TAX NEWS - June 2010

Texas Tax: Lewisville school board to ask for tax increase

The Lewisville school board in Texas has decided to ask voters to approve a tax rate increase to help offset an anticipated $18 million budget shortfall.

But the amount of the proposed tax increase is still up in the air, and may not be finalized until a public hearing next month.

At a budget work session and special meeting Monday, school board members had differing opinions about how to fill the budget gap

"I don't think the climate is right for a tax increase," said new trustee Jeff Knapp, referring to the economic downturn that has placed hardships on many residents.

School board member Tom Ferguson suggested tapping into the district's $100 million fund balance to help offset the deficit. The fund balance is a savings account that the district has built up over the years and has helped it earn a coveted AA+ bond rating.

"My concern is if we don't [spend it], the state will spend it for us," Ferguson said of the savings fund.

Over nine months, school officials have been holding a series of community meetings to discuss the projected budget shortfall and outline several options to address it.

One option is to make drastic cuts, including reducing staff through attrition, eliminating programs and increasing class size.

Other options would fill the deficit gap by increasing the current tax rate of $1.41 per $100 in property valuation by 2 to 15 cents. Any changes in the tax rate would require a tax ratification election.

State law requires school districts to publish a notice for a public hearing on a proposed tax rate increase by June 30. They can later adopt a lower tax rate, but not a higher one.

The board decided to publish the maximum proposed tax rate of $1.56 per $100 in valuation. Of that amount, $1.17 would go to maintenance and operations, and 38.67 cents toward debt service.

Board President Carol Kyer said the board could gauge the public's response at the July 12 public meeting before the final tax rate is adopted

School board member Brenda Latham cast the sole dissenting vote on the proposed tax rate.

Sept. 14 is the earliest date for a tax ratification election.