A provision buried in the recently passed budget-reconciliation bill allows school districts to ask voters to approve an operating levy for which collections would grow as property values rise — an inflationary windfall that has been banned by state law since 1976.
Although many districts would love to see some inflationary growth in their tax revenues so they wouldn’t have to go back to voters as often, the mechanism being offered is so complicated that state officials and school-board advocates who are well-versed in the subject are hard-pressed to explain it.
This measure needs to be considered on its own merits and should be fully debated and carefully considered. Inserting it in the budget measure was entirely inappropriate.
In any event, selling voters on the idea would be nearly impossible.
Many voters don’t understand that, under normal levies, the millage is set at whatever level is needed to raise a specified amount of money per year.
By law, a levy can raise only that amount each year. In most of the state’s school districts, the value of the property-tax base grows each year, so the millage of the levy is reduced to whatever level will raise the specified amount. This, in effect lowers the tax hit for most individual homeowners.
This so-called reduction factor was created to avoid the spiraling property taxes that were forcing people out of their homes as real-estate values skyrocketed in the 1970s. But school officials have lamented ever since that the no-growth levies have forced them to go back to the ballot box too frequently.
The system creates a further problem for school districts, because the formula for state school funding incorrectly assumes that districts’ tax revenues grow with their property values and so triggers a reduction in a district’s state funding for schools accordingly.
That quirk, called phantom revenue, is what lawmakers have tried to address with the provision in the new budget bill. It allows a district to put before voters a levy that would raise just enough money to make up what the district loses in state aid because of phantom revenue.
The amount required, and thus the millage, would vary each year according to changes in the district’s realestate valuation. In most districts, it would rise each year, although the levy’s total proceeds couldn’t grow by more than 4 percent per year.
Confused? Most voters would be, too.
A school district trying to persuade voters to approve a "growing levy" would face the task of convincing a skeptical public to approve a tax that probably would grow every year, without being able to tell them by how much.
Even if they managed that feat and passed such a levy, districts would be vulnerable to voter backlash.
The modest increase in levies, though helpful, probably wouldn’t sustain district budgets forever. Imagine how angry some voters would be to hear, after having passed a special, growing levy, that another ordinary levy is needed.
This provision also might worsen the funding gap between property-poor and property-rich school districts. For those with fast-rising property values, the growing levy would be one more source of revenue. But those with stagnant or falling values would get nothing from the new type of levy.
Moreover, the concept behind Ohio’s law limiting inflationary property-tax growth — that requiring voter approval for any tax growth makes taxing entities such as school districts accountable to taxpayers — is based on sound reasoning.
Legislators need to go back to the drawing board to formulate a simpler statewide approach to the levy dilemma.