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Public School Finance 101


Where does the Firelands Local School District revenue come from?

In Ohio, the funding of schools is shared by the state and local school districts. The Ohio

General Assembly determines what an adequate education costs in the State’s biennial education budget. The constitutionality of Ohio’s funding system has been in litigation for more than 17 years and no acceptable resolution has been passed by the state legislature. The Ohio Supreme Court ruled that the existing system of funding public schools did not provide sufficient monies to support an “adequate” education for all pupils. The court also found the division of responsibility between the state and its school districts relied too heavily on local revenue generated through property taxes. State and national mandates continue to be unfunded or underfunded placing a strain on the District’s budget and local taxpayers.

Firelands lacks a strong commercial base with approximately 90% of the District’s valuation classified as residential and agricultural. Less than 10% of our total revenue from taxes comes from commercial/industrial, which places a larger tax burden on our property owners for the operation of the schools.

Local Revenue 61%

State Revenue 39%

Where does the Firelands Local School District money go?

Instruction $9,668,190

Instruction is the largest expenditure category and the one most directly affecting students. The costs (teacher salaries and benefits, classroom materials, and textbooks) relate to the direct instruction of our students.

Support Services

Board and Administration $1,554,099

Costs related to the overall operation of the District and provision of administrative support to the staff and community.

Support Services

Pupil Support $1,571,390

Costs associated with services such as guidance, educational aides, special education, media centers, gifted services, health services, psychological services, and district curriculum.

Support Services

Business and Fiscal $709,619

Costs associated with all fiscal services, including budgeting and accounting services, payroll and fringe benefit processing, annual auditing, and purchase process of the District.

Operations and Maintenance $1,223,089

Costs associated with ensuring that the students and staff have a safe and efficient environment through custodial and grounds services and building repairs.

Transportation $1,152,248

Costs associated with transportation services, bus maintenance, and repairs to the vehicles owned by the district.

Extracurricular Activities $457,292

Costs associated with salaries and benefits of club advisors, fine arts advisors, extracurricular activities, and athletic coaches.

Does the district have a long-range financial plan?

The District has a five-year plan as required by law. The plan is located on the Treasurer’s web page along with detailed notes. The district is required to file a 5-year forecast with the State of Ohio by October 31 and to update it no later than May 31 of each year. The five-year forecast allows the State to anticipate the current and future financial status of all public school districts in Ohio for state budgeting purposes pertaining to public education.

I do not have students in the schools, why are the schools important to me?

Every resident of the Firelands Local School District has a stake in the schools remaining strong. Excellent schools are a vital part of a strong community. Quality schools mean higher property values and keep Firelands a desirable community in which to live and to raise a family.

How does open enrollment affect the Firelands Local School District?

Enrollment in the Firelands Local School District peaked at approximately 2,200 students during the 2003-2004 school year. Since that time, resident District enrollment has decreased each year. In our efforts to maintain District enrollment for funding purposes, Firelands practices full open enrollment

What is a mill?

Local tax rates against property are computed in mills. A mill is one-tenth of a penny (.001).

  • A mill produces 10 cents in tax income for every $100 worth of property it is levied against.
  • A mill produces $1.00 in tax income for every $1,000 of property it is levied against.
  • A mill produces $1,000 in tax income for every $1 million of property it is levied against.

The total property valuation for tax purposes in the Firelands Local School district last year was approximately $295 million dollars. Therefore, each mill generates approximately $295,000 each year that a levy is in force for the school district.

The tax rate expressed as mills is applied each year to the “Assessed” valuation of real property. Assessed valuation is 35% of the appraised value of the property. Therefore, for every $100,000 in “appraised value,a mill produces $35.

Currently, Firelands Local School residents pay school taxes of:

Where did the 51.98 mills come from?

The 51.98 mills is derived from operating levies passed by the community in 1976 (30.60 mills), 1981 (5.00 mills), 1987 (4.90 mills), 2006 (2.83 mills), and 2011 (4.95 mills). Within the 20 mills are 3.7 mills assigned to Firelands Local Schools by the County Auditor’s Office. These mills are known as “Inside” mills and they were assigned by the county many years ago and are not voted on. The remaining 48.28 mills are mills that have been approved by the voters in past years, and are called “Outside” mills.

It is important to note that as property values increase, voted millage rates decrease so that school districts do not collect any additional money on voted millage due to inflation. Over time, millage rates could be reduced to near zero. To keep this from happening, Ohio law establishes a minimum millage level, or floor, that millage rates cannot fall below. The minimum level is 20 mills. Once a district's total millage is reduced to 20 mills, it cannot be reduced any further, hence the 20 mill floor.

What levy formats have the Firelands Local Schools chosen to use over the past years?

Operating Levies are for the day-to-day expenses of running the school district. The levies are continuing, which means once approved by voters, the levy will be collected until withdrawn by the district or repealed by the voter. The last Firelands Local Schools Operating Levy passed was in 1987 for 4.9 mills.

Emergency Operating Levies are also for the day-to-day expenses of the district. This type of levy is submitted to the electorate as a dollar amount for a period of one (1) to ten (10) years. The mills are adjusted each year of the levy to account for changes in the tax duplicate in order to keep the school income constant for the term of the levy. After the voted period lapses, the levy expires unless reapproved by a vote of the electorate. The last Firelands Local Schools Emergency Levy passed in 2011 for 4.95 mills.

What are tax reduction factors?

Until 1976, continuing levies were just that. Millage was applied to real property at its assessed value. The millage of a continuing levy remained constant; therefore, if the value of the property went up, so did the tax. At that time, property values began to rise sharply. The state legislature believed that taxes should not increase due to increased property values. Thus, the passage of House Bill 920, which limited a continuing property levy to collect the same dollar amount as it collected in the year that it was voted.

Under this bill, which is still in effect today, the tax dollar amount of a continuing levy remains constant. When the value of the property increases, the millage is reduced by the County Auditor. This reduction to the millage is to ensure that the same dollar amount that was originally passed is all that is collected.

House Bill 920 is one of the major reasons that school districts in the State of Ohio place a new levy on the ballot every two to five years. Costs keep increasing, but the revenue remains the same.

Over the years, Firelands Local School District voters have approved 40.5 mills in continuing levies and 7.78 mills in emergency levies for residential and agricultural property. Because of HB920 Tax Reduction legislation in 1976, the current “voted” mills have been reduced from 48.28 “voted” mills to 27.96 “effective” mills.

Exceptions to HB 920:

Few exceptions exclude certain taxes from the operations of HB 920, but these exceptions have important consequences for school finance. The exceptions include:

  • Inside mills – A school districts un-voted mills are never reduced by a tax reduction factor.
  • Bond levies – A bond levy collects only as much revenue as required to pay debt service. Therefore, bond levies have an internal reduction mechanism and do not require the use of HB 920 reductions.
  • Emergency school levies – School districts may ask voters for authority to levy an “emergency” amount of dollars for up to 10 years. As with a bond levy, this levies only a specified number of dollars and carries with it an internal rate limitation.
  • 20-mill floor – Tax reduction factors may not force a school district’s effective tax rate below 20% (20 mills).
  • New Construction – Increases in valuation caused by new construction do not trigger any offsetting reduction in taxes.

How does the school district determine how much to levy and when?

As stated above, the average school district levy request occurs every two to five years. Over the period between levies, the school district is faced with increasing costs and flat revenues. The levy amount is set to accommodate this increase by collecting more than is spent in the early years to make up for a projected deficit in its later years. School Board members examine the costs of running the district as presented to them by the School Treasurer. The Treasurer is required to submit a new Five Year Forecast to the state twice per year. This document, which is posted on the district’s website, guides the Board of Education in making financial decisions. Board members look closely at programs and services of the district to see where money is needed and where money could be saved. They determine how much money they will need to fund the operating expenses of the district.

When do our taxes increase?

The county auditor completes a re-evaluation every 3 years and taxes are adjusted in January of the following year. In Lorain County, the next “desk” re-evaluation will occur in 2015 with tax bills adjusted in January 2016. Some residents will receive increases in taxes and some residents will receive a decrease. If your taxes increased, this means that another resident’s taxes decreased. Ohio law (HB920) does not allow schools to receive additional monies from voted levies when the county auditor re-evaluates property.

How does Firelands Local keep our costs low?

Although the Board of Education attempts to “operate like a business,unlike a business, there are activities that school districts cannot do or control:

  • Control the materials (number or type of students enrolled)
  • Control the production line (lower the credits to graduate or the hours in the school calendar)
  • Advertise with tax funds for a levy campaign
  • Operate at a deficit
  • Go out of business

Many costs are mandated by the State and/or Federal government and are either unfunded or under-funded. Some recent mandates are:

  • Collective Bargaining mandated 1983
  • Charter Schools Authorized 1992 (payments charged to public schools).
  • School Employees fingerprinting and background checks 1993
  • Educational Management Information System implemented 1998
  • Special Education Mandates
  • NCLB – No Child Left Behind 2002
  • Third Grade Reading Guarantee 2014
  • Resident Educator Program 2014
  • Ohio Teacher and Principal Evaluation System (OTPES) 2014
  • College Credit Plus Program 2015
  • Ohio’s new learning standards and end of course exams 2015

Education is heavily reliant on people. In 2014, 78% of our resources were spent on wages and benefits. Costs, such as utilities, county auditor and county treasurers’ fees, account for less than 1% and are charges over which the district has little control. This means only 20% of the budget is discretionary and the majority of the discretionary spending is spent on the mandates listed above.

What are other factors that affect school district revenues?

In an attempt to generate growth in commerce and industry, both the state and local government have enacted laws that reduce revenue for the schools.

HB 66 This bill accelerated elimination of the Tangible Personal Property Tax for businesses. Starting in calendar year 2006 through 2011, the State of Ohio replaced most of the taxes lost due to this bill. In calendar year 2012, the state began phasing out this reimbursement. In 2013, the state stopped the reimbursements. At this time, we no longer receive Tangible Personal Property Tax. This law eliminated approximately $500,000 of existing Firelands Local School District resources.

Tax Abatements – For many years, state tax policy has connected the prospects for economic development with the implementation of special tax concessions for business expansions. A variety of tax incentive programs enable county, municipal or township governments the ability to grant exemption from the property taxes applicable to new business investment. At least in some cases, school districts may play a role in the process by which local governments grant such concessions. In addition, in some instances, the beneficiary of a tax abatement may make payments in lieu of taxes to a school district under a contractual arrangement.

Tax Increment Financing (TIFs) – As further encouragement for economic development, the state has adopted tax policies by which a commercial development receives an abatement of taxes on the taxable property value of a new investment. As part of the abatement agreement, the taxpayer agrees to pay payments in lieu of taxes for use in financing site improvements by the city or township or county intended to facilitate the development. This policy has the effect of diverting taxes chargeable by a school district for education purposes into a cash flow used to fund economic development.

What is the current enrollment of the Firelands Local School District?

At the end of the 2013-2014 school year there were 1,770 students enrolled in the District.

Who determines how much I pay in taxes?

The State Legislature determines the level of state aid given to schools, they set the amount of homestead credit, they set the “inside” millage everyone must pay, and they mandate schools to provide programs that the Legislature does not fund.

The Auditors of Lorain County, Erie County, and Huron County assign each property a market value and property classification.

The Firelands Local Schools Board of Education determines the dollar amount needed and submits this figure to the County Auditor. The County Auditor determines the millage it will take to raise the dollar amount sought by the Board of Education.

The Voters must approve a levy request at the ballot box for it to be implemented.

Voted millage (outside) vs. Inside millage?

In Ohio, millage is referred to as "inside" millage and "outside" millage. Inside millage is millage provided by the Constitution of the State of Ohio and is levied without a vote of the people. It is called inside millage because it is "inside" the law. Another name would be un-voted millage.

The Constitution allows for 10 mills of inside millage in each political subdivision. Public schools, counties, townships, and other local governments are allocated a portion if the 10 inside mills. The Firelands Local School District is allocated 3.7 mills of the 10 inside mills.

Outside millage is any millage "outside" the 10 mills that is provided by the Constitution of the State of Ohio. This millage is voted in by the public. Another name for outside millage is voted millage.

What are “tax rollbacks” and the “homestead exemption?”

Taxpayers do not pay all of the taxes charged against residential and agricultural real property. All Class I property taxes receive a 10% discount. In addition, residential real property receives an additional 2.5% discount. Together, these reductions in real property taxes are called “rollbacks.

The homestead exemption allows senior citizens whose Ohio adjusted gross income is less than $30,000 to reduce their property taxes by exempting $25,000 of the market value of their home from all local property taxes. The limiting income provision applies only to homeowners who turn 65 beginning in 2014. No homeowner who currently qualifies for the exemption will lose it. To qualify, an Ohio resident must be at least 65 years old or be totally and permanently disabled and own and occupy a home as their principal place of residence. For individuals who own more than one home, the principal place of residence is the home where the person is registered to vote and the person's place of residence for income tax purposes.

Applications for the exemptions are available at the county auditor's office.

Under the HB59 state budget law any new or replacement millage will result in the elimination of Rollback and all new Homestead Exemptions are now means tested, effective beginning with all November 2013 enacted millage. This further complicates the ability of public school districts to explain tax levy proposals put before their voters and strains the ability of public school districts to pass new or replacement local property tax levies.

What is the “Tax Base of the Firelands Local School District?

The real property tax base equals the value of the property. “Value” means the market value multiplied by an assessment percentage of 35%. In other words, if a home has a market value of $100,000, its value for tax purposes equals $35,000. The county auditor reappraises all real property once every six years. In the third year after the reappraisal, the auditor updates the value of each property in the county. School districts have no direct responsibility for establishing the taxable value of property. However, school districts may participate in the valuation process by filing complaints against the value of property in the school district if the county auditor’s value appears too low.

The State claims to pay $5,800 to the school for every child. How much does Firelands Local Schools really get per student?

In Fiscal Year 2014, Firelands received $6,900,181 in school funding from the State of Ohio. Our Average Daily Members (ADM) was 1,635 at the end of May 2014. This equals $4,220 per student.

Why does the Firelands Local School District receive less than the full amount the state claims that they give each student?

The State of Ohio utilizes a formula that calculates how much money that a school district receives. The formula is complex with multiple variables for calculating funding for schools. The state determines a districts ability to pay based, in part, on the value of all of the property within a district. The more total property value per student” a district has, the greater its portion of the cost of an adequate education.

Why do I see yellow school busses everywhere?

Next to the cost of salaries and fringe benefits for staff, the cost of transporting students to and from school is usually the largest expense facing a school district. Ohio law requires districts to provide transportation for kindergarten through eighth-grade students who live more than two miles from their school. Public schools in Ohio, along with the responsibility for the children attending their schools, also bear the responsibility for transporting students attending private or parochial schools, as well as those attending community schools. Districts are required to transport these students in the same manner they provide transportation for their own students. However, the district is not responsible for transporting the students for any more than 30 minutes maximum travel time.

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