Criticism and questions continue over the way the Ohio House’s new proposed budget funds K-12 traditional public schools.
Republicans said their version of the budget adds $226 million to traditional public schools over current funding levels. But the budget includes a proposal they're billing as property tax relief for homeowners - a 25% cap on the amount of money schools can carry over in their operating budgets.
“That’s the recommendation from public school treasurers and business officials as to the appropriate carryover amount,” said House Speaker Matt Huffman (R-Lima).
Republicans say nearly all of Ohio's traditional public school districts have amounts over that percentage, adding up to $10.5 billion in their operating accounts as an excess. The provision would send several billion dollars to property tax payers from school districts that have collected that money.
"Those were essentially be refunded to the property taxpayers as immediate property tax relief. That would be done pro-rata. So folks who pay a higher share of property tax get a higher share of the benefit," said House Finance Committee Chair Brian Stewart (R-Ashville). "This is immediate relief that does not cost the state money."
But Minority Leader Allison Russo (D-Upper Arlington) said there are multiple reasons why schools keep 25% or more in their carryover from year to year, including having enough cash on hand for six months or enough set aside to keep bond ratings high. Russo said the proposal undermines public school funding.
"This notion that they somehow are addressing property taxes by reducing the reserve amount on hand is baloney. That is absolutely not true," Russo said. "In fact, they are creating a scenario where local school districts now have to go back to voters more often for school levies just to pay the bills."
A school financial leader weighs in
Jared Bunting, the treasurer and chief financial officer for the Athens City School District, said his district would be hard hit by the property tax rebate plan in the budget. He said the figures in the House budget were taken at the end of the last fiscal year, a time when there would be more money in the account because property taxes would have just come in, but payments had not yet gone out.
“So it seems a little bit inflated from our aspect is to be looking at that number, because in February or March typically is the point in time when we are typically scratching the bottom of the barrel when it comes to our cash liquidity,” Bunting said.
Bunting said his district has more carryover in its budget because it's building new facilities.
“So, in our instance, when you look at the simulations, we're running at 54.9% cash carryover but when after I've done my transfer from the, for the construction project, that number's dropping down to 33%,” Bunting said.
Bunting said the bond ratings agency Moody wants to see 50%, which allows districts to maintain a higher rating and borrow at lower costs. He said having more cash on hand also allows districts to enter into longer term contracts for things like software, which can save his district tens of thousands of dollars.
Stewart said 528 of the state’s 611 districts - or 86% - had an overage that exceeded 25% at the end of the last fiscal year. So he said reserves are high enough for them to keep their bond ratings and give property taxpayers a break.
“We believe that those monies are better in the taxpayer’s pocket than in the school district's bank account just accumulating, just sitting over time," Stewart said.
But Bunting said if this provision prevails and refunds go to taxpayers on years when there is an overage, it will lead to what he calls a "rubber band effect."
"There's going to be a lot of schools that have their tax rates cut. We don't collect the revenue and then next year when it's below that, it's going to go back to where it was. So the taxpayers are going to go from paying very little, to thinking they just saw a $1,000 increase in their tax bill or more,” Bunting said. “It's going to end up causing more confusion in the long run by doing that because of the yo-yoing effect of what the taxes are going to end up doing year over year.”
There are also questions about the overall funding in the budget. While leaders tout the $226 million increase and that no district will get a decrease in funding, the House plan doesn’t fully fund the last two years of the six-year phase-in of Ohio’s Fair School Funding Plan, the bipartisan proposal state lawmakers passed in 2021. Using current data and salary inputs would boost the funding by $1.8 billion. House leaders said the Fair School Funding Plan is the "bedrock" for the figures in this budget, and they call this funding a "bridge".
"We are putting ourselves on a path towards a more sustainable way of funding public schools. I expect we'll have a similar conversation in two years," Stewart said. "Folks have asked for the additional $1.8 billion. That's not sustainable. We don't have it. Ohioans are not going to support us raising taxes to cover that. And so giving more money to every public school district is a good place to be."
