Truth-in-Taxation and Budget Hearing Reminder

Michigan law requires that public schools adopt their budgets before the beginning of the fiscal year (July 1). A taxing entity, including a school district or ISD, must follow a “truth-in-taxation” process if its tax revenue will exceed what it collected in the prior fiscal year (with exceptions for certain taxable additions). This process includes a newspaper notice, a truth-in-taxation public hearing, and resolutions proposing and adopting additional millage rates. A school district or ISD, however, may avoid the truth-in-taxation proce­dure if it takes the following steps during budget adoption.

First, a school district or ISD may levy its full authorized operating millage without following the truth-in-taxation process if it complies with Section 16 of the Uniform Budgeting and Accounting Act. Section 16 requires that a taxing unit’s “general appropria­tions act” (i.e., the adopted budget) state the total number of mills of ad valorem property taxes to be levied and the purposes for which that millage will be levied.

Second, a description of the tax base on which the millage will be levied must be included in the budget. For example: (1) non-principal residence, non-qualified agricultural property, non-qualified forest property, non-supportive housing property, non-PSA-occupied property, and non-industrial property; (2) all property; or (3) principal residence, qualified agricul­tural property, qualified forest property, supportive housing property, property occupied by a PSA, and industrial personal property.

Third, the notice for the budget hearing, which must be published in a newspaper of general circula­tion within the taxing entity at least six calendar days before the hearing, must include the following statement, printed in 11-point boldfaced type:

The property tax millage rate proposed to be levied to support the proposed budget will be a subject of this hearing.

In summary, a school district or ISD may levy its full millage rate(s) without going through the more com­plex truth-in-taxation process by satisfying the following requirements:

  1. At least six calendar days before the hearing, publish a notice of budget hearing with the following information:

A.  the time, date, and place of the hearing;

B.  the location where the budget is available for public inspection; and

C.  the boldfaced language referencing the proposed millage rate as set forth above.

  1. After the hearing concludes, adopt a budget that includes:

A.  a statement of the total number of mills of ad valorem property taxes to be levied;

B.  the purposes for which the millage will be levied; and

C.  a description of the tax base on which the millage will be levied.

A school district or ISD seeking to levy a millage approved by voters after the adoption of the budget may avoid the truth-in-taxation process by: (1) pub­lishing the appropriate budget hearing notice, holding a second public hearing, and amending the budget to include the additional millage; or (2) providing a millage rate in the original hearing notice and budget that includes the proposed millage to be voted on, if known.

An ISD voting on a regional enhancement millage should consult with legal counsel about incorporating the enhancement millage in the truth-in-taxation process.

Because public school academies, schools of excellence, urban high school academies, and strict discipline academies have no authority to levy a school operating millage, their annual budget hearing notice need not include the 11-point boldfaced type state­ment or any reference to the proposed property tax millage rate.

A form for the budget hearing notice is attached to this edition of School Law Notes. Please note that no specific form of resolution for budget adoption is re­quired. Schools may continue to use appropriate budget adoption resolutions that have been used in past years.