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House approves $75M property tax increase to equalize school funding

House approves $75M property tax increase to equalize school funding

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SALT LAKE CITY — The House on Wednesday approved a bill that would generate $75 million in revenue by increasing Utah's basic property tax rate to equalize funding for schools.

Utah hasn't adjusted its property tax rate since 1996, resulting in a loss of about $90 million due to inflation, according to Sen. Aaron Osmond, R-South Jordan. The tax makes up 40 percent of education funding, and school districts with the lowest property values have borne the heaviest tax burden in meeting their funding needs, he said.

Since charter schools are public schools that don't have taxing authority, school districts are required to divert a portion of their revenues to fund charters, which are guaranteed the state's average per-pupil rate of $1,746. But more than half of Utah's 41 school districts earn less than that for their own students.

SB97 would raise the basic property tax rate to recapture in part the money lost to inflation and generate new revenue to bring funding for all schools to at least the same rate of $1,746 per student.

Owners of a residential property worth $200,000 would see an annual increase of $46. Commercial properties of the same value would cost an extra $185 per year, according to Osmond, the bill's sponsor.

"The only solution to solve this problem, and it's not one that I'm thrilled about, is to find new money to be able to do equalization in a way that truly makes sure that everybody's on par from a local funding perspective," Osmond said.

Billy Hesterman, vice president of the Utah Taxpayers Association, said Utahns shouldn't be expected to shoulder a heavier burden when the state had a surplus of about $700 million in the budget this year.

"This is one of the largest tax increases the state of Utah has ever seen," Hesterman said in a prepared statement. "Utahns would be better served by being allowed to keep their hard-earned money to help grow the state's economy than having it taken from them by the government.

Sen. Howard Stephenson, R-Draper, supported the bill, even though he is president of the Utah Taxpayers Association. He said it's normal for taxing entities to adjust their rate every decade or so to keep up with inflation.

"My first priority up here is my conscience and my constituents. That's why I'm supporting this," Stephenson said. "I think it's justified, especially because it's being used for equalization. Because right now, I believe we're ripe for a lawsuit."

Unlike sales tax or income tax, which adjust automatically with inflation, property tax requires manual adjustment.

"It means in a few years, we ought to come back and do this again," said floor sponsor Rep. Brad Last, R-Hurricane. "Although it's a lot of money, it's a pretty minor attempt at equalization of the property tax."

The bill passed in a House vote of 48-24. The Senate will vote on amendments to the bill before it goes to the governor.

The Legislature is taking a shot at school funding equalization in additional bills. SB78 would hold schools harmless financially if their school district should split.

When the Jordan School District split and the Canyons School District was formed several years ago, Canyons took with it a stronger portion of the property tax base. Because the change in property tax revenue would have resulted in a loss of about $1,000 in per-student funding for the Jordan School District, the Legislature enacted a law requiring the two districts to share tax revenues over a five-year period.

SB78 would remove the sunset on the current law and continue requiring such districts to share property tax revenues. Floor sponsor Rep. David Lifferth, R-Eagle Mountain, said the bill is part of a move toward equalizing school funding statewide over the next few years.

House Minority Assistant Whip Joel Briscoe, D-Salt Lake City, voted against the bill, which would continue to require people in his and other districts to pay taxes to fund more than one school district.

"I live in Salt Lake City, and I'm paying a chunk of property taxes, have been for the last four years, will for one more year, to a school board I didn't elect," Briscoe said.

Rep. Daniel McCay, R-Riverton, said a school district can split to solve philosophical or management issues, but that a split shouldn't be for financial reasons that would end up cutting it short for students and teachers.

"(SB78) just makes it so from now on, when adults have adult problems like money and buildings and those kinds of things, it doesn't punish the kids," McCay said.

SB78 passed the House in a 39-31 vote and awaits the governor's signature. Email: mjacobsen@deseretnews.com Twitter: MorganEJacobsen

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