In Breathitt County, one of Kentucky's poorest places, property owners are suing the school superintendent to force the repeal and refund of a tax increase that's expected to raise $76,938 this fiscal year for the cash-strapped county schools.
The lawsuit alleges that state officials illegally approved a property tax increase last fall that would raise school revenue by 4 percent, the maximum allowed by law without risking a voter recall. Although the Breathitt County school board voted unanimously against it — the board barely had touched the tax rate in five years — the Kentucky Department of Education in 2012 assumed management control of the troubled schools. State officials went ahead with the tax increase despite local opposition.
The state's action was "an unconstitutional disenfranchisement" of voters who elected the county school board, according to the lawsuit filed Sept. 26 in Breathitt Circuit Court by Darrell Herald, the commonwealth's attorney.
"Some folks felt like this was taxation without representation, which was a rallying cry for a revolution some 200 years ago, if you remember your American history," Herald said this week. "This was a tax imposed on us by people who do not live here, who do not own property here, who are not part of this community."
The suit originally identified 215 plaintiffs, but it has been amended to drop all but "30-odd plaintiffs," Herald said.
"There was a miscommunication," he said. "Some of these folks thought they were signing a petition against the tax as compared to agreeing to be a party in a lawsuit."
The state Department of Education doesn't comment on pending litigation, said Hiren Desai, associate commissioner of education.
However, in an interview this summer, state-appointed Superintendent Larry Hammond said the Breathitt County district was headed toward insolvency when the state took control. Breathitt County maintained one of the lowest property tax rates in Eastern Kentucky. Only 11 percent of the schools' $24 million in annual revenue was generated locally. The rest came from the state and federal governments.
Even after about 60 jobs were cut and an elementary school and day care were closed, more needed to be done, Hammond said. For one thing, the district faces a $28 million repair backlog with almost no money to pay for it, he said.
"Historically, undervalued properties here combined with low tax rates have left us reliant on outside funds, and obviously, in recent years, those outside funds have not kept up very well," Hammond said in an interview in Jackson, the Breathitt County seat.
In general, all school districts should claim the maximum allowable 4 percent revenue increase to match their rising expenses, said Stu Silberman, executive director of the Prichard Committee for Academic Excellence.
"You can't go that many years without taking the 4 percent, or else it will bankrupt you. Think about all of your operating costs and how they go up every year," Silberman said. "And under the law, unfortunately, if you don't take the 4 percent this year, it's lost. You can't go back later and claim it."
Last year, the Breathitt County school board approved a budget for the district that included additional money from the tax increase. But at a meeting attended by at least 20 vocal anti-tax protesters, board members balked at approving the increase.
The tax battle is the latest chapter in a struggle for control of Breathitt County's schools. The state took over after a previous superintendent, Arch Turner, went to prison in a vote-buying scandal, and state audits uncovered serious academic and financial problems. County school board members appealed unsuccessfully in August for an end to state management.
"We would love to be able to hand the reins back to you, but we're not going to do it until we believe that you're ready," Roger Marcum, chairman of the Kentucky Board of Education, told county school board members at the end of that hearing.
Breathitt County's median home value is $50,700. Because of relatively low property assessments and tax rates, homeowners typically owe $200 to $900 a year in taxes shared by the schools, county, state, library and other public agencies.
Nearly 30 percent of residential property value is not taxed because of two frequently used $36,000-a-year exemptions, one for the disabled, the other for the elderly.
"We realize we're not talking about that much money," said one of the tax suit plaintiffs, Everett Dunaway, a local pharmacist. "But it's really the principle. We're being taxed without representation. I know it sounds corny, but somebody has to stand up for the rule of law here."
The mistakes of past school officials should not be used to disenfranchise local voters, Dunaway said.
"If my state representative was removed from office for malfeasance, then I'd be allowed to elect a new one," he said. "But somehow, because of what's happened here before, we've lost our right to have an elected school board that represents us."