Truth-in-Taxation & Budget Hearing Reminder

Michigan law requires public schools to adopt their annual budgets by June 30th each year. A taxing entity, including a school district or ISD, must satisfy 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 or ISD may avoid the burdensome truth-in-taxation process and still levy its full authorized operating millage rate if it takes the following three steps when adopting its budget:

Step 1: The proposed budget must comply with Uniform Budgeting and Accounting Act Section 16. That section requires that a taxing unit’s “general appropriations act” (e.g., the adopted budget) state the total number of mills of ad valorem property taxes to be levied and the purpose(s) for which that millage will be levied.

The budget must also 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 personal property; (2) all property; or (3) principal residence, qualified agricultural property, qualified forest property, supportive housing property, property occupied by a public school academy, and industrial personal property.

Step 2: The school 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. That 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.

 The budget hearing notice also must include the following information:

• the time, date, and place of the hearing; and
• the location where the proposed budget is available for public inspection.

Step 3: After the budget hearing concludes, the school board must adopt a budget that includes the information described above (i.e., a statement of the total number of mills of ad valorem property taxes to be levied; the purpose(s) for which the millage will be levied; and a description of the tax base on which the millage will be levied).

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

If your school or ISD plans to put an operating millage proposal on the ballot in August or November, including information regarding that millage in the original adopted budget would avoid the need to conduct a second budget hearing procedure after the election.

An ISD that obtains voter approval for 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 or ISD may use 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.