SALT LAKE CITY — A bill that would raise Utah's basic property tax rate to equalize school funding gained preliminary Senate approval Tuesday.
Utah hasn't adjusted its property tax rate in almost 20 years, resulting in a loss of about $90 million in potential revenue. Meanwhile, school districts with the lowest property values continue bearing the highest burden in the property tax, which makes up 40 percent of education funding in Utah.
Because charter schools are public schools that don't have taxing authority, a portion of district revenues are used to fund charters at the state's average rate per student, which is $1,746. But half of Utah's 41 school districts earn less than that for their own students.
SB97 would adjust the tax rate to generate new state revenue, which could then be used to address the inequity.
"The bottom line is that half of our local school districts do not have sufficient funding to meet the local needs that they have," said Sen. Aaron Osmond, R-South Jordan, the bill's sponsor. "This bill simply generates $75 million in new money for education."
The bill would not recapture the full amount lost in inflation since 1996, but it would bring in the money needed to provide every school district with at least the same per-student funding amount as charter schools.
Families who own a home worth $200,000 would pay an extra $46 per year because of the tax rate adjustment, Osmond said.
Senate President Wayne Niederhauser, R-Sandy, said the tax increase would mimic other taxes that automatically adjust for inflation, such as the sales tax or the income tax. The property tax and the gas tax, however, have to be manually adjusted.
"If capturing inflation is really a tax increase, then we have a tax increase every year without us acting because our income tax is on a percentage and so is our sales tax," Niederhauser said. "We experience tax increases all the time just because of inflation."
While some asked why a tax increase is necessary in a year of surpluses, Osmond said surplus funds are mostly one-time appropriations, and ongoing funds are needed to address funding inequity throughout the state.
"At the end of the day, it's about doing the right thing for our school districts," he said. "I believe that this is the best option that we have, considering the context that while we are in surplus, we cannot guarantee or count on that surplus every year. This is a revenue source that we can count on every year for the benefit of equalizing our districts on an ongoing basis."
The bill passed with a 22-7 vote and now awaits final Senate approval before going before the House.