Prop. 123 could affect property taxes
PRESCOTT – If voters approve Proposition 123 at the ballot box May 17, it could impact property tax rates in Prescott Unified School District.
But only by a few cents.
District Chief Financial Officer Kevin Dickerson said it’s too early to tell what the actual impact will be.
That’s because the direct impact to school districts has yet to be determined.
PUSD is one of 39 school districts in Arizona that don’t receive state equalization funds because enrollment is low compared to the overall assessed property value.
Other nearby districts in the same circumstance include Bagdad Unified, Crown King Elementary, Sedona-Oak Creek Unified, Seligman Unified and Williamson Valley Elementary. (Students in Williamson Valley attend PUSD schools, but it’s a separate taxing entity.)
Superintendent Joe Howard said the big picture for Prescott schools is Proposition 123 would put more money in classrooms, no matter the source.
But he added his dismay that Prescott doesn’t stand to receive those funds the same way most other districts and all charter schools will.
“We’re in the position of looking like a bad guy,” he said.
In districts like PUSD, the state funds a portion of the total budget, but the equalization portion – the piece that’s intended to balance per-pupil spending economically across different regions – gets picked up by local taxpayers.
In most districts statewide, that amount is capped at around $4.19 per $100 of assessed value, though some districts are allowed to exceed that amount in specific circumstances.
“I’ve worked at districts where that’s $12,” Dickerson said.
In Prescott, the local rate for the current fiscal year is $2.79.
On the one hand, Prescott taxpayers are paying more of the bill for district schools compared to communities that receive equalization funds. On the other hand, districts that receive more state dollars generally levy higher property taxes.
Dickerson said the district has lowered its portion of the local tax rate in recent years due to a combination of increasing assessed values and reduced student enrollment.
The result for most taxpayers has been the total dollar amount paid to PUSD remained almost constant.
If Proposition 123 passes, the state will adjust its formula, increasing the overall base support amount.
Local school officials estimate that means an increase of about $700,000 for PUSD. They’re quick to point out, however, that other factors like changes in state law and declining enrollment already mean at least a budget shortfall of $1.2 million. If Proposition 123 fails, that increases to nearly $2 million for fiscal year 2016-17.
For most schools around the state, the additional funding brought by Proposition 123 will be covered through an increased allocation from the Permanent Endowment Trust Fund, not the state’s general fund.
Since the state isn’t expected to increase the amount allocated to schools though the general fund, school districts like PUSD will need to make up the difference with local tax dollars.
Dickerson said he’s done some preliminary estimates on what that will mean for local tax rates, given other factors like increasing assessments and declining enrollment.
He said the impact of Proposition 123 will be just a few cents to the overall tax rate, adding that combined with other factors, the local property tax rate will likely remain flat or continue falling.