Schools complicate property tax ‘transparency’ bill

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Schools are complicating a bill headed to the governor that would put limits on the longstanding practice of local governments collecting extra revenue without raising the property tax rate.

The Kansas Senate on Thursday agreed to send to the governor a bill requiring more public disclosure when local governments collect extra tax dollars from rising property values.

The bill passed in the Senate 30-5 on Thursday after the Senate Minority Leader Dinah Sykes voiced concerns about how it would affect schools, which were originally not part of the bill. The legislation passed the House last week 120-3.

Sykes said taking schools out of the bill was a compromise to pass the legislation. But when the House added in the school districts, all bets were off, she said.

Modeled after laws in Utah and Tennessee, the bill requires local governments to hold hearings and vote to accept extra revenues coming from increased property values even if the tax rate remained steady.

The legislation eliminates the controversial property tax lid that the Legislature imposed in 2015 and started in 2017.

The lid generally required voters to approve city and county property tax increases higher than inflation from the previous year.

Other features of the bill include:

  • Prohibiting an increase in the appraised value of property solely as a result of repairs or maintenance of existing structures.
  • Authorizing county treasurers to accept partial payments and establish payment plans for all property taxes. Current law allows treasurers to accept partial payments for delinquent property taxes.

However, the so-called property tax transparency bill started raising questions after the House amended the legislation to include schools in the requirement.

In recent days, the bill has set off concerns about how school districts could comply with the requirement if Gov. Laura Kelly signs the legislation.

Among other things, concerns were voiced about whether every school district in the state would have to hold hearings and a public vote – plus notify property owners – if they collected more tax revenue as a result of the statewide 20-mill property tax for schools.

There also were concerns about whether the timelines spelled out for local governments in the bill would parallel the same schedule that school districts follow.

The bill specifies that a public hearing may not be held earlier than Aug. 10 and no later than Sept. 10.

School district budgets are due to the county clerk by Aug. 25, which school officials said would limit the ability of districts to engage the public.

Republican state Sen. Caryn Tyson, chair of the Senate Tax Committee, said the issues raised by including schools could be remedied in another bill that renews the 20-mill property tax levy. She plans a hearing on that bill next Thursday.

“It sounds like the final train is leaving the station,” Tyson said, “but it’s not.”

Tyson said she wants to ensure that there is not a “ripple effect” or “unintended consequences” from the bill.

“We will work the process and give it as much time and diligence as it needs to get a good product,” Tyson said.

Tyson said there were a majority of requests to include schools in the legislation.

“The House sent us a very loud message of a 120-3 vote with schools being included in this legislation,” she said.

Sykes, the minority leader, raised the issue on the Senate floor.

She urged the chamber to address the questions in a conference committee before sending it to the governor to sign.

“I appreciate that we said we will fix this in a trailer bill,” Sykes said.

“Call me a skeptic, a little cautious,” she said. “We can only look to the Brownback tax-cut bill and there was an agreement to have a trailer bill and that didn’t happen.”

When the bill was originally passed last year – and ultimately vetoed by the governor –  schools were removed from the legislation.

At the time when the bill included schools, the Kansas Association of School Boards opposed the legislation, noting that “virtually all funds are already subject to budget limits or public notice and protest requirements, or both.”

For instance, school districts are now limited in how much they can raise in property taxes for general operating expenses through the local option budget and capital outlay.

Mark Tallman, lobbyist for the school boards association, said last year that most school district funds are subject to state equalization factors.

“Based on changes in assessed valuation per pupil, school districts may gain or lose state aid, which determines how much property tax is needed to their authorized budget, which could trigger the requirements of this bill,” he said in his written testimony.

Tallman said in an intervew Thursday that the new bill that includes schools takes the organization back to where it was a year ago when it opposed the legislation.

“We’re just still back in the position we were,” Tallman said.

“We don’t think the reasons that exist for the other units of government apply to school districts because they are already under a very different system,” he said.

The legislation, he said, “is based on the idea that you shouldn’t be bringing in more than a certain amount of revenue tied to how much you’re wanting to spend.”

Tallman said school officials are studying the new bill to get better handle on what needs to be addressed when the Senate considers follow-up legislation.

“We’re trying to get a handle on how big a problem it is. We think it needs more work,” Tallman said.

“We have asked some school leaders and business officers and others to really take a look at it so we have some suggestions we can get together for next week.”