Budget Information

For school districts, the “tax levy limit” is the highest allowable tax levy (before exemptions) that a school district can propose as part of its annual budget for which only a simple majority of voters (more than 50 percent) is required for budget passage. Any proposed tax levy amount above that limit requires budget approval by a supermajority (60 percent or more) of voters. Essentially, the “tax levy limit” sets a threshold that requires districts to obtain a higher level of community support for a proposed tax levy above the “tax levy limit.” However, the new legislation does not place a limit on any taxes a school district would levy to pay for expenses related to specific “exempt” items, including some court orders, some pension costs and local capital expenditures. The costs of these exempt items are added to the “tax levy limit” to come up with the “allowable tax levy” limit. It is important to note that: • Tax levy limits will vary by school district; • The new law does not limit an individual’s tax bill.

By law, each school district’s tax levy is determined by a complex, 8-step formula that was developed by the state. The formula takes into consideration a number of variables, including growth in the local tax base (if any), exemptions, the previous year’s tax levy, as well as the current and coming years’ PILOTs (Payment In Lieu Of Taxes). The rate of inflation or 2 percent (whichever is lower) is also part of the equation. Consideration is also made for any allowable “carryover” funds from previous years, as districts are allowed to “bank” some unused portions of their tax levy limits to use in future years (details on this are still emerging from the state). Individual school districts will each have a unique tax levy limit, which must be submitted to the state by March 1 each year. Once the tax levy limit is determined, the district will then add coming school year’s exemptions to the tax levy limit, creating a “maximum allowable levy.” As a result, a district may actually propose a budget with a tax levy that is higher than its lax levy limit and still be within its “cap” under the law.

Expenditures
(Money going out)

=
Revenue
(Money coming in) 

State/Federal Aid
Property Tax Levy
Miscellaneous Income
Fund Balance