Enter Katie Johnson, executive director of the Ohio Association of School Business Officials, who was on deck for more than an hour debating the issue Wednesday during the third hearing on House Bill 186.
H.B. 186 would limit increases in property tax revenues for school districts at the 20-mill floor to the three-year average rate of inflation following a reappraisal or update. Property owners would receive credits for taxes charged over the inflation rate.
A quick explainer on the 20-mill floor: For most property taxes, the tax rate — or millage — is reduced as property values go up so it collects the same amount of money. But state law says school district millage for operating expenses can’t fall below 20 mills. So property taxes go up as values increase.
In recent years, property values soared by an average 37% in Butler County, 34% in Montgomery County, 30% in Greene County and 27% in Warren County.
Credit: Alexis Larsen
Credit: Alexis Larsen
The Legislative Service Commission fiscal note projects tax credits from H.B. 186 would amount to $41.9 million in tax year 2025 and jump to $64.4 million the next year. Since they are projecting property values are expected to begin dropping more in line with the inflation rate soon, the credits will drop precipitously to $23.3 million in 2028.
Johnson said two-thirds of the school districts in the state would be negatively impacted if this were enacted and “while the bill includes a state funding adjustment mechanism, this would offset approximately 30% to 40% of the lost revenue and wouldn’t begin until fiscal year 2027.” She also latched onto the expected return to normalcy.
“The LSC fiscal note indicates the recent sharp increases in property values won’t continue,” she said. “Projections show valuation growth moving much closer to inflation rates in future years. This suggests that we already are emerging from the unusual valuation spike this bill aims to address.”
Thomas, who co-sponsored HB 186, told this media outlet the bill isn’t just a knee-jerk response.
“I think just that the underlying principle of this bill is to ensure the spikes we saw over the past five years do not occur again,” he said. “If a school needs more than inflation from their property owners, the voters should approve it.”
Johnson asked several times that lawmakers consider targeted relief, saying the “circuit breaker” proposal in Senate Bill 22— it gives tax credits to homeowners based on the percentage of their income they pay in property taxes — and adjustments to the Homestead exemption are better approaches to tax reform.
Thomas has said many times real reform is going to take a host of attacks on the entire property tax system, but this one comes down to fairness; the taxpayers didn’t approve these huge tax increases.
“Why not allow the voters to have that say if they wish to pay more than inflation every year, why essentially force them through a growing 20-mill number throughout the state to pay more than that inflation amount,” he said. “At a very boiled down, that’s kind of the bill, that’s the ultimate question.”
Johnson said voters did approve the millage and they can’t help what has happened to cause the current crisis, “the schools didn’t do this, it’s the impact of supply and demand, financialization of the housing market and a whittling away of the tax base, it’s those things coming together, that we’re now seeing tapering off.”
She also noted during her testimony that more state funding for schools would lessen the burden on locals. She said the state is paying 38% of the cost to run schools, “bringing it closer to a 50/50 partnership would help alleviate our local taxpayers.”
Rep. Steve Demetriou, R-Bainbridge Twp., said the legislature “provided record funding” for schools in the last budget and asked if the schools are doing enough to tighten their belts.
“We’ve seen administrative costs rising in our schools while school population, and I think that’s reflective of the population of our state unfortunately, is stagnant or declining in most districts,” he said. “Have your members had the conversations about making those tough business decisions as far as administrative costs to offset some of the $40 (million) to $60 million cost that you’re estimating if this bill should become law. Our mandate is to give property tax relief.”
Johnson countered that mandated requirements, like cyber security, drive the number of administrators they need and “all of that comes with a lot of cost, we would welcome a conversation about how do we decrease those requirements that likely feed into the requirement that you have administrators running certain programs.”
Demetriou conceded, “the regulatory burden on schools, I think there’s probably some things we can look at, I think that’s separate of this.”
Rep. Dan Troy, D-Willowick asked Johnson if it would be preferable to “park” this bill in favor of House Bill 129 which also targets the 20-mill floor. That bill was on the meeting agenda as well for proponent testimony but only written support was submitted. The bill would modify the 20-mill floor calculation to include unvoted emergency and substitute levies and income tax.
Troy said many districts have these other levies and “it really kind of misrepresents what we mean by the 20-mill floor, they very well may be collecting 30-something mills in taxes.”
“Does your association, your people have a problem if we tighten up on these exemptions over the years the general assembly has given that don’t count against the 20-mill floor,” Troy said. “They’re taxes they’re being paid by the taxpayers.”
Johnson said adding those “fixed sum levies” to the 20-mill floor calculation should be fine as long the law would only apply to new levies, but there would be “some serious challenges legally” if the state tried to apply it to existing levies.
Another tax reform bill, House Bill 103 that upgrades the Homestead exemption, received a second hearing but there was only written testimony.
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