Page 17 - School Finance Manual 2025-26

Where Formula Dollars Come From cont. 17

School District Property Taxes the homeowners tax reduction provisions pursuant to
A significant portion of school district funding in Arizona A.R.S. §15-992. Salt River Project funds are also in lieu
comes from local property taxes on real and personal of property taxes.
property. As outlined in the previous section on
equalization assistance, the funding for the Revenue Regardless of the collection of taxes or the timeliness
Control Limit and District Additional Assistance for each of being received in a district, the district can spend
district is comprised of state equalization assistance and up to the budget capacity authorized by the previously
property tax revenues. This system results in districts described limitations. The district must register warrants
with high taxable property values per pupil paying a if the cash is not available at the time of expenditure.
higher percentage of the total cost with local taxes. In
contrast, school districts with lower taxable property Registering warrants is the system established in A.R.S.
values per pupil pay a lower percentage of the total that allows the county treasurer to provide short-term
cost. Items outside the RCL and DAA that do not have a financing to school districts for cash flow problems in its
dedicated funding source are funded from the local prop- primary levy funds (M&O, Adjacent Ways and DAA) and
erty tax levies of each district. the Classroom Site Fund (CSF).

In August, the County School Superintendents’ offices
transmit tax levy requirements for each district to the Checking the Calculations
County Finance Departments who, in turn, inform the The budget limit and equalization assistance calcula-
county Board of Supervisors of the necessary levy by tions can be checked by obtaining the BSA 55, report
fund for each district. The levy, placed on property in on the Arizona Department of Education’s web site. This
August, applies to the assessed valuation determined for report is updated for each payment scheduled pursuant
real property and secured personal in the district through to A.R.S. § 15-973.
the previous January (varies by county). For the unse-
cured personal property in each district, the new tax rate The ADE website also provides the BUDG25 and
for each year is not applied until the following January BUDG75 reports. The BUDG25 report compares the
(varies by county). This variation in assessing practices budget submitted by the district to a calculation of the
can result in a revenue lag if district tax rates increase district’s budget that is
substantially over a previous year. performed by ADE and

notes the differences. The
Primary (M&O and Capital) and secondary (bonds and BUDG75 report compares
overrides) tax levies are determined by applying tax the actual expenditures in
rates against the net limited assessed valuation of the the Annual Financial Report
school district. This is based on a limited value determi- (AFR) submitted by the
nation specified in the constitution, which limits the value district to the lesser of the
of the property used for tax purposes each year to five ADE calculated budget and
percent growth, up to the full cash value of the property. budget limits and calculates
the budget balance carry-
Property taxes are collected and distributed in November forward for the next year.
and April of each year. Generally in Arizona, the delin- With student counts continuing to be adjusted after the
quency rate on taxes has been averaging approximately budgets are revised in May, it is important for districts
5%, which can account for cash flow problems in some to reconcile their budgets and AFR’s to the BUDG75 to
school districts. A portion of the taxes due is paid by the ensure they are using the correct budget limits, carry
State in the form of additional state aid, as provided by
forwards, etc.

Arizona Association of School Business Officials | School Finance Summary Manual