COLUMBUS — Ohio House Republicans’ proposed state budget expected to come to a vote on Wednesday is where previously separate debates over school funding and property tax reform are colliding.
Reacting to complaints among some growing districts back home that were facing funding cuts under Gov. Mike DeWine’s proposal, the House GOP plan guarantees no district will receive less basic aid from the state for the next two years.
But many of the same districts are also facing a scenario where they would see their local property tax collections cut if they’ve been sitting on year-end balances of more than 25 percent of their prior year operating budgets.
“That’s a whole new ball of wax that we’re still trying to process," said Tony Fenstermaker, treasurer for the North Baltimore School District in Wood County. “How did we arrive at 25 percent? Schools are only on the guarantee basis for two years based on this budget.”
“Those districts that are tied to the income tax, that’s a volatile number that fluctuates,” he said. “If we go into recession, that changes the budget. There are so many unexpected and uncontrollable things, so how did we arrive at this number?”
According to a legislative analysis, North Baltimore’s balance at the end of the last fiscal year was $6.4 million, or 59.6 percent of that year’s operating expenditures. The district would see increases of 3.2 percent and 2.9 percent in basic state aid over the next two years, respectively.
“Ohio’s public school districts had a carryover cash balance of $10.5 billion at the end of the last fiscal year,” House Finance Committee Chairman Brian Stewart (R., Ashville) said. “That is money left in their operating account — not including bond issues, not including federal money.”
He said 528 of Ohio’s 609 districts are carrying balances of at least 25 percent.
Under the House proposal, county budget commissions would be required to reduce school local property tax bills to offset what the state considers to be excess district savings.
“This is direct and much needed relief from Ohioans’ property tax burden,” Mr. Stewart said.
Organizations representing school administrators and their financial officers are urging lawmakers to separate the two issues. There are a number of separate bills pending in both the House and Senate to address various elements of property tax reform, but nothing has reached the governor’s desk.
A House vote on Wednesday would send House Bill 96 to the Senate. A final plan must reach Mr. DeWine’s desk by June 30.
The governor’s budget would not have fully funded what is supposed to be the final two years of a six-year phase-in of the Fair School Funding Plan. That formula is broadly designed to estimate what it would cost to educate a student in a specific school, look at how much a district is capable of raising in local revenue, and then try to compensate for differences with state funding.
Superintendents and treasurers generally prefer Mr. DeWine’s plan, despite the fact that most of their districts would have seen cuts in their immediate future. They like the fact that, unlike the House plan, the governor’s proposal would largely leave elements of the Fair School Funding Plan formula intact.
The House proposal instead has been presented as a “bridge” to a brand-new formula in the next one.
“A bridge to where? That’s what is concerning me,” said Perrysburg School District Superintendent Tom Hosler, part of the team that helped to write the Fair School Funding Plan.
On paper in the short term, Perrysburg would fare better under the House plan as opposed to Mr. DeWine’s. The House plan would put some $200 million more into a reworked formula over what the governor proposed, guaranteeing no district would see less state aid over the next two years.
Under the House plan, Perrysburg would see increases of 5.4 percent and 4.5 percent in the next two years. Under the governor’s plan, Perrysburg would have seen cuts.
But the district is carrying a year-end bank account of $25.5 million, or 36 percent, putting it in the crosshairs of the property tax clawback provision.
"This is a significant tax shift and a pretty complicated proposal,” Mr. Hosler said. “We’ve had eight days between when it was introduced and when it’s going to be voted on. A lot goes into this. Over 200 districts are on the income tax. Those dollars go into your cash balance. [Tax Increment Financing business deal revenue] goes into that cash balance.”
But any excess would presumably be returned to taxpayers in the form of property tax cuts.
Mr. Hosler said smaller savings accounts could also endanger district credit ratings as Wall Street evaluates their financial health.
Rossford School District’s $36.6 million budget carryover last year translated into a whopping 133.9 percent, one of a number of districts whose balances exceed their operating budgets. But Rossford plans to build a new $35 million middle school and intends to use some of its reserves to help pay for it, avoiding going back to the ballot.
Toledo Public Schools is treated pretty evenly between both the governor’s proposal and the House plan, and its 22 percent, or $8.3 million, budget carryover keeps it below the 25 percent trigger.
But TPS wouldn’t mind having healthier budget reserves.
“You never want it to be too big, but when you have a balance that starts falling too low, then you have to adjust finances when things happen, such as COVID,” Treasurer Ryan Stechschulte said.
It also plays a role when the district promises taxpayers that it won’t be back on ballot with another levy for a certain amount of time. Keeping that promise can involve banking cash on the front end to help get through the later years of levy’s life.
“We’re going towards the defunding of public education, switching to funding vouchers and private schools,” Mr. Stechschulte said. “I think there needs to be a conversation between the legislature and school district treasurers so they have a better understanding of how school funding works, why we have a large carryovers sometimes, and then why we have to ask for a levy again.”
First Published April 7, 2025, 7:53 p.m.
