Court finds for school districts in school millage lawsuit

Tuesday, September 20, 2011

EUREKA SPRINGS -- "It looks like we won," said Superintendent Wayne Carr late Tuesday afternoon after hearing that Sixth Circuit Judge Timothy Fox weighed in favor of the Eureka Springs and Fountain Lake school districts in the lawsuit over excess school tax millage. "It's good news for the school district!"

The joint lawsuit against the Arkansas Department of Education (ADE) and the state treasurer on behalf of both school districts was filed May 6 in Pulaski County by Hatfield & Sayre of Little Rock.

The suit asked for declaratory judgment and injunctive relief from the state's demand that these school districts remit what it considers to be "excess" revenues from a 25-mill property tax that exceed the state's foundation funding per student of $6,023 for the 2010-2011 school year.

For Eureka Springs, that amount was $824,916 and for Fountain Lake, $1,387,567.

The ADE withheld $130,000 this year in state funds for designated programs, such as special education, and refused to approve the district's budget last year as punitive measures after the school board refused to reduce its budget income figure by the amount in demand or remit those funds to the ADE, which has no physical way to withhold or collect them.

The court's determination overrules state Attorney General Dustin McDaniels' opinion that local school millage property tax revenues in excess of the "foundation funding" amount set by the ADE are to be disbursed among all school districts, and not kept in the county where they were collected.

The court found that the state legislature "intentionally provided different definitions for 'foundation funding' (for education) and the 'uniform rate of taxation (URT)'" and that "they are not synonymous terms."

It specifies that the state legislature "did not delegate the authority to address the receipt and distribution of the URT revenues."

The judge's order prohibits the ADE from taking any action against the school districts to recoup these tax monies "until such time as the General Assembly passes legislation authorizing such defendants to take such action."

Fox wrote that state lawmakers simply haven't yet had a chance to address the situation.

"I'm sure the fight's not over," Carr said. "They have 30 days to appeal, but I have no sense of whether they will. It's possible they'll wait and try to get the law changed in next year's General Assembly."

He said if the ADE does not appeal, he expects they will release the designated funds they have been withholding and approve last year's and this year's budget, due at the end of this month.

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