Ohio school funding model leads to repeated levy requests

More than 4,500 tax issues for schools appeared on Ohio ballots between 2003-2013 and legislators and education officials say there is no solution to the continual churn of local levies.

There are 13 tax issues for Dayton-area schools on the ballot next month, including the region’s five largest suburban districts. Beavercreek, Centerville, Kettering and Huber Heights are asking for additional funds. Springboro is seeking a renewal levy that would actually cost less money.

“Until we can figure out how to cut the cost of education, it is an unsolvable problem,” said State Sen. Peggy Lehner, R-Kettering, who serves on the education finance subcommittee. “Our whole education system seems to be struggling under the weight of underachievement and cost.”

Over the next week, the Dayton Daily News will examine some of the proposed tax issues. We’ll look at district spending, how new funds will be used and the cost to property owners. Today, the newspaper digs into Ohio’s system of funding K-12 education, one that sets up voters for repeated trips to the polls.

The Dayton-based, Thomas B. Fordham Institute works to advance educational excellence for every child through research as well as on-the-ground advocacy in Ohio. The institute’s position on school funding: there needs to be a complete overhaul of Ohio’s system.

“The state funding model uses a whole bunch of proxies to understand whether the locals have the ability to fund their schools at what they call ‘an adequate and equitable level,” Aaron Churchill, a policy analyst for the institute said. “So, the state grants are based on the district’s need rather than the individual child’s needs.”

The Fordham Institute advocates for a weighted student funding model.

“The tag line is: the funds follow the child,” Churchill said. “Our goal is to advocate that the needs of the individual child be prioritized over everything else.”

Nationally, about 44 percent of total education spending comes from state funds, according to the Center on Budget Policy and Priorities. Cuts at the state level mean districts either have to scale back or raise more local tax revenue to fill the gap.

Sometimes, districts have to do both.

“I don’t know why the legislature, school boards and superintendents can’t sit down and come up with a school funding system that works,” said Bill Homan, 74, of Huber Heights, who had four kids go through school system there. “What do we need to do to educate our kids properly? If the state doesn’t come through and parents don’t come through, what’s going to happen to the kids?”

At least 34 states are providing less funding per student for the current school year, compared to before the recession, according to the Center on Budget Policy and Priorities report.

In the current fiscal year which started July 1, the state allocated $9.2 billion for primary and secondary education, a 7 percent increase over the previous year. This comes after a 6.6 percent cut in 2010 and 1.6 percent reduction in 2011. Increases in 2012 and 2013 were 2.8 percent and 3.6 percent respectively.

But, local taxpayers still carry much of the burden to pay for schools.

The amount of state funds Ohio school districts receive is based on a formula using student enrollment and the property wealth of a district. In nine of the 13 Dayton-area school districts with levies on the ballot in November, local property owners paid 50 percent or more of the total per pupil cost in Fiscal Year 2012.

“It’s not that we’re ignoring education. We’re not,” Lehner said. “Education spending (K-12) takes up 40 percent of the state budget.”

Beavercreek’s per pupil spending tallied $10,307.71 in Fiscal Year 2012, just under the state average, according to Ohio Department of Education data. Beavercreek taxpayers paid 69 percent of the cost, about $6,511.90 per student. The state contributed 26 percent and the federal government 5 percent.

The district returns to voters for a fifth time seeking additional operating funds on Nov. 5, after four rejections.

“Right now, I tell people school districts are basically on a fixed income that expires,” said Al Nels, president of the Beavercreek Board of Education. “The current funding method that we have is very fixed and, it is also limited typically to five years. That has been a real challenge for us.”

Beavercreek parent Linda Borgert said per pupil spending should be uniform thoughtout the state, instead of being determined by the wealth of a district.

“Someone needs to step up to the plate and work in a bi-partisan committee to find a better way to fund schools,” Borgert said. “Obviously, property tax levies aren’t working.”

The National Taxpayers Union, with 13,500 members in Ohio, is an independent non-partisan advocate for “overburdened taxpayers.” Pete Sepp, executive vice president, said their stance is one that education should be funded with a mix of consumption and property taxes.

“It’s important to keep the tax as low as possible. We believe, as much as possible, local services should be paid for with a user funded approach,” said Sepp, adding that schools bring value to a community.

Kevin Philo, treasurer for Oakwood City Schools, said as part of its current levy campaign voters are being told the district will be back on the ballot in three years. To break that cycle and bump the time span to every five years, would have required a larger levy.

“We’re trying to educate the public so they know how the system works. This isn’t the levy to end all levies. We know in three years we’re still going to need this funding. We’re going to be back on the ballot in three years.”

Ohio law also contributes to the school levy churn.

A law on the books since 1978 drives districts to make tax issue requests routine by eliminating inflationary growth on levies, said Rob Delane, deputy executive director of the Ohio School Boards Association. When taxes are put on the ballot to raise a certain amount of money and property taxes increase, millage gets rolled back. School districts receive no additional monies.

“As inflationary costs begin to impact schools — as they do everyone else — the dollars to schools remain the same,” DeLane said. “The cost of purchases goes up. Utility costs go through the roof. School districts are saying, where is that money going to come from?”

For Montgomery County school districts, it’s declining property values that have impacted collections on some tax issues. Existing levies are not generating the dollars that they once generated, or that they were expected to generate, because of falling values, said Montgomery County Auditor Karl Keith.

Meanwhile, several state revenue sources are ending.

New-money property tax levies on the November ballot are the first ones affected by a state law forcing local property owners to pay the full amount of new levies. In past years, the state paid 12.5 percent of the levy cost, through a property tax “rollback.” The rule change will only impact new or replacement levies.

If school levies on the ballot are approved this fall, Centerville taxpayers collectively will pay an additional $950,000; Huber Heights $400,000, Vandalia-Butler $350,000 Kettering $200,000; Oakwood $200,000 and, Brookville $87,500, due to the elimination of the rollback, Montgomery County Auditor Karl Keith said.

The average cost to the owner of a $100,000 house in Montgomery County will be between $20 and $30 a month, Keith said.

“That is money that will have to come from taxpayers if the levies are approved, that would have come from the state through the rollback,” Keith said.

In Greene County, the cost per $100,000 of property value without the rollback will be $27.56, David Graham, county auditor said.

The rollback will continue on renewals of existing levies, including the school ballot issues for Jefferson Twp., Yellow Springs, Springboro, Wayne Local Schools in Warren County and Troy City Schools.

In addition to the rollback, districts also are dealing with loss of revenue from the phase out of reimbursements from elimination of the state’s Tangible Personal Property Tax. The state legislature voted in 2006 to phase out the tax on business equipment and inventory.

School districts were protected from the loss with the help of the commercial activity tax, or CAT tax. The state made up the difference between what the reduced personal property tax generated, and the full amount of personal tax the schools would have received.

The reimbursement formula was always meant to phase out that revenue to school districts, according to the Ohio Department of Taxation. In 2011, however, the General Assembly changed its mind to provide continuing reimbursements to districts heavily dependent on the tax, but the funding formula was changed.

Now, districts like Kettering receive the reimbursement, but they get less than they would have received if the tax hadn’t been eliminated and the reimbursement formula changed.

“At one time (2001-02), the Tangible Personal Property Tax generated $15 million a year for us. This year it will generate about $6.2 million,” Steve Clark, chief financial officer and treasurer of Kettering City Schools said. “It was a huge source of revenue for school districts. The CAT tax never generated enough to make up for that loss.”

Clark said the district will continue receiving funds from the reimbursement in 2014 and 2015, but what action the state will take in the next budget cycle is uncertain.