When a school district closes and is absorbed by another, what happens to the property tax millage residents were paying?
Plain-English summary
The Compton School District was dissolved. Its territory and the millage taxes the Compton voters had approved are now being collected for the Harrison School District (in a different county). Compton residents are paying property tax to support Harrison schools. State Representative Keith Slape asked the AG: was the millage supposed to disappear when Compton closed, and is it constitutional to require Compton residents (in one county) to pay a school millage flowing to Harrison (in another)?
The AG's answer to both: no concerns. The millage transfers; cross-county taxation is fine.
On the millage transfer:
- The State Board of Education has the authority under Arkansas school law to dissolve a district and annex its territory to another, or to consolidate two districts.
- When dissolution-and-annexation or consolidation occurs, "the millage rate of the electors of the [dissolved] district shall remain the same until an election may be held to change the rate of taxation for the...receiving district."
- The receiving district's board is required to submit any rate change to the voters of the newly expanded district.
- So the millage does not lapse on dissolution; it continues at the same rate, payable to the receiving district, until the voters of the expanded district approve a change.
On cross-county taxation:
- School district boundaries in Arkansas often cross county lines. A district may include territory from multiple counties.
- Districts are distinct taxing units. The fact that the recipient district's headquarters or majority of territory lies in a different county does not violate Arkansas state law.
- Federal law issues are generally outside the scope of AG opinions; the AG noted this explicitly.
The opinion is rooted in Ark. Const. art. 14, § 3 (the school millage framework) and the school dissolution and consolidation statutes.
What this means for you
Compton-area property owners
Your school millage continues at the rate Compton voters previously approved, but the revenue now goes to Harrison School District. You can vote on millage rate changes through the next millage election held by the receiving district. You cannot opt out of the millage on the ground that "your" district closed; the rate continues by operation of law.
County assessors and collectors
When you process millage on territory that has been annexed or consolidated, code the receiving district as the taxing unit. The rate continues at the prior level until the voters of the expanded district approve a change. Coordinate with the receiving district's superintendent and board on any millage election.
School district administrators receiving territory
You inherit the prior district's millage at the same rate. Plan revenue accordingly. If you want to harmonize rates across the expanded district (e.g., apply your prior district's rate to the new territory, or vice versa), the path is a millage election in the expanded district's electorate.
Property owners in cross-county school districts generally
If you live in one county but your school district is centered in another, you pay millage to your school district, not to your county of residence. This is a long-standing Arkansas pattern. Look at your property tax bill for the line items: school district millage is separate from county and city millage.
Local government attorneys advising on dissolution and consolidation
Build the millage continuation into the transition planning:
- Document the prior district's millage rate.
- Notify property owners that the rate continues and is now payable to the receiving district.
- Plan for a future millage election in the receiving district's electorate to harmonize rates if desired.
Common questions
Why doesn't the millage end when the district ends?
The State Board of Education's dissolution authority is paired with annexation or consolidation; the territory continues to be in some district, and that district inherits the prior millage. Voters who approved the prior millage are still receiving school services (now from a different district), so the tax authority continues until voters change it.
Can voters of the dissolved district vote separately to lower the rate?
No. After dissolution, the relevant electorate is the entire receiving district. The dissolved district's voters merge into the expanded district for future millage votes.
Is this different in consolidation versus annexation?
The principle is the same in both: the millage continues until the voters of the resulting district change it. The procedural mechanics differ slightly between consolidation (voluntary merger of two districts into a new entity) and annexation (transfer of territory from one district to another).
What about bonded indebtedness of the dissolved district?
The receiving district typically inherits the dissolved district's bond obligations along with the millage. Specific provisions in Arkansas school law govern this. Local counsel should verify for any specific dissolution.
Does federal law have any concerns about cross-county school taxation?
Probably not, but the AG declined to opine on federal questions. Property taxation is overwhelmingly a state and local matter. Federal Equal Protection or Due Process concerns would arise only if there were arbitrary or invidious distinctions, which cross-county district boundaries are not.
Can a county refuse to collect millage for an out-of-county school district?
No. The county collector collects all property taxes due on property within the county, including school millage flowing to districts whose seats are in other counties. The collector is essentially a passthrough.
What if I think the millage rate is too high?
Vote in the next millage election held by the receiving district. The voters of the expanded district can lower (or raise) the rate.
Background and statutory framework
Constitutional framework:
- Ark. Const. art. 14, § 3: authorizes school district millage taxes for school purposes, subject to voter approval.
School dissolution/consolidation framework:
- The State Board of Education has dissolution and annexation authority under Arkansas school law (specific code sections govern the procedures).
- The Arkansas Code provides that the dissolved district's millage rate continues until voters of the receiving or consolidated district change it.
The opinion does not cite specific statutory section numbers in the limited published text the AG produced. School district administrators should consult the Arkansas Code's school dissolution and consolidation provisions for the specific procedural details.
Citations
- Ark. Const. art. 14, § 3 (school millage)
- Arkansas school dissolution and consolidation statutes (specific provisions vary; consult Arkansas Code Title 6)
Source
Original opinion text
Opinion No. 2022-024
September 26, 2022
The Honorable Keith Slape
State Representative
HC 33 Box 107
Compton, AR 72624-9622
Dear Representative Slape:
This is in response to your request for my opinion on several questions regarding school millage property taxes. You write that the Compton School District, which was supported by a millage, has closed. You further communicate that the revenues from that millage are now going to the Harrison School District. In this regard, you ask the following:
Question 1: After a school district closes, does the millage levy for that school transfer to another district? Or does the levy cease when the school closes?
Question 2: Does it violate any state or federal law to require a resident of one county to pay a school millage when the millage goes to a school district located in another county?
RESPONSE
The answer to the first part of your first question is "yes." Accordingly, no response is necessary to the second part. If a school district is dissolved and annexed to or consolidated with another school district, the existing millage taxes of the old school district remain in place until changed by the voters of the newly expanded school district. The answer to your second question is "no." School district boundaries often cross county lines, and school districts are considered distinct taxing units. The analysis of this question must be limited, however, to a discussion of state law, as questions of federal law are generally not within the scope of opinions issued by this office.
DISCUSSION
Question 1: After a school district closes, does the millage levy for that school transfer to another district? Or does the levy cease when the school closes?
A school district may be dissolved (or "closed" as you term it), but the area once served by the old district will then be served by an existing school district through either annexation or consolidation. In such an event, the millage levy of a "closed" school district stays in place until changed by the voters of the resulting school district.
The state grants the State Board of Education the power, among others, to dissolve a school district and annex the territory of the dissolved district to another school district. In such cases, state law makes it clear that the "millage rate of the electors of the [dissolved] district shall remain the same until an election may be held to change the rate of taxation for the...receiving district."
Furthermore, when a school district is dissolved and all or part of the area of the dissolved school district is annexed to or consolidated with an existing school district, that existing school district board of directors is required to submit to the voters any change in millage rate.
Question 2: Does it violate any state or federal law to require a resident of one county to pay a school millage when the millage goes to a school district located in another county?
The answer to this question is "no" under state law. School district boundaries often cross county lines, and the residents of those cross-county districts pay millage to the district, regardless of their county of residence. The school district is a distinct taxing unit under Arkansas law. The fact that a particular property owner's county of residence differs from the location of the district seat does not affect the tax obligation.
I cannot opine on federal-law questions; that analysis is outside the scope of an Attorney General opinion.
Sincerely,
LESLIE RUTLEDGE
Attorney General