Apportionment of County Revenue

GAO was asked what portion of Forest Service revenues paid by a State to a county must be considered to be received by the county and, therefore, deducted from its payment in lieu of taxes, where the county has disbursed approximately one-half the amount to school districts under a State law which does not specify how much must be distributed to school districts. The State law requires only that the county give the school districts an amount that will provide a real benefit to the schools. GAO concluded that, where a county is responsible for providing and supporting public schools and funds them with its own tax revenues, the entire amount of Forest Service revenues expended for the schools, regardless of whether such expenditure exceeds the minimum required by State law, must be treated as received for purposes of computing the county's payment in lieu of taxes. On the other hand, where a county which is required by State law to pass a certain portion of its Forest Service receipts on to politically and financially independent school districts and chooses to pass on a sum which exceeds the State-established minimum, the amount by which the county's expenditure exceeds the minimum must be viewed as received for purposes of computing the payment in lieu of taxes. Arizona law provides that any forest reserve funds which are received by the State from the United States are to be apportioned among the counties according to the forest reserve acreage contained in each county and that these funds are to be disbursed by the county for schools and roads. A county's share of forest reserve funds were treated as the amount received for a fiscal year. However, a portion of this amount was passed on to school districts. Therefore, the county claimed that it was entitled to additional funds. The county's request was denied, and this decision was appealed to the Department of the Interior. GAO found that the Forest Service payment belonged to the county, as if it were part of its own tax revenues. It made no difference whether the county passed only a State-required minimum or more to the school district. All Forest Service revenues should be deducted from the county's in lieu of taxes entitlement since the county has the responsibility both for the maintenance of county roads and the financing of the schools within its boundaries. In this case, the school boards did not have the authority to collect taxes necessary to generate school revenues on their own initiative.