Study examines ad valorem reimbursement funding gap
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Published: 15-Nov-2010
CapitolBeatOK Staff Report

Published: 15-Nov-2010

The ad valorem reimbursement fund has been insufficient to reimburse claims since 2003, a Tax Commission spokesperson told lawmakers today (Monday, November 15).

Oklahoma Tax Commission Tony Mastin spoke at a legislative study requested by state Reps. Pat Ownbey and Wes Hilliard.

When local property is not taxed, the state’s ad valorem reimbursement fund is designed to make up for the lost property tax revenue that supports local schools.

Due to supplemental appropriations, schools have been fully reimbursed, but only after the school’s fiscal year ended, according to two superintendents that spoke at the study.

“This is clearly an ongoing funding problem that unfairly penalizes a handful of school districts around the state,” said Ownbey, an Ardmore Republican. “It’s time we find a way to prevent these unnecessary, mid-year shortfalls.”

According to Wynnewood Superintendent Raymond Cole, the district has a budget of approximately $4 million and is due an $883,000 reimbursement for fiscal year 2010-2011. He said that in fiscal year 2009-2010, the district had a budget hole of $96,000 in May. He also said that late payments of the ad valorem reimbursements threaten the payment of bond issues, which in turn could affect the rates of all future school bond issues in Oklahoma.

“I don’t believe in throwing money at a problem,” Cole said. “We’re not asking for additional funding, but just the timely payment of money that comes out of our state aid, but is supposed to be returned in the form of these reimbursements.”

Ardmore Superintendent Ruth Ann Carr said her district has cut teachers in part because of uncertainty over when and if approximately $1.1 million in reimbursements will be paid. She said the reimbursements account for about 19 percent of the school’s general fund and $20 percent of the school’s building fund.

“We’re here today to discuss the ad valorem reimbursement fund and the challenges presented to the schools that receive that fund,” Carr said. “The reimbursement fund is regularly behind and that’s passed onto use as we try to make our decisions about retaining teachers and other budgetary considerations.”

Hilliard and Ownbey said that because of the state’s ongoing revenue shortfall, the ad valorem funding gap is likely to grow.

“These districts have managed to stay solvent and pay their bills, but only by relying on carryover funds in the case of Ardmore, and a local bank in the case of Wynnewood,” Ownbey said. “As the state’s revenue shortfall continues, they will be put under even greater pressure.”

“This problem has the potential to create a higher rate of interest on school bond issues, create additional costs to school districts because of cash flow problems, and even affect the number of teachers a school district retains,” said Hilliard, a Sulphur Democrat. “I believe it is up to the Legislature to make a fiscally responsible decision to address this funding gap.”

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