Arizona homeowners face tax hike after move by Legislature

Homeowners in numerous school districts statewide are going to end up with higher property-tax bills because of a little-noticed tax shift lawmakers approved in the state budget.

The shift, included in an education-budget bill, pushes $70 million of the state's responsibility for school finance onto homeowners by limiting the "homeowner rebate" on annual tax bills. The rebate subsidizes part of the property tax that homeowners owe for education. The funding change made by the state will force school districts to raise their local taxes on homeowners to compensate.

The increases won't show up on tax bills until fall 2011 and are likely to be largest in central-city and rural districts, where they could run from about $60 to $200 a year per $100,000 of home value.

Republican lawmakers, who approved the tax shift despite an aversion to tax increases, cast the move as a fairness issue rather than a tax hike.

But Democrats say it's one more example of a patchwork approach to the state's ongoing budget deficits and another reason the state needs to overhaul its tax code.

School officials say that they are likely to get heat for the tax increases from homeowners who will see higher bills without gaining any programs or improvements, even though the Legislature is responsible.

"If you signed a no-tax statement that you wouldn't raise taxes, well - you did," said Chuck Essigs, government-relations director for the Arizona Association of School Budget Officials. "It's a nice way to blame the school districts."

Rebate limited

The tax hike happened quietly, tucked into an education budget bill last spring. The budget passed with Republican votes only and was signed into law by Gov. Jan Brewer.

The Republic learned about the increase when reviewing changes in the state budget.

The homeowner rebate has been in place for 30 years, approved by voters in 1980 as part of the state education-funding formula.

It benefits school districts that, among other things, are working under desegregation orders, serve sparsely populated areas and have higher-than-average transportation costs.

But it comes at the expense of homeowners whose school districts don't have those extra expenses, said Kevin McCarthy, executive director of the Arizona Tax Research Association, a business-backed group that lobbied for the change.

"Why in the world would you be subsidizing (them)?" he asked.

By curbing the state rebate, the tax burden shifts onto homeowners in districts with those extra needs. It's a move that will provide more transparency in understanding where taxes come from and where the money goes, he said.

But Essigs said the tax shift ignores the intent of the homeowner rebate: to keep residential property taxes for schools low.

"Whatever the state saves, the homeowner makes up," he said.

Increases vary

The change in the rebate will add up to big increases for some while others won't see an increase at all.

For example, the tax bill on a home with an assessed value of $100,000 could rise by $190 in northern Arizona's Ash Fork Unified School District, according to figures compiled by Essigs' organization and the Arizona School Boards Association and based on this year's tax numbers.

Homeowners who live in the Glendale Elementary and Glendale Union school districts are likely to see an increase of $14.88 if their home is assessed at $100,000.

For a central Phoenix home assessed at $190,000 and located in the Phoenix Elementary and Phoenix Union High School districts, the increase would amount to $69.35.

Delayed effect

House Appropriations Chairman John Kavanagh, R-Fountain Hills, said lawmakers looked at the shift as a matter of fairness. Extra educational costs above the basic state aid provided to all school districts should be picked up by taxpayers in individual districts, he said.

He rebuffed suggestions that lawmakers delayed the shift until September 2011 to avoid repercussions in this year's elections. "We did plenty of things that were controversial in the budget," Kavanagh said, suggesting lawmakers weren't afraid to make tough decisions as an election loomed.

Rep. Chad Campbell, D-Phoenix, is one of many Democrats in the Legislature who complained that the Republican-driven budget included tax hikes. The increase is another example of the Legislature's quick-fix approach to its fiscal woes, he said.

"This got us $70 million, basically," he said. "It's a drop in the bucket. This is not a fix to our problem. We have not seen a fix from Governor Brewer."

Campbell said lawmakers need to tackle comprehensive tax reform rather than enacting a cut here or tacking on a tax hike there.

Last year, lawmakers fought for months to eliminate another property tax that had been suspended for three years. Brewer vetoed that effort. Critics said it amounted to a $250 million tax increase; Brewer said the money was needed to help balance the budget.


by Mary Jo Pitzl The Arizona Republic August 5, 2010 12:00 AM



Arizona homeowners face tax hike after move by Legislature