Request By:
Hon. Clayton G. Lykins, Jr.
Holder and Lykins
407-409 Second Street
P.O. Box 160
Vanceburg, Kentucky 41179-0160
Opinion
Opinion By: Frederic J. Cowan, Attorney General; Ann M. Sheadel, Assistant Attorney General
In your recent letter you requested an opinion from this Office interpreting certain provisions of House Bill 940, the Kentucky Education Reform Act, enacted by the 1990 General Assembly. In particular, you ask whether a school board that levies a utility gross receipts license tax for schools is required to adhere to the notice and hearing provisions of KRS 160.603. You state that the Lewis County Board of Education voted on August 10, 1990, to levy a utility gross receipts license tax pursuant to KRS 160.613 without adhering to the notice and hearing provisions of KRS 160.603.
The Lewis County Board of Education took the action without hearing due to the provisions of § 107 of House Bill 940, amending KRS 157.440. That statute enables school districts to levy an equivalent tax rate that will produce up to 15 percent of the revenues for education guaranteed to the district by the state, and exempts district boards of education from certain public hearing requirements. Prior to the imposition of the utility gross receipts license tax, Lewis County School District's equivalent tax rate was 25.8 cents. The utility gross receipts license tax is estimated to raise an additional 11.5 cents.
After the board took the action, the superintendent received a letter from an attorney representing a cable television company which does business in Lewis County, stating that the tax is ineffectual due to the fact that there was no hearing. Accordingly, you seek clarification from this Office.
The utility gross receipts license tax is one of three special taxes that any board of education may levy pursuant to KRS 160.593(1), which states:
Any board of education of a school district may, after compliance with the public hearing requirement contained in KRS 160.603, levy school taxes authorized by KRS 160.593 to 160.597, 160.601 to 160.633, and 160.635 to 160.648 . . . .
The particular procedure which a district board of education shall follow in providing notice and holding a hearing before levying the special school taxes is set forth in KRS 160.603, which states by way of introduction:
No school district board of education shall levy any of the school taxes authorized by KRS 160.593 to 160.597, 160.601 to 160.633, and 160.635 to 160.648 until after compliance with the following:
(1) The school district board of education desiring to levy any one (1) of these taxes shall give notice of any proposed levy of one (1) of the school taxes . . . .
(2) The school district board of education shall conduct a public hearing at the place and on the date advertised for the purpose of hearing comments and complaints regarding the proposed levy and explaining the reasons for such proposal.
KRS 160.613 specifically authorizes a utility gross receipts license tax for schools not to exceed three (3) percent of the gross receipts derived from the furnishing of several utility services. Prior to the enactment of the Kentucky Education Reform Act, KRS 160.593, 160.603 and 160.613 authorized the levy of a utility gross receipts license tax only after compliance with notice and hearing. The question now raised is whether House Bill 940 eliminated that requirement when utility gross receipts license taxes are levied for the purpose of complying with KRS 160.470(12) or KRS 157.440(1), as amended.
KRS 160.470(12)(a) states:
Notwithstanding any statutory provisions to the contrary, effective for school years beginning after June 30, 1990, the board of education of each school district shall levy a minimum equivalent tax rate of thirty cents (30 cents) for general school purposes. Equivalent tax rate is defined as the rate which results when the income collected during the prior year from all taxes levied by the district for school purposes is divided by the total assessed value of property plus the assessment for motor vehicles certified by the Revenue Cabinet . . . .
Under the language stating, "Notwithstanding any statutory provisions to the contrary" in this provision, there is no question but that districts must levy taxes sufficient to raise their equivalent tax rate to a minimum of 30 cents for general school purposes; otherwise, sanctions follow. If any board fails to comply with that mandate, its members are subject to removal from office for willful neglect of duty. See KRS 160.470(12)(b).
KRS 157.440(1)(a) states:
Notwithstanding any statutory provisions to the contrary, effective for school years beginning after July 1, 1990, the board of education of each school district may levy an equivalent tax rate as defined in subsection (12)(a) of KRS 160.470 which will produce up to fifteen percent (15%) of those revenues guaranteed by the program to support education excellence in Kentucky.
The language "Notwithstanding any statutory provisions to the contrary" in this provision clearly indicates that every school district is entitled to levy this equivalent tax rate under the Kentucky Education Reform Act. (Funding at this level is referred to as "Tier 1.") This provision is a key aspect of the General Assembly's plan to equalize funding among school districts in Kentucky in compliance with Rose v. Council for Better Education, 790 S.W.2d 186 (1989).
In levying taxes for the purpose of reaching the minimum equivalent tax rate set forth in KRS 160.470(12)(a) or for the purpose of obtaining "Tier 1" funding, as set forth in KRS 157.440(1)(a), any combination of school taxes may be used, including property taxes and special taxes.
It is the opinion of this Office that any board of education that seeks to levy a utility gross receipts license tax either for the purpose of establishing a minimum equivalent tax rate of 30 cents for general school purposes, or for the purposes of establishing an equivalent tax rate to obtain "Tier 1" funding, must comply with the notice and hearing requirements of KRS 160.593 and 160.603. These statutes, repealed and reenacted in House Bill 940, do not conflict with the goals of raising the minimum equivalent tax rate to 30 cents and of allowing "Tier 1" funding. Therefore, they are not affected by the "Notwithstanding any statutory provisions to the contrary" language of KRS 160.470(12)(a) and KRS 157.440(1)(a), and must be followed. However, the recall provisions of KRS 160.597 would be inconsistent with the legislative mandate of KRS 160.470(12)(a) and KRS 157.440(1)(a) and, accordingly, must yield to the "notwithstanding" clauses.
In summary, when levying a utilities gross receipts license tax rate for the purpose of complying with the minimum equivalent tax rate requirement set forth in KRS 160.470(12)(a) or for the purpose of participating in the "Tier 1" program set forth in KRS 157.440 , a school board must follow the notice and hearing requirements of KRS 160.593 and KRS 160.603. The recall provisions of KRS 160.597 do not apply.