HOW ARE SCHOOLS FUNDED IN OHIO?
• LOCAL SUPPORT
The property tax is the predominant method communities use to raise additional revenues in Ohio. The property tax comes in two forms:
* Real property tax- This is a tax levied on land and buildings located within the school district. Private individuals, businesses and public utilities that own land and buildings pay this tax.
* Tangible personal property - This is a tax levied on furniture, fixtures, machinery, equipment and inventory owned by business.
Key factors used in calculating property tax bills are the assessed valuation of property and the millage rate. The county auditor of each county in the state had the responsibility of appraising all taxable real property once every six years to determine the values. Every third year after each reappraisal another form of reappraisal, called an update, is conducted. Property tax bills are calculated on the assessed value of property, which equals 35 percent of the auditor's appraised value. For instance, a home with an appraised value of $100,000 will be taxed on a value of $35,000.
• MILLS
Local Property tax rates are always computed in mills. One mill costs the property owner $1.00 for every $1,000 of assessed valuation each year. In our example, the $100,000 will produce $35 in tax revenue for each mill.
In Ohio, millage is referred to as "inside" millage and "outside" millage. Inside millage is the millage provided by the Constitution of the State of Ohio and is levied without the vote of the people as established very early in the State's history. The inside millage rate is limited to ten mills in each political subdivision. Public schools, cities, counties and other local governments are allocated a portion of the ten inside mills. The Rocky River School District's portion is 4.57 mills. Outside millage is the millage voted in by the public.
There are two major forms of tax credits property owners receive.
1. The first is a 12.5 percent millage rollback. With this credit, a homeowner receives a credit of 12.5% on the total gross property tax amount due. In our example, the property owner would receive a credit of $4.38 ($35 x .125).
2. The net tax bill would be $30.62. The State of Ohio reimburses the amount of this credit back to all the taxing authorities, so they end up collecting the full amount of the levy.
• HB 920- THE CONTROLLING FACTOR
Another key tax credit is known as House Bill 920, which went into effect in 1976. This credit effectively freezes all voted real property millage at the dollar amount collected the first year the millage went into effect. As property values rise through reappraisals, the outside millage rate is commonly referred to as "effective" millage. The inside mills are not affected by the House Bill 920 credit, so a small amount of additional revenue is gained as property values increase.
• STATE SUPPORT
State Foundation - The State of Ohio provides funding to school districts by way of a foundation formula. The foundation formula method of funding Basic Aid takes into account the ability of school districts to raise taxes locally as well as a state determined minimum amount necessary per student to provide an adequate education. The formula is designed to provide a higher level of assistance to school districts with low property wealth relative to districts with higher property wealth.