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Superintendents and officials gather to discuss mills

BY DALE ELLIS
Managing Editor    05 Jan 2003

School superintendents and officials from throughout the county met Monday night at Eagleview Catering in Searcy to tackle what is considered to be one of the most pressing and complicated problems brought on by the affirmation of the Arkansas Supreme Court of the Lake View School District decision.

According to the court's decision, maintenance and operations millage must be set at 25 mills per district to be in compliance with Amendment 74 of the Arkansas Constitution.

In 1997, Act 1300, the enabling legislation for Amendment 74, allowed school districts with less than 25 mills in maintenance and operations to use excess debt service millage to make up the difference. As part of its November 21 ruling, the high court stated that the practice is contrary to the intent of Amendment 74, and placed a stay on its decision until January 1 of next year to allow districts to get into compliance with that and other provisions of the decision.

Wayne Hartsfield, a member of the state's Blue Rbbon Commission to study education reform, as well as a former member and chairman of the state Board of Education, moderated the meeting. He began by outlining two choices each school district could make.

One choice, he said, was to do nothing and wait for the January 1 deadline. However, the drawback to that, he told the group, is that the millage rates for maintenance and operations would then be set automatically by action of the quorum court as directed by the constitution, regardless of the excess debt service millage rate, resulting in property tax hikes as high as 15 mills in some districts.

"I don't think any of us want to place the quorum court into that kind of a posture or to put our patrons and school districts in that position," Hartsfield said.

Another option Hartsfield outlined was for the districts to call a special election to restructure the millage rates to bring them into compliance with the order.

Currently, the maintenance and operation millage in the Searcy School District is set at 10.02 mills, the lowest in the district, which would have to be raised by 14.98 mills to bring it into compliance. Debt service millage is set at 23.18 mills, of which only slightly over eight mills is required to service the district's debt.

The Beebe School District currently has the highest maintenance and operation millage, which is set at 19.2 mills, which would require a 5.8 mill hike. Debt service millage for the Beebe School District is set at 15.18 mills.

Hartsfield pointed out that, because of Act 1300 legislation, which the school districts have complied with in good faith, no district is currently acting outside of the law. However, once the supreme court's stay is lifted January 1, any district not in compliance will be in violation of the state constitution.

"They have declared the use of this excess debt service millage as void," said Don Raney, of the law firm of Lightle, Raney, Bell and Simpson, as he explained the legal ramifications of the order. "Yes, they've stayed that, but come January 1, 2004, that action takes effect. If it becomes void January 1, 2004, we've got to do something right now."

Raney said that once the deadline approaches, any district out of compliance could face immediate illegal exaction lawsuits.

"If you don't believe that," he said, "just ask the city of Searcy or White County about the sales tax lawsuits a few years ago."

Raney explained that the Lake View finding by Chancery Judge Collins Kilgore was based upon whether school funding in the state was unconstitutional based upon equity and adequacy of funding.

"Along the way," Raney said, "the supreme court threw in this zinger about the excess debt service millage. I don't think anyone expected that."

Hartsfield next explained about the different types of bonds that school districts use to borrow money and some of the difficulties in refinancing those bonds. However, he said that refinancing existing debt would likely be the recommended course of action along with calling a special election to restructure the millage rates.

He cautioned about using debt service supplements, which is money paid by the state to school districts, as part of the millage in bond issues.

"I think that is very dangerous," Hartsfield said. "I think we're going to see some changes in the funding formula, and some of the richer districts are going to lose that money."

Asked why he recommended calling a special election rather than adding the millage issue in with the September school elections, Hartsfield responded that it would be advantageous to concentrate on the one issue rather than mixing it in with other issues to be decided on in September.

"You want to make sure the public understands what we have to do," he said. "I think if we choose a May 6 date, we'll have a few weeks to educate the public on what has to be done." He said that public notices would have to go out at least 60 days prior to a special election.

Raney was asked what would happen if the districts did nothing and the quorum court did not act upon the matter. He responded that as of January 1, the Lake View ruling will become law, and the quorum court will have no say in the matter.

"That's just an illegal operation that opens the district up to an illegal exaction penalty," Raney said. "It would be a financial nightmare for the district in my opinion."

The school officials were urged to make a decision soon concerning a special election in order to fix the problem before the deadline. Raney noted that the county attorney has already advised the county judge and the quorum court that the court must act if the districts fail to.

"The local superintendents and boards of education must make a decision as quickly as you can," Raney advised.

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