What financial limitation is placed on school districts by law regarding debt?

The correct answer is grounded in the legal framework that governs school district financing. Specifically, the law imposes a limitation on the amount of debt that school districts can incur, which is tied to the value of taxable property within their jurisdiction. This means that any debt issued by a school district is capped at a certain percentage of the taxable property. This regulation helps ensure that schools do not overextend themselves financially and maintain fiscal responsibility, aligning their borrowing capacity with the tangible taxable assets available in their district.

This limitation is critical for the sustainability of both the school district and the local government's financial health, as it prevents schools from incurring unmanageable debt levels. It also ensures that taxpayers are shielded from potential financial strains that could arise from excessive borrowing, thereby maintaining public trust and accountability.

In contrast, the other options do not accurately represent the specific legal limitations that are placed on school district debt. Operating at a deficit and balancing the budget yearly are broader financial management principles but do not specifically address the legal cap on debt relative to taxable property. Additionally, while state funding is a significant issue for school districts, the law does not state that they cannot receive state funding; rather, it depends on various conditions fulfilling state requirements.