Maricopa County school districts are facing a major financial blow following a court ruling that they must return nearly $150 million to property owners who were overtaxed due to misclassification of their homes. Property owners were overtaxed due to misclassification of their homes that were misclassified as rentals or second homes. School districts are scrambling to balance their budgets for the next fiscal year amid this sudden debt. The biggest bellwether of the woes is Mesa Public Schools, Arizona's largest school district, which is being asked to return about $11.2 million. ABC15.
“I've been in this job for almost 30 years, and this is by far the largest and most complicated thing I've ever heard of,” said Jeff Simmons, assistant superintendent of the Buckeye Union High School District, which is saddled with about $900,000 in debt. ABC15The complexity of the situation is further compounded by school district budget structures, which are often a blend of budget-controlled and cash-controlled funds, each dictated by their own governing rules and restrictions. These range from prescribed formulas that limit spending to strict requirements that cash must be held in advance to meet financial obligations. Scottsdale Unified School District (SUSD).
Maricopa County Superintendent Steve Watson expressed outrage at the situation, saying in a statement, “What frustrates me most is that we are paying interest on this, which means our school district is asking taxpayers to pay additional money to pay interest on a mistake made by Maricopa County.” ABC15Districts may be forced to renegotiate tax rates to collect larger refunds, while school officials are consulting with the Arizona Department of Education to reevaluate state aid and explore other options to wisely use cash reserves without jeopardizing educational services.
The root of this financial quake lies in the class action lawsuit, Cashmere v. Maricopa County, which uncovered significant errors in property tax classifications affecting assessed values from 2015 to 2023, leading to a laborious correction process in which the Maricopa County Treasurer’s Office was tasked with recovering overpayments from various taxing entities. This includes a staggering $27,598,581 from SUSD alone. This amount includes multiple fund types such as, but not limited to, Maintenance and Operations (M&O), desegregation funds and overrides, capital expenditure debt assistance, and bond funds. This is confirmed in the breakdown of SUSD’s projected recoveries: website.
Final numbers are expected to be released in August, but so far districts have yet to release clear plans for replenishing these funds, so it remains to be seen how districts will pivot amid this financial headwind.
