Fair School Funding
One of the most critical factors in Olentangy’s continued success is the ability to receive fair funding from the state. All residents are strongly encouraged to learn more about how the state funds our schools.
HOW PUBLIC SCHOOLS ARE FUNDED IN OHIO
Ohio K-12 school districts often must place ballot issues before the voters every several years to support public school education. Ohio citizens need to understand why these levy issues are repeatedly on the ballot. The need for these ballot issues is not about Ohio public school districts wasting money. Rather, key provisions of Ohio state laws directly contribute to the need for Ohio voters to decide how and to what extent to fund public education in their local communities.
Ohio public schools are primarily funded in three ways:
1) The Federal government allocates funding to state educational agencies like the Ohio Department of Education (ODE). ODE then distributes this federal funding to Ohio’s public school systems for targeted programming like special education, the education of the economically disadvantaged, and English Learners, to name a few of these targeted grants. The money received from these federal grants must be diligently accounted for and spent directly on the targeted programming–it cannot be used to support the general day-to-day operations of the school district. Some federal funding is receipted to the district’s general fund, but these receipts are in the form of Medicaid reimbursements for eligible students who are provided special education services by the district. In total, Olentangy Schools receives less than 5% of its budget from the federal government.
2) The State of Ohio funds public schools based on a funding formula that is developed by Ohio’s Governor and the Ohio House and Senate. The funding formula is often subject to significant changes every two years because the formula itself is a component of Ohio’s two-year biennium budgeting process. Ohio’s biennial budgets are developed through the political process of law-making, and the state funding formula is often a hotly contested component of the state budget. The iteration of a state funding formula that is in current law is called the Fair School Funding Formula. All funding formulas developed by state law are created with the basic understanding that state funding is partially funded by the state of Ohio, but some might find it interesting to know that the state funding formula also requires a portion of the funding provided by the state of Ohio to be paid for by the school district itself. This is often called the ‘local share’ of the state funding formula. Determining the ‘local share’ is a complex algorithm that considers the ability each school district has to raise funds (taxes) for public education, and is measured generally by property wealth per pupil and income per pupil–both factors that vary from community to community. The formula also uses data to calculate how much a school district should spend per pupil, a figure known as the base cost. The formula ultimately uses the local factors for each school district (i.e., property wealth and income wealth) to determine the ability each district has to raise its share of the base cost per pupil.
In addition to the funding provided by the base cost, the Fair School Funding Formula also has categorical funding items that are targeted funding for specific programming. These categorical funding items include gifted funding, special education funding, English Learner funding, career technical educational funding, and economically disadvantaged student funding. As with federal funding, the categorical items are restricted and can only be spent on the programming for which the funding was received.
The final major component of state funding is derived when the state of Ohio pays a portion of the local tax bill for residents across the state of Ohio. The amount the state of Ohio pays to Olentangy Schools is recognized as a credit on a homeowner’s tax bill, and is generally about 12.5% of the total tax bill that a homeowner would otherwise have to pay to Olentangy Schools. See below for more details about these credits.
For the 2022-23 school year, Olentangy Schools received about 13% of its revenue from the state of Ohio.
As a final note, in exchange for the funding received from the state, Ohio requires all of its public schools to meet certain standards and mandates to ensure a quality education for all of Ohio’s students. Many of these mandates do not come with additional funding beyond what is provided by the state funding formula and the state share of local property taxes. These are often referred to as ‘Unfunded Mandates’ and include items like the Ohio Teacher Evaluation Program and the Third Grade Reading Guarantee.
3) Local Support is provided mostly by school districts using property taxes to support their schools, although a few have also included local income taxes in their funding mix. Olentangy Schools uses only property taxes. The real property tax is one levied on land and buildings located within the school district (not the city limits). Owners of the land—businesses, public utilities, and private individuals—are taxed on the value of the real property, a concept called ad valorem taxes (ad valorem meaning ‘according to value’ in Latin).The county auditor appraises real property every six years. Every third year an “update” is performed on the value (i.e., the triennial update). The appraisal is the auditor’s opinion of the market value of the property, which is what the property would sell for in an arm’s length open market transaction. But the taxes are based on the assessed value, which in Ohio is 35% of the appraised value.
Mills
Real property rates are computed in mills. A mill raises $1.00 annually in property taxes for every $1,000 of assessed value for a property. A house worth $100,000 would bring in $35 of annual tax revenue for each mill assessed ($100,000/$1,000 x 35% x $1.00 = $35).
Inside Mills and Outside Mills
Inside mills: The Ohio Constitution allows 10 mills of unvoted taxes to be levied by each political subdivision and the resulting taxes are divided among the cities, counties, other local governments and public schools in that subdivision.
In the Olentangy Schools community, only 8.50 mills of the total 10 mills are currently assessed. This is because Delaware County, which has the authority to assess 1.90 mills, only currently chooses to assess 1.40 mills. Olentangy Schools’ share of the inside millage is 5.00 mills.
As an example, a home in Orange Township in 2023 that is not in the Westerville corporation would have the 8.50 inside mills distributed as follows: Olentangy Schools–5.00 mills; Delaware County–1.40 mills; and Orange Township–2.10 mills.
Outside Mills: All other mills are voted by the public and these are called “outside mills”.
State Share of Local Property Taxes: As noted in the section on state funding for schools, the state of Ohio pays a portion of the tax bill for homeowners in every county. There are two main credits that the state of Ohio gives to local property tax payers–a 10% credit on all non-commercial property (often called the Non-Business Credit) and a 2.5% credit on the value of up to one acre of each homestead for Ohio homeowners (often called the Owner-Occupied Credit).
In total, the state of Ohio pays each political subdivision about 12.5% of the tax bills for residential homeowners, and the County Auditor then issues a 12.5% credit on the homeowner’s tax bill. In this way, the homeowner’s effective tax rate is decreased, and the county subdivisions, including school districts, are ‘held harmless’ and receive the same funding they would otherwise have received if the credit hadn’t existed.
The state of Ohio also provides additional tax relief for senior citizens (65 or older) as well as permanently and totally disabled homeowners. Beginning with applications from 2014 forward, there is also an income test to determine eligibility which is indexed to inflation–the 2022 income threshold has increased to $34,600 (meaning those with incomes greater than $34,600 generally do not qualify).
This Homestead Exemption generally exempts the first $25,000 of market value of a qualifying homestead. Further, the exempted value is indexed to inflation, and for the 2023 pay 2024 tax year has increased to $26,200. This means that in 2023, a homeowner qualifying for the Homestead Exemption is issued a credit on his or her real estate tax bill that is equal to the amount of taxes that would otherwise be paid on the first $26,200 in home value.
As with the 12.5% credits, the state of Ohio reimburses the county subdivisions, including school districts, for the Homestead Exemption credits.
HB 920
In 1976, when inflation was very high, the Ohio legislature enacted HB 920 governing the property taxes going to school districts. For existing properties, the bill generally seeks to alleviate the issue whereby tax bills automatically increase because home values increase. Because real estate taxes are ad valorem taxes, in general when the value of a home increases by X%, the tax bill will increase by X%. So the Ohio legislature enacted legislation that automatically adjusts the millage assessed by schools and other subdivisions as values increase. The bill ‘freezes’ the aggregate dollar amount districts receive on existing properties at a dollar amount that is equal to the amount voted when the levy was first passed. So as inflation increases the costs and expenses that school districts must pay to effectively maintain excellent staff members who promote educational excellence, any increases in tax revenues that schools receive are restrained by HB 920. In general, as property values rise with reappraisals, the dollar amount paid to schools remains the same, and because the costs associated with running an excellent school system naturally increase over time (i.e., wage inflation), schools are forced to repeatedly ask residents for additional tax revenue via levies.
Olentangy Schools efficiently and effectively uses its resources to operate within the constraints created by HB 920. This generally means that while cost increases are inevitable for our rapidly growing district (e.g. personnel, supplies, textbooks, utilities, health care), the district strategically plans for the use of its resources to facilitate maximum learning for every student. Regardless of our diligence, as more time passes from our last levy, the district often must plan for the next levy to be sure that our resources are adequate for a rapidly-growing and highly-effective school district.
On the ‘flip side’ of HB 920, as property values decrease, the dollar amount received by school districts on existing properties still remains constant. In this scenario, the tax rate (in mills) will actually increase to offset decreased values.
Over time as residential values increase, the adjustments to the original millage (called gross millage) decrease the actual tax rates assessed. At any point in time, this adjusted millage amount can be calculated and is called the effective millage rate. The inside millage rate is not affected by HB920, so this very tiny amount of tax may rise with inflation. For Olentangy Schools, recall that our inside millage is 5 mills, which is only about 8.9% of the effective tax rate. The rest of our mills are voted mills and are subject to adjustments. Olentangy Schools effective millage rate is 56.2 mills though the total voted millage, or gross millage, is 92.2. So over time and due to HB920, our gross tax rate has been reduced by 39%.
Other forms of income
A few other forms of income bring in small amounts of funds.
There may be emergency levies and other forms of levies passed. Districts have resorted to incremental levies, replacement levies, and emergency levies in an attempt to balance their budgets. To date, Olentangy Schools has not passed or attempted to pass these types of levies as a general funding strategy.
Ohio Casino funding, often touted as providing funds for education, only brings in about $66 per student for the 2023-24 school year. Lottery funds are also touted as benefiting schools directly. While this is accurate, the Ohio General Assembly generally uses Lottery profits to offset other general funding that would be provided to Ohio school districts.
Some grants may bring in dollars for specific purposes.
Infrequently there are bequests or donations to the district.
Capital Funds
Bond issues are often passed to provide monies for capital improvements. Capital improvement monies are separate from operating funds and the two forms of financing may not be co-mingled.
Olentangy Schools passed a bond issue in 2020 to build two new elementary schools and a new middle school, and will be on the ballot in March 2024 to build five additional school buildings to address enrollment growth.
What factors differentiate school districts?
There are many differences among the 607 districts in Ohio and each may impact the funding of a district differently. A few are described below.
1) If a district has a lot of commerce or business property, the cost to residents may be reduced as these commercial ventures help pay the costs of education. Olentangy Schools does not have large industrial parks and commercial ventures; property taxes are primarily paid by residents.
2) Various factors based on the school population may result in additional funding to the district. Small amounts of money are available to a district based on disadvantaged pupils, number of free lunches, etc. As noted in the State Funding section of this article, the state does provide some extra money dependent on the numbers in special populations recognizing in a small way the additional costs of educating these students.
3) Mobility of families has been shown to result in a disruption of education from one district to another, creating learning problems for the children. The more transient the population, the more difficult it is for students to reap the benefits of a coordinated curriculum. Districts spend additional dollars to help students get in step with the curriculum. Fortunately Olentangy Schools does not typically deal with high mobility.
4) The state requires districts to bus all pupils, whether attending the public schools or private schools within the same parameters. State law requires all students in grades K-8 who live two miles or more from their schools to be bused. If a district, such as Olentangy Schools busses its own students living outside 1.5 miles, then it must bus all students living outside 1.5 miles to their respective schools. Currently Olentangy Schools buses about 142 non-public school students, which is about 1.3% of bused students. Further, Ohio law allows Olentangy Schools to declare transportation for some non-public schools students as impractical given the constraints of time, money and other resources. The parents or guardians of these students qualify for a payment-in-lieu of transportation services. For the 2023-24 school year, Olentangy Schools will pay the parents or guardians of about 164 students at least $596 per student as a payment-in-lieu of transporting the students.
5) Many additional education choices in a district also impact funding. Recent changes to the Ohio EdChoice program have made school vouchers universal for the first time. Parents who choose to have their children educated in a non-public school can get up to $6,165 per K-8 student, and as much as $8,407 per 9-12 student. By way of comparison, for the 2022-23 school year Olentangy Schools received about $2,120 in total state support per pupil (i.e., formula funding and the state share of local property taxes).
6) High-quality public schools are desirable to residents. This impacts the curriculum and therefore costs. Services expected by local communities vary from community to community, and may go beyond the minimum required by the state.
7) Labor market trends also dramatically impact costs. A high-quality district like Olentangy Schools must attract and maintain excellent teachers, administrators and other school personnel. The only effective way for that to occur is to be sure that employee wages and benefits keep pace in a highly competitive labor market where multiple school districts are competing for the same talent. (All public school teachers must be certified in their teaching area.) Operational costs are also impacted by the ever-increasing costs of utilities, transportation, and other services.
8) Tax abatements given in some districts are more numerous than others. The aim of a tax abatement is to spur economic growth and development that positively impacts the whole community. But each abatement decreases the tax revenues that flow to a school district. Olentangy Schools works diligently with local cities, townships and other municipalities to ensure that these economic development tools are utilized in ways that are not overly disadvantageous to the school district (i.e., non-school abatements, compensation or ‘hold-harmless agreements,’ non-residential abatements).
9) Economic trends can impact residents’ abilities to timely pay tax bills. The local economy can be impacted by regional, state or national factors. In general, the Olentangy community has remained financially stable over the past few years, which means that the Olentangy Schools tax collection rates have been high and stable. But many districts saw a decline in the collection rate over the last several years due to state and national trends. Olentangy Schools work very closely with the Delaware County Auditor to ensure predictability and stability of local tax revenues.
These basics of funding public schools help to explain some of the differences in costs to various districts, and the complicated system of funding the state of Ohio uses. Despite these challenges, Olentangy Schools strives to be the recognized leader for high performance and efficiency in education. Towards that end, we recognize the need to partner with parents and community members as we educate and promote an awareness of how the complex factors of Ohio school funding impact our collective mission. We sincerely hope that this article has provided additional insights, and we welcome any questions or feedback as we work to facilitate maximum learning for every student!
fair school funding Advocacy Efforts
July 13, 2022
The first-year implementation of the Fair School Funding Plan (FSFP) has been beneficial to the district. The district will realize an increase of $4 million in revenue in fiscal year 2022 (over fiscal year 2021). Revenue estimates for fiscal year 2023 increase another $5 million (over fiscal year 2022).
Continued legislative support of the FSFP for the next two biennium budgets is vital. Fully funding the formula would allow the district to further stretch times between levy cycles and/or reduce operating mills needed to sustain programming.
Let your legislative representatives know school funding is important to you! Find your representatives and their contact information online at the Ohio Legislature General Assembly website.
March 1, 2022
One-third of the Fair School Funding Plan has been adopted by the state in the current biennium budget. It is vital for district staff and community partners to continue to advocate for full funding of the formula. Specific components of the plan can be found here: Ohio Fair School Funding.
The Ohio Department of Education (ODE) is tasked with developing new funding reports that explain funding model allocations. Funding reports were delayed until January 2022. Additional adjustments to formula calculations are expected in March 2022. Supplemental reports are also expected in March 2022. ODE funding reports can be found here: Traditional School Districts Funding. The results of the funding model will be included in the 2022 spring update of the five-year forecast.
July 8, 2021
The Fair School Funding Plan has been adopted by the state in the current biennium budget. Specific components of the plan can be found here: Ohio Fair School Funding.
The Ohio Department of Education (ODE) is tasked with developing new funding reports that explain funding model allocations. New funding reports will demonstrate changes in base funding, direct funding of students where enrolled and the application of current statistics. Funding reports issued by ODE will incur progressive updates throughout July, August and September to include the components of the Fair School Funding Plan. FY22 actual funding allocations will not be available until the October or November reports. ODE funding reports can be found here: Traditional School Districts Funding. The results of the funding model will be included in the 2021 fall update of the five-year forecast.
June 30, 2021
What is the status of the latest state biennium budget?
Governor DeWine prepares to sign the latest biennium budget in the next few days. This biennium budget includes significant changes to school funding with the inclusion of the Fair School Funding Plan (FSFP). Representatives Cupp and Patterson led a work group comprised of superintendents, treasurers, and economists that developed this plan during the past several years. Senators Sykes and Lehner supported the plan through the most recent legislative efforts to include the plan in the 2022-2023 biennium budget. Specific components of the plan can be found here: Ohio Fair School Funding.
What does the FSFP mean for Olentangy’s financial future?
If approved by Governor DeWine, estimates indicate that Olentangy will receive an additional $3.5 million in each of the next two fiscal years. This would provide the district with revenue for an additional four to five days of operations each year. Additionally, the district would no longer incur reductions for the Jon Peterson or Autism scholarships. The state would fund students where they are educated. This direct funding methodology would save the district approximately $1.5 million in annual deductions.
Why doesn’t the plan provide more funding if the funding formula was ‘fixed’?
Legislators were unwilling to support the funding of this model beyond the 2022-2023 biennium budget. The funding estimates represent the first two years of a six-year implementation as presented by the House.
April 12, 2021 - School Funding Virtual Public Forum
The District held a School Funding Virtual Public Forum March 22 featuring Senator Andrew Brenner, State Reps. Rick Carfagna and Kris Jordan, as well as District Superintendent Mark Raiff and District Treasurer Emily Hatfield. The group discussed the state's current school funding status as well as an update on the status of the Fair State Funding Plan.
November 6, 2020
Senators Peggy Lehner and Vernon Sykes introduce SB 376, a companion bill to substitute HB 305- the Fair School Funding Plan. The Senate bill and substitute HB 305 are identical, thus allowing for hearings to occur simultaneously in both the House and Senate.
Testimony in both legislative branches are expected to begin in the next week or two. Hearings may be viewed on www.ohiochannel.org.
Additional information regarding the details of the Fair School Funding Plan are available at https://sites.google.com/view/ohiofairschoolfunding.
We encourage you to contact your legislators regarding this very important matter. Your legislators may be found at http://webapp2.ode.state.oh.us/legislator/search/.