STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6032

January 25, 1982

CONSTITUTIONAL LAW:

Const 1963, art 9, Sec. 31--reduction of millage allocated by county tax allocation board after separate tax limitation authority expires

Upon termination of a separate tax limitation for a school district by operation of law, millage allocated to the school district by the county tax allocation board continues to be subject to reduction, if applicable, pursuant to Const 1963, art 9, Sec. 31.

The Honorable Richard J. Allen

State Senator

The Capitol

Lansing, Michigan

You have requested my opinion on the following question:

Const 1963, art 9, Sec. 6 limits the amount of ad valorem property taxes which may be levied without voter approval to 15 mills. Pursuant to that constitutional provision, county electors may approve separate tax limitations not to exceed 18 mills between the county, townships, and school districts. If approved separate tax limitations are not in effect, the tax rates authorized within the 15 mills limitation are annually allocated between the county, townships, school districts, and, where applicable, to community college districts by the county tax allocation board. 1933 PA 62, Sec. 11; MCLA 211.211; MSA 7.71. The tax rate under consideration here is the school district's rate as allocated by the county tax allocation board.

Your opinion request is based on the following facts. In 1976, voters of a county approved establishment of separate tax limitations for the county, townships, and intermediate and local school districts for a four year period, pursuant to Const 1963, art 9, Sec. 6, and Secs. 5a-5i of 1933 PA 62; MCLA 211.201 et seq; MSA 7.61 et seq. In 1980, the voters defeated a proposal to establish separate tax limitations for an additional four year period. The basic 15 mill levy, as limited by Const 1963, art 9, Sec. 6 and authorized by 1933 PA 62, Sec. 3; MCLA 211.203; MSA 7.73, was then allocated for 1981 among the various units by the county tax allocation board pursuant to 1933 PA 62, supra, Sec. 11. School districts were allocated 8.0 mills as the tax rate, which was also the amount of school district millage established by the separate tax limitation approved in 1976 and the amount which would have been provided for school districts by the proposal defeated in 1980.

Const 1963, art 9, Sec. 31 was added to the Constitution in 1978 by the approval of the Headlee Amendment by the electors. In pertinent part, it provides:

Under this provision, if the assessed valuation, as finally equalized, of property in a school district increases by a greater percentage than the increase in the General Price Level, the authorized tax must be 'rolled back' to offset the valuation increase in excess of the increase in the General Price Level. OAG, 1979-1980, No 5562, p 389 (September 19, 1979), concluded that this requirement applied not only to voter-approved millage levies, but also to the maximum 15 mill levy whether allocated or established by separate tax limitations. When Const 1963, art 9, Sec. 31 is applied to the 15 mill levy, it reduces the maximum permissible levy from 15 mills to a lower 'rolled back' rate. Thus, the county, township, and school district allocated shares of the 15 mill levy are 'rolled back.'

When a unit of local government is subject to the rollback requirement of Const 1963, art 9, Sec. 31 in each of two or more years, the rollback for each of these years must be cumulated. Thus, for example, a school district which has been allocated 8.0 mills, but which is subject to the rollback requirement for three consecutive years because of increases in assessed valuation in excess of increases in the General Price Level, might see its maximum authorized millage rate drop to 7.8 mills the first year, to 7.5 mills the second year, and to 7.2 mills by the third year. Even though nominally allocated 8.0 mills, the school district may not actually levy this rate unless its voters have approved an increase in the maximum authorized rate to 8.0 mills.

Const 1963, art 9, Sec. 31 is implemented by the General Property Tax Act, 1893 PA 206, Sec. 34d; MCLA 211.34d; MSA 7.52(4). When a unit of local government is subject to a millage rollback, (pursuant to 1893 PA 206, Sec. 34d(7), (8), and (9), supra, for calculating a 'millage reduction fraction'), the Legislature has established the following procedure:

In the first year that a unit of local government is subject to a millage rollback, the authorized millage rate is multiplied by the millage reduction fraction to determine the 'rolled back' millage rate. In succeeding years, the millage reduction fractions for each year are multiplied together to calculate a 'compounded millage reduction fraction' which is then used to determine the 'rolled back' millage rate. This procedure continues annually until the voters authorize an increase in the tax rate, at which time the procedure starts anew pursuant to 1893 PA 206, Sec. 34d(11), supra, which provides:

The compounding of millage reduction fractions is necessary to enable valuation increases in excess of the General Price Level to be permanently offset or 'rolled back.' If the millage reduction fraction for each year were calculated solely on the valuation increase for that year, taxpayers would receive the benefit of the rollback for only the most recent year and would be subject to the full effect of the valuation increases in years prior thereto.

Under Const 1963, art 9, Sec. 31 and 1893 PA 206, Sec. 34d, supra, the millage rollback requirement continues from year to year unless the electors affirmatively act to increase the authorized tax rate. In the fact situation presented in your request, the electors of the school district have not approved a levy of a tax rate in excess of the limit set by 1893 PA 206, Sec. 34d(7), (8) and (9), supra. Consequently, no millage rate in excess of the rate calculated by application of these subsections may be levied.

It is my opinion, therefore, that upon termination of a separate tax limitation for a school district by operation of law, millage allocated to the school district by the county tax allocation board continues to be subject to reduction, if applicable, pursuant to Const 1963, art 9, Sec. 31.

Frank J. Kelley