Proposal to address property tax hikes would cost Ohio schools $336M

Following the triennial update property values soared by an average 37% in Butler County, 34% in Montgomery County and 30% in Greene County. Warren County has undergone the sexennial reappraisal this year and the average increase is 27%.

Some of the largest property tax increases resulting from this are due to the 20-mill floor school funding formula.

20-mill floor

A millage is a tax rate that is a percentage of home value. For most taxes, as values increase the millage decreases because it takes a smaller percentage of the value to collect the same dollar amount.

But Ohio law says once a school district’s total current expense millage is reduced to 20 mills, it cannot be reduced any further, so tax revenues grow as property values increase. It only applies to operating levies not bond, permanent improvement, emergency, or income tax levies.

This applies to several school districts in Montgomery County, and most in Butler and Greene counties.

Credit: Alexis Larsen

Credit: Alexis Larsen

School districts collect the lion’s share of property taxes and bill sponsor Sen. Sandra O’Brien, a Republican who served as Ashtabula County auditor for three terms, is proposing the state modify the 20-mill floor calculation to include unvoted emergency and substitute levies into the 20-mill floor calculation.

O’Brien told the committee this week 68% of Ohio’s school districts are at the 20-mill floor and half of them have emergency or substitute levies or both and the ending cash balances of all the state’s districts combined “sit at a very large $9.6 billion” while taxpayers are suffering.

“Tax reduction factors do not apply once a school district’s 20-mill floor is hit. What does this mean, without these tax reduction factors a school district’s taxpayers pay for all the increases from their property tax valuations. This on top of the fact that nearly 50% on the floor also have emergency or substitute levies that means that Ohio taxpayers in these school districts are seeing even larger increases in their property tax bills,” she said. “S.B. 308 looks to tackle this issue and provide tax savings to our over-burdened taxpayers.”

Since these levies are unvoted O’Brien’s bill also would require school districts to hold public hearings before converting inside millage to permanent improvement levies.

A report by the Legislative Service Commission shows if the bill passes impacted schools will lose $336 million in revenue and taxpayers will save roughly $296 million. The state would save $40 million in tax rollbacks.

“The bill’s effect on school districts that impose emergency or substitute levies is to increase the total millage that is compared with the 20-mill floor,” the LSC report reads. “School districts now at the floor, in which taxable value increases result in commensurate revenue increases, will no longer be at the floor if they have such levies and will lose this revenue that results from valuation increases.”

Sen. Kent Smith, D-Euclid, was the only committee member to question O’Brien about her bill and he expressed concern for school districts.

“We’ve had a number of bills in this committee seeking property tax relief. I would love to see some of those become law. This strikes me as kind of in that same subject area. But is this property tax relief coming at the expense of school districts that then are going to have to find $300 million from other sources?” Smith said.

O’Brien responded “no it’s not, this involves inside, unvoted millage that our property taxpayers in Ohio have had a dramatic increase in, that they didn’t vote for and didn’t get their consent.”

Property tax reform efforts

There have been 23 bills introduced since January 2023 that address property tax reform in some form or fashion. The state also convened a special Joint Committee on Property Tax Review and Reform to tackle the issue.

Sen. Bill Blessing, R-Colerain Twp., chairs both the Senate Ways and Means Committee and co-chairs the special committee. He told this news agency while he believes O’Brien is “sincere and earnest in her efforts for property tax reform” he is “struggling” with S.B. 308 and would oppose its passage.

“This would represent an across-the-board property tax cut at the expense of our schools. The likely result would be deteriorating quality, more levy attempts, and the General Assembly having to make up at least some of the difference in the school funding formula,” Blessing said.

“Moreover, it’s also not targeted. Large institutional housing investors and the wealthy would be the largest beneficiaries in real dollars, thus this would likely be extremely expensive and inflationary, as free money to investors would supercharge their home buying binge. This inflationary pressure would actually make housing, and by extension property taxes, worse in the long run.”

The county auditors have been very active during the vetting of the various bills, which run the gamut from expanding Homestead exemptions, requiring that a three-year average be applied when valuing property, adopting a “circuit breaker” and others. All along they have said the 20-mill floor must be addressed.

Warren County Auditor Matt Nolan told this media outlet O’Brien’s bill is “going in the right direction.”

“That’s kind of an axe when we need a scalpel, it’s a big weapon and the schools aren’t prepared for that,” Nolan said. “It starts the conversation and the more we’re having the conversation that’s all where it’s going. There are so many pieces that have to work together, so you can’t just cut floor because there are constitutional implications, there’s legal implications, there’s all these parts to it, but the floor has to be part of the answer.”