The Budget and Your Taxes
Why Did My Taxes Go Up?
Although the Governing Board is not taking any direct action to increase funding for the School District beyond what the State Legislature and Governor have put in place, there are some factors occurring at this time that are having a negative impact on the estimated primary and secondary property tax rates.
Assessed Valuations / Qualifying Tax Rate
Primary and Secondary Assessed Property Valuations have decreased by 11%. Since the property values have decreased, the qualifying tax rate (primary) has increased, as required by state law to make up for that difference.
School Improvement Bond Principal Reduction
Our debt service schedule requires an additional $4M payment/reduction to the principal balance of bonds outstanding which has also contributed to the increase in the Secondary Tax Rate.
Cash Rollover/State Aid Reduction
With the State education rollover from FY 2011 a large amount of cash hit the district account just prior to the tax rate being set for FY2012 (last summer) which was calculated towards lowering the primary tax rate calculated for that year (year we have just finished). However, that cash was needed to cover the 9.5M reduction in state aid (capital reductions) implemented by the Legislature and Governor as part of the State Budget that followed in FY 2012. The Governor's proposed budget for FY 2013 included a provision to recover this cash in Soft Capital to prevent the tax rate impact, but that proposal was rejected by the legislature in budget negotiations. In FY 2013 that loss of tax revenue is now considered as the next year calculation to support the new tax levy. Taxpayers in Gilbert Schools boundaries benefitted by a reduction in the FY2012 primary tax rate but now are being assessed that lost amount in FY2013.
Why such a large percentage increase this year compared to other districts?
Below is a chart of the 10 year combined (primary and secondary) tax rate history for Gilbert Public Schools and neighboring districts.
A large portion of the tax rate increase that we are seeing this year is a delay of the increase that would have occurred last year. That delay can actually be observed in the chart above. Arizona school districts had some cash flow adjustments to make considering the delay of the state aid payment as well as the reduction in state aid the following year. The high cash balance that lowered the tax rate last year should have been adjusted to keep the rate less volatile. The formula however will automatically correct for the loss of tax revenue due to those variances in the following year. Since this is an anomaly you are not likely to see an increase like this again for the same reason.
Who Raises the Taxes?
Unlike other political subdivisions, school districts operate under budget limits, where the levies are controlled by a statutorily established Qualifying Tax Rate (QTR) and voter approved initiatives. The proposed budget limits that are funded by the primary property tax are based on formulas established in State Law and dollar amounts per student that are determined by the State Legislature. Regarding the primary property tax, the Governing Board is not taking action for any additional dollars that are not already budgeted for all school districts within the State of Arizona.
The proposed budget limits that are funded by the
secondary property tax are determined by voter approved initiatives from November of 2003, 2005 and 2007. Regarding the secondary property tax, the Governing Board is not taking action to approve any funding more than what has been put in place by the voters of this community and has been in existence for many years.
These initiatives include:
1) School Improvement Bonds (for building, remodeling and renovating school facilities). These bonds require annual payments of interest and principle reduction. Based on the current debt service schedule, the District will have retired all debt by the end of Fiscal Year 2023.
2) Capital budget overrides to provide furniture fixtures and equipment for the schools that were built, and/or remodeled with the school improvement bonds previously mentioned. One of these capital overrides ($1.8M per year) expires at the end of FY2013, the other ($1.2M per year) expires at the end of FY2015.
3) Capital budget override for the District to maintain a five year life cycle/refresh period for outdated student, teacher and staff computers, software and network equipment. This capital override ($7M per year) expires at the end of FY2015.
4) Maintenance and Operation override (approved by voters in 2007) which provides an additional 10% to the operating budget (above the per student allocation provided by the State, as mentioned above) to:
- maintain current levels of salaries, wages and benefits for teachers and support staff
- maintain class size and student/teacher ratios
- continue funding current instructional programs
- continue to provide the fine arts, athletics, elective classes, and extracurricular programs that are currently available to students in the District's schools.
This override expires at the end of FY2013 and has been placed on the ballot for reauthorization by the voters.
Did the governing board vote to increase taxes?
The statute that refers to the governing board’s ability to vote for an increase in property taxes is A.R.S. 15-905.01. This portion of the law refers to the budget amounts in various categories such as adjacent ways or any amount above the school district budget limit defined in statute. The board is required by law to hold a truth in taxation hearing when they vote to increase taxes for these reasons. There has not been a hearing to vote for an increase in taxes by the GPS board since 2009.
Every year the board is required to adopt a budget within the limits calculated by a formula in statute. At the time the budget is proposed to the public, the latest estimate of tax rates is provided in the summary. Whether or not the tax rates go up or down, the adoption of the budget should not be confused with the process described above where there is actually a vote for a tax increase.
Why does the district budget to the budget limits?
Gilbert’s operational education funds are not solely from Gilbert taxpayers. The state equalization formula establishes the budget limits that are available to each school district. To fund those budget limits the revenue comes from local property taxes as well as the state general fund.
For example, the Equalization Base for FY2012 is $189,062,170.
The Qualifying Levy that needed to be collected from property taxes is $65,638,129.36
The Equalization Assistance which represents the funds from the state general fund that are provided to Gilbert Public Schools to reach the Equalization Base is $123,424,040.
Budgeting to the budget limits maximizes the educational purchasing power of the Gilbert taxpayers. However, adopting the budget limits does not mean that the school district is committed to spending all of the dollars. If at the end of the year there is a balance left in the funds, the resulting cash balances that offset the levy will lower your taxes.
Where Did My Tax Money Go?
This is a common question asked by many Arizona taxpayers. An excellent discussion is found in an article prepared by Stone & Youngberg, a leading underwriter for Arizona educational bonds.
This article also addresses the false assumptions regarding the ability of school districts to lower taxes by not increasing their spending.
Truth in Taxation
Schools may access the local property tax base to fund a number of expenditures outside the budget limits, including desegregation, excess utilities, small schools adjustment, adjacent ways and liabilities in excess of the budget. Since there is no state assistance tied to this funding, every Gilbert property tax dollar provides only $1.00 of educational funding for the schools in these areas. Before doing so however, the intent must be disclosed through a public notice of truth in taxation (A.R.S. 15-905.01 (B) ).
Unlike other surrounding districts like Chandler, Mesa and Higley, since Gilbert Public Schools is not going to levy for any of the expenditures described above in FY 2013, there is no requirement to publish any notice. The calculations used to determine whether or not a truth in taxation notice must be posted are on the final page (page 14) of the Proposed Expenditure Budget.
External Links to Tax Information
