Property tax-setting time, in the five years since our economy went down the tubes, has forced local politicians to choose between feeding sacred cows and giving tax breaks to taxpayers who struggle to make ends meet. Frankfort and Franklin County leaders have done a little of both.
The City Commission recently agreed to a slight reduction in its property tax rate coupled with an increase in the payroll tax to balance the city budget. Fiscal Court has eased county property taxes repeatedly since 2009 but decided to reverse course this year and take the “compensating” rate, which theoretically means it’ll collect the same amount from property owners as it did last year. It actually expects to take in $170,000 more because of growth and reassessment of property. The owner of a $100,000 home will pay the county $165, $8 more than last year.
The biggest bite on local property owners is the school tax, higher than the city and county levies or any other imposed by a collection of special districts. Most people agree education is important. But in 2008, the county school board went too far, thinking taxpayers might be willing to alleviate the funding losses K-12 education suffered when the General Assembly cut spending because of the recession. The board proposed a tax increase that would have increased local revenue by 10.5 percent.
A taxpayers’ revolt that spread from California had prompted Kentucky legislators in 1980 to pass a bill capping property tax revenue hikes at 4 percent a year. Voters can petition for a referendum if higher increases are proposed. When petitions began circulating in 2008, the school board saw the writing on the wall and had to settle for 4 percent – the maximum being virtually an automatic choice for local governments and school districts at the time.
The county school board took the compensating rate last year, resulting in just a $1 increase on a $100,000 home. But like Fiscal Court, it may have reached its limit. The board has decided to consider a range of options, including a rate increase that would bring in the maximum 4 percent growth. The owner of a $100,000 home would pay $25 more. The abortive tax increase of four years ago would have added $50 to that homeowner’s bill.
Why, you might ask, does the school board need 4 percent more revenue when the latest report from the U.S. Department of Labor showed the urban consumer price index rose just 1.4 percent in the 12 months ending in July? Franklin County’s biggest work force – state employees – likely faces another two years without even a cost-of-living pay adjustment. But county Superintendent Chrissy Jones says her system needs a 1 percent pay raise the tax increase would enable because it doesn’t want to lose teachers to neighboring districts where salaries are higher.
Public agencies also have inescapable obligations, like helping to reduce the multi-billion-dollar unfunded liability confronting the Kentucky Retirement Systems. Public retirees, including former teachers, get guaranteed pensions, which have to be paid in good times and bad. Taxpayers who receive no such benefits themselves often resent having to underwrite the promises government made to its workers in more prosperous times.
The public will have an opportunity to air its opinions on the school tax at 5 p.m. Tuesday in a hearing at the county system’s central office, 916 E. Main St.