About School Funding

How are school districts financed?
Ohio school districts are financed with a combination of state, local and federal 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. Federal funds come to school districts in the form of grants that are restricted for specific purposes.

What is a property tax levy?
A property tax levy is approved by voters to charge a millage rate on the value of property.  A mill is $1 of taxation for every $1,000 of property value.  In Ohio, property is taxed at 35% of its appraised value (or market value) as determined by the county auditor. 

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 two 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 are different types of levies?

Operating Levy

• Fixed rate levy, expressed in mills
• For day-to-day operating expenses
• For a specified period of time or for a continuing period of time

Emergency Levy

• Fixed sum levy, expressed in dollars
• For day-to-day operating expenses
• Must generate a fixed dollar amount each year it is in effect
• Cannot exceed a period of 10 years

Permanent Improvement (PI) Levy

• Fixed rate levy, expressed in mills
• Cannot be used for daily operations
• For improvements with an expected life of 5 years or more

Bond Levy

• Fixed sum levy, millage rate is set to produce enough revenue to meet outstanding debt obligations
• Cannot be used for daily operations
• For buildings, building improvements or land acquisition

What is an Operating levy?
Operating levies provide school districts money to be used for day-to-day expenses such as supplies, utilities, programming, activities and personnel costs.  

What is a Permanent Improvement levy?
A Permanent Improvement levy is used for building and facility maintenance, security and technology costs and replacement of computers, vehicles and furniture.  PI funds can be used for improvement projects, maintenance and repairs of school property that are designed to last five years or more. PI funds allow districts to maintain safe and secure facilities for students, staff and the community.  Funds generated by a permanent improvement levy cannot be used for operating expenses, such as personnel, benefits and instructional supplies.

What is a mill?
Local property taxes are levied in mills. A mill is one thousandth of a dollar. Millage is the factor applied to the assessed value of property, which is 35% of the appraised value determined by the county auditor, 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.  Each taxpayer is assessed 10 inside mills, which are unvoted mills. The rate is always the full 10 mills, and each tax bill will adjust proportionately as the property's value changes. Of the 10 inside mills, Oakwood Schools receives 4.72 mills, Oakwood City receives 3.58 mills, and Montgomery County receives 1.7 mills.
• 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. 

What is House Bill 920?
H.B. 920 was passed in 1976. The purpose of the bill was to keep inflationary property value increases from increasing property taxes without a vote of the people. Basically, H.B. 920 says the amount of revenue a levy will generate annually for  a district will stay the same throughout the life of the levy. If property values increase, the effective millage rate of the levy will roll back to achieve the same annual tax revenue for the district. The only exception is that new construction may generate additional revenue for the district.

If my property value increases due to the Montgomery County Auditor’s Office triennial update, will I pay more for these levies than the original amount estimated?  

A taxpayer always pays tax on their current property value.  If the value increases, that value is multiplied by the EFFECTIVE tax rate. The effective tax rate changes (in this case, reduces) so the school district collects the same amount as originally certified by the county auditor. 

Here's an example:

Let's say the average value across the district goes up 30%. The auditor will reduce the effective rate of all voted levies so the District continues to collect the same amount of money as the year before (or in this case, the amount certified by the auditor).  However, each individual taxpayer may experience something different.

• Taxpayer A experiences a 50% increase in value. Their new value is used to calculate their tax bill based on the effective rate the county auditor sets.  This person will likely experience a tax increase because their value went up more than the average in the district.
• Taxpayer B experiences a 30% increase in value. Their new value is used to calculate their tax bill based on the effective rate the county auditor sets.  This person will likely experience a tax bill that is very close to the amount from the prior year for voted tax levies because their value went up an amount equal to the average of the whole district.  This taxpayer may still pay a little more on their overall tax bill because of inside millage.
• Taxpayer C experiences a 10% increase in value. Their new value is used to calculate their tax bill based on the effective rate the county auditor sets. This person will likely experience a tax decrease for voted tax levies because their value went up less than the average in the district.  This taxpayer’s bill for inside millage will increase, but they may still see an overall tax bill reduction.  

The county auditor sets the effective rate based on the average increase in value throughout the district. Every taxpayer pays the same effective rate.  Their individual value is then multiplied by this new effective rate.

For information on how levies impact your property, you can call the Montgomery County Auditor's office at 937-225-4236