REVENUE SOURCES

Sources of Revenue for Ohio Public Schools

The four main sources of revenue for Ohio public school districts are:

1. Local Taxes
   Local funds are collected primarily through Property Taxes collected by local governments on real property (land and buildings) for residential, agricultural, commercial, and industrial property. Except for a small portion of rates known as inside millage, property tax rates are primarily voted on by the community.
    
2. State Funds
   State funds are collected through income and sales taxes, lottery and casino profits, and other taxes. Ohio’s funding formula has moved to combining a Formula Aid (used for general purposes) and Categorical Aid (for specific state-identified purposes such as student identified needs and other needs such as transportation) into one formula.  Each district’s unique calculated amount is shared by local sources with an offset based on the amount of property wealth and income wealth per student where the wealthiest districts receive the least and the neediest receive the most.
    
3. Federal Funds
   Federal funds are collected through federal income taxes. This money is targeted for specific programs. Schools receive this funding only if they participate in these programs. Some examples include funding for disadvantaged families, students with disabilities, food service programs, and vocational and student learning options such as charter schools.
    
4. Other Revenue
   There is a growing popularity in non-tax funding sources, such as:
   • Tuition from student learning options such as open enrollment and intergovernmental agreements
   • Earnings from investments
   • Community business/school partnerships
   • Rental revenues from facility use
   • Student fees
   • Earnings on investments

Funding from each source tends to vary by district type. Urban districts tend to get a higher percentage from state sources. Suburban districts with higher property values get more from local sources. Rural districts fall somewhere in between urban and suburban districts, relative to the property and income wealth of the district.

In general, local property taxes and state aid make up the largest shares of a typical district's revenue. The specific percentages from each source are determined by factors like the wealth of the local tax base.

Current Year Breakdown

Local Revenue in 2023:

• Dollar amount: $ 46,520,600
• Percentage of total revenue: 50%
• Dollars per pupil: $6,978.70

State Revenue in 2023:  

• Dollar amount: $ 29,773,184
• Percentage of total revenue: 32%
• Dollars per pupil: $4,444.86

Federal Revenue in 2023:

• Dollar amount: $9,304,120
• Percentage of total revenue: 10%  
• Dollars per pupil: $1,444.80

Other Financing Sources in 2023:

• Dollar amount: $ 7,443,296
• Percentage of total revenue: 8% 
• Dollars per pupil: $1,130.30

Total Revenues Per Pupil 2023: $13,999
Total Revenues and Other Financing Sources in 2023: $93,041,200

Source:  FY23 Cupp Report

Local Tax Options

In Ohio, there are two primary ways that local taxes are collected to help fund school districts:

1. County property taxes:

• Property taxes, especially on residential and agricultural property, are the largest single revenue source for school districts in Ohio, accounting for over 53% of total revenues for West Clermont School District.
• The county auditor assesses the value of each property in the county every six years, with an update at the three-year midpoint. The assessed value is based on the property's market value. 
• The county sets millage rates that determine the amount of tax owed per $1,000 of a property's assessed value. A portion of this millage is dedicated to funding public schools.
• Ohio law limits taxation without a vote to the "10 mill limitation" ($10 per $1,000 of assessed value). Additional property taxes must be voted on by residents.
• When property values increase, such as after reappraisals, property tax revenues also increase even if the millage rate stays the same.
• As property values rise, there is potential for increased education funding if millage rates remain steady or increase. The county aims to set millage rates high enough to adequately fund schools while not excessively burdening property owners.
• The portion of your property taxes collected going to West Clermont School District is noted in the “CURRENT TAX DISTRIBUTION” section of your Clermont County tax bill, with the line item “West Clermont Lsd”.

2. School district income taxes:

• In addition to property taxes, Ohio school districts may enact a school district income tax with voter approval. As of January 2024, 212 school districts impose an income tax.
• This income tax is separate from federal, state and city income taxes. It is collected from residents of the taxing school district by the Ohio Department of Taxation.
• School district income tax returns are subject to the same requirements as the state individual income tax return. The state offers free electronic filing and payment.
• As of January 2024, West Clermont School District does not collect a school district income tax.

In summary, county property taxes based on assessed property values are the primary local funding mechanism for most Ohio school districts, while some districts also have a voter-approved school district income tax. There is a direct relationship between rising property values and increased school funding when millage rates are stable. West Clermont relies heavily on property taxes and does not currently have a school district income tax.

For more help in understanding your Clermont County property tax bill, visit the Clermont County Auditor’s website.

For more information about school district income taxes in the state of Ohio, see the Ohio Department of Taxation website.

Description and Purpose of Levies/Property Taxes

School districts rely on property tax levies as a key local funding source in addition to state and federal funding. The mix of levies used depends on each district's specific financial situation and facility needs. 

A levy is a tax that is authorized and approved by the voters within a school district. When voters approve a tax levy, they are authorizing the school district to collect a specified amount of additional property taxes for school funding purposes.

The four main types of property tax levies that school districts in Ohio can use to raise funds are:

1. Operating levies - These levies provide funds for the day-to-day operations of the school district, such as salaries, utilities, supplies, etc. The funds go into the district's general fund to pay for operating expenses. Operating levies can be term-limited or continuing (permanent).
2. Emergency levies - These are a type of operating levy but for a specific dollar amount and a limited time period, usually 5-10 years. The dollar amount stays constant even if property values increase. Emergency levies are frequently used when a district has an urgent need for additional operating funds. 
3. Bond levies - Bond levies provide funds for specific capital improvements, such as new school construction, building renovations, land acquisition, etc. The levy funds are used to pay off bonds that are sold to generate the money for the capital projects upfront. Bond levies have a specific time limit for how long the tax is collected.
4. Permanent improvement levies - These levies provide funds for maintaining, repairing and improving school facilities and equipment. By law, they cannot be used for salaries. Permanent improvement levies can be term-limited or continuing. The tax rate stays the same but revenue can grow as property values increase.

Levies are used by school districts to generate local revenue to support the education of students in the district. School levies are typically placed on the ballot during an election and must be approved by a majority vote. The ballot language specifies the purpose, amount, and duration of the levy. If approved, the levy results in an increase in the property taxes paid by homeowners and property owners within the school district boundaries. The ability to raise local tax revenue through levies is an important part of the school funding system in many states.

Categories of Property Values

There are four categories of property values that contribute to the property taxes  collected by Clermont County:

1. Residential (Homes people live in)
2. Agricultural (Farms and land used for growing crops)
3. Commercial (Stores, offices, and other business properties)
4. Industrial (Factories and industrial buildings)

Local property tax revenues made up 63.1% of the West Clermont's total revenue in 2023.

It is important to note that all four categories of real estate make up this tax base. The money collected from taxes on these properties (land and buildings) is used to help pay for public schools in the county, not just residential. Businesses contribute through their property taxes (stores, offices, farmland, factories, and other business property), and are a major source of local revenue for school districts. As property values increase the amount of taxes collected goes up. For example, in the 2020 reappraisal, Class II commercial/industrial property values increased by 1.9%. The increased taxes collected on commercial real estate properties in Clermont County directly contributed to providing more revenue to public schools.

Property tax rates are voted on by the community. The county auditor, the office that collects the taxes, cannot raise or lower the tax rates. The rates are based on what the schools and government offices say they need in their budgets each year, and what the voters approve.

In summary, property from all four categories of real estate (residential, agricultural, commercial and industrial) contribute to the taxes collected in Clermont County. Those taxes are a major source of local funding that supports the operating budget of West Clermont Schools. The specific tax rates are set based on levies approved by voters.

Reappraisal - How does the recent property tax revaluation impact revenues?

Property reappraisals occur every 6 years in Clermont County, with a less detailed "update" done in the middle of that cycle (so an update happens 3 years after each full reappraisal). For example, there was a full reappraisal in 2020, and an update is scheduled for 2023.

The county auditor's office determines the assessed value of each property during the reappraisal or update. The assessed value is their opinion of what the property would sell for on the open market (the appraised value). The taxable value of a property is set at 35% of the assessed/appraised value. This taxable value is what the property tax bills are calculated from.

All types of property are reappraised - residential, agricultural, commercial and industrial. The changes in value can differ between these classes. For example, in 2020, home values went up 13.9% while commercial property only increased 1.9%.

As property values go up (or down) during a reappraisal, the total amount of taxes collected changes proportionally. However, individual tax bills may not change by the same percentage, due to various credits and rollbacks applied to residential properties. The reappraisal itself doesn't change the tax rates (millage). Those rates are set by voter-approved levies. But the reappraisal does change the total tax base those rates apply to, changing the total amount of money collected. In other words, reappraisals update the county's record of what each property is worth, which then determines how much each property owner pays, and how much total money is collected. 

The 2020 reappraisal increased overall property values in Clermont County by $164.6 million or 11.8%, including both residential/agricultural (Class I) and commercial/industrial (Class II) properties. Reappraisal in 2023 was estimated to increase Class I residential/agricultural values by 23% and Class II commercial/industrial by 2%, for an overall increase of $303.9 million or 18.89%.  

Since local property taxes make up over 63% of the district's revenue, these increases in assessed property values provide a boost to revenue for the West Clermont’s overall operating budget. The tax base growth from reappraisals is a key factor supporting the district's financial forecast.

State Funding Resources and the Fair School Funding Plan

The state of Ohio helps pay for schools in a different way than local taxes do. While local money for schools mostly comes from taxes on homes and businesses, the state gets its money from other kinds of taxes, like income tax, sales tax, and taxes on lottery tickets and casinos.

The state's funding formula, known as the Fair School Funding Plan, establishes a unique base cost per student, based on how much it costs to educate a typical child. Then, it looks at how much money the district can raise on its own through local taxes. Districts that have less money and property in their area get more money from the state. This means that if a district is poorer, the state will pay for a bigger part of what it needs to educate its students.

The state also gives extra money to districts for special programs: Helping students with special needs, students who speak English as a second language, the gifted students program, and for transportation. This extra money can only be used for these specific programs.

Under the current budget, the state directly covers the costs of students attending charter schools, STEM schools, and those using state scholarship programs, so that funding isn’t deducted from a district's state aid.

The Fair School Funding Plan is in its fourth year of a six year phase in. By the end, the goal is to make sure each district gets the money it needs based on what its students need and how much money the local community has. So, while local school money is based on taxes, and depends on how wealthy an area is, the state tries to balance this out by giving more money to districts that need more help.

How does the district leverage federal funding sources/grants?

Federal funds are made available to public schools in the United States through several different mechanisms.

Formula Grants 
These are entitlements that allocate funds to states or school districts based on formulas set by law. Examples include Title I funding for low-income students and Individuals with Disabilities Education Act (IDEA) funding for special education. 

Block Grants
These grants provide a fixed amount of funding to states or school districts for a broad purpose, such as improving education quality or supporting disadvantaged students. States and school districts have more flexibility in how they use block grant funds compared to formula grants or competitive grants.

Competitive Grants
These grants are awarded to states, school districts, or individual schools based on the quality of their grant applications and their ability to meet specific criteria. Competitive federal grants often have more stringent requirements and may require schools to use funds for specific purposes outlined in their grant applications. These grants typically focus on promoting specific educational initiatives, such as improving teacher quality, implementing innovative programs, or supporting science, technology, engineering, and math (STEM) education. Other examples include the Teacher Incentive Fund (TIF) and the Education Innovation and Research (EIR) program.

Discretionary Grants
These grants are awarded by the U.S. Department of Education for specific purposes or priorities, and the amount of funding may vary from year to year based on Congressional appropriations. Examples include the School Safety National Activities program and the Promise Neighborhoods program.

Impact Aid
This program provides funding to school districts that are financially impacted by the presence of federal activities, such as military bases or Indian lands. Impact Aid helps these districts compensate for lost property tax revenue and the additional costs of educating federally connected students.

Reimbursement Programs
These programs reimburse states or school districts for specific expenses, such as providing free or reduced-price meals to low-income students through the National School Lunch Program.

Emergency Relief
The district received three rounds of federal Elementary and Secondary School Emergency Relief (ESSER) funds, which began in fiscal year 2020 to help with COVID-19 pandemic costs and impacts. The most recent allocation of ESSER funds must be spent or encumbered by September 30, 2024. 

Federal education funds are administered by the U.S. Department of Education and are subject to Congressional appropriations and oversight. The specific funding mechanisms and programs may change over time based on legislation and budget priorities.

The following shows the breakdown of funds received by West Clermont from the federal government for the 2023-2024 school year:

Additional Types of Local Funding for Schools

It is important for West Clermont to diversify its local revenue base so the district is not solely reliant on property taxes.

Other sources of local funding include:

• Tuition - Districts can charge tuition for students placed by the courts or coming from other districts. This provides additional revenue to help cover the costs of educating these students.
• Interest on investments - Districts can earn interest income on their cash balances and investments. Higher interest rates provide the opportunity for increased interest earnings for the district. 
• Student fees - Districts can charge student fees for supplies, materials, activities, etc. This helps offset some of the costs borne by the district.
• Payment in lieu of taxes (PILOT) - These are payments made to the district, often by businesses, instead of paying property taxes. This provides a steady revenue stream to the district, unlike property taxes that can potentially be abated. 
• Rental fees - Districts can charge rental fees for use of their facilities by community groups and organizations. This generates additional income to support facility costs.

So while property taxes are the major local funding source, these other options give districts additional ways to generate local revenue to support their operations and avoid being completely dependent on property values and tax collections. Exploring and optimizing alternative funding sources can improve a district's fiscal health.