Truth-in-Taxation and Budget Hearing Reminder

Michigan law requires that public schools adopt their annual 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 anticipated operating tax revenue will exceed what it collected in the previous fiscal year (with exceptions for certain taxable additions). This process includes: (1) publishing a newspaper notice, (2) holding a truth-in-taxation public hearing, and (3) approving resolutions proposing and adopting additional millage rate(s).

A school district or ISD may avoid the truth-in-taxation process and still levy its full authorized operating millage rate if it takes the following steps when adopting its budget.

First, a school district or ISD may levy its full authorized operating millage without following the truth-in-taxation process if it complies with Uniform Budgeting and Accounting Act Section 16. That section 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, the budget must include a description of the tax base upon which the operating millage will be levied. Examples of those descriptions include: (1) non-principal residence, non-qualified agricultural property, non-qualified forest property, non-supportive housing property, and non-industrial property; (2) all property; and (3) principal residence, qualified agricultural property, qualified forest property, supportive housing property, and industrial personal property.

Third, the notice for the budget hearing must be published in a newspaper of general circulation within the school district or ISD at least six calendar days before the hearing. The notice 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.

A school district or ISD may levy its full operating millage rate(s) without going through the burdensome 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:
   1. 1. Time, date, and place of the hearing;
      2. Location where the budget is available for public inspection; and
      3. Boldfaced language referencing the proposed millage rate(s) as outlined above.
2. After the hearing concludes, adopt a budget that includes:
   1. 1. A statement of the total number of mills of ad valorem property taxes to be levied;
      2. The purpose(s) for which the millage will be levied; and
      3. A description of the tax base on which the millage will be levied.

A school district or ISD seeking to levy an operating millage approved by voters after adopting its budget may still avoid the truth-in-taxation process by either: (1) publishing the appropriate budget hearing notice, holding a second public hearing, and amending the budget to include the additional millage; or (2) providing the proposed millage rate(s) to be voted on, if known, in the original budget, along with the proper hearing procedures.

An ISD voting on a regional enhancement millage should consult with legal counsel about incorporating that millage into 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 boldface type statement or any reference to a 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 desiring to reuse budget adoption resolutions from previous years should ensure that they are up-to-date and do not contain certain COVID-19 related provisions that are no longer applicable (e.g., references to executive orders or electronic meetings).