Minimum Property Tax, Penalty Approved in Ark.

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Just five months after a judge ordered Arkansas to overhaul its school-funding system, state lawmakers have emerged from a fractious, whirlwind debate with a radical spending plan.

Gov. Jim Guy Tucker signed legislation last week that mandates a minimum local property tax as at least a partial response to the court's order to make school spending more equitable.

A second measure also signed into law last week sets a penalty--a 10 percent income-tax surcharge--on taxpayers in districts where voters reject the minimum tax rate of $25 per $1,000 of their assessed property value.

A third, critical part of the new plan is a constitutional amendment giving the state power to equalize property-tax revenues by redirecting some funds from wealthier districts to poorer ones. Late last week, the legislature appeared set to send that amendment to voters in the fall, but approval at the ballot box seemed doubtful.

This latest package represents a compromise from the plan that the Governor sent to the legislature in January, but Mr. Tucker embraced it as a historic effort to close the state's gap in per-pupil spending, which ranges from about $1,900 to nearly $8,700.

"This action ... has brought more than three-fourths of the state's school districts to within $300 of one another in terms of state funding per pupil," the Governor said in a written statement.

But both critics and supporters of the Democratic Governor suggested that more may have to be done to satisfy the court's order.

"Substantial progress has been made," said Grainger Ledbetter, the president of the Arkansas Education Association, "but whether it's going to stand up to the legal test, the jury is still out on that."

Local Control Wins

The new spending plan will take effect for the 1996-97 school year, the second year of the state's biennial budget. A county judge last fall ruled the state's funding system unconstitutional and ordered lawmakers to fix it within two years. (See Education Week, 11/23/94.)

Governor Tucker declined to appeal the decision at the time, choosing instead to send the legislature a plan to establish a minimum state-defined tax rate and 34 regional boards. In districts that failed to pass the tax rate, the boards would have the authority to close schools. (See Education Week, 1/25/95.)

Many legislators opposed such a plan, arguing that it sacrificed local control of schools to achieve equity. Instead, lawmakers opted for the income-tax surcharge as the leverage to force districts to accept the minimum property-tax rate.

Kellarsic Noggle, the executive director of the Arkansas Association of Educational Administrators, said the new laws would force 125 of the state's 312 districts to raise their property-tax rates.

The legislation approved last week probably will satisfy the court order, he said, but whether it will have long-term curative powers on equity problems is not clear.

"It's conceptually a pretty good bill," he said. "But it's such a dramatic kind of change that everyone is nervous, and everyone is unsure about how to predict the effect on districts in the long run."

A 'Warmed Over' Scheme

Some critics of the plan rejected it outright, arguing that schools should be financed with money from a state sales tax, not property taxes.

Rep. Lloyd R. George, who unsuccessfully pushed for a 1-1/2-cent state sales tax, said the new laws amounted to the same school-funding scheme "warmed over."

"We will never meet the court order to equalize funding," he added, "as long as we rely on local property taxes for school funding."

Sen. Bill Lewellen, one of the lawyers representing the 230-student Lake View school district that is the plaintiff in the suit against the state, said that many poorer districts would not benefit from the new minimum property-tax rate.

"They are already taxing at that rate," he said, "so they will get no new money."

Last week, meanwhile, the House was debating a bill already passed in the Senate for a November ballot initiative on the constitutional amendment. That amendment would give the legislature authority to levy a uniform statewide property tax whose revenues would be collected and distributed to schools according to an equalization formula.

Such authority is key to meeting the court order, observers said, but it will be tough to garner public support for the amendment.

"Many wealthy counties are not willing to go the polls and vote away their own money," Mr. Lewellen said.

Vol. 14, Issue 29

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