How are school districts financed?
School districts in Ohio are financed with a combination of federal, state and local funds. At the state level, school districts receive funding from the Ohio Department of Education’s (ODE) general revenue funds and Ohio Lottery profits. At the local level, school districts receive funding from locally levied property taxes. School districts also can receive funding from income taxes approved by voters.
What is a property tax levy?
A property tax levy is the collection of taxes charged on the value of property. Each district must follow a process described in Ohio law in order for taxes to be levied on property within the district. Boards of education propose additional local tax revenues by board resolution. School districts can place a levy on the ballot up to three times a year on specified election dates. If a majority of voters in an election approve the tax, county officials charge and collect the tax under the terms specified in the tax levy proposal. The collected funds are then disbursed to the district. When a levy is placed on the ballot, it must identify as its objective a legally defined school district purpose.
What types of property can be taxed?
Real property subject to taxation includes the buildings and land held by individuals or businesses. Real property is divided into two classes: Class I (residential and agricultural) and Class II (commercial, industrial and all other real property).
What are different types of levies?
Operating Levy
- For day-to-day operating expenses
- Expressed in mills
- For a specified period of time or for a continuing period of time
Emergency Levy
- For day-to-day operating expenses
- Expressed in dollars
- Must generate a fixed dollar amount each year it is in effect
- Cannot exceed a period of 10 years
Permanent Improvement (PI) Levy
- Cannot be used for daily operations
- For improvements with an expected life of 5 years or more
- Expressed in mills
Bond Levy
- Cannot be used for daily operations
- For buildings, building improvements or land acquisition
- Debt charges are paid on outstanding debt
- Expressed in mills
What is an operating levy?
Operating levies provide school districts money to be used for day-to-day expenses such as salaries, supplies, utilities, transportation, activities and programming.
Why do some levies also include a piece for Permanent Improvement funds?
A Permanent Improvement levy is used for improvement projects, maintenance and repairs of school property that are designed to last five years or more. Permanent Improvement funds allow districts to continue providing first-rate facilities for students, staff and the community to use year-after-year. Funds generated by a permanent improvement levy cannot be used for operating expenses, such as personnel, benefits and instructional supplies.
What is a mill?
The unit of value for expressing the rate of property taxes in Ohio is the
“mill.” A mill is defined as one-tenth of a percent or one-tenth of a cent (0.1
cents) in cash terms. Millage is the factor applied to the assessed value of
property to produce tax revenue.
- Inside or unvoted mills: Millage imposed by local governments without
voter approval as defined in the Ohio Constitution. The constitutional limit for
these taxes is 1% or 10 mills. Public schools, cities, counties and other local
governments within a taxing district are allocated a portion of the inside mills
collected within the district.
- Outside or voted mills: Millage approved by voters. Outside mills are subject
to the property tax reduction factor.
- Effective mills: In the case of real property, a difference can exist between a
tax levy’s rate as authorized by the voters and the actual amount of mills charged
against a district’s assessed valuation. The effective millage rate reflects the fact
that the original number of voted mills has received an adjustment to compensate
for the impact of inflation on real property values.
Does the millage rate apply to 100% of my home value?
No. The millage rate only applies to 35% of your home value, not 100%.
What is the House Bill 920 factor?
In 1976, the Ohio General Assembly passed House Bill (HB) 920, which reduces the taxes charged by a voted levy to offset increases in the value of real property. This is called the property tax reduction factor or HB 920 factor. The reduction factor applies to both Class I and Class II real property. This means the amount of outside millage taxes collected on property will not exceed the amount collected at the property’s value in the first year the taxes were collected. Although property values may increase while the levy is in effect, the amount of taxes collected on those properties do not increase. The reduced rate at which taxes are collected is termed the “effective” millage.
For instance, if a school district receives voter approval on a levy and the following year, after a reappraisal, property values have increased, HB 920 does not allow the school district to receive any additional revenue from this voted levy. In order for the school district to raise more revenue, it must go to the voters for approval of another levy.
Why do schools rely on continuing levies?
Continuing levies provide a reliable funding source for schools and is the way a majority of Ohio public schools fund their operations and improvements. They allow the district to plan for future needs, continue essential services and maintain high-quality programming to support the academic, social and emotional health of students.
Why do schools ask for levies every 4-6 years?
In a majority of school districts, real estate tax dollars account for the largest portion of revenue. HB 920, which was enacted in 1976, restricts tax dollar growth as property value increases. But because expenses continue to rise, schools ask voters to approve levies to keep up with increasing costs. Unlike income and sales taxes, which rise with inflation, school property tax revenue is frozen at the last dollar amount approved by voters and school districts are faced with increasing costs and flat revenues during the periods between levies. Eventually, expenditures are exceeding revenues each year, resulting in less operating funds.
How does our school tax millage compare to other local districts?
Rocky River's property tax rate remains near the bottom in Cuyahoga County (28th of 31). Although RRCSD has had a total of 91.27 voted and inside mills, this has been reduced by HB 920 to 35.47 effective mills, which is the actual amount taxed. To view a community tax bill comparison of other districts in Cuyahoga County, please click here.