COLUMBUS, Ohio — Outrage from homeowners across Ohio over rising property taxes that prompted reforms from legislators and sparked a drive to abolish them permanently have public school districts concerned.
After all, money derived from property taxes is by far the largest funding source for the state’s public school districts.
The fury has prompted some districts to act, taking steps such as educating voters and considering new funding sources as they brace for what the storm may bring.
School districts have turned to the Ohio School Boards Association, asking how they can better explain how Ohio pays for public education, said Tom Hosler, the organization’s CEO.
“We are hearing from members. Questions about both the property tax changes (recently passed by the legislature) and what is kind of playing out for each individual (district) locally,” he said. “We also are hearing questions about the possible ballot issue amendment, with eliminating all property taxes.”
The Committee to Abolish Ohio’s Property Taxes, which is behind the proposed amendment to Ohio’s constitution, is collecting signatures to get on the Nov. 3 ballot. It needs just over 413,000 valid signatures of registered Ohio voters. Volunteers are gathering signatures.
Recent hikes in property values have many Ohio homeowners hurting. In some school districts, homeowners must pay higher property taxes to schools when their home value increases. That spurred interest in the proposed abolishment amendment.
But beyond that issue, districts are acting as legislators continue to consider reforms in Columbus.
Here’s a look at some of those efforts
Rocky River’s voter education
In Rocky River, in suburban Cleveland, the Superintendent Adham Schirg has started a social media series called The ABCs of School Finance.
Schirg said his 12-part series reflects his overall philosophy of being transparent. The series, he hopes, will make people in Rocky River better informed on how the tax system works.
Some trivia about Rocky River schools, from the first installment of the series: Just over 81% of the district’s annual revenues come from property taxes.
That’s high. Statewide, the average portion of school district revenue from local sources, including property taxes, is 46.8%.
Schirg has been sharing one-sheet data points each Friday. With the possibility that a proposed constitutional amendment abolishing property taxes will get on the Nov. 3 ballot, people in Rocky River who are paying attention will be better informed when they go to the polls.
Rocky River schools depend more on property taxes than other districts because of the city’s wealth.
The state’s funding formula expects wealthier districts to raise more money locally.
Of Rocky River schools’ $51.3 million yearly revenue, just $7.6 million comes from the state funding formula and the U.S. Department of Education for special education and other services.
“That puts the burden on local school districts to work with their residents to close that gap to provide educational services,” said Schirg, the superintendent.
Further adding to the tax burden of homeowners and farmers is how the legislature has given relief to business property taxpayers in recent years.
“Statewide, homeowners’ share has increased from 47% in 1991 to 70% in 2023,” the data sheet from Jan. 9 notes.
On Dec. 19, Gov. Mike DeWine signed a property tax package to provide property owners $3 billion in savings. Districts are evaluating the impact of the legislation.
Rocky River schools could hardest hit by House Bill 335, which limits increases districts receive for unvoted levies known as “inside millage” when counties revaluate property values, Schirg said.
Previously, if a house value increased by 30%, for example, districts would receive a 30% increase on the unvoted levies. Under HB 335, the increases will be capped to inflation over the preceding three years.
“This is something that we are prepared for and recognize that it’s something that we’re going to have to evaluate moving into those reappraisal processes,” Schirg said.
If the property tax abolishment plan gets on the ballot and wins, Rocky River would lose over $41.5 million annually.
“We would have to look to partner with our residents, along with state legislators, to figure out how do we make up for that revenue gap?” he said.
A different approach
Some school boards are looking at other options as they face a potential future without property taxes.
Last week the Willoughby-Eastlake City School District in Lake County took the first action in putting a 1.5% earned income tax on May ballots to replace four levies supported by property taxes.
School income taxes are more common in rural areas, where people may own a lot of land but not have huge incomes. Rural school boards have seen income taxes as fairer to the public, said Hosler of the Ohio School Boards Association.
“Now you’re beginning to have conservations about how does that work in these other settings,” he said. “I think it’s an option, not necessarily because of the property tax proposed amendment but I think just with property taxes and home values increasing and rising the way they have, that has caused boards to ask treasurers and superintendents to run the numbers.”
The Willoughby-Eastlake school board still needs to vote a second time to send the measure to May 5 ballots, board vice president Jaime Shatsman said. The public is invited to attend an event on Jan. 26 in which the earned income tax will be discussed.
An earned income tax would apply only to wages. Social Security, pensions, capital gains and other sources of income would not be taxed. The school board chose to tax wages in part to protect retirees leaving on fixed incomes, she said.
In a recession, when people earn less, they would be taxed less. The criticism of an earned income tax is that the funding squarely falls on working people, not on commercial and business profits or valuations, she said.
The 1.5% earned income tax would generate about $28.2 million for the district each year. The emergency levies it would replace total $29.6 million, for a savings to the public of about $1.4 million a year, Shatsman said.
The school board convened a work group to study the school funding issue as it saw property taxes becoming unaffordable as valuations soared. The school board also followed state-level discussions about lowering property taxes.
“Right now, a school district can only forgo property taxes, which gives taxes back to the people of all income levels, as well as businesses and corporations,” Shatsman said. “There was no good way for us to give significant relief to the people who need it most under the current existing laws. We kind of heard this from our community.”
The school board was also following the abolishment amendment. If property taxes go away, officials in Columbus will not be able or willing to replace all $22 billion statewide raised from property taxes for schools, she said.
“So we’re looking at all these things,” she said. “We’re saying, What other options do we have at a local level? We can’t wait around for someone else to fix this problem.”
Lake County Commissioner John Plecnik, who is also a Cleveland State law professor who studies taxes and public policy, thinks an earned income tax is a mistake.
Plecnik, who lives in the district, believes residents with the means will move out.
“This is going to create the classic tax death spiral,” he said. “You cannot have any tax rate – income, property, whatever – that is substantially above your neighbors without having people migrate.”
Plecnik, who supports the abolishment amendment proposal, said that the point of getting rid of property taxes is not to replace them with another funding stream.
“People want government to cut spending,” he said.
Abolishing property taxes
If the abolishment amendment gets on the ballot and passes, officials will likely have to cut state and local government.
Historically, most successful Ohio ballot campaigns use paid signature gatherers. The committee behind the abolishment proposal is using volunteers. Brian Massie, a member of the committee, declined to share how many names it has collected toward its goal.
Massie, a retired CPA and business owner who lives in Lake County, said cutting state and local government spending will put more money in the hands of people to spend locally, which will boost local economies, he said.
The state constitution requires the legislature to fund the public schools. Massie argues the legislature has shirked that duty.
Local districts should not be raising money through property taxes, because that’s the legislature’s job, he said.
And, he doesn’t think it’s naïve to end property taxes without a replacement stream of revenue. Government will adjust to the proper size, he said.
Rocky River City School District is among the state’s best. In September, it received 5 stars on the Ohio School Report Cards, the highest possible score. The report cards are mostly based on student performance in standardized tests.
But most districts don’t do as well. Massie said he doesn’t like how school expenses keep rising as enrollment across the state is generally on the decline.
“Schools have got to learn to perform better,” he said.
