A ruling last week in a Pulaski County Circuit Court stymied efforts by the Arkansas Department of Education to withhold excess property tax revenues from school districts in Carroll and Garland counties.

The state wanted to recover $2.2 million from the districts because local revenues exceeded a level deemed adequate by the Legislature, but District Judge Tim Fox said the state did not have statutory or constitutional authority to withhold the money.

The revenue came from a constitutionally required local property tax of at least 25 mills dedicated to public education.

If a district’s collections from the tax fall below the state’s foundation funding of $6,023 per student, the local revenue is supplemented by state aid.

Fox’s finding overturns an opinion from Attorney General Dustin McDaniels that local school millage property tax revenues above the state threshold could be kept by Arkansas for disbursement to other districts

Fox agreed with McDaniels that the revenue is controlled by the state because it was generated by a provision in the Arkansas constitution. However, Fox ruled that the revenue from the tax must be turned over to the districts.

The state can recover a variety of overpayments to school districts through withholding, Fox said, but is “unambiguously” required to turn over all revenue generated by the local property tax.

The Department of Education withheld $1.4 million from Garland County Fountain Lake School District 18 and $825,000 from Carroll County Eureka Springs School District 21.

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