Despite many property owners throughout Northeast Ohio seeing increases in their taxes after property reassessments recently, school districts are continuing to have to ask for voter support for new levies.
Since schools receive a significant amount of money from property taxes and taxes have increased, why are school districts, from Akron to Medina to Ravenna, seeking more money?
Some districts argue it’s because of House Bill 920. It’s an impactful but little-understood state law passed in 1976 that essentially locks many school districts’ tax levies in at the same rate as when they were passed.
For Akron Public Schools, that means its last operating levy is still pulling in money based on property values from 2012, when voters approved the levy. Chief Financial Officer Stephen Thompson has a problem with that.
“I don't care how hard we try, our expenses are going to go up,” he said during an April 11 meeting. “Just like in your home. Our expenses go up too. We pay the same things you pay only in much greater volume. Electricity, fuel, repairs, salaries, all of those things.”
The district is already set to make cuts as pandemic relief – a major infusion of cash from the federal government – is set to expire this year, and the administration hopes to put a levy on the ballot in November. Medina City School District is also feeling the pinch, set to cut roughly 25 staff positions going into the next school year after several recent levy failures. They similarly haven’t had a new operating levy approved by voters in 11 years, Superintendent Aaron Sable said.
“The issue that we've really faced is our community just saw major increases in their property taxes,” Sable explained. “So the timing has not been good. We're coming off a bad economy following the pandemic. There's not many taxes that people can control. And school taxes, people can (at the ballot).”
So how does House Bill 920 work, exactly?
It’s complicated. Ideastream Public Media reached out to Howard Fleeter, a Columbus-based economist who has researched issues relating to school funding and tax levies in Ohio for more than three decades, to help explain. He said the general idea is to protect property owners from “unvoted” property tax increases.
"And on the other side of the coin, for schools and libraries and other local governments that rely on voted levies, it gives them essentially zero growth from reappraisal," he said.
Where the money comes from
What follows is based on information provided by Fleeter as well as fact sheets from the Ohio School Boards Association and the Greene County Auditor's Office.
First, an explainer is needed on how Ohio’s school funding model works. The majority of school districts’ funding comes from a mix of state aid and local property taxes, with a smaller proportion coming from federal sources and other grants.
Local property taxes are often expressed in the form of “mills.” A mill translates to $1 per $1,000 of assessed property value. However, you only pay taxes on the “assessed” value of a home, which equals 35% of a property’s appraised value. So, a 1-mill levy for the owner of a home valued at $100,000 would be paying $35 per year.
So, how much of your property tax goes to your local school? It’s determined by multiple factors. The main factors are:
- Inside millage. This is revenue coming from property taxes split between schools and local taxing authorities like the county and the township you reside in. It’s limited to 10 mills, and it does not require approval by voters. These taxes are NOT subject to House Bill 920, and can rise as property values rise. For example, Akron City School District has 4.2 inside mills, which resulted in a $3 million increase in revenue last year when property values increased. Akron's total budget is about $365 million this year. Medina City School District has 4.3 inside mills, which brought in an additional $1.375 million last year after property reassessments. Medina's total budget is about $95 million this year.
- Outside millage. These are new property taxes approved by voters; often, you’ll see these on the ballot as operating levies, bond issues or permanent improvement levies. These taxes ARE subject to House Bill 920, meaning once voters approve them, they typically don’t increase when property values increase. Rates are simply adjusted so the school district receives the same amount of funds each year. Even if taxpayers approve a renewal of a levy from a decade ago, for example, that levy is still locked in at the rate it initially was passed at.
Outside of one exception known as the 20-mill floor, the only way schools can see an increase in the money they get from levies voters have already passed is through taxes coming in from new houses or buildings constructed. Even then, that only applies to certain kinds of levies.
Fleeter noted that to his knowledge, basically all other states allow for a small percentage increase in taxes for most school levies when property values increase. He said House Bill 920 is one of the reasons why school districts in Ohio appear to be having a tougher time getting levies passed in recent election cycles. He chalks it up to “levy fatigue.”
“We vote more than any other state on school levies,” Fleeter said. “And I think this idea of levy fatigue is that voters are just tired of seeing things on the ballot.”
Time for a fix?
There’s one final factor that complicates things further: the 20-mill floor. House Bill 920 provides for school districts that only levy 20 mills of taxes to receive increased tax revenue when property values rise; essentially, property value increases drop schools' tax rates below the “floor,” so taxes are increased to bring them back to that 20-mill point.
The long and short of it is that property owners living in school districts that have kept their taxes at that floor do see greater tax increases each time property values increase; the trade-off is those typically put fewer levies on the ballot. The biggest school districts in northeast Ohio like Cleveland and Akron are well above the floor. Several examples of schools at the floor are West Geauga and Berkshire in Geauga County.
However, Geauga County Auditor Chuck Walder noted that certain kinds of levies – emergency levies and bond issues - are not counted toward the 20-mill floor. So essentially, schools at the floor can still receive those large inflationary increases on property taxes, while also having the benefit of additional levies.
“Many of the smarter school districts have figured out how to stay at the floor while getting increased funding through other levies that are not counted,” Walder explained.
Walder said he believes it’s time for Ohio to revisit House Bill 920 to address schools which may be gaming the system in that regard.
“You know, none of us said at the ballot this is what we're willing to do," Walder said, referring to the property tax increases for districts at the floor. "And I think that inherently is not democratic.”
He said the way Ohio funds schools is “broken,” but, he said he doesn’t think the solution is to “dump this on taxpayers without a vote.”
Sable, at Medina City School District, said he agrees that Ohio’s school funding model needs to be updated. State funding for schools is typically far greater in districts with more low-income residents and lower property values, in cities like Cleveland and Akron. In suburban Medina, the state only covers 17% of the cost of education at the school district; the other 83% falls on Medina taxpayers, according to data provided by the district.
Medina voters want to support public schools but feel overtaxed, Sable explained. They’re also frustrated with the state for its funding priorities
“A lot of money in Ohio is currently being redirected towards charter and private schools,” he said. “So there's a lot of money that could be, and should be, going to public school systems to support our public kids that is being shifted over to the private sector. And I think that's frustrating to our community, that those public dollars are being used for private reasons."
The state has increased funding for public schools in recent years through the bipartisan Fair School Funding Plan - a phased-in approach which provides more money based on student need and estimates of districts' actual costs of education - but Sable said it's only had minimal positive impact in Medina.
