Opinion ID: 2124044
Heading Depth: 1
Heading Rank: 7

Heading: Debt Service Levy

Text: The debt service levy, unlike the other two components, is outside the general education revenue fund. These levies, which must be approved by voters, are locally authorized taxes which are used to finance bonds for construction or renovation of school buildings. Minn.Stat. § 124.95 (1992). The debt service levy also has a different effect on districts from the referendum levy and supplemental revenue because those latter components impact the year-to-year operating budgets of districts, whereas the debt service levy provides funding for construction of buildings which are paid for over time. The debt service levy is used to fund capital projects and is therefore determined by the demographic growth and decline cycle of districts rather than being related to the tax wealth of a district. The trial court, although finding that the levy showed no patterns across tax base deciles, struck down this provision because it found that the effect of high debt service levies in low property tax base districts adversely affects that district's ability to generate referendum levy dollars. At the time the trial court struck down this provision in 1991, the debt service was wholly unequalized. In 1992, however, this program was funded and partially equalized. Act of April 29, 1992, ch. 499, art. 5, § 17, 1992 Minn.Laws 408, 449. The state also provides comprehensive aid for capital projects, with the state's capital expenditure revenue rising from $0.5 million in fiscal year 1988 to $108 million in 1991, and this revenue provides a fully equalized $195 ppu to districts for their general capital needs. Thus, given the small portion that supplemental revenue accounts for in the overall state education budget (less than 0.5%), and the subsequent actions which have been taken to fund and partially equalize the debt service levy, we hold that these areas have been adequately addressed by the legislature and that any resulting disparities do not rise to the level of a constitutional violation. However, this still leaves unresolved the issue of whether, and to what extent, the referendum levy withstands constitutional scrutiny. Thus, the present funding systems in dispute must be analyzed under both the Education Clause and the equal protection clause of the Minnesota Constitution in order to determine whether the present system must be declared unconstitutional.