How school districts are 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.
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. Simply put, 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.
Examples
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.
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
Understanding Millage
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.