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Schools are funded from three primary sources:
- Residential property taxes: Each piece of
residential property in Franklin County is assigned an assessed value by the
County Auditor. Local governments, including school districts, are allowed
to request its voters to approve levies which are based on the assessed
value of a residential property. The tax rate is expressed in "mills," which
is the number of dollars in tax charged per $1000 of assessed value. Another
way to say it is that 1 mill = 0.1%. If you have a property with an
assessed value of $100,000, and the total of all levies imposed on your
property is 2 mills, then your tax is $200.
Note that the market value and the assessed value are two
different things. My house is assessed at about 35% of its estimated market
value ($354,200 market value vs $123,980 assessed value). The tax
rate is applied to the assessed value of your property. The total tax
load for the Hilliard City Schools is
42.114270,
which means that on a home with an assessed value of $100,000, the annual
tax would be about $4,211.
- Commercial property taxes: Businesses pay
real estate taxes at the same millage rate as homeowners with an
important difference: the municipal government has the authority to
excuse a business from some or all of its real estate taxes. This process is
called tax abatement, and it is used as a tool to recruit new businesses
into a city. But don't you think it is bizarre that the city gets to decide
whether or not a business pays its property taxes to the local school
system? After all, the city gets its revenue in the form of income
taxes on the wages of people employed in the city limits. So when the city
abates property taxes, the city's revenue is not hurt at all -- in fact it
increases because of the new business.
When the city government and the school system have a cooperative
relationship, the proposal to the candidate company will often include a
"keep whole" agreement with the schools where the business pays the school
directly they same amount they would have otherwise collected in property
taxes. In fact, anytime the city wants to abate more than 75% of the
property tax for a business, the school district must approve the
arrangement. A good example is the deal which brought
BMW Financial to Hilliard. BMW is getting an 100% abatement of property
taxes, but will pay 25% of the abated amount directly to Hilliard City
Schools, which has been claimed to represent the same amount of money the
schools would have received had then been no abatement deal at all.
For many years, businesses have also been taxed on so-called personal
property, which includes things like machinery and inventory. Governor
Taft pushed through legislation which phases out personal property tax and
replaces it with a new
Commercial Activity Tax. The Governor promised that schools will not
suffer a funding reduction because of this, but that remains to be seen now
that Gov Strickland is in office.
Some of the other central Ohio suburbs have even less contribution from
commercial sources. For example, in New Albany, only
15% of the funding is commercial
property tax.
- State Aid: Some of
the money collected as state income taxes, as well as a fraction of the Ohio
Lottery profits, are redistributed back to school systems in the form of
State Aid. This is the mechanism used by the state to ensure, supposedly,
that every school system has enough money to provide a quality education to
all children. The problem is that the State Legislature has been told by the
State Supreme Court, on several occasions, that the way the Legislature has
implemented the State Aid system is unconstitutional.
Most people think it is the formula which is wrong. The truth is that the
formula is fine. The problem is that the Legislature never funds the State
Aid system to the level the formula requires.
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