Truth-in-Taxation and Budget Hearing Reminder

Michigan law requires that public schools adopt their annual budgets before July 1, which is the beginning of the fiscal year. A taxing entity, including a school district or ISD, must implement the 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). Elements of this process include: (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 levy its full authorized operating millage rate if it takes the following three steps when adopting its budget:

Step 1: A school district or ISD 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.

Step 2: The school district or ISD 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; or (3) principal residence, qualified agricultural property, qualified forest property, supportive housing property, and industrial personal property.

Step 3: A school district or ISD must publish a notice for the budget hearing 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, it must publish a notice of budget hearing with the following information:
   
   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, it must adopt a budget that includes:
   
   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 sample form that a school district or ISD may use for the budget hearing notice is attached below. 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. For example, the notice should not include certain COVID-19 related provisions that are no longer applicable (e.g., references to executive orders or electronic meetings).