An error in the way state aid has been calculated for public schools across Oklahoma since 1992 is expected to cause as much as $18 million to be redistributed for the current fiscal year.
That could mean an unexpected windfall for some districts and an unforeseen loss for others come January.
No official notice has gone out to schools from the Oklahoma State Department of Education. But officials say anxiety is running high, with the annual midyear adjustments made to the initial state aid allocations that school districts receive in July due out any day now.
Shawn Hime, executive director at the Oklahoma State School Boards Association, said word about the longtime error has been spreading rapidly among superintendents and finance officials.
“There was a law passed in 1990 that was supposed to take effect in 1992. It allows for local people to approve more money for their local schools and not have them penalized within the state aid formula, but it was apparently never enacted,” Hime said. “Our recommendation to districts that have contacted us is the law is the law; we have no choice but to follow the law as it’s written.”
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At issue is local property tax revenue, called ad valorem, from commercial personal property and agricultural personal property. The percentage of a property’s market value that is taxed, called the assessment ratio, can vary from 10 percent to 15 percent from county to county.
And through exemptions, some counties have opted out altogether from taxing such properties.
Ponca City Superintendent David Pennington said beginning in 1992, school districts were supposed to start retaining any ad valorem revenue collected for these two categories of personal property above the state assessment ratio of 11 percent.
“I try not to think about this as winners and losers — some people are going to get dollars and some are going to lose dollars. The fact of the matter is, districts like Ponca City have been subsidizing the state funding formula since 1992,” Pennington said.
He said he first discovered the state’s calculation error 10 years ago when he came to Ponca City from a smaller school district that didn’t have near as much commercial and agricultural personal property being assessed.
But Pennington said he just couldn’t get anyone in government to understand his claims at that time.
“I started asking questions to my local assessor, to the state Department of Education,” he said. “As superintendent, one of the first things you learn about school finance is what the law says about assessment ratios. I’ve read the law, it’s very clear. But when I calculated it, I should have had more revenue and I just couldn’t find it. I kept asking people, ‘Where is it?’ ”
The issue was revived in January when Pennington was able to get a state education administrator to understand his concerns. He said that led to talks with officials at the Oklahoma Tax Commission, but still no official word that the situation would be corrected.
The delay has caused Pennington and leaders of other affected districts to consider legal action to force the state Department of Education to correct the situation.
“From our perspective, this needs to be fixed and it needs to be fixed now,” he said.
Hime said no one knows for sure what the impact could be on individual districts. But Pennington said Oklahoma County school districts alone are due to get back about $6 million total, while Kay County schools, including his, are due $1 million.
“The 10, 11 and some of the 12 percent (assessment ratio) districts and those that don’t have a lot of property in those commercial and ag personal categories are going to lose money,” Pennington said.
Trish Williams, chief financial officer at Tulsa Public Schools, said the assessment ratio in Tulsa County is 11 percent.
“This is very concerning for us. We have been hearing for several days that there is a problem, but we’ve had no direct communication from the state Department of Education about what that problem might be. We build a budget on our estimate of the midterm allocation,” she said.
Tulsa Superintendent Keith Ballard said, “This is the result of gross incompetence on somebody’s part and I don’t know whose. Here we are, trying to be professional in crafting a budget and being careful with our money, and at the last minute the state undoes us.”
