The treasurer of the Tallmadge city schools noted something last week that deserves amplification. He made the comment during a meeting with residents as the district looks for a way forward after the defeat of its levy request in November. He reminded that the district wouldn’t face the loss of $2.5 million a year if the state had kept its promise regarding the elimination of the tangible personal property tax, long a significant funding stream for schools.
In 2005, state lawmakers approved a sweeping overhaul of taxes on businesses. It made sense to phase out this outdated tax on business equipment, machinery, furniture, fixtures and inventory. At the same time, lawmakers recognized the blow that would land on school districts.
Of the $1.6 billion generated annually by the tax, $1.1 billion flowed to public schools.
Thus, lawmakers pledged to honor a hold-harmless period of five years. Districts would receive funds equal to what they lost. More, during those years, lawmakers would devise a permanent mechanism, relying heavily on the newly enacted commercial activity tax on businesses to compensate schools for the loss of revenue.
Then, the recession hit. As part of the response to the fiscal wreckage, the Statehouse extended the hold-harmless period to 2013.
All of that changed when John Kasich stepped into the governor’s office. He and the Republican majorities began to put the squeeze on the reimbursement revenue, arguing that the challenge of balancing the state budget required such steps. Bear in mind, too, that the governor and the Republican majorities were in the midst of reducing income tax rates, now at a cost of roughly $3 billion a year.
Consider the decline in replacement payments for the loss of the tangible personal property tax. In the 2011 budget (the last of the Ted Strickland years), the replacement sum was $1.1 billion. By 2013, it had been cut in half, and then continued shrinking — to $150 million last year and next it has disappeared entirely, as the Tallmadge schools treasurer explained.
This turn of events would be acceptable if overall school funding somehow made up the difference. Unfortunately, as Howard Fleeter of the Ohio Education Policy Institute has calculated, school funding the past decade has fallen nearly 2 percent below inflation. That helps explain the Tallmadge district asking voters to approve a property tax increase. It also sheds light on the difficulties facing the Cuyahoga Falls city schools, the state auditor recommending staffing reductions and other savings measures last week as the district deals with its own deficit.
If the state won’t meet its responsibility — or keep its pledge — then school officials have little choice but to ask local taxpayers.
Yet the reality is that taxpayers in Tallmadge and Cuyahoga Falls have been doing their part. The state has an index to measure what is called the local tax effort. It compares the level of local taxes to the ability of a community to pay. The index sets the state average at 1, higher translating to more effort, lower to less. In 2017 version, Cuyahoga Falls and Tallmadge both rate 0.91. By comparison, Hudson and Revere stand at 0.49 and 0.41, respectively.
Without question, districts must look for efficiencies. The truth is most have been doing so for years. The state has been the slacker, neglecting its duty to public education — evident in the broken promise to make up for the revenue lost in ending the tangible personal property tax.