The "Why" Behind Budget Reductions & Demographic Projections
Why Does "ADDL EDUC AID - CAVE CREEK" Show on My Tax Bill and Where Does the Money Go?
In 1980, the Arizona Legislature refined the school finance system to provide equal dollars per weighted pupil for school district operations through a balancing of the local qualifying property tax rate and State/County equalization assistance so that districts experience similar “effort” in raising educational dollars for their students irrespective of property valuations within their boundaries. The State still utilizes this formula today. Therefore, as property value increases, State Equalization decreases and vice versa. Everyone in Arizona has to pay fifty percent of the qualifying tax rate, thus the “equalization” concept.
In the case of Cave Creek, the total primary assessed value of the district is $2.3B, providing $448,000 of assessed value per student. In comparison, our neighboring district, Deer Valley Unified, has approximately $89,529 per student. Deer Valley receives $103,202,000 in State Equalization and Cave Creek, one of a handful of districts in Maricopa County, is not eligible for state equalization assistance because of its property wealth, and receives no state equalization.
Public schools in Arizona are governed by the Arizona Constitution and Title 15 of the Arizona Revised Statutes (ARS). ARS §15.992.B. states “At the same time of levying taxes as provided in subsection A of this section, the county board of supervisors shall annually levy an additional tax in each school district that is not eligible for equalization assistance as provided in section 15-971. Because of this statute and the assessed value in Cave Creek, the County Assessor collects approximately $4.1M annually from taxpayers on the line entitled “ADDL EDUC AID – CAVE CREEK” which is transmitted to the state treasurer for deposit in the state general fund to aid in school financial assistance. CAVE CREEK UNIFIED SCHOOL DISTRICT DOES NOT RECEIVE ANY OF THIS FUNDING.
How is the Cave Creek USD operating budget funded?
All schools in Arizona operate on a fiscal year beginning on July 1 and ending on June 30. The Governing Board of the District must propose its budget on or before July 5 and adopt a budget before July 15. The Maintenance & Operations (M&O) Fund budget is where most of the day-to-day expenditures of a school district take place. Approximately 80% of the M&O budget is comprised of salary and benefits for employees.
Although the format and formula computation of the M&O Fund is very structured, the process of determining how the monies are spent varies among school districts. The State bases the M&O Budget on a number of formulas that are heavily dependent on student enrollment.
The District multiplies the number of students enrolled by a Base Level amount determined annually by the Legislature. For the current year, that amount is $4,359.55. The product of this number plus the amount allocated for Transportation becomes the Revenue Control Limit for the District. Arizona law does not allow districts to overspend their budgets. Although Cave Creek Unified does not have one, A.R.S. §15-481 allows school districts to ask voters to increase their budgets by up to 15% to support or maintain additional programs through a M&O override.
The State determines funding for the Revenue Control Limit for each district based on what a tax rate generates in each district. This system results in districts with high taxable property values per pupil paying a higher percentage of the total cost with local taxes and vice versa. Because of its property wealth, Cave Creek is one of eight school districts in Maricopa County that fund its schools entirely from the tax base and receive no State Equalization.
In August, the County School Superintendents’ offices transmit tax levy requirements for each district to the county finance departments who, in turn, inform the county Board of Supervisors of the necessary levy by fund for each district. Primary (M&O and Capital) and secondary (bonds and overrides) tax levies are determined by apply tax rates against the net limited assessed valuation of the school district.
What is a Bond Election?
Education or general obligation (Class B) bonds are voter-approved funds used to purchase technology, school buses, school safety and security, athletic infrastructure, and school facilities improvements. Districts collect this money by taxing property owners on the assessed value of their properties. Residential, commercial, industrial, and agricultural properties all pay taxes. Tax-exempt properties include churches, nonprofits, and government buildings.
Districts sell the bond to investors. Selling bonds are similar to a loan, much like a home equity line of credit, but for the school district. A unified school district may only sell up to 10% of their existing secondary assessed value, including existing debt.
Districts must maintain their facilities and the School Facilities Board does not cover expenses for technology, athletic improvements, transportation, or several maintenance items on schools. The District cannot pay salaries or benefits for district employees from bond funds.