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Arkansas Ruling: Districts Can Keep Extra Property Tax Cash

On Nov. 29, the Arkansas Supreme Court answered an interesting question involving a problem many school districts would like to have: Can a district keep property tax revenues that are above state-mandated school-funding levels?

Per the Associated Press, the case involved two districts, Fountain Lake and Eureka Springs, which sued the state education department last year, after the department said they'd received "too much money" from the state-mandated minimum property tax. The state education department has said that it should have the ability to withhold the additional revenues because the state had a duty to ensure equal school funding aid regardless of local revenue dynamics.

In a 4-3 ruling in Kimbrell v. McCleskey, the justices said the districts could keep their additional cash. You can read the full decision here on the state Supreme Court's website. ("Kimbrell" is Tom Kimbrell, the state's education commissioner.) The key section is on pages 16 and 17, where the majority of justices argue that the state constitution requires such revenues as collected by the state be returned "to each local school district from which the revenues were derived."

The justices in the majority also point out that under the terms of the state's foundation funding formula, "each student is guaranteed an adequate education as demanded by our constitution ... Indeed, no one in the instant case alleges any inadequacy or inequality in the education being received by the Arkansas students today, but for the dissenters' machinations."

As for the dissenting justices? In their published opinion, via the Arkansas Times, "Today's decision takes us back twenty-nine years to a time when a student's public education was based on the property wealth of that student's school district. ... This court expressly held in a landmark decision in 1983 that a school-funding system based on property wealth was inherently discriminatory and violated the Arkansas Constitution." The case they're referring to is Dupree v. Alma School District No. 30.

In the AP report, Kimbrell says that the decision eliminates the basis for several decisions regarding school funding for the last 10 to 12 years. Gov. Mike Beebe, a Democrat, argued that the ruling could permit state lawmakers to permit all kinds of "backtracking" in terms of equitable school funding. A 1996 amendment to the state constitution requires that districts levy at least 25 mills of property tax for maintenance and operations (one mill creates $1 of tax revenue for every $1,000 of assessed value), although districts can levy more if they want.

So, if education funding is by definition "adequate" for every student in every district, as the majority of justices say, and nobody can point to inequitable funding between districts, how concerned should Arkansans be concerned about inequality? The AP story notes that only six of Arkansas' 239 districts in 2012 were collecting more in property taxes than the state school "foundation" funding amount. But those opposed to the ruling seem to be arguing that that number could change radically down the road.

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