By Cindy Kranz
The Cincinnati Enquirer

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Today's stories: • A third of Ohio districts seeking money • A look at school issues and cost to property owners Online extras: • Gloomy forecast • Levy glossary • School tax Q&A Previous levy coverage: • State rating an issue in levy ballot • Batavia schools plan cuts • W. Clermont seeks 7.9 mills • Reading needs levy for success, educator says • Middletown schools to trim • Three Rivers seeks a levy • Levy on ballot for new Lakota school • Tax increase sought for Madeira schools • Lakota growth, deficit forces levy, $10 million cuts • Levy vote key to school planning • Edgewood to ask for 6.9-mill levy • Franklin Schools asking for help • Springboro seeks to build two new elementary schools • Mason school board starts steps for 1.8-mill bond issue • Ross to ask voters for two school levies

Here are answers to frequently asked questions about Ohio school funding and finances:

QUESTION: Why do Ohio schools have to keep putting levies on the ballot?

ANSWER: In the late 1970s, during times of double-digit inflation, a housing boom and skyrocketing property values, the Ohio General Assembly passed House Bill 920, which created a phenomenon known as "phantom revenue," which actually reduces state aid to schools. The law prevents voter-approved school taxes from increasing with property values, which in turn, keeps property taxes from skyrocketing.

In the Winton Woods City School District, for example, a 6.95-mill levy was passed in 1998. When a $100,000 home was later reappraised at $110,000, the 6.95 mills had to be reduced because what homeowners pay in voted taxes to the school district can't increase without voter approval.

Educators say Ohio schools do not have enough money to keep up with inflation; unfunded mandates, such as the No Child Left Behind reforms; services to special populations, such as students with disabilities and gifted students; expanded services, such as breakfast programs; rising health insurance and utilities rates; technology upgrades; and aging buildings.

Ohio's school funding system was challenged in the "DeRolph lawsuit" filed in 1991. The Ohio Supreme Court ruled four times that the school funding system is unconstitutional. After the last ruling, in 2002, the Supreme Court said it would not hear the case again. The legislature has not fixed the problem.

Q: Why are some of the millage rates so high on Tuesday's ballot?

A: Mostly because of unexpected cuts in state funding, changes in the tangible personal property tax and deregulation of power plants.

For example, Three Rivers School District, home of the Miami Fort Cinergy Plant, is losing $2 million in revenue annually, and the gap aid (A form of state aid by which the state pays a school district whose local tax revenues do not equal the district's share of formula costs) provided by the state has only been $600,000 annually, not the $2 million that was expected for five years.

Q: What recent school funding cuts affected districts?

A: After the Ohio Supreme Court ruled that the Ohio General Assembly should fix the school funding problem, the legislature promised to increase the per pupil amount of the state foundation formula by 2.8 percent for the next six years.

Because of a budget crisis, the legislature later reduced that promise to 2.2 percent. School districts have had to readjust their budgets and the size of their levies to make up for those lost revenues.

It's as though you were told you were going to get a 3 percent raise every year for the next five years, but suddenly, your employer reduced that annual raise.

Also, in March 2003, Gov. Taft made immediate cuts to the state budget to balance it. School districts were 10 months into their budgeted year when the state cut what was committed to them.

Q: What's happened with the personal tangible tax, and how has that affected school districts?

A: With HB94 (for 2002-03), legislators eliminated the inventory portion of the personal tangible tax, which is a tax mainly on business equipment and inventory. The law would have eliminated the tax over 25 years, but HB95 (for the 2004-05 school year), cut that time frame down to about 12 years. That speeds up the elimination of the inventory portion of the tax.

For districts with numerous warehouses and inventory, it's a sizeable reduction in revenues. West Clermont, for example has $4.5 million in personal tangible revenue. Sixty percent - or roughly $2.7 million - is inventory. That amount will dwindle each year until it disappears.

Q: A lot of new houses are being built in my school district. Isn't the district getting a lot of new tax revenue from those homeowners?

A: That's a common misconception. When you move into a new house, you never start paying school property taxes immediately. That's because Ohio taxes are paid in arrears. So if you buy a house this year, you won't have to pay property taxes, based on the value of the home you bought, until next year.

Also, with most new homes come new students. A $160,000 home in the Lakota Local School District, for example, generates about $2,300 in school district property tax. But it costs about $7,600 to educate a student, so the district can never keep up. The state supplements the difference with about $2,600 per student, not the entire balance. Lakota, for example, enrolls between 400 to 450 new students per year. So, school districts actually would receive more revenue if a business located on the property or if it remained land.

Q: Is Ohio the only state with a complicated or unconstitutional school funding formula?

A: No. School funding lawsuits, claiming inadequate or inequitable funding, have been brought in 45 states since the 1960s. The issue of how to fund public schools has been debated since the early 1900s.

Meanwhile, Ohio's portion of revenues for school districts has dropped steeply over the years. In 1978, for example, 62 percent of the Winton Woods City School District budget came from the state. Today, it's 45 percent.

During a six-year period in the 1990s, Ohio fell from 24th to 32nd among the 50 states in its support of public schools, according to a Congressional Quarterly report.

Q. How does Kentucky fund its schools?

A: Kentucky school districts are funded by a combination of local and state revenues. State law limits the amount that school taxes can increase each year. Every district is entitled to an increase in its local revenues of 4 percent every year for existing property.

School boards can vote to raise local revenues above that level but the public can appeal by filing petitions to have the issue placed on the ballot.

Sources: Charles Gossett, West Clermont Local School District treasurer; Alana Cropper, Winton Woods City School District treasurer; John Pennycuff, Winton Woods board president; Glenn Alexander, superintendent, Clermont County Educational Service Center; Alan Hutchinson, Lakota Local School District treasurer; Buckeye Association of School Administrators; Wayne Young, executive director, Kentucky Association of School Administrators; The Ohio Coalition for Equity & Adequacy of School Funding.