How Public Schools Are Funded

Local Support
The property tax is the predominant method communities use to raise additional revenues in Ohio. The property tax comes in two forms:

• Real property tax- This is a tax levied on land and buildings located within the school district. Private individuals, businesses and public utilities that own land and buildings pay this tax.
• Tangible personal property - This is a tax levied on furniture, fixtures, machinery, equipment and inventory owned by business. Key factors used in calculating property tax bills are the assessed valuation of property and the millage rate. The county auditor of each county in the state had the responsibility of appraising all taxable real property once every six years to determine the values. Every third year after each reappraisal another form of reappraisal, called an update, is conducted. Property tax bills are calculated on the assessed value of property, which equals 35 percent of the Fiscal Officer's appraised value. For instance, a home with an appraised value of $100,000 will be taxed on a value of $35,000.

What is a mill?
Local property tax rates are always computed in mills. One mill costs the property owner $1.00 for every $1,000 of assessed valuation each year. In our example, the $100,000 will produce $35 in tax revenue for each mill.

What is House Bill 920?
House Bill 920, went into effect in 1976. This credit effectively freezes all voted real property millage at the dollar amount collected the first year the millage went into effect. As property values rise through reappraisals, the outside millage rate is commonly referred to as "effective" millage. The inside mills are not affected by the House Bill 920 credit, so a small amount of additional revenue is gained as property values increase.

Why Do Schools Keep Asking for More Money?
The short answer to this question is that while most of the revenues available to schools are fixed and inflexible, the cost of education continually rises. Many of the rising costs are out of the control of local school boards.

How Do Schools Raise Additional Funds?
The property tax is the main funding mechanism available to school districts to increase revenue. State law makes a distinction between operating funds and capital improvement funds. Proceeds from an operating levy can be used for any legal expenditure by a board of education. The following are types of operating levies:

• Operating levy for current expenses - A millage rate is submitted to the voters for approval, not a dollar amount. The millage rate will be adjusted as property values change pursuant to HB 920. This levy can be voted in for one to five years or for a continuing period of time.
• Emergency Levy - This type of levy is submitted to the voters as a dollar amount. For example, "The emergency levy will raise $1,000,000 per year." An emergency levy can only be voted in for a period of time from one to five years, and expires after the time has elapsed unless renewed by a vote of the public.
• Permanent Improvement Levy - Permanent improvement levies for specific projects can last from one to five years. Permanent improvement levies for general on-going permanent improvements can be levied for a continuing period of time.
• Bond Issue - A bond issue is a tax, the proceeds of which can only be used to pay bonds and noted issued by school districts for the purposes of permanent improvements. Bond issues are normally used for building new or additions to buildings. However, proceeds of a bond issue cannot be used for operational costs of the new facility (ies). This is often a source of misunderstanding. People remembering a bond issue was passed for a new building can't understand why "the district built a new building without having the money to operate it." Many times an operating levy must also be passed to help pay for the operational costs when the new building was necessitated by increased enrollment.

 
What Does All This Mean to Taxpayers?
While state legislators continue to wrestle with issues of equity and fairness in funding public education in Ohio, public schools continue to depend on the support of local taxpayers. There is no quick fix or easy solution coming from the state or federal level. Despite this, children continue to come through doors of our schools each day asking and deserving to be educated. Until the state creates a new system on funding schools, local taxpayers in Ohio will continue to shoulder the responsibility of providing quality education for our children.