AG clarifies opinion on school millage

Friday, March 18, 2011 ~ Updated 12:45 PM

EUREKA SPRINGS -- With a new opinion issued by State Attorney General Dustin McDaniel on school millage revenues and a bill coming before the House Education Committee, Eureka Springs School District officials are calling on the public's help.

On March 9, McDaniel clarified his opinion, 2010-94, issued last fall, that funds generated in any school district from the state-mandated 25 mills property tax that exceed $6,023 per student should be redistributed to districts that cannot generate the minimum funding.

In 2010, this applied to four school districts in the state, one of which was Eureka Springs because of its high assessed property values.

The state then demanded Eureka Springs remit back $824,000 for last year and said it will have to do so every subsequent year as long as Eureka remains a "property-rich" district. That, along with revenues from the other three districts, means the state would have around $3 million to redistribute each year and would not have to make up the difference out of its own coffers.

Rep. Bryan King (R-Green Forest) filed House Bill 1435 on Feb. 17, sponsored by nine other legislators from around the state, to keep the excess funds in the districts that generate them, as is stated in the enacting state code language in 1999.

King further sent a letter to McDaniel asking him to clarify what appears to be a discrepancy between state code and his interpretation of the state's Uniform Rate of Tax (URT) foundation funding formula.

"I continue to subscribe to the conclusions I reached in Opinion No. 2010-94," McDaniel wrote, although he did acknowledge there appear to be inconsistencies.

"This statute on its face is internally inconsistent," he said of Amendment 74 of A.C.A. 26-80-101(b)(1) and (c). "Subsection (b)(1)(B) clearly contemplates that URT revenues raised in a particular district might be distributed "to other school districts," whereas subsection (c) indicates that "net revenues" should be remitted to the school district from which the revenues derived."

He said resolving the inconsistency requires "applying clear constitutional imperatives" based on court cases.

Citing Dupree v. Alma School District in 1983, McDaniel wrote that "basing educational funding upon disparities in tax revenues between property-rich and property-poor school districts is inconsistent with the constitutional requirements of equal protection ... and of adequacy and equity in education" and said that such disparities "widen the gap."

"The trial court found that educational opportunity of the children in this state should not be controlled by the fortuitous circumstances of residence, and we concur in that view," McDaniel continued. "Such a system only promotes greater opportunities for the advantaged while diminishing the opportunities for the disadvantaged."

He said what the court defined as the "main issue" was that "when all counties are assessed at the proper level, the gap will still exist between the poor and wealthy districts and the mandate of the constitution will remain unfulfilled."

He did not define or make reference to a definition of "the proper level," however.

In reviewing the Lake View School District v. Huckabee litigation in 2005, McDaniel quoted court documents that noted that while Amendment 74 does authorize funding variances, it "does not authorize a system of school funding that fails to close the gap between wealthy school districts with premier educational programs and school districts on the lower end of the economic spectrum, which are mired in poverty and unable to provide a system of education much above the most elementary kind."

At issue for Eureka Springs, however, is the fact that while the property valuations may be considered "wealthy," in actual fact, 77 percent of the elementary school children in the district qualify for the Free and Reduced Lunch program, i.e., poverty level.

Superintendent Wayne Carr has maintained that having to pay out $824,000 of last year's budget, which is already spent, will almost wipe out the district's reserve funds of $1.5 million, and continuing to pay that amount in the future could put the district in financial distress.

He and the school board are calling for the public to contact members of the state's House Education Committee by Tuesday, March 22, when the committee is expected to consider House Bill 1435.

"This bill, if approved, would allow school districts to keep all the money that is collected from local school millages," he wrote in an email to the Eureka Springs Chamber of Commerce. "Our patrons approved our local school taxes with the impression that all of the money collected would stay here for the benefit of our local school. If the Attorney General's opinion is allowed to stand, we will be sending around $800,000 of our local taxes every year to Little Rock to be used for other purposes other than to fund the Eureka Springs School District."

He said he and board president Rusty Windle will attend the committee meeting in Little Rock to express their opinion that House Bill 1435 should be approved.

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