HB 2173
Initials CH Page 1 Transmitted
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-sixth Legislature
Second Regular Session
House: ED DPA 10-0-0-0 | 3rd Read 58-0-1-0-1
Senate: ED DP 6-0-1-0 | 3rd Read 27-0-3-0
Final Read: 59-0-1-0
HB 2173: county aid; school districts; revisions
Sponsor: Representative Pingerelli, LD 28
Transmitted to the Governor
Overview
An emergency measure that revises statutes relating to tax levy calculations for a common
school district not within a high school district (Type 03 district). Details session law
provisions that redirect monies collected by the additional tax in a Type 03 district in TY
2023 to the state General Fund (GF).
History
Laws 2022, Chapter 285 eliminates the requirement for a Type 03 district (that is not a
transporting school district) to pay tuition for high school pupils who reside in the Type 03
district but attend another school district. Currently, students who reside in a Type 03
district but attend another school district for high school are deemed to be enrolled in the
school district of the student's attendance for the purposes of determining student count and
apportionment of state aid (A.R.S. § 15-824).
Each county board of supervisors (BOS), when levying school district property taxes, must
annually levy an additional tax in each Type 03 district. This additional tax is levied in an
amount equal to the countywide average per pupil equalization base for high school pupils
multiplied by the number of resident high school pupils in the Type 03 district during the
prior year. Monies collected by this levy are added to county aid for equalization assistance
and distributed to school districts in the county according to the school finance formula.
A school district that fully funds its equalization base through monies generated by its local
qualifying tax rate (QTR) is not eligible to receive state equalization assistance. In these
school districts, an additional property tax may be levied, commonly referred to as the MQTR.
The MQTR is determined based on the difference between the levy that would be produced
by 50% of the school district's applicable QTR and its equalization base (A.R.S. § 15-992).
Provisions
MQTR and Additional Tax in Type 03 Districts
(Retroactive to Tax Years Beginning January 1, 2024)
1. Modifies the amount levied by the MQTR in a school district not eligible for equalization
assistance by subtracting the amount levied by the additional tax in a Type 03 district.
(Sec. 3, 7)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☒ Emergency (40 votes) ☐ Fiscal Note HB 2173
Initials CH Page 2 Transmitted
2. Sets the levy for the additional tax in each Type 03 district at the lesser of:
a) a rate that is equal to the applicable QTR; or
b) a rate that would result in a levy that equals the statewide average per pupil funding,
rather than countywide average per pupil equalization base, for high school pupils
multiplied by the student count, rather than number, of the Type 03 district's resident
high school pupils during the prior school year. (Sec. 3, 7)
3. Instructs the Arizona Department of Education (ADE), by July 1 annually, to:
a) provide each county board of supervisors (BOS) with:
i. the statewide average per pupil funding, rather than countywide average per pupil
equalization base, for high school pupils; and
ii. the student count, rather than number, of resident high school pupils in the Type
03 district during the prior school year; and
b) provide each Type 03 district with the student count of the resident high school pupils
in the Type 03 district during the prior school year. (Sec. 3, 7)
4. Redirects the monies collected from the additional tax in a Type 03 district from county
aid for equalization assistance to the State Treasurer for deposit in the state GF to aid in
school financial assistance. (Sec. 3, 7)
5. Defines per-pupil funding. (Sec. 3, 7)
School District Tax Levy Cap
6. Excludes the MQTR and additional tax in a Type 03 district from the criteria used by the
Property Tax Oversight Commission (PTOC) to determine if a school district primary
property tax rate exceeds the maximum permissible statutory primary property tax rate.
(Sec. 4)
Type 03 District Additional Tax Deposit (Session Law)
7. Instructs each county BOS that levied an additional tax in a Type 03 district in TY 2023
to direct the county treasurer to transmit any unexpended and unencumbered monies
that were collected by the additional tax in TY 2023 to the State Treasurer for deposit in
the state GF to aid in school financial assistance. (Sec. 6)
8. Repeals the Type 03 district additional tax deposit requirement on January 1, 2027. (Sec.
6)
Miscellaneous
9. As session law, authorizes ADE, in FYs 2025 and 2026, to use the most recent data from
the statutory open enrollment report to provide the information required for the
additional tax in a Type 03 district to a county BOS. (Sec. 5)
10. Makes technical and conforming changes, retroactive to July 1, 2023, by
a) deleting obsolete references to repealed statute relating to school finance calculations
for a Type 03 district; and
b) repealing duplicative statute relating to the determination of equalization assistance
payments from county and state funds for school districts. (Sec. 1, 2, 7)
11. Contains an emergency clause. (Sec. 8)
12. Makes technical and conforming changes. (Sec. 3, 4)