Request By:
Mr. David L. Williams
State Representative
53rd Legislative District
Parkway Building
Public Square
P.O. Box 666
Burkesville, Kentucky 42717
Opinion
Opinion By: David L. Armstrong, Attorney General; By: John A. Miller, Assistant Attorney General
You have requested a formal opinion of this office on the following question:
If a local school district levys a minimum equivalent tax rate of twenty-five cents prior to October 18, 1985, will the district be required to place all new revenue generated by the tax increase necessary to meet the minimum equivalent tax rate in a restricted account as called for in Section 30(1)(b) of House Bill 6?
It is our opinion that a tax increase levied by a local school district prior to October 18, 1985 will be subject to the restricted account requirements of Section 30.
House Bill 6 is the education package recently passed in the extraordinary session called by the Governor last July. The provisions of that bill which relate to your question are Sections 7, 28, 29, 30, 31 and 44. Section 7 amends KRS 157.564 to require each school district to levy for general school purposes a minimum equivalent tax rate of twenty-five cents (25 ) upon each one hundered dollars ($100) of value of all property directed to be assessed for taxation for school years beginning on or after July 1, 1986. Section 28 is a definition section. Section 29 creates the School Facilities Construction Commission (SFCC). Section 30 sets out the requirements for participation in the school construction funding program. Section 31 sets out the method by which the SFCC will determine how much funding to provide each school district for construction purposes. And Section 44 contains an emergency clause making Section 30 effective immediately upon the Governor's signature. As will be seen, this emergency clause plays a pivotal role in our opinion.
In the absence of an emergency clause, no act of the General Assembly becomes a law until 90 days after adjournment of the session at which it was passed. Ky. Const. § 55. Since the legislative session in which House Bill 6 was enacted adjourned on July 19, 1985, the effective date of all provisions of that bill other than Section 30 is October 18, 1985. This explains why your question is posed in terms of a tax levy enacted prior to October 18, 1985. Your question contemplates that there may be some difference in the accounting requirements placed upon increased revenues resulting from a tax rate increase depending on whether or not that increase is levied before or after the effective date of the act. That we do not perceive this to be true is a result of our reading of Section 30 in conjunction with Sections 7 and 44.
Section 30(1) states:
(1) In order to participate in the school construction funding program, the district must have unmet needs as defined by Section 28 of this Act and must meet the following eligibility criteria:
(a) Levy a minimum equivalent tax rate of twenty-five (25) cents as defined by Section 28 of this Act;
(b) All new revenue generated by any tax increase required to meet the minimum equivalent tax rate must be placed in a restricted account for school building construction bonding; and
(c) Upon the effective date of this section and on June 30 of each year thereafter, the district board of education shall transfer all available local revenue, as defined by Section 28 of this Act, to a restricted account for school building construction, to be utilized in accordance with the priorities determined by the approved school facilities plan.
As noted, by virtue of the emergency clause contained in Section 44, Section 30 took immediate effect upon approval by the Governor. It is rather curious that the legislators singled out this section for such special treatment when one considers that much of the meaning and significance of this provision derives from other provisions in the act. To illustrate, the school construction funding program is dependent upon the existence of the School Facilities Construction Commission created in Section 29. And the definitions of many of the terms employed in Section 30 such as "equivalent tax rate" and "available local revenue" are contained in Sections 7 and 28. At first glance, thus, it is difficult to discern any practical utility in causing Section 30 to have an effective date in advance of the other pertinent parts of the act. But, of course, an act of the General Assembly is presumed to be effective as an entirety. "No rule of statutory construction has been stated more definitely or more often repeated than the cardinal rule that significance and effect shall, if possible, be accorded to every part of the Act."
George v. Scent, Ky., 346 S.W.2d 784, 789 (1961).
What then is the significance and effect of giving Section 30 an early effective date? In our opinion, the General Assembly was seeking to prevent the local school districts from escaping the restricted account requirements by levying the twenty-five cent (25 ) minimum equivalent tax rate in 1985 rather than waiting until 1986. This is important since funding provided by SFCC is determined in part by reference to how much available local revenue the school district already has. See Section 31. Available local revenue, in turn, is determined in part by the additional revenues generated by an increase in the minimum equivalent tax rate. Without the emergency clause to make Section 30 effective immediately upon the Governor's approval, local school districts would be able to levy the minimum equivalent tax rate of twenty-five cents (25 ) for the tax year 1985 (assuming compliance with KRS 157.440) and thereby escape the restricted account requirement in the year 1986. This is because there would be no, or virtually no, new revenue generated between the years 1985 and 1986 since the tax rate in both years would be identical. In addition, without an early effective date on Section 30, the local school districts would be able to spend down their available local revenue so as to increase their share of the state funding available through the SFCC. In short, the legislature determined that those districts which previously had a low rate of taxation would be required to ear mark the new revenue generated by the higher minimum tax rate for construction purposes. In order to prevent circumvention of this policy judgment, the General Assembly enacted the restricted account requirements on available local revenues in advance of the effective date of the remainder of the act.