For those who don't know what HB 920 does, when a school district initially passes a levy it generates a certain amount of money for the school district. In extremely broad terms, the amount of money the levy generates in that first year is all it will ever generate in any later year.
While your home goes up in value, your tax rate goes down over time to keep the money the levy generates at the same dollar level. In the mean time, school expenses are growing about as fast as property values. The impact of the law, over time, is that this main source of income for the school effectively shrinks over time, as the fixed dollars generated when the levy first passed buy less and less. (In addition, most levies expire, so not only do schools have to keep going back to the voters to keep the same dollars coming in, they also have to make up the loss, in today's dollars, created by the tax rate rollback.)
There are three kinds of levies schools can seek. Omitting details for the sake of simplicity, assuming there was a 1% levy in place and at the time it was passed your home was worth $80,000. Now, 10 years later, your home is worth $120,000.
- Renewal Levy: At 1%, in the year it passed, you would have owed $800 a year. At 10 years, in order to keep the amount of money you owe the same, the rate is adjusted downward to 2/3 % (2/3% of $120,000 = $800). This downward adjustment applies to the original levy (which is also periodically adjusted during its life) and to any renewal of that levy. Typical campaign literature will promote the fact that this is not a new tax, or that this levy will not cost you any more money.
- Replacement Levy: A replacement levy allows the school to reset the tax rate to catch up to inflation. A 1% replacement levy will now generate $1200 (1% of your now $120,000 home). Even though your tax is now $1200, it is only $400 more than you are currently paying - which is how the school districts will likely advertise it - an increase of only $400/year for the average homeowner).
- New Levy: The most drastic option is a new levy. A 1% new levy would generate $1200 a year in new money to the schools. Just as a replacement levy is a harder sell than a renewal levy, a new levy is a harder sell than a replacement levy, because the entire $1200 (in our 1% example) is a new cost to the voters, rather than just the bump up from whatever was already being collected.
Those concerned about details, who understand HB 920, will recognize that this is a gross simplification and I have deliberately avoided too many terms I would need to explain. It is faithful to the underlying concepts which most of us don't really understand. I think the general lack of understanding that schools steadily lose spending power, as the tax rate is rolled back because of this law, contributes to the complaints that the schools need to stop asking for "more" money.
And, FWIW, I agree that as long as property taxes are the main source of income for the schools, HB 920 needs to be repealed.
Posted Apr 16, 2012