Thursday, August 28, 2014

Local school revenue: Clarifying "the 4%"

Right now, school boards all over Kentucky are voting on budgets and tax rates for the school year, and the media reports often say the vote was on whether "to take the 4%" or not. 

That means they're voting for a 4% increase in the total amount brought in by local taxes.  If a district brought in $1,000,000 in local revenue last year, they're setting taxes that will bring in $1,040,000 this year.

Here's the tricky part: that may not mean a school board is voting to raise the tax rate on local properties.  In some districts, boards may be able to bring in 4% more dollars by lowering the tax rate on all the property being taxed.  That's because in most districts, the taxable properties become more valuable year by year.   If the assessed values go up enough, a district that wants 4% more revenue may have to lower the tax rate it charges on each $100 of taxable property. In other districts, it may be possible to bring in 4% more revenue by keeping the same tax rate, or raising the rate just 1% or 2%.

What's the magic of 4%?  That number matters because state law says that if a school board increases revenue more than that, voters can call a referendum to consider repealing the increase.  Given that rule, boards are very hesitant to go past the 4% mark.

For individual property owners, the key thing to know is that 4% in the headlines isn't necessarily 4% on your tax bill.  If you read the full article, you may find information on the old and new tax rates--or you may need to wait for your bill to arrive in the mail.

For community members in general, it can also be good to check on whether the new tax rate allows the schools to keep up with changes in prices and enrollment.  Recently, inflation has been lower than 4%, but if it ever went back to double digits, it would be really hard for districts to keep up.  And if 4% more money has to fund 6% more students, schools may be giving each child less support even though there's a larger total being spent.

[Note just for folks who love stuff like this: the rule about a 4% revenue increase only applies to property that's being used in similar ways from year to year.  When property is developed --say, from farm use to homes or from homes to stores-- it isn't included in figuring out the 4%. My friends and colleagues who work on these details at the state or local level will, rightly, want me to mention that nuance.]

No comments:

Post a Comment

Updates and data on Kentucky education!