LITTLE ROCK — Two school districts where property tax collections exceeded state-mandated school funding levels should not be able to use the excess funds, an attorney for the state argued Thursday before the Arkansas Supreme Court.

An attorney for the Fountain Lake and Eureka Springs school districts argued that under Arkansas law, the districts where the taxes were collected should control the money.

The high court heard oral arguments but did not immediately issue a ruling in a dispute between the districts and the state Department of Education over money collected for the 2010-11 fiscal year through a 25-mill property tax.

The tax is required by the Arkansas Constitution to be imposed in every school district in the state to fund operations and maintenance of public schools. Districts can vote to levy additional mills, but 25 mills is the mandated minimum.

The level of per-student funding established by the Legislature for the 2010-11 year was $6,023. Most districts did not reach that level solely with revenue from the 25-mill property tax, but Fountain Lake and Eureka Springs did.

The Department of Education declared that the excess funds — $1.39 million for Fountain Lake and $824,914 for Eureka Springs — could not be retained by the districts and had to be surrendered to the department. The districts sued, and Pulaski County Circuit Judge Tim Fox ruled in their favor, saying the Department of Education could not force the districts to give up the money, nor could it obtain the money by withholding an equal amount of state or federal funds.

Assistant Attorney General Colin Jorgensen, representing the Department of Education, argued Thursday before the Supreme Court that under the court’s ruling in the Lake View school funding lawsuit, public school funding must be distributed in an equitable manner.

Affluent districts should not receive a greater share of the 25-mill tax than poor districts, he said.

"Such a distribution only serves to provide more opportunity for the already advantaged and diminish the opportunities for the disadvantaged," Jorgensen argued.

He told the justices that if the court rules the money should go to the department, the department would use it for school funding, but in an equitable manner.

Justice Robert Brown pointed out that a district can vote to impose an additional millage and that the resulting revenue can stay in the district, so variations in funding are allowed under the law.

Jorgensen said that was true, but the department’s position was that because the 25-mill tax is imposed statewide, it must be distributed equitably.

"The state will never touch anything they pass on their own," he said.

Eugene Sayre, attorney for the districts, argued that state law requires that property tax revenue collected in a district go to that district. There is no state law allowing the Department of Education to seek to recoup money when a district’s property tax revenue exceeds the mandated per-student funding level, he said.

Sayre said the phenomenon is new, but when it arose the department responded in a way that did not follow state law.

"They did not go to the Legislature and seek a change in the statute," he said.

Sayre said that if the court ruled that the district could keep the money, the district would use it for operations and maintenance.

"It’s not squandered," he said.

The court did not indicate when it would rule.