School funding 101: Understanding levies

Posted On: Friday, October 16, 2020

As the Nov. 3 election draws closer, voters in Ottawa Hills likely have questions about school funding. Here is information to help understand how schools are financed and the role of levies and property taxes in that financing.

Public schools in Ohio are funded from two main sources: state funds and property taxes.

In Ottawa Hills Local Schools, state funding provides about 20 percent of revenue; the rest comes from property taxes. The state funding model differs for every district. From the Ohio Department of Education website: “The amount of state funds that a district receives is based on a formula that takes into account the student enrollment and the property wealth of the district."

Districts like Ottawa Hills receive far less in state funding because of the property valuation in the Village and the income and wealth index of residents. It is expected that districts like Ottawa Hills will generate most of its funding through property taxes.

Property tax in Ottawa Hills is almost exclusively residential.

Most districts have commercial businesses helping to shoulder the cost of property taxes that fund schools. In Ottawa Hills, however, the cost falls nearly exclusively on residents because there is almost no commercial property within the Village. By contrast, Toledo Public Schools generates a significant amount of revenue from business property taxes.

Still, school funding through property taxes has limitations because of House Bill 920, which was passed by the Ohio legislature in 1976. It states that millage acquired through a levy on property can never increase, even if property valuations go up. However, it can decrease if property valuations go down.

Example: If the district’s Issue 16 (a 4.9 mill operating levy) passes on Nov. 3, the district will receive from it an estimated $794,000 per year starting in 2021 based on current Village property valuations. The next time the state auditor revalues properties, valuations will likely rise. But when property valuations increase, the effective millage decreases so as not to exceed the $794,000 per year tax collection. Property owners benefit because their tax bills cannot go up--even by $1--without the request and approval of an additional levy.

Changing enrollment is an important factor for every Ohio school district.

You might think that in a community the size of Ottawa Hills (estimated population: 4,470), changing enrollment wouldn’t have much effect on financing. But in recent years, it actually has. In the past four years, district enrollment has grown by almost 140 students: from a recent low of 913 in 2016 to 1,050 this school year (the highest since 1971). With each additional student, the district receives about $2,600 in additional state funds. It receives $0 in additional property tax. The cost to the district to educate each child is about $15,000.

(The total budget for Ottawa Hills Local Schools is just under $16 million for 2020-2021; expenses are budgeted to be $17.7 million. You can find the district's annual budget and Five-Year Forecast here.)

The last time Village voters passed a school operating levy was in 2013. The revenue collected from district millages has stayed exactly the same every year since. State funding adjusts a little year to year, but effectively stays the same over time. So revenue basically stays flat – forever. In the meantime, cost of living, student enrollment, and needs for additional intervention specialists and counseling positions have all increased. Meanwhile, state funding has now been reduced to COVID-19.

Every Ohio school district faces similar funding challenges.

State funding vs. property tax revenue varies by district, but wealthier districts are expected to provide the majority of school funding locally. Every school district has to go back to the voters to ask for additional millage every three to five years. Wealthier districts are even more reliant on property taxes than other districts.

Additional information about the issues on the Nov. 3 Village ballot:





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