Bill would require counties to remit basic school levy to state, creating $842 million flow shift

Sam Urey, school finance director for the Utah State Board of Education, and Dale Frost, minimum school program administrator, briefed the board on Senate Bill 37 and its likely fiscal effect.

"What this bill does is now requires counties to remit those revenues directly to the state," Dale Frost said, describing a change to how basic-levy property tax receipts would be handled under SB 37.

The bill would have counties remit revenue from the basic levy directly to the state treasurer rather than leaving those dollars in local district coffers and then reducing state allocations. Under current practice, districts collect basic-levy revenue and state aid for the minimum school program is reduced by that local amount. Under the bill, Frost said, counties would remit basic-levy receipts to the state treasurer and the state would deposit the money into the state general fund; districts would then receive their full program allocation from the Uniform School Fund.

Why it matters: the Legislative Fiscal Analyst (LFA) estimate cited in the briefing puts the shift at about $842,000,000 in ongoing basic-levy property tax revenues. Frost and Urey said that would create an equivalent $842 million in new general-fund receipts and a corresponding $842 million cost to the Uniform School Fund unless the Legislature provides offsetting appropriations in the budget process.

Frost and Urey told board members the change does not guarantee an immediate cut to education spending because the revenue and the new cost largely offset in year one. Frost said the principal policy effect is to give the Legislature more flexibility over how property-tax-generated revenue is used in future budgets: "This gives them flexibility to spend more broadly than they could have otherwise," he said.

Board members asked where the remitted money would be held and whether interest that accrues while funds move through state accounts would be retained by districts or the state. Urey and Frost said the bill requires the county treasurer to remit to the state treasurer and that the state treasurer would notify USBE of remittances so Washington County or Alpine School District, for example, would be credited with the preexisting amount of basic-levy revenue. They said the bill is written to return the same amounts out to districts (effectively an in/out flow) and that timing differences would likely be minimal under the current draft.

The LFA estimate included an interest-income effect in an earlier draft of the fiscal note; that estimate suggested roughly $1.4 million in lost district interest income under one timing assumption, but Urey said the bill’s amended timing language largely eliminates that differential because the state would be paying out in a manner similar to current monthly distributions.

Board context: presenters emphasized the bill affects only the basic levy — one of six possible school-district levies — and does not change voter-approved or board-determined locally levied rates such as voted, board, capital or bond levies. The presenters framed SB 37 as a mechanics-and-fiscal-shift change rather than a direct, immediate cut to program funding, while acknowledging that over time shifting a large revenue stream into the general fund increases legislative discretion over those dollars.

Looking ahead: presenters said SB 37 had already passed the Legislature and was going to the governor at the time of the briefing. They urged board members to consider the longer-term implications as state revenues and property valuations evolve.