One such target is the “20-mill floor.” For most property taxes, the tax rate — or millage — is reduced as property values go up so it collects the same amount of money. But state law says school district millage for operating expenses can’t fall below 20 mills. So property taxes go up as values increase.
The Senate Ways and Means Committee took proponent testimony recently for Senate Bill 66, a measure that would modify the 20-mill floor so it wouldn’t kick in if district revenues were offset by other types of levies.
Geauga County Auditor Charles E. Walder in written testimony last week said the 20-mill floor was created in 1976 with House Bill 920.
“Over time, some school districts became familiar with the nuances of the 20-mill floor calculation and designed their funding and budgets to maximize HB 920’s loopholes,” Walder wrote.
Walder said of Ohio’s 611 school districts, about 65% are at the 20-mill floor. Of those, 78% have other revenue sources that aren’t included in the calculation.
Adam Zink, treasurer and chief financial officer for the Lakota Schools, the 8th largest district in the state, told this media outlet this issue is extremely complex but for districts at the floor — Lakota is not one of them — the proposed changes could be consequential.
“This would cause a bit of a flat line in overall revenue collections,” Zink said. “If that did not pace with inflation, then reserves would need to be utilized to offset the deficit, programs reduced, or asking a local tax base for additional funding through a ballot issue to align with the communities' expectation for the services provided.”
Committee Chair Bill Blessing, a Republican from Colerain Twp. told this media outlet he isn’t too fond of this bill and voiced his misgivings at the hearing.
“The issue that I have I guess is that there’s a lot of talk about the Fair School Funding formula being unsustainable, from what I hear in the House,” Blessing said. “We’re constitutionally required to fund our public schools, I’m worried we’re burning the candle at both ends. Now, that having been said if you’re doing something like this and taking on more of the burden at the state level it’s a different conversation.”
Supporters of the proposal include the Ohio Chamber of Commerce and Ohio REALTORS.
“These school districts benefit from unrestrained property tax growth as home values rise, tightening the financial strain on homeowners and making it increasingly difficult for them to stay in their homes,” wrote Scott Williams, chief executive officer of Ohio REALTORS, in submitted testimony.
Income tax debate
One source of revenue some school districts enjoy that isn’t part of the 20-mill floor calculation is income tax.
S.B. 66 co-sponsors Sens. George Lang, R-West Chester Twp. and Sandra O’Brien, R-Ashtabula, tweaked the bill a bit from a version proposed last year, adding income tax into the calculation. O’Brien, the former Ashtabula County auditor said the cost savings to taxpayers will likely be “significantly” higher with this version.
A report by the Legislative Service Commission on the previous bill showed schools would lose $336 million in revenue and taxpayers would save roughly $296 million. The state would save $40 million in tax rollbacks.
Information from Ohio Department of Taxation shows here are four school districts in Butler County that charge income tax (Madison, New Miami, Ross and Talawanda), five in Greene County (Cedar Cliff, Fairborn, Greeneview, Xenia and Yellow Springs) and two in Montgomery County (New Lebanon and Valley View).
But some question whether including income taxes in the calculation would run afoul of Ohio’s constitution. This was raised during S.B. 66’s first hearing by Sen. William DeMora a Democrat from Columbus, pointing to an analysis from the LSC.
The LSC does in-depth analyses on all bills up for consideration. On S.B. 66 they noted the constitution spells out the floor can be “established with respect to the taxes charged for current expenses against the land and improvements. This suggests that the 20-mill floor calculation may only take into account property taxes, and income taxes are not levied against land and improvements.”
O’Brien said there aren’t any court cases that say they can’t include income taxes and “oftentimes people will give their opinion, even though I have a lot of respect for the Legislative Service Commission doesn’t necessarily mean that’s true.”
The County Auditors Association of Ohio has also proposed adjustments to the floor, namely capping the revenue growth on certain school levies to an inflationary index. Warren County Auditor Matt Nolan, who was just named CAAO president, told this news outlet the constitutional question always surfaces when school funding is the topic.
“That is a term that gets thrown a lot in all my discussions about school funding. Anytime a creative idea comes up, ‘Oh that’s unconstitutional' and as a lawyer I struggle with that,” he said. “Because one, the constitution seems to change pretty regularly anymore and two, most of these things have never been brought up. So for people to quickly say you can’t do that it’s unconstitutional, okay maybe but I’m kind of skeptical.”
Other bills
There are two other bills that target school funding.
The House is vetting a nearly identical 20-mill floor modification bill by Rep. David Thomas, R-Jefferson, a measure he is calling the Truth in Guaranteed Tax Rate Bill. His version would only add emergency levies and income taxes to 20-mill floor calculations but would also “prevent schools from moving portions of their inside millage to cause unvoted increases.”
The bill has been referred to the Ways and Means Committee and a financial analysis is pending. He is estimating that if passed, the measure would impact “roughly 25% of school districts in largely rural, lower socio-economic communities which have passed emergency levies.”
Sen. Andrew Brenner, R-Delaware, filed Senate Bill 93 that would “establish a new school financing system that provides a statewide per-pupil funding payment to public and chartered nonpublic schools based on a single statewide property tax and increased state sales tax.” It is sitting in the Senate Finance Committee.
The House Ways and Means Committee also heard tax relief options recently, namely two recycled bills — although the bill sponsors say they’ve made some changes — namely eliminating replacement property tax levies and enhanced homestead exemption benefits for disabled veterans.
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