Latest / Public Education Matters / Understanding Ohio's property tax situation - Part 2: The Solutions
Transcript
- Various student voices 0:08 Public education matters. Public education matters. Public education matters. Jeff Wensing 0:15 This is Public Education Matters brought to you by the Ohio Education Association. Katie Olmsted 0:26 Welcome back to Public Education Matters, and welcome to part two of this special two part conversation on Ohio's property tax situation, where we're looking at where we can go from here. If you have not heard part one, stop now and go back. It is really important context about how we got here, and we all need to understand that so we can move forward together to push for meaningful property tax relief measures that make sense for our future. That means these relief measures should not and cannot be achieved on the backs of Ohio's public school students, which is a real threat under some of the bills making their way through the ohio general assembly right now, and even more devastatingly, a potential ballot measure to abolish property taxes in Ohio altogether. Dr. Howard Fleeter with the Ohio Education Policy Institute joined us for part one of this two part series to talk about changes in the tax burdens in Ohio for local essential services like public education and how everything kind of came together to have us end up in a place where, as the OEPI put it in its new analysis of residential property taxes in Ohio report that dropped last month, quote, Ohio has found its fragile system of reliably funding and delivering local services to be pushed near the breaking point. End quote. So what do we do now? What can be done to get us back from that edge? How do we do that without creating catastrophic consequences for Ohio's public school students? Let's rejoin the discussion with Dr. Howard Fleeter at that point for the second half of our conversation. Howard Fleeter 2:11 This is a serious problem, and it needs serious people with serious ideas on how to solve it. They could use state revenue to to expand something called the homestead exemption, which helps elder, you know, which helps people over 65 and disabled people, and it pays a portion of their taxes. And that has been the parameters about who is eligible and how much of a benefit you get have not been adjusted very much over time, and it's longer to adjust that. Katie Olmsted 2:40 I think I saw something like, Les Wexner gets a homestead exemption, right? Howard Fleeter 2:43 Yeah, so back in Katie Olmsted 2:45 Oh boy. Howard Fleeter 2:45 So Governor Strickland, right? He made a decision to apply the homestead exemption. There used to be an income limit on it, and he decided that everybody over 65 regardless of income, would get it, and now you're grandfathered in. The legislature changed that after several years, but anyone who was still in their home who qualified for it before they reverted back to the way it used to be with an income limit still is grandfathered in and gets it. Wes Les Wexner is still in the same house he was back in 2008 so he still gets this. He still gets a break on his property taxes, even though he obviously doesn't need it and. Katie Olmsted 3:25 He's clearly in a break on his income taxes too, because Howard Fleeter 3:29 He doesn't need that either. But he really benefits from that right and right to a lesser extent, from the homestead but the fact he gets it at all is a problem, and so we could be expanding the homestead exemption in a significant way. We could also do something called a circuit breaker, which is work similar to the homestead exemption, and is basically just an income cut off that says, regardless of age, if your income is below a certain level, or if it's or if your taxes are more than a certain percentage of your income, you will get a break, and the state will pay some of your property taxes. And Michigan has this. There's 30 states that have some form of a circuit breaker or other. Michigan is a state which is very substantially similar to Ohio in terms of size, in terms of demographics, in terms of income level. If you know, Michigan can afford to do this. There's no reason Ohio can't afford to do it. Ohio is just not chosen to not do it. And Michigan's, you know, Michigan's circuit breaker applies to people below $60,000 in income. It also has a component which applies to renters, not just homeowners, since property taxes do get rolled over into your rent. When property taxes go up, your landlord will typically raise your rent. And so the legislature could have been able to do these things right, and it would involve spending, depending on what they do, 200 million, 300 million, 400 million, $500 million that sounds like a lot of money, except when you. Think that the income tax cut that they made two years ago was over a billion dollars. The income tax cut that they made earlier this year for 2025 and 2026 is another billion dollars. We could have done a property tax circuit breaker and still had a billion and a half dollars left for an income tax cut. Instead, they chose not to do anything at all to help people with property taxes and just flatten the income tax right? And so this is at this point, they have taken a challenging situation and made it worse. I mean, the legislature right now bears a lot of responsibility for the anger that people have, and that anger has manifested itself in there is a attempt to put a constitutional amendment on the ballot next November in 2026 that would eliminate Ohio's property tax, and that would be devastating to this state, but I sympathize with the feeling of anger and frustration that the people who are trying to gather these signatures, I sympathize. I understand why they're doing this. I don't think they understand the ramifications of what will happen if we didn't have a property tax, but they feel like that nobody is doing anything about this. In the legislature, in the last two budgets, has literally done nothing at all to help with this issue, instead choosing to solve the what they see as a problem with the income tax. And so it is, you know, we're really at a pressure point right now, right? And, you know, I think the legislature is now understands how angry people are, and they are desperate to come up with some way to reduce people's taxes next year, before this issue is on the ballot. And the problem is that the way they are trying to go about this is they still are refusing to do a circuit breaker or an expansion of the Homestead, because they are saying we're not going to spend one cent of state money on this, you know, and what that does is, if the only way you can lower people's property tax bills is to you only have two choices. One is you put in a circuit breaker, or you expand the homestead exemption, and the state then will pay a share of the property taxes. So that means the schools and local governments will get all the money that's owed to them, but the state will pay a share of it, and people will pay less of it. And you can give people a break and help them with their rising taxes. By doing that, they've taken that off the table. The only other way you can lower people's taxes is you reduce the amount of money that schools and other local governments get. And they are choosing to go that route where they've been. They tried several different things during the budget process. Several of them were vetoed by Governor DeWine. They've got a host of I've literally lost track of how many property tax bills have been proposed in the last year and a half or so. Somebody told me that it was over 100 and I was surprised, but I believe it, they are desperately trying to do something to reduce people's taxes next year, but the only ideas that they are pursuing are ones that would cost schools and then for some of them, other local governments revenue, and there's no other you know that those are the only two sides of the coin. Either the state's going to help people pay their taxes, or you're going to lower their taxes, and schools and local governments will get less revenue, or you can split the difference and do a combination of both those things, which I think is the sensible thing to do, but you know, it's really put schools and local governments in the crosshairs right now because the legislature is taking the position that, you know, this is your fault. Our property taxes are in eighth highest in the state. You need to solve it by giving up some money, and they are conveniently forgetting to understand that the state support for these services has been declining for over 20 years. Katie Olmsted 8:56 And that's the thing, if we reduce the amount of revenue for like, soapbox moment, real quick, we are in the position we are in because of the lawmakers who have not been paying their fair share and continue to pass that buck, continuing to make it more our local communities more reliant on these local property taxes, and now we're sitting here with them saying, oh, property taxes are too high. Let's take that away without at all saying, oops, our bad. That's that's frustrating. That's frustrating. But what's also frustrating is the idea that if they just slash property taxes with one of these thousands of bills, honestly, it feels like there's just a whole raft of bills they're looking at right now without coming up with another solution to backfill that, it will be devastating for students, for communities. Just across the board, cuts, we will gut public education in Ohio if we cannot fund public education at the local level because they're not doing it at the state level. Howard Fleeter 9:54 There will be repercussions, right? And so, I mean, you know, the biggest rep. Cushions are if somehow this property tax amendment, this amendment to abolish the property tax, if that passes, it would be devastating for this state, for schools and particularly all the other local services. So the property tax in 2024 raised almost $24 billion that is more revenue than the state sales tax and state income tax raised. Put together the two largest sources of state revenue raise less money than we got from the property tax. Now again, so you might have the legislature say, there's your problem. See, our property taxes are too high. But that's not the problem is much more complicated than that, and I hope I explained that, you know, 15 or 20 minutes ago that our property taxes are going to be high because we deliver, we have chosen in this state to deliver and fund services at the local level. And then there have been other things that have happened that have made that gap between the state revenue and the local revenue even widen beyond, you know, 15th high you know, 15th on local taxes, 35th on state taxes. Now you're in the top 10 on local taxes, and you're in the 40s on state taxes. So forces have made it that schism even more extreme. But you know, we, if you you cannot, we're talking basic services for people that they will lose, right? And so if you're in a township, and townships in Ohio are only allowed to rely on property taxes, they can't have no other way to raise, raise revenue. They provide police, fire, EMS, services, roads, right, cemeteries, ambulance, right. They provide what any reasonable person would say is a basic service, and the only way they can fund those is through property tax. If you abolish that, they won't be able to do that at all. Then you've got all the human services that are out there, the developmental disabilities, the mental health, the alcohol drug addiction, senior services, children's services, these are also essential services that people rely on, right? And that's one of those, you know, there, but for the grace of God, go I types of things, right? Most of us don't have to use those services, but if you need them, and needing them is, you know, almost an, you know, accident of circumstance, and your property taxes aren't there to fund those services. You are in a world of hurt from that. And so again, I I don't think that the people who are so angry that they are not getting the help that they need for their rising property taxes. I don't think they would want to live in this state without a property tax, right? So they they don't understand what it is they're asking for, but what we need is something to happen between now and then that is a real solution to this problem. And it can't be a one sided type of solution. It has to be something where the state is kicking in. And I think, you know, can schools and local governments, you know, withstand some type of a hit on their revenue growth. I think that they can. That's not unreasonable. So, you know, there are proposals, you know, one of them is House Bill 186 which was particularly targeted to those 20 mill floor districts, where it would put an inflationary cap in and so you would your property taxes would not be able to go up more than inflation over the three year period of time since your last reappraisal. That would, you know, mean that schools would still be able to get revenue growth equal to inflation so they can continue to provide their services, but that property taxpayers would also be protected and so that their taxes won't go up more than inflation. That is a not unreasonable idea. It works moving forward. It doesn't help people right now. And so what they've done with this bill since the legislature realizes, wow, we better help people now, but we're not going to spend our own money to do it. They have modified that bill so that it now we'll look backwards a couple years, and we'll, you know, it essentially pretends that we would have had this inflationary growth provision back in 2023 and 2024 and so it's going to then reduce revenues for districts that went through reappraisal, that are at the 20 mill floor the last couple years. And so those districts. You know that the simulations I've seen from that show that half the, more than half the districts in the state would have less property tax revenue in tax year 25 than they got in tax year 24 right? And so it's, again, it's an attempt to claw back money. You know, if the state would have started two budgets ago with expanding, you know, the homestead, or putting in a circuit breaker. They would have helped people in real time with taxes that they've already paid. And then, if they would have implemented this inflationary cap on the 20 mil floor, they would have solved the problem moving forward, but they didn't do either of those things. So the problem continued to go on for a couple years, and now they're stuck with a problem that's much larger than it was three years ago. So it's, it's and again, the state is intransigent about only looking at solutions which will cost schools, and for some of them, other local governments, revenue, so. Katie Olmsted 15:16 What are solutions? I know the ones that are forward looking, but are there any relief measures that are reasonable right now, or has that ship sailed? They just need to start working toward the future. Howard Fleeter 15:27 Oh, I mean, I, you know, if, if I could pick what to do right now, right? You know, I would say, come up with some way to at least start to phase in a real circuit breaker like Michigan has, right? And it is hard, you know, the cost of that, you know, to do something exactly like what Michigan was doing. The cost to the state, for homeowners was about $500 million and for renters was about $300 million so you could, you know, that's Howard Fleeter 15:51 $2 billion million dollars to vouchers. I'm pretty sure we could figure that out. Howard Fleeter 16:06 Yeah, well, that's, it's, that's, it's a lot of money, but the state has, yeah, I mean, two budgets ago, we increased vouchers by three, $50 million could have you use that for property tax relief? Yes, you could have, right? Who benefits from vouchers? 96% of the people who benefit from that voucher expansion were already attend, you know, had kids were already attending private schools. So again, that was an expenditure of money that was in favor of wealthier people. And so the legislature has has made several decisions, you know, that have chosen to not address this problem. But you know, so it's during the budget process you can find that amount of money. Would it have meant slowing down their flattening of the income tax? Yes. Would it have meant slowing down their expansion of vouchers? Yes. But you know, many people would, you know, I'm wondering if many legislators looking backwards are saying, I wish we would have done that, because we want to have a property tax revolt on their hands right now. But we can't go back in a time machine to, you know, two and a half years ago. So I think starting to do something, you know, they, they can, you know, they gave, you know, they just gave, what, five or $600 million to the Browns for their new stadium. Would we rather spend that on property tax relief? We would. Katie Olmsted 17:23 You show me your budget. I'll show you your priorities, right? Yeah, conscious decisions here about what they actually care about, and it's not us and it's not our property tax. It's about not about my wallet. Howard Fleeter 17:33 Yeah, it is harder for them to find the money outside of the budget process, but it is not impossible, and I think if they started to do that, they could help people, and they could do it in a way where you're targeting, you know, one thing that is good about the homestead expansion or the circuit breaker is that it targets the help to the people who really need it, right, which are lower income people, fixed income people, so people who are older, People with disabilities, those are the people that really struggle, right? And so you can target that. And some of the other solutions, you know, benefit just all property taxpayers, not all of whom are, you know, like I said, I you know, my taxes went up. You know, in 2020 they went down a little bit. In 2023 I'm fortunate enough that even if they'd gone up, I still have the resources that I can pay them. Not everybody needs the property tax help the same way some people do so. Doing something that targets it to the people that read need it, I think, is absolutely essential to this. And then you can do something which is forward looking about the 20 mil floor, right? I think in fairness, that having two-thirds of school districts at the 20 mill floor right now that is a problem. And like I said, that problem is not solely because of the emergency levy issue. Like I said, if half the districts at the floor don't use those they're just at the floor because of nine House Bill, 920 and so doing something which helps people with their property taxes at the next reappraisal. That helps solve the problem going forward, but to help these people for the damage that has already been done, the state really needs to kick in some money to do it, because otherwise, what you'll be doing is reducing school taxes. You'll be cutting K-12 education services, and for some of the proposals that are out there other types of services as well. And so that, again, is not a balanced approach, but I think we need to do something to fix the problem. Moving forward with an inflationary cap, there have been suggestions of maybe using an inflationary cap on inside millage that in some places that that would not be a bad idea. In other places it the inside. Millage is a low enough percentage of property taxes. It's not really much of a problem overall, but for some people, it is. For you know, any increase for some people, if you're on a fixed income, is hard, right? So I think they're, they're looking at things. Which you know, most problems you know, benefit from a balanced solution, right? So if everybody walks away from the table feeling like, I wish that hadn't happened, but also feel like at least I got something from it, that's probably, in general, a good outcome from something like this. And I think that that logic applies to this as well. And so, you know, we will, we'll see what happens. The state has a couple months in order to iron this out, they need to make changes, I think, before the end of the year, in order for this to take effect for next year. And then, regardless of what happens, we're still going to need to educate people in 2026 about why eliminating the state's property taxes is not a good idea. Because there are some people, I think, that are so angry that they're just saying, forget it. You know, I just think they're just going to throw the whole thing out. And I think that would be a devastating outcome for the state of Ohio. We cannot viably deliver services that people need and rely on without without a property tax. So, I mean, you know, we'd have to more than double the state sales tax rate, right? Which I don't think you know, and that's a regressive tax. It would put more of the burden on lower income people if we did that. You know the progressive tax at the state level, the one that where you know higher income people paid a higher rate was the income tax, but the legislature has now made it a proportional, flat rate tax. So we'll see this is, this is serious problem, and it needs serious people with serious ideas on how to solve it. Howard Fleeter 17:33 Well Howard Fleeter, thank you so much for helping us understand how this problem started and where we are now and where we need to go. We will be watching the legislature very closely, and we will continue to rely on your expertise to help us understand all of this. Howard Fleeter 20:19 Well my pleasure. Thanks for having me on. Katie Olmsted 21:44 Our huge thanks to Dr. Howard Fleeter for sharing his expertise with all of us. If you want to check out the OEPI analysis with its suggestions for a balanced approach to property tax reforms, you can find the link in the show notes for this episode. We will be back here next week with a more usual episode as we talk with the Columbus Education Association member about the importance of educators running for elected local leadership positions, and I promise we'll get back to the shorter episode length for that one too. But honestly, I'm not sorry this conversation went long. It is so important that we really understand Ohio's property tax issues and why we need to stand up for Ohio's public schools as these property tax debates continue, because in Ohio, public education matters. Transcribed by https://otter.ai