When Utahns pay their property taxes for local schools, the money raised goes directly to their local school districts — but a bill moving through the Utah Legislature could redirect those dollars to a fund state lawmakers control, allowing them to use the money for other purposes.
SB37 would require school districts to deposit all property tax revenue into Utah’s general fund. The state would still have to pay districts the minimum funding amount — set at $4,494 per student for fiscal year 2025 — but could use income tax revenue to do that, freeing up the local property tax dollars for other state purposes.
The bill’s sponsor, Sen. Lincoln Fillmore, R-South Jordan, argued the bill “establishes a framework to provide additional resources to expanding school districts by redirecting revenue from districts with declining student enrollments.”
“While we are protecting education funding in this bill, it also allows the state the flexibility to be able to make sure that we can adequately fund other priorities like social services, transportation, public safety,” Fillmore said.
However, education organizations say there’s no guarantee those local property tax dollars would make it back to schools.
“This is just dishonest,” said Lexi Cunningham, executive director of the Utah School Superintendents Association and the associate executive director of the Utah School Boards Association.
“Putting it in the general fund, that is money that the legislators control, and then they can decide what to do with that money. … It may or may not go to education,” Cunningham said.
During a House Revenue and Taxation Committee hearing on SB37, several district administrators, school board members and educators spoke against it.
“I still have concerns about local control,” Linda Hanks, a member of the Juab School Board, said Thursday. “As those local funds come in, whether it’s at the base basic rate or the local levy rate, why shouldn’t those revenues be kept within the community?”
Fillmore countered that the bill would not change local control over the funds.
“It does not touch any property tax levy that is initiated by a local school district,” Fillmore said. “It does not change the timing, the amount or the permitted uses of any education dollars that school districts will receive.“
The House committee passed SB37 unanimously Thursday. The bill has already cleared the Senate, so if the full House passes it, it would then go to Gov. Spencer Cox.
(Christopher Cherrington | The Salt Lake Tribune)
How schools are funded in Utah
Utah’s Minimum School Program (MSP) is the primary way the state funds K-12 public education. It ensures that all schools receive a baseline level of funding, regardless of local wealth, by combining state and local tax revenues.
Here’s how it works:
Each year, the state sets a “Weighted Pupil Unit” (WPU), which determines a minimum amount of money spent for each student. Schools receive funding based on the number of students they serve, with adjustments for factors like grade level and special education needs.
There are other funds the state distributes that are not included in the MSP or the WPU, but these are the primary funding mechanisms.
School districts must levy a basic property tax rate, which helps fund the MSP. If a district’s local property tax revenue isn’t enough to meet the per-student minimum, the state provides extra funds to make up the difference.
These additional funds come from revenue raised through the state’s income tax. And while the money in the state’s general fund can be used for any purpose lawmakers choose, the Utah Constitution limits the uses of income tax revenue to three areas: public education, higher education, and services for children and individuals with disabilities.
Last year, lawmakers tried to pass Amendment A to remove that earmark from the Utah Constitution. That amendment would have let the Legislature use income tax revenue for “other state needs,” but only after meeting the minimum per-student funding requirements.
Lawmakers had hoped voters would decide on Amendment A in last November’s election. However, a judge voided the amendment, ruling the Legislature violated another part of the Utah Constitution — Article XXIII — that requires ballot language be published in newspapers statewide at least two months before an election.
How does SB37 change school funding?
When local property taxes are collected in November, each county deposits that revenue into a “Public Treasurer’s Investment Fund,” which school districts can access.
This fund allows districts to earn interest on local property tax revenue, currently at a rate of about 4.5%. Eventually, though, districts spend these funds, along with state revenue, leaving their coffers low by the following year, said Alan Kearsley, business administrator for the Salt Lake City School District.
“But we get a boost when the next year’s tax bill arrives,” Kearsley said.
If SB37 were to become law, local property tax revenue wouldn’t go directly into that investment fund. Instead, it would go into the state’s general fund. The State Board of Education would have 35 days after receiving the money to transfer an equivalent amount — taken from the income tax fund, not the general fund — into each district’s investment account.
“The bill is essentially taking our income tax dollars, funding the weighted pupil unit and freeing up property tax dollars to be used for general state purposes,” said Todd Hauber, business administrator for the Granite School District.
The intent of Amendment A, Hauber said, “was to be able to access income tax revenue after public education commitments were taken care of. … That’s where this starts to feel the same.”
An effort to ‘equalize’
Some districts generate much higher property tax revenues and don’t need state funding, while others, particularly rural districts, depend heavily on state contributions.
Fillmore argued Thursday that SB37 will help the state equalize funding across districts.
Fillmore highlighted the Park City School District, saying it generates nearly $13,000 per student in local property tax revenue — more than double the current weighted pupil unit.
“In the Alpine School District, that number is about $800 per student,” Fillmore said. “This would treat all school districts equally from that standpoint.”
Under the current system, when districts generate more than the WPU requires, the money goes back to the state, which helps supplement its portion of the Minimum School Program for other districts, Hauber said.
Fillmore added the bill would allow property tax-poor districts to benefit from interest accrued by wealthier ones.
“We recognize the intent of the [bill] is to minimize the interest lost to local school districts,” said Randy Upton, business administrator of the Park City School District, “but until we know the mechanics of how that would play out, we remain concerned.”
A ‘volatile’ source of revenue
Hauber said the proposed system “works so long as there are more income tax dollars coming into the revenue picture.”
However, lawmakers have cut income taxes for four consecutive years, and are set to do so again for a fifth time. The 2024 Utah Legislature passed SB69, lowering the income tax rate from 4.65% to 4.55% percent, representing $167 million in cuts.
This session, a lawmaker has introduced HB106, which proposes lowering the rate even further to 4.45%, another $195 million in cuts. That bill has yet to have a hearing in the House.
Cunningham, at the Utah School Superintendents Association, said property taxes are a “stable” source of revenue for districts, while income tax is “volatile,” as lawmakers continue to make cuts every year.
She added that SB37 could sow division between local school boards and their communities. Residents pay property taxes expecting to support schools, she said, but their money “may or may not” be used for that purpose.
“Taxpayers have a right to know where their tax dollars are going,” Cunningham said, adding that, at the end of the day, it’s school boards who have to answer to their communities.
Cunningham added, “let our local board members and our local districts make these decisions.”
