This briefing document provides an overview and analysis of Ohio Senate Bill No. 66 (SB 66), which proposes to amend section 319.301 of the Revised Code. The bill aims to alter the calculation of a school district’s effective millage floor by including additional types of levies and taxes in the determination.
1. Summary of the Bill’s Purpose
Senate Bill No. 66 seeks to modify the formula used to calculate the effective millage floor for school districts in Ohio. The current law, outlined in section 319.301 of the Revised Code, mandates reductions in property tax levies under certain conditions to prevent inflationary revenue increases due to property value appreciation (commonly referred to as “rollback”). This bill proposes to broaden the base used to determine the effective millage floor by including several types of levies and taxes that are currently excluded from this calculation.
2. Key Provisions and Changes Proposed by SB 66
The core change proposed by SB 66 is the amendment of section 319.301(A) of the Revised Code. Specifically, the bill seeks to include the following in the calculation of a school district’s effective millage floor:
- Emergency Levies: These are typically short-term levies approved by voters for specific immediate needs.
- Substitute Levies: These levies replace existing levies, often combining multiple existing taxes into one.
- All Inside Millage: This refers to the unvoted property tax within the ten-mill limitation imposed by the Ohio Constitution (Section 2, Article XII).
- School District Income Taxes: These are income taxes levied by school districts, as defined in section 5748.01 of the Revised Code.
The bill explicitly states the intention of this amendment by proposing the following change to the Revised Code:
“To amend section 319.301 of the Revised Code to include emergency levies, substitute levies, all inside millage, and school district income taxes in the calculation of a school district’s effective millage floor.” (Lines 4-8)
Currently, section 319.301(A) lists specific taxes that are exempt from the rollback reductions. These exemptions include taxes levied to produce a specified amount (like debt service or those under sections 5705.199 or 5748.09), taxes within the one percent constitutional limitation, and taxes provided for by a municipal charter. SB 66 does not propose to remove these existing exemptions but rather to include the newly specified levies in the calculation of the effective millage floor, likely influencing the extent of any potential rollback.
3. Understanding the Existing Law (Section 319.301)
To fully grasp the implications of SB 66, it’s crucial to understand the current operation of section 319.301. This section primarily deals with:
- Calculating Percentage Reductions (Rollback): The tax commissioner annually determines the percentage by which taxes levied against “carryover property” (property taxed by the district in both the preceding and current year, within the same class) would need to be reduced to yield the same dollar amount as the previous year, after the initial rollback but before any homestead exemption reduction (section 319.302).
- “(D)(1) Determine by what percentage, if any, the sums levied by such tax against the carryover property in each class would have to be reduced for the tax to levy the same number of dollars against such property in that class in the current year as were charged against such property by such tax in the preceding year subsequent to the reduction made under this section but before the reduction made under section 319.302 of the Revised Code.” (Lines 47-55)
- Certifying Reduction Percentages: The commissioner then certifies these percentages to county auditors, who apply the reduction to individual property tax bills.
- “(D)(2) Certify each percentage determined in division (D)(1) of this section, as adjusted under division (E) of this section, and the class of property to which that percentage applies to the auditor of each county in which the district has territory… The auditor… shall reduce the sum to be levied by such tax against each parcel of real property in the district by the percentage so certified for its class.” (Lines 61-69)
- Establishing an Effective Millage Floor: Division (E) of the current section establishes a mechanism to prevent the total “qualifying taxes charged and payable for current expenses” from falling below certain minimum thresholds (2% of taxable value for most school districts, 0.2% for joint vocational districts). This provision acts as an “effective millage floor.”
4. Impact of Including New Levies in the Calculation
By including emergency levies, substitute levies, inside millage, and school district income taxes in the calculation of the effective millage floor, SB 66 would likely have the following effects:
- Potentially Higher Effective Millage Floor: The inclusion of these additional revenue sources in the calculation of “qualifying taxes charged and payable” could raise the overall effective millage floor for school districts. This means that the state-mandated rollback reductions might be less significant in ensuring a minimum level of funding.
- Consideration of Diverse Funding Sources: The bill acknowledges the diverse ways in which school districts are funded, including voter-approved emergency and substitute levies, constitutionally guaranteed inside millage, and locally enacted income taxes.
- Complexity in Calculation: Incorporating these different types of revenue streams into the existing formula will likely add complexity to the tax commissioner’s annual calculations. The bill already includes detailed definitions and calculations related to existing taxes and property valuation.
- Potential Impact on Taxpayers: Depending on the specific circumstances of a school district, the inclusion of these levies in the effective millage floor calculation could potentially result in taxpayers seeing less of a reduction (or a smaller increase) in their property taxes due to the rollback mechanism. This is because the floor would be based on a larger overall revenue base.
5. Specific References to Included Tax Types
- Emergency Levies: Explicitly mentioned in the amendment’s purpose (Line 6).
- Substitute Levies: Explicitly mentioned in the amendment’s purpose (Line 7).
- Inside Millage: Referred to as “all inside millage” in the purpose (Line 7) and likely corresponds to “(i) For real property taxes levied within the one per cent limitation imposed by Ohio Constitution, Article XII, Section 2, all taxes charged and payable” within the definition of “Qualifying taxes charged and payable” (Lines 100-102), which the bill intends to factor into the floor calculation more directly.
- School District Income Taxes: Explicitly mentioned in the amendment’s purpose (Line 7) and defined under “(b) ‘School district income tax’ has the same meaning as in section 5748.01 of the Revised Code” (Lines 94-96). The bill also details the calculation of a “property tax equivalent rate” for school district income taxes, which is included in “Qualifying taxes charged and payable” (Lines 107-110).
6. Section 3 – Applicability
Section 3 of the bill clarifies when these amendments will take effect:
“Section 3. The amendment by this act of section 319.301 of the Revised Code applies to tax years beginning on or after the effective date of this section.” (Lines 215-218)
This means that the changes proposed by SB 66 would be implemented for tax years commencing after the bill becomes law.
7. Conclusion and Potential Implications
Senate Bill No. 66 represents a significant proposed change to the way Ohio calculates the effective millage floor for school districts. By including emergency levies, substitute levies, inside millage, and school district income taxes in this calculation, the bill aims to provide a more comprehensive view of a school district’s total revenue when determining the minimum funding level after rollback.
Potential implications of this bill include:
- More stable funding for school districts: By considering a broader range of revenue sources, the effective millage floor might be higher, potentially mitigating the impact of property value increases on tax revenue through the rollback mechanism.
- Increased complexity in tax administration: The tax commissioner will need to incorporate additional data and calculations to implement these changes.
- Varied impact across school districts: The effect of this bill will likely differ depending on the specific mix of funding sources utilized by individual school districts. Districts relying more heavily on emergency levies, substitute levies, or income taxes might see a more pronounced impact.
- Potential shifts in the property tax burden: The extent to which the rollback mechanism reduces property taxes could be affected, potentially leading to taxpayers paying slightly more in property taxes than they would under the current law in some circumstances.
Further analysis would be required to fully understand the quantitative impact of these proposed changes on individual school districts and taxpayers across Ohio. It would also be beneficial to consider the rationale behind these proposed inclusions and their alignment with broader state education funding policies.