Judge Rules In Favor Of School Districts On Property Tax Lawsuit

Pulaski County Circuit Judge Tim Fox ruled today in favor of the Fountain Lake and Eureka Springs School Districts who had challenged the Arkansas Department of Education’s (ADE) ability to withhold property tax collections from the local districts. The withholding of property tax collected in accordance with the 25-mils URT (uniform rate of tax) revenue by the state was occurring in districts in which property taxes were collected above the "foundation" funding requirement amount set on a per student basis.  This was occurring in areas such as Hot Springs Village and Eureka Springs, where a high number of retirees without school age children lived, and accounted for an estimated $2.5 million last year.

On Tuesday, Fox enjoined the state from continuing to withhold this portion of the property tax from the local districts.

"The policy decision by the ADE is both well intentioned and well-reasoned, but it is an unconstitutional encroachment by the executive branch of a power that belongs to the legislative branch," wrote Fox in his ruling.

"In the present matter, the ADE is prohibited by the separation of powers from undertaking its present action. By specific statutory directive, the General Assembly has occupied the field concerning the distribution of the 25-mill URT revenues," continued Fox. " A.C.A. § 26-80-101(b)(1)(A) requires the Treasurer to remit the URT revenues to the ‘county treasurer of each county for distribution to the school districts in that county as provided by subsection (c) of this section.’ Subsection (c) unambiguously requires each county treasurer to ‘remit the revenues from the uniform rate of tax to each local school district from which the revenues were derived.’ The General Assembly has retained control of distribution of the 25-mill URT revenues."

The districts first sought a legislative remedy through HB1435 introduced by their state representatives, Bruce Westerman (R-Hot Springs) and Bryan King (R-Green Forest).  However, after opposition from the ADE and the office of Attorney General Dustin McDaniel, they were unable to get the bill out of the House Education Committee.  In addition, McDaniel upheld that ADE should withhold this amount in an opinion requested by King.

The ADE has 30 days to appeal Fox’s decision at which point it will go to the Arkansas Court of Appeals, but for now, the local school districts are enjoying the victory.

"I agree with and applaud Judge Fox’s conclusions regarding the separation of powers and how the ADE and executive branch’s attempt to take property taxes from the school districts in which they were collected is an unconstitutional encroachment of the legislative branch," said Westerman. "Throughout this ordeal, the ADE has been aided in their unfounded policy efforts by opinions from the Attorney General’s office. I hope the executive branch will uphold their oath to abide by the Constitution and abandon their attempts to illegally take money from local public schools."

Read the full ruling here.