Introduction to Taxation

Funding for Public Education comes from three general sources: federal, state, and local funds. Federal funds account for 11.86% of school districts’ General Fund revenue and is appropriated for specific purposes. State funds account for 63.99% of school districts’ General Fund revenue and earmarks revenue from income taxes for public and higher education. Local funding accounts for 24.15% of the school districts’ General Fund revenues.

Local funding consists of revenue from six different taxes that a local school board may levy plus interest on investments, tuition payments, and student fees. Each district must impose a minimum Basic property tax levy and contribute the proceeds of that levy to the cost of providing educational services. The more Basic Levy revenue collected, the less state funding–from the Uniform School Fund is required.

Property taxes are the main source of local funding and consist of the following:

Local Property Taxes That Are Used for General Fund Expenditures

Basic Rate

Voted Local Levy

Board Local Levy

Taxes Used for Capital Outlay and Debt Service

Capital Outlay

Debt Service

Other Taxes a District May Levy

Judgment Recovery

Certified Tax Rate and Truth In Taxation

Each year a school district board of education must decide what property taxes they will levy and whether or not they will need to increase the total dollars yielded from those six different tax rates over the prior year budgeted amount. Except for the Basic Tax Rate, the Debt Service Tax Rate and the Judgment Recovery Tax Rate, if the new budget year sum of the Certified Tax Rates* is more than the prior year, the district must go through the “truth in taxation” process.

The Certified Tax Rate is defined as the total rate that the school district would levy–excluding the Basic Tax Rate, the Debt Service Tax Rate and the Judgment Recovery Tax Rate–so that the district would receive the same dollars as was budgeted in the prior year, plus new growth.