by Justin Olson
In this odd-numbered year no candidates are up for election. Still, ballots will be counted this November since school districts can ask voters to approve bonds and overrides in any year.
With their ballots that will be hitting mailboxes any day, Arizonans will be asked to approve 21 different school district bond proposals and 39 separate budget override requests. If approved, the bond proposals will authorize $1.6 billion in new school debt and a corresponding $2.5 billion of property tax debt service levies over the life of the bonds. The overrides will lead to an annual property tax levy of $297 million for each of the next five years.
As school finance in Arizona can oftentimes seem a bit complex, we thought we would break down some of the basic facts about these school district ballot measures.
What is a bond?
A vote for a new bond issuance does two things: first, it authorizes the district to enter into new debt, and, second, it allows a new property tax to fund the annual principle and interest payments on the new debt. With authorization from the voters, a school district can sell bonds to raise funds to purchase physical assets such as school buildings, vehicles, text books, furniture, and computers and other technology. The bonds are sold to investors in the capital markets with a promise to repay the amount borrowed together with annually accrued interest. The district then uses its property taxing authority to raise the revenues for the annual debt service payments.
What is an override?
A budget override authorizes a school district to levy a property tax to fund spending above the amount allowed under a budget limit called the equalization base. Arizona created the equalization base in the 1980s in an attempt to create more equity across the state in school district expenditures and tax rates.
Prior to the 1980 reforms, the state had very little involvement in school district taxing and spending decisions. Due to court rulings that the Arizona Constitution requires the state to attempt to create more uniformity in school district expenses, the state established this budget limit based on the number of students enrolled in each district.
To decrease the reliance on local property taxes, the equalization base is largely funded with state revenues. For example, for fiscal year 2020 the state funded $4.5 billion of the equalization base while the remaining $2.6 billion was funded through school district property taxes.
If school districts spent only the amount authorized by the equalization base then the average amount spent per student would be about the same in each district. But the school finance laws allow for several exceptions to this budget limit. Among those exceptions are the voter-approved budget overrides that are funded through local property taxes.
With these overrides, districts can increase their budgets by up to 15% for their maintenance and operations expenses which include primarily employee salaries and benefits. Districts can also seek an increase of up to another 10% to spend on physical assets through additional assistance overrides.
Will my taxes increase?
All of the bonds and overrides on the ballot are funded by property taxes. So passing any of these measures will lead to a higher property tax bill than would be due if the measures are rejected.
To determine whether a property tax bill will be higher than the previous year’s bill as a result of one of these measures, however, requires additional analysis. Property tax bills can be somewhat complex since there are many potential changes that can impact a bill. With so many moving parts, it can be difficult at times to identify what jurisdiction is responsible for a particular bill’s increase.
Oftentimes a taxing jurisdiction will argue that a proposal will not increase taxes because the tax rate will remain the same after the measure is approved. This means that the rate is set to decrease unless the voters authorize the new bond or override.
Additionally, in the current environment where homeowner’s assessed values are increasing, a tax rate that remains the same will lead to a higher property tax bill since the rate is applied to the higher assessed value. Voters that are concerned about a bill going up relative to the previous year will need to compare the proposed tax rate applied to the voter’s most recent assessed value to determine what will be the actual bill impact of the proposed rate.
Why is this on the ballot again?
Overrides can only be approved for up to seven years with a phase down of the override amount required in the last two years. For that reason, most districts that have voter-approved overrides in place will ask voters to adopt a new override before the existing one begins to phase down.
Additionally, if voters reject a bond or override there is nothing that prevents the district from sending the measure back to the voters in the following year. In Maricopa County there are a few examples of bond and override questions that are on the ballot this year after the voters rejected similar measures in the 2018 election.
These examples include the Buckeye Elementary School District where voters last year rejected a $65 million bond proposal with 57% voting no and 43% voting in support. This year the district seeks approval of a $54 million similar proposal. Additionally, the Nadaburg Unified School District voters narrowly rejected a $2.3 million bond proposal last year, and the district now seeks a slightly higher $2.4 million similar authorization. Lastly, voters in the Mesa Unified School District will be voting this month on the same 15% budget override that they narrowly defeated last November.
How can I be sure the additional tax revenues will benefit my child?
Individual districts have a lot of autonomy in how to budget their resources. This results in significant differences in the percentage of educational dollars that reach the classroom from district to district as is seen annually in the Arizona Auditor General’s report on instructional spending.
The percentage spent on instructional support is as high as 78.1% in the Blue Elementary School District and as low as 34.6% in the Red Mesa Unified School District. There is even a wide range among large districts where one would expect less variability. With 61.6% spent on instruction, the Chandler Unified School District leads among the state’s largest districts and is solidly ahead of Tucson Unified where 51.1% reaches the classroom.
School districts’ governing boards adopt budgets annually. It is during this budget process and during the election of school board members that voters can have the most influence on ensuring that the districts’ resources are prioritized on instructional spending.
When is the election?
Like every year, Election Day is the first Tuesday after the first Monday in November. But, as this is a mail-in only election, voters will need to cast their ballots in plenty of time for the post office to deliver the ballot to the county by November 5th.