Approval of a Cash Deficit Property Levy Pursuant to A.R.S. § 15-992(G)(10)

To:

James T. Giel, Gust Rosenfeld PLC, on behalf of Alhambra Elementary School District No. 68

Pursuant to A.R.S. § 15-253(B), this opinion affirms in part, revises in part, and declines to review in part the opinion that you prepared for the Alhambra Elementary School District No. 68 (“District”) regarding approval of a cash deficit property levy requested under A.R.S. § 15-992(G)(10). That opinion is attached hereto as Appendix A.

Background

Each year, Arizona school districts must “fix, levy and assess the amount to be raised from primary property taxation and secondary property taxation.” A.R.S. § 42-17151(A)(1). Once they have calculated the “entire amount to be raised by direct taxation for that year,” each district must “fix and determine” the primary and secondary tax rates that will generate that amount. A.R.S. § 42-17151(A)(1). Primary property taxes are “all ad valorem taxes except for secondary property taxes.” A.R.S. §§ 15-101(20). Secondary property taxes include “ad valorem taxes used to pay the principal of and the interest and redemption charges on any bonded indebtedness or other lawful long-term obligation issued or incurred for a specific purpose by a school district” (i.e., bonds) and “amounts levied pursuant to an election to exceed a budget, expenditure or tax limitation,” (i.e., overrides). A.R.S. § 15-101(25).

Relevant here, A.R.S § 15-992(G) permits the county school superintendent to “validate” certain “additional primary school district tax levy amount requests” from school districts. This includes validation of “a rate that would result in a levy that equals any separately stated cash deficit from the prior fiscal year resulting from an anticipated or actual deviation in the property tax roll,” but only if the county board of supervisors first approves. A.R.S. § 15-992(G)(10).

The District experienced a cash deficit in fiscal year 2025 because the limited assessed property value within the District decreased between February and August 2024, causing the District to collect less tax revenue than the approved budget anticipated. See A.R.S. § 42-17151(A)(3) (tax rates are fixed based on property valuations “as determined by the assessor on or before February 10 of the tax year”). To remedy this shortfall, during the 2026 levy process, the District sought the Maricopa County Board of Supervisors’ approval of an “additional primary school district tax levy amount” pursuant to § 15-992(G)(10). The additional levy sought to recoup the District’s undercollection of both primary and secondary taxes—specifically, two voter-approved budget overrides—in the prior year. After review, the County approved an additional levy equal to the portion of the cash deficit attributable to undercollection of primary taxes only. The County concluded that § 15-992(G)(10) did not authorize an additional levy for a cash deficit arising out of secondary taxes.

Conclusion

We agree with your opinion as to its interpretation of A.R.S. § 15-992(G)(10) and its conclusion that the authorized additional primary school district tax levy amount can include “any separately stated cash deficit” that results from a “deviation in the property tax roll” regardless of whether the deficit arose from undercollection of primary or secondary taxes. However, we disagree with your statement that subsection (G) “does not include any language limiting the [additional] levy to the immediately preceding prior fiscal year.” By its plain text, subsection (G) authorizes an additional levy only for a “separately stated cash deficit from the prior fiscal year.” A.R.S. § 15-992(G)(10) (emphasis added). Subsection (G) does not, however, require that the “deviation in the property tax roll” occur in the prior fiscal year. Subject to that clarification, we generally agree with your conclusion that “a school district may request an [additional primary tax] levy if anticipated or actual changes to the property tax roll caused a cash deficit in the prior fiscal year.”

Finally, we decline to review and express no opinion regarding your subsidiary conclusion that “the Superintendent is required to recommend and the Board of Supervisors should approve the additional levy.”

Kris Mayes
Attorney General