In each Ohio K-12 school district the public schools must place a ballot issue before the voters every several years to support public school education. Ohio citizens need to understand why these levy issues are repeatedly on the ballot. They also need to understand that the districts are not being spendthrifts nor are they necessarily wasting money. The Ohio state laws require these repeated ballot issues to fund public education.
Ohio public schools are primarily funded in three ways:
1) Federal government monies allocated to the state systems are usually on a grant or mandated system. Willoughby-Eastlake City Schools (WECS) receive 6% of their budget from the federal government. This has increased recently with the COVID relief funds. Prior to that WECS was only receiving 3% of their budget from the federal government.
2) The State of Ohio contributes money based on the State Foundation Formula which provides Basic Aid to districts, taking into account the ability each district has to raise local taxes plus the per student minimum amount the state determines is necessary to provide an adequate education. Lower wealth districts should receive more assistance than those with higher property wealth. WECS gets 17% of its budget from the State of Ohio. In return, the state requires its public schools to meet certain mandates. Many of these mandates are unfunded.
The specific state formula is very complicated and often changes, especially in recent years. July 2021, the State of Ohio passed HB 110 in an attempt to simplify the funding formula. The Ohio Supreme Court found the funding system of Ohio’s public schools unconstitutional in 1997 and the legislature has not given it the “complete systematic overhaul” required by the Court since that finding. In
3) Local Support is provided mostly by school districts using property taxes to support their schools although a few have also included local income taxes in their funding mix. The WECS district uses only property taxes, not income taxes. The real property tax is one levied on land and buildings located within the school district (not the city limits). Owners of the land—businesses, public utilities, and private individuals—are taxed on the value of the real property. The county auditor appraises real property every six years. Every third year an “update” is performed on the value. The appraisal is the auditor’s value of the property, but the taxes are based on the assessed value. The assessed value in Ohio is 35% of the appraised value.
Mills
Real property rates are computed in mills. Each mill equals $1.00 for every $1,000 of value that the property is assessed for each year. So a house worth $100,000 would bring in $35 of tax revenue for each mill.
Inside Mills and Outside Mills
Inside mills: The Ohio Constitution allows 10 mills of unvoted taxes to be levied by each political subdivision and the resulting taxes are divided among the cities, counties, other local governments and public schools in that subdivision. The WECS receives 4.8 of these 10 inside mills.
Outside Mills: All other mills are voted by the public and these are called “outside mills”.
The 12.5% rollback is now called the Non business Credit. A 10% discount was given to all property owners and an additional 2.5% discount was given to residential property tax payers under the old law. These discounts were reimbursed to the school districts by the state so that the school districts were not losing dollars. Under the new law enacted in 2013 these rollbacks no longer apply to new or renewal levies that fail to be renewed prior to expiration.
The Homestead Exemption is now called the Owner Occupancy Credit. This discount ($8.75 per mill of tax exemption) was given to seniors over 65 years of age regardless of income. Since the 2013 law, the exemption now will only be granted to new applicants with an income figure of $30,000 or less or those with a permanent disability.
HB 920
No matter where you live in Ohio, regardless of whether or not you have children or whether or not they attend public schools, you will be asked to vote periodically on a local school levy. You might as well understand why that is.
House Bill 920, the Ohio law that outlines how public schools are funded, is complex and confusing. But it has a huge impact on all public schools.
H.B. 920 was passed in 1976, during a period of unprecedented inflation. Home values were soaring every year, sometimes by double-digit percentages, and property taxes were growing at the same alarming rate. The State Legislature attempted to lessen the burden on homeowners by freezing the dollar amount paid to school districts and libraries at the 1976 level. Not at the rate or percentage, but at the actual dollar amount.
To better understand the ramifications, let’s break this down with numbers.
Imagine you own a $100,000 house and you are paying 10 mills. The millage would be $35 per $100,000 in valuation multiplied by 10 mills for a total of $350/year. After three years, the value of your house is reevaluated and determined to be $120,000. The amount received by the school must remain the same as prescribed by HB 920. Due to this, the millage amount will be readjusted by the county auditor from 10 mills to 8.33 mills. This is determined by taking $120,000 times .00035 which equals $42/mill and dividing $350 by that number.
Now imagine that this goes on for 10 or 20 years. After a while, your house has increased in value up to $250,000 and your local schools are still generating the same $350/year, even though it is now only four mills, which is 40% of the original passage.
Cities however are primarily funded by income taxes. As you make more, so do they. This allows them to stay off of the ballot for sometimes decades at a time without asking for a tax increase.
Meanwhile, everything from teacher salaries to textbooks to gas for school buses has gone up in cost over that twenty-year period, but schools are not receiving a single dollar more in tax revenue. And no matter how conservative or efficient districts are with taxpayer money, they simply cannot keep up with those day-to-day cost increases without asking for additional revenue from a levy.
Other forms of income
A few other forms of income bring in small amounts of funds.
The Lottery, often touted as providing funds for education, only brings in about $50 per student to a district per year. The rest of lottery profits are diverted to replace monies originally slated for education in the general fund.
Some grants may bring in dollars for specific purposes.
Infrequently there are bequests or donations to the district.
Capital Funds
Bond issues are sometimes passed to provide monies for capital improvements. Capital improvement monies are separate from operating funds and the two forms of financing may not be co-mingled. The WECS district passed a bond issue that allowed the district to build the new North and South High Schools and Longfellow Elementary school.
What factors differentiate school districts?
There are many differences among the 612 districts in Ohio and each may impact the funding of a district differently. A few are described below.
1) If a district has a lot of commerce or business property, the cost to residents may be reduced as these commercial ventures help pay the costs of education. The WECS taxes received is made up of 69.8% from residential, and 30.2% from commercial property.
2) Various factors based on the school population may result in additional funding to the district. Small amounts of money are available to a district based on disadvantaged pupils, number of free lunches, etc. The state does provide some extra money dependent on the numbers in special populations recognizing in a small way the additional costs of educating these students.
3) Mobility of families has been shown to result in a disruption of education from one district to another, creating learning problems for the children. The more transient the population, the more difficult it is for students to reap the benefits of a coordinated curriculum. Districts spend additional dollars to help students get in step with the curriculum.
4) The state requires districts to bus all pupils, whether attending the public schools or private schools within the same parameters. State law requires all students in grades K-8 who live two miles or more from their schools to be bused. If a district, such as WECS busses its own students living outside 1.5 miles, then it must bus all students living outside 1.5 miles to their respective schools.
5) The district’s resident’s desires for the education of their children may also impact the curriculum and therefore the costs. Services expected by the communities vary with the population and may go beyond the minimum required by the state.
6) The market place the district is in also impacts costs. For instance, the cost of doing business is lower in some southern counties than it is in Northeast Ohio. Attracting and keeping good personnel means necessarily keeping up with neighboring communities’ pay scales. (All public school teachers must be certified in their teaching area.) The cost of doing business is also impacted by the differing costs of utilities, transportation, and other services.
7) Tax abatements given in some districts are more numerous than others. If the cities provide property tax abatements for businesses and industries, then the school district is the party forfeiting most of the money for the abated period of time.
8) The rate of a district’s ability to collect the real property taxes owed is often affected by the larger economy, but to some extent its population. Most districts saw a decline in the collection rate over the last several years. The county auditor keeps track of collection rates and predicts what a district’s rate will be for the coming fiscal year.