‘It’s money laundering’: Utah state school board wants Cox to veto bill that diverts property taxes from local schools

The Utah state school board passed a resolution Thursday urging Gov. Spencer Cox to veto a bill that would divert Utahns’ property taxes away from local public schools and instead drop them into the state’s general fund.

“It feels, quite frankly, really fishy,” Utah State Board of Education member Sarah Reale said Thursday. “It’s money laundering.”

Under SB37, the state would still be responsible for allocating the minimum amount of money that each local school district requires, based on the “Weighted Pupil Unit” (WPU) that the state calculates each year — currently set at $4,494 per student for fiscal 2025.

But the bill allows lawmakers to solely use income tax revenue to do that, freeing up local property tax dollars for other state purposes.

School districts and education organizations across Utah have opposed the measure. But the bill’s sponsor, Sen. Lincoln Fillmore, R-South Jordan, has argued it “isn’t a clever way” for the state to “steal money from public education.”

“The bill requires that whatever money is collected, the same amount of money in the exact same time frame, and with the exact same funding flexibility, is distributed to school districts as soon as it’s collected,” Fillmore said.

What would change under SB37?

Utah’s “Minimum School Program” (MSP) is the primary way the state funds K-12 public education.

The program ensures that all schools receive at least a baseline level of funding — tallied using the WPU — regardless of a district’s local wealth. It does that by combining state and local tax revenue; if local revenue doesn’t meet the baseline funding amount, state funding makes up the difference.

(Schools with similar enrollment figures may ultimately receive different funding amounts based on factors like grade level adjustments and special education needs.)

Right now, when local property taxes are collected each November, each county then deposits that revenue into a “Public Treasurer’s Investment Fund,” which school districts can access. That fund also allows districts to earn interest on local property tax revenue, currently at a rate of about 4.5%.

If SB37 becomes law, local property tax revenue would instead go directly into the state’s general fund, bypassing any accounts that school districts can access.

The Utah State Board of Education would then have 35 days after receiving the money to transfer an equivalent amount — taken from the state income tax fund, not the general fund — into each district’s investment account.

“It’s up to almost over $800 million that could be potentially [put] into the general fund,” Reale said Thursday.

SB37 won’t change “Truth in Taxation” procedures — a public hearing process that allows residents to learn about and comment on proposals to increase property taxes.

But the revenue collected may not go to education. That’s why those opposed to the bill have argued it could sow division between local school boards and their communities.

“It will be a little bit different to have a basic levy school tax that can be used for purposes that are not education funding,” said Dale Frost, the Minimum School Program’s administrator, to state school board members Thursday.

USBE’s resolution passed 9-3 Thursday. A spokesperson for Cox did not immediately respond to The Salt Lake Tribune for comment.