This question came to us from a reader:
"I have been hearing many people say school funding is unconstitutional as reasons why they vote no on levies, but I really don't know what is EXACTLY unconstitutional about it, and I don't think they do either. Could you tell me what the Supreme Court actually ruled unconstitutional about our school funding system. I appreciate your time. Thank you!"
Thanks for your question.
This is one of the most misunderstood and misrepresented issues in the dialog about school funding in Ohio.
Thousands of pages of briefs and opinions have been written on this case, known as DeRolph v. State of Ohio. The page numbers used reference this opinion, also known as DeRolph III (there have been additional appeals and opinions since then). So here goes...
The first point is that the Supreme Court never said that property taxes in of themselves are unconstitutional. What they said was:
"In DeRolph I, this court's primary concern with the state's funding system was that it relied too heavily on local property taxes to fund a statewide system. The problem this creates, as articulated in DeRolph II, is that a system overly reliant on local property taxes will result in disparities between districts because the same tax effort in two different districts will produce different results." (p18)
However, in the same paragraph, the Court went on to say:
"In defining overreliance, we stated that local taxes need not be totally abandoned, because equality is not constitutionally mandated. Rather than completely rejecting property taxes, the majority stated that "property taxes can no longer be the primary means of providing the finances for a thorough and efficient system of schools." Thus, some use of local property taxes is constitutionally permissible."
The problem therefore seems to be centered around the fact that a levy of 1 mill in one school district generates a different amount of money than 1 mill in another school district. In the Columbus City School district, a 1 mill levy will raise $10.4 million, according to the "Cupp Report" published by the Ohio Dept of Education. This is the most money that is raised with 1 mill of all the 610 school districts in Ohio. The lowest amount is $21,400, in Bettsville Local Schools. Hilliard City Schools (HCS) comes in 12th place in the State in this statistic, at $2.45 million.
Let's make sure we know what a "mill" is before going on. A mill is simply a tax rate of $1 dollar per year for each $1,000 of assessed taxable value. Let's say that your home has a market value of $100,000, as determined by the County Auditor. This market value is supposed to be a reasonable estimate of what your home might sell for on the open market. By law, it would therefore have a taxable value of 35% of that, or $35,000. Accordingly, 1 mill of property tax represents $35 per $100,000 of market value.
However, our lawmakers have also enacted two "rollbacks" of property taxes over the years, one of 10% and one of 2.5%. Putting that all together, our property taxes are calculated in this way, using a home with $100,000 of market value and our last levy of 6.9 mills for the example:
- Take 35% of the market value: $100,000 x 35% = $35,000
- Divide by 1000 and multiply by the millage rate: $35,000 / 1,000 = $35 x 6.9 = $241.50
- Reduce this amount by 10%: $241.50 x 90% = $217.35
- Reduce this amount by 2.5%: $217.35 x 97.5% = $211.92
The aggregate value of the property within the boundaries of Columbus City Schools is $10.4 billion, which is the reason 1 mill raises $10.4 million/year. Bettsville has a total property value of $21.4 million, so 1 mill is $21,400. No rocket science here, but the numbers are strikingly different for these two districts.
Is that by itself a problem? It seems that you have to take into account the number of students in a school district. Doing this, we find that Danbury Local Schools (Lakeside/Marblehead), raises $660/student per mill, while Huntington Local Schools in Ross County raises only $39/student per mill, the lowest amount of all school districts in Ohio. Hilliard Schools comes in at 135th place, with $164/student per mill.
Ohio's public schools are funded by three sources: a) local residential property taxes; b) local commercial property taxes; and, c) the State of Ohio. The primary claim in the DeRolph case was that in school districts with very low per student property values, it is unreasonable to expect the local taxpayers to vote to levy themselves the high millage rates required to generate enough local funding to operate their schools to the "thorough and efficient" standard of the Ohio Constitution. The Supreme Court agreed, saying:
"Therefore, disparity caused by a school-funding system that rests on the dual foundations of state support and local property tax revenues is unconstitutional only if the disparity is so dramatic that children in the poorest of our school districts are deprived of a basic educational opportunity, and a thorough and efficient distribution of funds need only ensure that each Ohschool district is financially able to offer an adequate education" (p19)
"In general, property taxes are less sensitive to economic cycles than are taxes based on income or sales. Property values tend to remain stable over time, whereas income and spending are affected by movements in the economy. Property taxes, therefore, give school districts a stable and reliable source of local revenue through both good and bad economic times." (p19)
"May local property taxes be used as any part of a funding solution? The answer is "Yes," but property taxes can no longer be the primary means of providing the finances for a thorough and efficient system of schools."
Finally, what does all this have to do with Hilliard?
The real problem has never been that the Hilliard community doesn't have enough money to operate our schools to the "thorough and efficient" constitutional standard. We spend just over $10,000/student per year to operate our schools, placing us at 98th highest in the State in that category (top 20%). Our school system offers a quality and depth of programs and services well beyond that required to meet this standard - a point of pride, and the reason many of us live here.
To support the most recent Five Year Forecast prepared by our Treasurer, we would have to pass 7 mill levies every two years, adding each time to your taxes an amount of $245/yr per $100,000 of market value. This isn't something we've heard from our school leaders, but if nothing changes, we'll likely be voting on the first of these next fall.
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