In May 2001, Judge Collins Kilgore issued a historic ruling in the Lake View School District v. Huckabee et al – the state’s current school funding formula is unfair to poorer school districts and provides inadequate funding for education. Early estimates suggest $500 million to $1 billion in new funding will be required annually for education. The case is expected to have major implications on education funding, other programs serving children and families, tax equity and fairness, and state and local tax systems.

This brief, the fifth in a series devoted to the Lake View School District case, examines the use of industrial revenue bonds and their impacts on local property taxes and public-school funding:

Arkansas has no reliable system for tracking the amount of revenue that schools are losing each year because of property tax exemptions associated with industrial revenue bond issues.

A study of industrial revenue bond issues in Pulaski County found 14 companies benefiting from property tax exemptions associated with bond issues.

During 2002, the school districts in Pulaski County are scheduled to receive $132,352 in payments in bond issues involving exempt industrial properties. If the properties had been assessed and on the local tax rolls, the districts would have received $828,889 in property taxes, a net loss of $696,548.

School districts in seven counties receive over 70 percent of the payments in lieu of property taxes reported by Arkansas schools.

During the 2000-01 school year, Arkansas schools received $1.6 million in payments in lieu of property taxes. If the properties had been on the local tax rolls, the schools would have received $9.9 million. This represented a net loss of $8.3 million in local tax receipts to Arkansas schools.