Legislators support tweaking equalization formula
December 7, 2007
Park City School District administrators have been keeping a wary eye on a state legislative committee tasked with reviewing how Uniform School Funds are distributed. The fund collects taxes from each of the states 26 school districts and redistributes them according to enrollment, need and other factors.
Earlier this year the committee was looking at a proposal that would have redirected a larger share of Park City-generated property taxes to other less prosperous districts in the state.
Last week, however, committee members seemed to be leaning toward a formula based on income tax revenues rather than property taxes, which, according to Park City school board members, would not impact Park City as much and they say would be more fair.
The new proposal, sponsored by Utah Sen. Dan Eastman (R-Davis), was the only bill to pass favorably in the task force’s meeting on Monday, Dec. 3.
For School Board President Kim Carson, the tough part about equalization is that "it’s a moving target. You think you have a handle on what’s proposed and you build a strategy and then they change it."
According to Park City School Superintendent Ray Timothy, the property-tax proposal would have forced the district to raise local property taxes by $9.4 million. Eastman’s bill, however, draws on the money generated through income taxes (all of which is already equalized across the state and dedicated completely to the Uniform School Fund).
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In addition to funding school programs, the Uniform School Fund distributes about $26 million to the Capitol Outlay Foundation Program for schools to use for construction projects. This bill would double capital funds bringing the total to about $52.8 million.
The existing Uniform School Fund formula has been in place for about 20 years, Timothy said, and has been tweaked over time so that it is something that most people think is a fair, reasonable solution.
Timothy said the downside to increasing capital allocations is that it would deplete the Uniform School Fund, but that with the robust economy projected by Governor Jon Huntsman, more money would be raised as well.
"I’m much more in favor of using the school fund," Timothy said. "I am hoping that as the economy grows, it won’t hurt to take those funds out."
In Senator Howard Stephenson’s bill, which utilized property taxes, Park City would have to raise $9.4 million to be added to the pool, and would only get back $40,000 of that because the criteria for receiving funds is based solely on the district’s growth without weighing any other criteria used in the Capitol Outlay Foundation Program like need and local effort.
Carson’s concern lies in Park City’s large assessed property valuation. "Our property taxes are based on that large number, but I think that overshadows the fact that we have a lot of people that have been living in their homes for a long time and are really feeling the pinch," she said.
Timothy says there are several reasons why he does not support using property taxes.
"It’s grossly unfair to expect our taxpayers to be paying for schools in other districts," Timothy said. "There was a time when Park City was the lowest-funded district and we still built our own schools.
"Senator Stephenson said, ‘Why should Park City be allowed to hoard their gold and not help other people,’ but we already generate enough money for the state to fund the 13 smallest districts. It’s not that we’re up here not wanting to help. We fund most of our education costs by ourselves; we get very little money from the state.
"The second reason is that it really shifts the burden away from those large growing districts to rural districts."
Timothy likes to use Wayne County, one of the poorest districts in the state, as an example of how resorting to property taxes for equalization would negatively affect rural districts.
"Even if Wayne maximized all their tax levies," he said, "they would still have a hard time building schools, even though they really need new buildings." Of the $300,000 that the Wayne district could earn in taxes and send to the state, they wouldn’t see much of that back, Timothy said.
Using property taxes and only looking at growth is just not a fair system, according to Timothy. "It would negatively impact two-thirds of the state," he said.
While Stephenson is still planning on presenting his bill, the task force has said it will support Eastman’s bill. Eastman’s bill generates money through income taxes, but it still makes changes to property taxes by increasing the threshold from .0024 to .003, which, as one committee member said, "gives us more bang for the buck."
A property tax threshold is how high a district can raise its taxes. Eastman’s bill uses a school district’s threshold as a measure of their local effort, which is one of the three criteria for determining a school districts qualification for funds. The criteria are the same for Eastman’s bill as for the Capitol Outlay Foundation program, the remaining two being a district’s growth and need.
If a district raises its taxes to .003, it is demonstrating a good local effort, and is therefore eligible for Capital Outlay Foundation funds, Timothy said. "But, most districts don’t raise it up to the highest. They try to be frugal with taxpayers’ dollars."
Timothy said that while this new bill still won’t bring in much funding for Park City, at least it’s not taking excessive tax dollars away only to get a miniscule amount back.
How it all began
The need for equalization arose from the splitting of a district
"The idea started out with people wanting to split school districts." Superintendent Ray Timothy said. "There was a feeling that Jordan and Granite districts were too large and impersonal."
While the proposal for Granite School District to be split never made the ballot, Jordan’s did. The legislation was barely passed on Nov. 6, with 53 percent of east side voters favoring it and 47 percent against it.
The vote designated that students in Cottonwood Heights, Draper, Midvale, Sandy and Alta would become the "west side" of the Jordan District. But, ironically, the west side was not allowed to vote, which has resulted in a pending lawsuit.
According to Timothy, the idea of equalization arose when the legislators who were in favor of the split wanted to help facilitate a way for the west side to generate enough money to build all those new schools they’ll need after the split is scheduled to take place on Jan. 1, 2009.
"The area is growing like crazy," he said. "In just the part of the west-side district where I have a home, they need 12 elementary schools, three or four middle schools and one high school."
Those opposed to the split, Timothy said, say that the only reason that the east side is breaking off is that they have all their schools built already, and if they break off, they won’t have to directly pay taxes to build the west side’s schools.