TUCSON, AZ (Tucson News Now) - Pima County and Tucson Unified School District filed a special action in Maricopa County Superior Court on Dec. 24 against the state of Arizona in an attempt to compel the state to provide TUSD more than $8 million in state aid it has withheld based on the Arizona Department of Revenue’s reading of a new state law. This is the second attempt in recent years by the Legislature to reduce its state aid for education responsibilities. The county fought and won in court a similar attempt in 2015.
Under ADOR’s reading of the new law passed by the Legislature this year, approximately $8 million that the state would previously have paid to TUSD as Additional State Aid for Education is now instead supposed to be paid by TUSD homeowners as a secondary property tax. The county and TUSD disagree; they believe that the new law didn’t actually change the existing school-funding scheme, and that the state —not TUSD homeowners — owes TUSD that $8 million.
Underlying the controversy is a complex school-funding scheme that was enacted by the Legislature in the early 1980s in order to implement a tax limitation that the voters had recently added to the Arizona Constitution. Under the constitution, the total of all property taxes—with three narrow exceptions—levied on a parcel of residential real property cannot exceed 1 percent of the home’s full cash value. For TUSD homeowners, that includes taxes levied by TUSD, Pima Community College, the city of Tucson, Pima County, and the state. In order to implement that limitation, the Legislature provided that, when the total of those taxes exceeds 1 percent, homeowners get a credit against their school district taxes to bring the total taxes down to the 1 percent maximum level. That reduces the district’s tax revenue, so the Legislature provided that the state will give any affected districts more state funding (Additional State Aid for Education) to make up the difference. For TUSD, that is around $8 million for the current fiscal year.
The Legislature this year added a requirement that any property tax levied by a school district to fund a court-mandated desegregation program is a secondary tax that must be listed as a separate line item on property tax bills. According to ADOR, that means that the desegregation portion of TUSD’s tax levy is outside the 1% limit—which in turn means that the State doesn’t have to pay TUSD that $8 million in additional state aid. Instead, according to ADOR, the county should have billed TUSD homeowners an extra $8 million in property taxes. Having concluded that the new law did not in fact change the funding scheme, the county refused to increase TUSD homeowners’ taxes. The county and TUSD are suing to force the state to provide the additional state aid to which they believe TUSD is entitled.
TUSD will have a budget shortfall unless the district and county are able to force the state to do the right thing and pay what it owes.