By Nolan Madden
Among the fiscal tools slated for consideration in Arizona State Legislature session opening Jan. 11, 2016, including education funding cuts, one item in particular is forecasted to impose a significant and negative impact on community colleges, according to Arizona community college lobbyists.
“Community colleges in the State of Arizona are going through an interesting and challenging time. The state legislature’s willingness to fund community colleges as we slowly emerge from the recession has not been very good,” Northland Pioneer College lobbyist Michael Racy informed the Navajo County Community College District Governing Board last week.
Racy retrospectively explained that in a six-month special session in 1980, in response to tax reform efforts in California and California Proposition 13, the Arizona Legislature added items to the ballot resulting in a number of reforms and limits in the state, including tax levy and expenditure limits. As part of that reform, a constitutional limit was placed restricting the total assessment against homeowner-occupied residential properties not to exceed one percent of assessed value.
In order to implement that provision, the legislature also put into place provisions for Arizona to pay a portion of homeowner-occupied residential property taxes for schools, recognizing that the combined property tax burden in any jurisdiction is generally the sum of county, community college, state, school district, and city or town property taxes, also not to exceed one percent of assessed value.
“The legislature also recognized that no single entity could control when and if that limit was exceeded, and that the largest single contributor to exceed this limit in Arizona’s property tax system were school property taxes, so they created the Homeowners rebate that brought down that rate,” he said.
As the economy and property values fluctuated over the past 34 years, Arizona has had to backfill and spend between $0 and upwards of $27 million to offset low assessed property values.
“The districts that have the greatest expenditures for the state are those that have federally mandated desegregation funding, and the conservative Arizona Legislature resents having to pay for that portion of those costs. This year, Doug Ducey announced in the governor’s budget that, “’are going to push that back to the local jurisdictions, and everyone needs to pay their proportionate share,’” Racy explained.
However, rather than the expenditure costs being apportioned evenly among the tax contributor categories, the legislation was instead written to shift the expense burden “in very perverse ways,” he said.
Racy noted that if the law remains the way it’s currently written, more and more Arizona community college districts will be implicated in this legislation, “it’s not necessarily imminent that it will hit NPC, but it’s something that has profound implications.”
Communities statewide have moved to oppose the legislation, with county supervisors and community college presidents in Pima, Pinal and Maricopa counties filing legal suits so far, in addition to active municipal efforts to arrive at a settlement of the issue.
For Navajo County, this means that, moving forward, if an individual school district’s tax rate assesses the county’s tax rate high, and NPC district’s property taxes exceeded the one percent average assessment limit, NPC would be forced to potentially pay property taxes for the unfunded county K-12 district.
Arizona Community College Coordinating Council lobbyist Kristen Boilini added, “That’s one of the problems with the way the formula works now. As equalization districts, you are always the highest because you need to put your county’s effort into funding the community college before you even justify drawing down equalization funds from the state, that’s the way that agreement has always worked.
“So in the event that one of the counties has an equalization school in it, and any of them are a rural school district, the community college is disproportionately impacted. That’s been a big part of our concern in wanting to make sure that this gets readjusted, that the state pays their fair share, and also that the mechanism for sharing any of that overage or exceedence is fairly distributed, and doesn’t disproportionately hurt the poorest counties that are eligible for equalization,” she explained.
Racy also pointed out that a single county taxpayer event, such as a power plant closure, could dramatically affect the tax base and subsequent rate, and very easily collectively drive a group over that limit.
With Arizona Public Service Co.’s plans to potentially shutter its Cholla Power Plant operations, such an event will drive property taxes to the set limit as quickly as within one year, he said.