Tax reform debated

Definitions • Property taxes owed equals assessed value times tax rate in mills • Assessed value equals county auditor's appraised value times 35% • One mill is equal to $1 per $1,000 of assessed value • Inside millage is authorized in the Ohio Constitution for up to 10 mills that all Ohioans pay. This millage is divided among a school district, county, and political subdivision (city, township, village). Inside millage is inflationary, meaning that an increase in value will equate to a proportional increase in what one pays. • Outside millage is authorized by a vote of the people. Citizens of a taxing jurisdiction must approve a millage rate, which is voted on. However, HB 920 (passed by the Ohio General Assembly in 1976) makes outside millage non-inflationary. This means that as values in a taxing jurisdiction increase, the effective rate of outside millage levies decreases by a proportional amount. This keeps the dollar amount one owes the same. • 20-mill floor: School districts get the lion's share of property taxes — from about 50% to 70% — of the total amount collected. They are guaranteed a minimum 20-mill floor, plus a share of a guaranteed 10-mills that is shared by townships, villages, cities and county governments. Source: Erie County treasurer Caleb Stidham NORWALK — A tax reform bill could potentially become state law. House Bill 335 aims to make changes to the state's property tax system. One specific change to the system would be to eliminate inside mileage. Erie County Treasurer Caleb Stidham described this millage as inflationary and given without a vote. The bill was introduced at the beginning of the month by state Rep. David Thomas, R-Jefferson. The bill was introduced June 4 and currently sits in the House Ways and Means committee. County and school district officials within Ottawa, Huron and Erie counties each commented on the proposed bill. "This proposal would take significant money from the county, schools, cities and village," Huron County auditor Roland Tkach said. Effect on schools County officials Stidham said the bill would eliminate inside millage for entities such as school districts, counties and municipalities. "Eliminating inside millage will take away revenue from these entities, with one exception, which will have to be made up for with carryover funds, new revenue, and/or spending reductions," Stidham said. "The one exception is for school districts at the 20 mill floor." Stidham said the 20 mill floor is a guaranteed 20 mills, which goes to school districts. This is the minimum amount districts can receive. "Districts cannot be below the floor," Stidham said. "For those at or near the floor, they will lose little to no revenue because the loss of inside millage will be made up for an increase in revenue to keep those districts at the floor." The majority of Erie County school districts are at the floor, except for Sandusky and Perkins Schools. Huron, Edison, Vermilion, Firelands, Margaretta and Bellevue are all at the floor. All schools in Ottawa County are at the floor, according to county auditor Jennifer Widmer and county treasurer Tony Hatmaker. All schools in Huron County are also on the floor, according to Tkach. "Most schools hold roughly half of the inside millage," Widmer said. "This, combined with the limit on the 20 mill floor would ensure that the schools see very little increase in their levy dollars." Hatmaker believes school districts in the state are partly to blame for "getting us to the doorstep of a taxpayer revolt." He said districts' "greed, short-sightedness and stupidity" have played a large part. "Taxpayers in this state and around the country have been dumping wheelbarrows full of money into public education for decades for at best mediocre results on the whole," Hatmaker said. "I hope one (of) the long-term upshots of this situation is a complete restructuring of public education and how it is funded in this State." Tkach provided data for the amount each district in Huron County would lose: • Norwalk: $2.4 million • Willard: $1.5 million • New London: $800,000 • Monroeville: $700,000 • Western Reserve: $1 million • South Central: $600,000 Note: Figures are rounded School officials Edison Schools superintendent Corey Ream said the effect of House Bill 335, if implemented, would cost the district about $2 million annually. This money is now used to fund areas like classroom instruction, student services, extra-curricular activities and transportation. School districts in the state rely on property tax dollars by the system's design, according to Ream. The state's funding of public school districts "has been unconstitutional since 1997 and there has been little appetite from the legislature to appropriately address it," Ream said. "If HB 335 becomes law, Edison would likely need to place a levy on the ballot now, and more frequently in the future, just to maintain current services." If Edison Schools does not receive its inside millage, the district would lose financial stability and would need to pressure taxpayers for funds. "Our communities would be faced with a difficult choice: vote for new levies or lose the quality of education expected from the Edison Local School District," Ream said. Huron Schools superintendent James Tatman said officials at his district will continue watching state legislative activity and budget proposals to measure possible impacts on the district's funding. They will also follow guidance and analysis provided by professional public school organizations. House Bill 335 would be Ohio history's largest reduction in school funding, taking away $1.5 billion in revenue without replacement, according to Vermilion Schools' treasurer Justin Klingshirn. Klingshirn's district would lose $2.7 million annually and Vermilion's public library would lose $70,000 annually. He did not speak on behalf of the library, but said the school district would need to reduce $2.7 million in programs, personnel and services expenses. "School districts are only able to operate within the revenue they receive from the state and local community," Klingshirn said. Norwalk Schools treasurer, Joyce Dupont, said her district has been at the 20 mill floor for about five years but the anticipated changes in the budget bill will change this case. School funding is supposed to be a partnership with the state but, according to Dupont, the state is still underfunding public education, forcing districts to rely on property taxes to support students. "The anticipated state budget for fiscal years '26 and '27 continues that trend, with more of the funding being pushed to the local communities," Dupont said. State share for public school funding is set to drop from 38%, 35% and then 32% in the coming years, according to Dupont. She said the state has given other entities of local governments the same reduction treatment. Locals are forced to fund roads, police, fire and other necessities. Dupont said House Bill 335 will make this worse. Effect on homeowners County officials Stidham said the bill will give relief to residents. If it passes, taxpayers will see their property bills go down, meaning less money will go to entities that rely on this tax. "The vast majority of property taxpayers in Ohio will see a reduction in their property taxes," Stidham said. "The amount will depend on a variety of factors, including whether you live in a district at the floor and whether you live in a township, city or village." Homeowners drive to have House Bill 920's promises restored, but House Bill 335 does not accomplish this, according to Hatmaker. Stidham said this bill created protections from inflation for taxpayers that have been undermined by provisions like the 20 mill floor. "Homeowners deserve real lasting property tax relief," Hatmaker said. "House Bill 335 provides gimmicks and shifts the burden of the relief it does provide to other public entities that will inevitably try to make up those lost funds in other fashion. Again, the legislature can do a lot better than this and taxpayers deserve a lot better." School officials Property tax is not only paid by homeowners, but also by businesses and industries and public utilities. "Shifting from a property tax to an income or sales tax as suggested by Rep. Thomas moves more of the burden to residents and away from commercial entities," Dupont said. "A broad based, low rate paid by everyone is the fairest to all." Officials' opinions County officials Stidham cited House Bill 920 to support his opinion on the proposal. He said once the floor is hit, protections go away. "This causes taxpayers to be subject to unvoted tax increases as the value of their property increases," Stidham said. "In times like now, that can be very painful for taxpayers and fruitful for school districts." Widmer said the bill has its pros and cons. On one hand, it limits the 20 mill floor's growth and allows additional budget commission permission, but the 10 inside mills is collateral from which all government bonds are based. "If it goes away, political subdivisions are immediately in default," Widmer said. "Because the inside millage does see a measure of inflation, many political subdivisions use it for things like police, police pensions and road and bridge funds. These are costs that also see inflation and so matching them with the 10 inside mills provides a measure of stability." Widmer said she believes the pros of the bill will be short-lived because political subdivisions will have to go back to the ballot and as for increased levies and the bill allows counties to issue an increased sales tax of 1%. Hatmaker described the bill as "better than nothing," but said legislation can do better, which taxpayers deserve. School officials "We recognize our families are navigating rising costs, and we take seriously our responsibility to manage public funds wisely," Ream said. "The Edison Local School District operates extremely efficiently, prides itself on being fiscally responsible and delivers strong results." He continued: "We're not opposed to tax reform, but it should be the result of a thorough and detailed discussion. Unfortunately, House Bill 335 takes a 'Fire, Ready, Aim!' approach to the problem and fails to appropriately address the potentially dire consequences for schools, counties and municipalities." Ream said the community will receive an update after June 30 once the state budget is finalized. "Regardless of the outcome, our mission remains the same: to provide a high-quality education for every student while operating within our means and serving as responsible stewards of public resources," he said. Norwalk Schools spends less than the state's average, according to Dupont. She said the district is very careful with its finances. "We returned 2.65 mills to the taxpayers with a bond refunding. The previous year, all taxpayers in the school district saw a reduction in their tax amount due to millage being reduced," Dupont said. "Norwalk does not have a large cash carryover and we are looking to become even more efficient when we are at one campus." Dupont said her district welcomes tax relief to local homeowners and has suggested that legislators increase and expand the homestead exemption, which provides tax relief for seniors and disabled individuals. Bellevue School's superintendent, Troy Roth, said his district is reviewing information about House Bill 335, but officials are concerned it does not provide new funding to offset the losses communities and districts will face. Ohio Schools organization In his response, Margaretta Schools superintendent Ed Kurt shared information and an FAQ sheet put together from three state school organizations: the Ohio Association of School Business Officials, Ohio School Board Association and Buckeye Association of School Administrators. Along with the three associations' statement, Kurt called the funding decrease detrimental to all districts. Officials from the three organizations sent a message to several members of the state's House and Senate. In four pages, the organizations highlight provisions in school funding, property taxes and policies. The organization's eight pages of frequently asked questions inform school leaders and communities on several topics, including inside millage elimination, 20-mill floor districts, and levies, to name a few. Roth also shared documents provided by the Buckeye Association of School Administrators. In four pages, the association summarized the bill and discussed elements of the bill, including prohibiting changes to inside millage that would lead to increasing property taxes and allowing counties to have optional sales tax increases.