-0-1-0-1
Prepared by Senate Research
March 11, 2024
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