The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
School officials from around Ohio pleaded with lawmakers this week to pump the brakes on two more property tax reforms. Both proposals tie increases in property tax collections to inflation.
School leaders agree tax reforms are necessary but insist the changes would force them to slash budgets when they’re already at the brink.
“My district will lose almost $2 million, and I will have to cut deep to make that happen,” Fairless Local Schools Superintendent Mike Hearn said.
He added those losses will compound year by year. Hearn’s district had already cut back almost a $1 million in staffing in recent years.
“We know that we have to do something,” Springboro Community City School District Treasurer and CFO Terrah Stacy said. “We just want to make sure that we’re not the collateral damage, and our kids aren’t the collateral damage of that happening.”
Inside millage
The Ohio Constitution allows local governments to levy 10 mills (or 1%) in property taxes without going to voters. Any taxes beyond that amount need the approval of voters. Those 10 mills are known as “inside millage” — a guaranteed revenue stream that, importantly, grows with inflation.
Most other levies have a hedge against inflation. A decades-old provision reduces a homeowner’s tax rate to keep their tax bill steady, so they aren’t paying more in taxes without first approving it.
House Bill 335 would put a ceiling on the growth of inside millage.
The bill’s sponsor state Rep. David Thomas, R-Jefferson, explained the bill is meant to blunt sharp increases in Ohio’s three-year home revaluation cycle. Property tax rates might still climb, but on a gentler angle.
“Our whole goal,” Thomas said, “is to prevent that spike from a revaluation, while still in between those years allowing for some new revenue from new construction.”
But Licking Heights Local Schools Superintendent Kevin Miller said that could be devastating for fast-growing districts like his. Enrollment has swelled to 5,400 kids. More than 1,200 of them showed up in the last five years. Rising property values help the district keep up with the increase.
“However, House Bill 335 further limits even that local revenue growth for districts like ours,” he said.
Inside mills represent only about 12% of the total effective tax rate, Miller explained.
“Even if property values increase by 20% during a reappraisal, our total tax revenue would rise by only 2.07%,” he added.
Spread across the community, that increase is nominal. But as the bill is written, Miller said, they’d see an annual loss of $280,000.
In Springboro, Stacy said, H.B. 335 would cut even deeper — a loss of almost $2 million or about 27 positions.
“We already have higher class sizes than 96% of Ohio districts,” she said, “(and) low cash reserves, with just 79 days of cash on hand, and that actually drops to 44 by the end of our forecast.”
Both administrators argued the measure punishes districts for following the rules state lawmakers wrote. And Stacy said state policy decisions have increasingly shifted the burden onto homeowners. Tax cuts for businesses have curtailed their contributions. Updates to the school funding formula accounted for rising home values, she said, but not the increasing cost of operations.
State Rep. Tracy Richardson, R-Marysville, countered, saying schools perhaps “also have to look at their spending.”
Stacy emphasized the fact that her district is the 11th lowest spending district in the state.
“We spend over $2,500 less per child than any district in the state,” she said. “So, we are very frugal and very responsible with the dollars that we’re being provided.”
Tweaking outside millage
Ohio’s decades-old mechanism for reducing property tax rates to keep property tax bills steady comes with a very important catch. House Bill 186 aims to change it.
As property values increase, tax officials apply a reduction factor, but those reductions stop working when rates have been reduced to 20 mills (or 2%). Essentially if your home’s value rises high enough, there’s nothing to rein in your property taxes, and they’ll rise in line with property values.
In 2024, more than 475 school districts in Ohio were at the so-called 20 mill floor.
The new House measure would limit tax increases to the rate of inflation in the overall economy. Like H.B. 335, it’s meant to soften the impact of rising home values, but school districts would still likely see modest increases in funding.
Among the laundry list of property tax reforms lawmakers are considering, the idea is generally seen as a reasonable compromise. The sticking point is deciding which year to start with. As it was initially written, the bill’s inflation cap would be forward-looking, but an amendment changed that start date, making it retroactive to 2023.
Testifying alongside school officials from several neighboring districts, Fairless Superintendent Mike Hearn explained they can make the original version of the bill work.
“Our schools would use tools like attrition, cash carry over and negotiated agreements to keep costs down and keep our budgets balanced,” he said. “The amended version of House Bill 186 with the retroactive tax cuts would pose a significant financial threat to our districts.”
He argued the range of impacts in their districts demonstrate the bill’s shortcomings. Hearn’s district would lose almost $2 million a year until the next property valuation. Neighboring Strasburg-Franklin Local Schools would lose $250,000 a year on an ongoing basis. But in Lake Local, Hearn said, taxpayers wouldn’t actually benefit from the inflation cap.
“Tax reform this one-size-fits-all in a state as diverse as Ohio can create winners and losers, and the losers are going to see real reductions at their local public schools,” Hearn said.
Thomas zeroed in on school officials agreeing that property taxes had gotten out of hand to make the case for a retroactive start date. He thanked them for acknowledging those spikes “really were wrong,” and insisted even if districts will get less than they’d planned on, they’re still getting more than they did before property values shot up.
“And so now if we’re looking at when should that start,” he said, “if something’s wrong, and if our taxpayers are really in the crisis that they’re at, we should be starting that as soon as possible.”
Both measures are slated for a hearing and possible vote on Tuesday. The Ohio House has a floor session scheduled the next day, and both bills could be on the agenda.
