Critics: State Supreme Court Ruling on School Property Tax Goes Against Lake View

by Andrew DeMillo, The Associated Press  on Thursday, Nov. 29, 2012 3:41 pm  

The Arkansas Supreme Court building in Little Rock. (Photo by Dustin Nevill)

LITTLE ROCK - School districts that collect more in property taxes than state-mandated school funding levels can keep the money, a sharply divided Arkansas Supreme Court ruled Thursday in a decision that top officials said threatened reforms intended to provide equitable education funding across the state.

The high court ruled 4-3 that state education officials cannot withhold excess money from the Eureka Springs and Fountain Lake school districts, where higher property tax collections pushed the districts above total school funding levels set by state law. Chief Justice Jim Hannah wrote the dissent, warning the decision "obliterated" a school-funding system that legislators hammered out to end a long-running court case.

The districts sued last year after the Education Department billed Fountain Lake for $1.4 million and Eureka Springs for $825,000, saying they'd received too much money from levying the state-mandated minimum property tax.

The court sided Thursday with Pulaski County Circuit Judge Tim Fox, who ruled last year that Arkansas law doesn't allow the state to withhold property tax money from local school districts.

The court's majority wrote that the property tax — known as the district's uniform rate of tax, or URT — could not be considered a state revenue.

"It is a one-of-a-kind tax, a school-district tax, approved by the voters of the state of Arkansas and levied, assessed, and collected by the counties for the sole use of the school districts," Justice Paul Danielson wrote in the majority opinion.

State officials said the financial impact of the ruling would be relatively small, with only six of Arkansas' 239 districts this year collecting more in property taxes than the state school funding amount. However, they fear the ruling will undermine a series of school funding equity reforms.

"It's the foundation on which we've based so many decisions over the last 10 to 12 years on how we fund education, what we expect our schools to do, what we expect of our General Assembly," state Education Commissioner Tom Kimbrell said. "There have been so many things done based upon this premise. It surprises me and I think it just changes the game."

The ruling prompted critics to complain that it goes against the long-running Lake View school funding case and reforms that lawmakers enacted in response to it. The case ended in 2007 when justices ruled that Arkansas had funded its schools adequately. Two of the justices opposed to the ruling were key voices on the court during the Lake View litigation.

"They've just opened the door for future governors and legislative bodies to do all sorts of things backtracking," Gov. Mike Beebe told reporters.

Not all state officials criticized the ruling. House Republican Leader Bruce Westerman said he believed it was a good thing for the districts to be able to keep the excess money and disputed the idea that it would hurt the state's school funding efforts.

"I'm waiting for somebody to show me how one district is getting less money than they were before," said Westerman, R-Hot Springs.



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