How Can Schools Raise Property Taxes Without Voter Approval?

Last month, school districts throughout the state set their tax levies for this school year. I suspect most people believe that taxpayers vote to approve a certain property tax rate, and that the rate just stays the same until they vote to change it again. In reality, it’s a bit more complicated.  For example, the Eldon School District will be increasing the property tax levy by two cents this year; while the School of the Osage’s tax levy will increase 11 cents. Both of these increases were possible without voter approval—kind of.

When you vote to raise your local property tax for schools, you are essentially voting to raise the district’s property tax ceiling. This is the maximum rate the district can use to collect local revenue for schools.  The district may be forced, however, to lower the rate during times of economic growth thanks to the Hancock Amendment in Missouri’s Constitution.  Basically, school district revenues collected from existing real property cannot increase beyond the rate of inflation.  If an increase in taxable property values outstrips the pace of inflation, the district rolls back the property tax rate.

Rollbacks create a gap between the tax rate ceiling and the tax rate used by the school district. Thus when districts have space under the cap and their property values are flat, the school board can choose to raise the rate without voter approval because the voters have previously given approval.

Despite the tax rate increases this year in Eldon and School of the Osage, each district will remain under its tax rate ceiling.  Moreover, each school district’s tax rate will remain below the state average. In Eldon, the rate was $3.54 per $100 of assessed valuation in 2015; it was $2.849 for the School of the Osage.  The state average tax rate for operating and capital expenses was over $4.

School funding is complicated, but we are here to help. If you want to know more about how schools are funded in Missouri, check out our Funding Formula Primer. And, if you have questions don’t hesitate to contact us.