Arkansas Panel Backs Retaining Property Tax Money

LITTLE ROCK – A proposal to allow Arkansas to retain excess property tax revenue from a handful of school districts won the backing of a Senate committee Thursday, but faced opposition from the top Republican in the House and superintendents from the districts.

The Senate is expected to vote Friday morning on the plan, endorsed by the Senate Education Committee. The proposal was being considered as part of a special session convened to address looming hikes in teacher insurance rates.

The bill would allow the state to retain excess property tax revenue from districts where higher property tax collections pushed the districts above total school funding levels set by state law. It would also phase out the excess revenue from eight districts where collections are currently above that funding level.

The plan is in response to a court ruling last year that said Arkansas law didn’t allow the state to withhold the funds. Gov. Mike Beebe and other top officials have said the decision threatened reforms intended to provide equitable education funding across the state.

“It’s a matter of fairness, a matter of equity, it’s the spirit and the intent of Lake View,” Sen. Bruce Maloch, D-Magnolia, told the committee, referring to the long-running school funding case that led to the reforms.

A 1996 constitutional amendment approved by voters requires each school district to levy no less than 25 mills of property tax for maintenance and operation of schools. Districts are allowed to levy more than 25 mills. A mill produces $1 for every $1,000 of assessed property value.

Beebe backs the bill, which is intended to help restore a school facilities fund that’s being tapped to assist with alleviating teacher insurance rate hikes. Beebe compared the minimum property tax rate to state sales taxes. The proposal would not affect revenue from any mills above the state-mandated minimum.

“A lot of people are saying, ‘You’re taking our local tax.’ They’re not,” Beebe said. “Nobody’s taking anybody’s local property tax.”

But a group of superintendents from the districts told lawmakers the proposal would mean a financial hit for their schools and would make it more difficult to convince voters to back millage increases in the future.

House Majority Leader Bruce Westerman filed a competing bill aimed at preventing the withholding of the funds. The proposal would require the excess money to stay in the districts in some fashion, including for facilities funds or as tax credits for property owners.

Beebe’s office said it was opposed to the bill, which a spokesman said raised constitutional concerns by trying to use the money for tax credits rather than for schools. Westerman was expected to present the bill to a House panel Friday.

“If there are these so-called excess funds, the taxpayers are the ones that paid these excess funds. And if these excess funds don’t go back to the district where they should rightly go … then the taxpayers who paid them should receive them,” Westerman, R-Hot Springs, said.

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