A tax cap’s effect on schools at issue

By Emily Richmond (contact)

Wednesday, Dec. 1, 2004 | 11:07 a.m.

The Clark County School Board will meet Thursday to discuss the possible implications for education funding if a proposed cap is enacted on property taxes -- the revenue source for nearly one out of every four dollars of its $1.6 billion operating budget.

With homeowners receiving "notice of value" cards indicating their tax bills could increase as much as 50 percent, Clark County Assessor Mark Schofield is advocating that property tax increases be capped at a maximum of 6 percent a year. The proposal is slated for discussion at the Dec. 9 meeting of the Southern Nevada Regional Planning Coalition, of which the district is a member.

For the past few months the district's business office has been busy working up scenarios of how the proposed cap could impact daily school operations, planned renovations of aging campuses and the district's long-term fiscal health. Those scenarios will be shared with the School Board Thursday.

Clark County School Board member Denise Brodsky, who co-chairs the coalition, said she scheduled Thursday's discussion in order to give her colleagues an opportunity to voice their opinions and help develop the district's official position.

"I need to hear from my colleagues and district staff and get a sense of the stance we're going to take on this," Brodsky said. "This is an issue that is going to have far-reaching consequences for all of us, no matter what ultimately happens or whether or not there's a cap put in place."

The Legislature determines how much money each of Nevada's 17 school districts receive. The state covers the difference between the guaranteed minimum per-pupil funding level and the actual amount collected by local districts through property taxes and sales taxes.

Property tax revenue makes up 24 percent of the district's $1.6 billion operating budget. Sales tax revenue accounts for another 35 percent, with 36 percent coming from the state's coffer and another 5 percent is in federal funds.

Since 1994, the district's property tax revenue has grown an annual average of 12 percent, thanks to not only rising valuations but to the sheer volume of new real estate developments.

In theory, if Clark County imposed a property tax cap and the district's revenue dropped, the responsibility for covering the gap would fall to the state.

But there is no guarantee that shortfalls would be met, said Joyce Haldeman, executive director of community and government relations for the district. In 1981 and 1991, when sales tax revenue fell below expectations, the state did not make up the shortfall and school districts were forced to make cuts.

"It's unrealistic to say that we can cut off funding sources at the local level because the state will take care of us," Haldeman said. "There seems to be a huge push to jump on the tax cap bandwagon when the (School Board) trustees may not yet have all the information we need to make a sensible decision."

The state's Constitution requires that property tax caps be implemented statewide. That could have a devastating effect on rural school districts, Haldeman said.

If a 6 percent cap had been in place for the 2004-05 fiscal year, the Clark County School District would have received $20 million less in revenue, according to estimates by the business office.

The potential fiscal impact of a property tax cap to the district's daily operations should be "minimal," said Carole Vilardo, executive director of the Nevada Taxpayers Association.

In 1998, voters approved a 10-year school construction plan, freezing property tax rates to guarantee the district 55 cents for every $100 of assessed property value. Each year the district raises about $400 million for school construction through bond issues. Property taxes that would have been retired instead go to the district to pay back the bonds.

Thanks to the combination of low interest rates and rising property values, the district expects to yield an extra $200 million over the $2.5 billion guaranteed by the 1998 bond measure.

It is that "windfall," and not tax revenue, that would likely be reduced by a property tax cap, Vilardo said.

With student enrollment continuing to grow at a record pace, district officials say they plan to go back to voters in 2006 to approve a new bond program to fund additional school construction.

The district should be considering the frame of mind of those potential voters, Vilardo said.

"If people believe their property taxes have gotten too high, and no action is taken to mitigate some of the impact being felt right now, voters may not be inclined to approve a new bond issue," Vilardo said. "This is an example of where government needs to be proactive, or down the road voters will revolt -- and they may take a course of action that isn't favorable to schools, government or the community as a whole."

The per-pupil funding formula aside, increased property tax revenue has allowed the district to revive its emergency reserve fund.

Earlier this month School Board members heralded that, for the first time in three years, the district general fund's ending unreserved fund balance did not fall below 2 percent of projected annual expenditures.

The School Board will meet Thursday at 4:30 p.m. at the Greer Education Center, 2832 E. Flamingo Road.