What constitutes a tax cut? School boards request dollar amounts, not millage rate

Published 1:40 pm Tuesday, August 14, 2012

A story in the Wednesday, Aug. 8, Picayune Item, entitled “PRC school board OKs ad valorem tax request,” was inaccurate in describing the way tax money is generated by school boards, and T.J. Burleson, the Pearl River County School District’s financial director, said he was misquoted. The Item has researched the error, and agrees with Burleson that the description of the process was in error and that he was misquoted.

However, a thorough investigation reveals a complicated tax process, and shows just how difficult it is to determine, or predict, or even report on, whether property taxes to support your school district are going up or are going down.

The best and most accurate way, says tax assessor-collector Gary Beech, is when you receive your tax bill from the county or city in December, go back, retrieve your bill from last year and compare it to the current one. If the current bill shows an increase in taxes levied for the school system is more than last year’s, your taxes to support the school system have gone up; if it’s less, your taxes have gone down. Each category supported by property taxes needs to be reviewed separately to determine if taxes are going up or down in that category. The total will show whether you are paying more or less in total property taxes.

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That sounds simple, but actually it is the most accurate way to determine whether your property taxes have risen or fallen, says Beech. Your property is reappraised every four years, and it’s impossible to predict taxes on the first year of an appraisal. It not only depends on the reappraised value but what school boards and the county request in funding.

When the economy is good and everything is rising, so does the value of your home. The assessed value is a percentage of the market value against which the millage is applied. A mill is one-tenth of a penny.

“Every four years, based on reappraisal,” says Beech, “you have different values and different millage rates.”

The only way for a taxpayer to experience a real reduction in property taxes is for a government body that depends on property taxes to cut its budget and request less money. Then local tax payments would fall. Otherwise, don’t look for it. Historically, land values have always increased; this year they fell, said Beech, causing all the confusion and pain.

Currently, officials and residents are arguing over whether the level funding requested by the Picayune school board can be considered a tax hike, because it was the first one to do so and the matter of the number of mills needed to raise that amount of money came up the school board’s discussion. Beech says you can argue that issue both ways. It depends on how you approach it. If you approach it from the amount of money collected district wide, and it is the same amount, you could say your taxes have not gone up. Administrators say they are not asking for more money than they did last year. So overall, it’s a wash.

In the Picayune school board debate, which prompted a 3-2 vote on the funds request, some board members said the request represented an increase in taxes and others, including Supt. Dean Shaw, said it wasn’t.

In a public notice in the Picayune Item on Sunday, Picayune city officials said taxing officials will have to apply a 9.5 mill increase on property in the city to generate the $8.2 million the school board is asking for local support. That is the same amount requested last year.

The public notice published by the city also said that revenue from ad valorem taxes requested for city operations will fall from $2.1 million to $1.9 million and millage will remain the same as last year, or 38.66 for the city. That is a true tax cut. On average, residents will pay  less tax money, although it will vary individually. The notice says school tax millage rates will jump from 60.25 mills to 69.70 mills to generate the $8.2 million requested by the Picayune school board.

A public hearing on the proposed millage rates will be held on Aug. 21 at 5 p.m. at Picayune City Hall.

However, all three school boards in Pearl River County are doing the same thing, though only the Picayune school board appears to be facing any heat over its request. All three school boards are asking for the same amount of money they received or requested last year. Technically, that does not mean taxes have increased in their districts, officials say, though the number of mills needed to raise the money will increase because of falling property values.

Again, the amount of money paid in taxes doesn’t go down until government budgets are cut and less money is actually requested.

On Monday, Aug. 6, the Pearl River County school board approved agenda item 7, which said: “Consider approving the Resolution of the 2012-2013 Ad Valorem from the Pearl River County Board of Education of Pearl River County School District to the Board of Supervisors of Pearl River County, Mississippi, for the local support of the District’s 2012-2013 Budget.” If you had been at the meeting, that is all you would have seen and heard. And you probably would have not understood it or known what was happening, although the board earlier held a public hearing and explained the budget.

Actually the resolution requested the supervisors to levy an “ad valorem tax sufficient to raise $5.5 million for local support of the District’s 2012-2013 budget,” the resolution said. That $5.5 million is the same amount of money the school board requested in taxes last year. The school board’s total budget is $23 million.

The operational budget is $19 million. Expenses did override revenue and the school board said the district would make up the difference by dipping into its fund balance, which is a cash reserve that the state requires school boards to maintain and which in the Pearl River County district’s case is actually more than what is required.

The resolution is sent to supervisors who have received the assessed valuation from the tax assessor. If the valuations are down, it will take additional millage to raise the same amount of money as last year. If valuations have risen, it will take fewer mills to generate the same amount of money. For instance, in a rising economy the amount of millage could be reduced if no additional money is requested. But when the economy goes down, the number of mills required to raise that amount of money goes up, because property values have fallen.

Supervisors and city boards have to give the school boards what they ask for, according to state law.

In effect, all that can be said is that the  Pearl River County school board asked for the same amount of money as it did last year. You shouldn’t have to pay more money. But the number of mills required to raise that amount probably will go up so that the taxing authority can generate the same amount of money as last year. Does that constitute a tax increase or no new taxes? Some say it does; some say it doesn’t.

Supervisors, after receiving Pearl River County school board’s request, will take the assessed valuation and, using a formula, apply the millage to generate the same amount of money as last year. That millage rate — the school district’s and the county’s — will be set on Sept. 15. Tax bills go out on Dec. 1. Picayune will set its millage on Sept. 4.

Both supervisors and city officials are obligated by state law to give educators what they ask for, as long as it’s not four percent more money than last year’s request. It’s all controlled by state law promulgated and adopted by the State Legislature.