By Brian Massie, Lake County, Ohio resident
In my ongoing efforts to try to understand Ohio’s complex property taxes, I have done quite a bit of research on the rules dealing with the 20 mil floor.
I would like to publicly thank Lake County Auditor Chris Galloway and the ever helpful and extremely knowledgeable Barb Hogya of Auditor’s office for spending time with me explaining how the 20 mil floor impacts local taxpayers. In addition, Ms. Daria Shams, Senior Policy Analyst of the Office of Budget and School Funding, was very helpful in explaining that the 20 mil floor does not impact the State’s school funding formula.
To our State Representative, Jamie Callender, you were elected to help all of your constituents, and not just your friends and donors. It is shameful that you did not respond to my email for help.
The State of Ohio decided from the very beginning that citizens should pay 1% (10 mills) of their property values annually to ensure that local government has the funding to operate and provide need services. This is known as “inside millage”, and the citizen has no vote or choice, it is simply assessed by the government. The inside millage is shared by the various governmental sub-divisions, and is not given 100% to the public school district.
There are nine public school districts in Lake County. Here is the current inside millage approved for each district:
Willoughby-Eastlake 4.80 mills
Kirtland 4.80 mills
Perry 4.20 mills
Riverside 4.80 mills
Wickliffe 5.20 mills
Painesville City 4.72 mills
Mentor 4.80 mills
Madison 4.85 mills
Fairport 5.24 mills
Let’s discuss the outside millage as it applies to schools.
The State legislature also decided that the local public school districts should also have a minimum of 1% (10 mills) to operate the schools. This is known as outside millage, and requires a vote of the citizens. Only levies dealing with current expenses are factored in the 20 mil floor calculating.
The following is an example of “Schedule A” maintained by the Lake County Auditor’s office. It provides the details for the Willoughby-Eastlake School District property tax levies. For now, I would like you to focus on the bottom part dealing with all ten of the levies currently being assessed to the taxpayers.
The first entry deals with the “inside millage” of 4.80 mills. The second entry is a levy passed in 1976 for 32.50 mills. It has now an effective millage of 15.200023.
You may wonder how did the number of mills drop from 32.50 to 15.20 mills? That is a product of law known as HB 920 that was passed in 1976. The purpose of the law was to prevent inflation from increasing property taxes. So, as your home values increased the number of mills was reduced in order to collect the same tax amount that was originally voted on by the taxpayers.
However, the combined inside millage plus the effective outside millage rate could not drop below 20 mills (2% floor approved by the State legislature). This is the 20 mil floor!
In addition to the Willoughby-Eastlake school district, the Kirtland and the Perry school districts have reached the 20 mil floor.
I hope you are still with me.
What does that mean for the taxpayers?
In the Willoughby-Eastlake example, when we add the inside millage of 4.80 and the 15.20 outside mills we get 20 mills in total. HB 920 is no longer applied to the outside mills for the 1976 levy and the outside millage for that levy is treated just like the inside millage. From now on, any increase in the property valuations will mean an automatic increase in property taxes without a vote of the taxpayers!
I wondered how the 20 mil floor would impact the State of Ohio school funding formula. Here is the reply that I received from Daria Shams, Senior Policy Analyst of the Office of Budget and School Funding.
“The state foundation funding is totally independent of the local taxes and efforts and its calculation does not involve local revenue. State foundation funding only considers a district’s potential to raise local funds through property and income taxes or through the residents’ ability to pay as measured by their income. As far as the state foundation funding is concerned, whether a district is at the floor in terms of revenue raising millage rates or above it is totally irrelevant. The only time the state funding is affected by local taxes, is when the tax base is increased or decreased, like if new properties are added or a business moves out of the district, or a plant shuts down. These all involve the potential for generating taxes and not the real generation of taxes. I hope this helps.”
The State is looking at the local community’s ability to pay for their own public schools. The greater the perceived wealth of the district the less financial assistance is provided by the State of Ohio.
We will next explore the State Funding Formula in another article.