On May 15th the Governor signed Legislation approving the sweep of funds from Arizona School Districts in excess of their year-end operating budgets.
What excess are they talking about? Let’s take a closer look.
Here are some possibilities:
- School districts can legally carry over up to 4% of their operating budget. Some carryover is considered prudent since expenses occur continuously from year to year.
- Tax credits may carry over, but they are in separate segregated accounts and it would appear to be illegal to sweep these accounts.
- Lunch accounts would also carry over amounts as would any gift and donation accounts, but again these are separate segregated accounts.
- District money reserved at the County Tax Assessor’s Office. This seems to be the most likely candidate.
Why is there school district money held by County Tax Assessor’s Office?
(As an important aside–school districts disclose all funds at the district and held at the County Tax Assessor’s Office in audits and state filings and insinuations that school districts are “hiding” money are patently false.)
Districts have funds at the County Tax Assessors office for several reasons:
- To pay for projects already committed to by the district.
- Debt service for bonds.
- A reserve to pay operating expenses when the state delays payment (this have happened for the last three years in Arizona.
- A reserve to avoid borrowing for emergencies and to meet the required minimums for bonds ratings (A high rating saves taxpayers higher interest payments).
- To stabilize taxes and avoid gyrations in tax payments.
- Funds that do not fall into one of the above categories are scheduled to be returned to the local taxpayer – usually as a result of an unrealized student count–at the completion of the fiscal year.
If the state sweeps funds held by the districts they will have to be replenished by raising local property taxes in order to pay for projects already committed to by districts, meet debt service for bonds, maintain prudent reserves and stabilize tax payments.