Even though Governor DeWine has put his signature on the biennial state budget bill, the process still isn’t quite over. On the heels of sixty-seven line item vetoes, lawmakers are planning a return to Columbus to override several nixed property tax provisions in late July. Given the uproar over rapidly increasing property taxes—a result of skyrocketing home values—as well as the legislature’s extensive review of this issue, it’s not surprising to see lawmakers seeking to undo the property-tax vetoes and making every effort to quickly provide taxpayer relief.
In his veto message, DeWine acknowledged citizens’ concerns and promised to convene a working group to explore reform efforts. But he also expressed unease about the fiscal implications of the proposed measures on school districts. The governor is correct that a balance must be struck, and he rightly nixed one of the General Assembly’s proposals that would diminish districts’ capacity to wisely steward funds. However, he was wrong to veto two reforms that would create a fairer and more intelligible property tax system for voters, one that allows them to hold districts more accountable at the ballot box. In summary, here’s where the General Assembly should land on three vetoed property-tax items.
Override the governor’s vetoes regarding:
Emergency and replacement levies. The General Assembly proposed to eliminate districts’ ability to put two unconventional types of levies before local voters: the emergency levy and replacement levy.[1] The governor vetoed the proposal on grounds that they are “important tools” for school districts. However, both types of levies defy principles of transparency and fair play, as they use language that could be easily misunderstood by citizens and give districts built-in advantages at the ballot box.
- Emergency levy: To put this type of levy on the ballot, districts need not be in any category of state-defined fiscal distress. All they must do is show the levy is needed to “avoid an operating deficit” at any time in the future, something that could be easily manufactured on paper (e.g., penciling in large pay raises). Districts should not be allowed to use misleading and inflammatory language to gin up votes. Instead, they should be required to use more conventional and neutral ballot language that already exists (seek “renewal” or “additional” levies).
- Replacement levy: This extends an existing levy already on the books. While the “replacement” language sounds innocuous enough—as if it maintains homeowners’ current tax liabilities—this levy actually socks them with a higher tax bill. As illustrated here, a replacement levy resets the tax rate to the higher rate that was initially voted upon years ago, which in turn allows districts to capture revenue gains through property inflation. Districts should, of course, be able to ask voters for more revenue, but they should do so using mechanisms that signal to citizens that their tax bills will rise (“additional levies”).
Twenty mill floor calculation. The General Assembly proposed an important change in the way the 20 mill (2 percent) property tax floor is calculated. As a quick refresher, districts whose rates are at this floor automatically generate additional “unvoted” tax revenues when property values increase. This can be a windfall for districts, but it also hammers taxpayers who are no longer protected by Ohio’s longstanding tax reduction factors. In short, whether a district is at the 20 mill floor is highly consequential for taxpayers, and as of 2023, about two-thirds of districts are at this floor in at least one of two property classes (residential or commercial/industrial).
But in a mathematical quirk, certain property taxes (emergency levies, most notably) do not count towards the 20 mill floor. This allows districts to exploit the floor and emergency levy, together, to gain revenues through inflation and by putting another levy on the books. House Bill 96 would close this loophole by including already enacted emergency levies in the 20 mill calculation. This will move some districts above the floor, and would provide residents in those districts with the same inflationary protections that citizens in other districts receive.
Let the governor’s veto stand on district cash carryovers
Concerned about the large sums of cash some districts have accumulated, the General Assembly proposed a carryover threshold—a year-end cash balance at or above 40 percent of a district’s annual expenditures—that triggers property tax refunds to local citizens. The idea was understandable: It would provide immediate tax relief for Ohioans residing in districts with seemingly “excessive” amounts of funding. But the proposal also runs the risk that districts will simply unload their cash reserves in careless ways—e.g., giving every school employee big one-time bonuses—just to get under the threshold. This would not only represent wasteful spending, but also undermines the policy goal of providing tax relief. Governor DeWine was right to veto the simple yet likely ineffective cash carryover provision.
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Many Ohioans are clearly upset with the local tax system, so much so that a grassroots initiative has emerged to repeal property taxes altogether. That effort would be incredibly disruptive to school districts and other municipal services that rely on this revenue source. Yet the public frustration is understandable, given the system’s complexity and structural flaws that seem to favor higher taxes. This year’s budget bill took some thoughtful steps toward a fairer and more even playing field between citizens and local government. Those provisions should be enacted as soon as possible.
[1] The budget bill also eliminates the “substitute” levy, which extends an emergency levy slated to expire.
