Copyright cleveland.com
AMHERST, Ohio -- As Ohio wrestles with how to fund its public schools — and with a growing movement to roll back or even abolish property taxes — one district is charting a new course. Amherst is breaking from tradition, asking voters next week to replace the familiar property tax levy with a 1.5% earned income tax, a model officials say better reflects ability to pay and protects seniors on fixed incomes. For 13 years, the Amherst Exempted Village School District has managed without new operating revenue, stretching every dollar while state funding lagged and property tax growth stalled. But with reserves dwindling and costs rising, leaders say they can’t hold off any longer — and that Ohio’s outdated property tax system left them no choice. Next week, voters will decide on Issue 16, a proposed 1.5% earned income tax levy that would generate approximately $10 million over five years for the district’s daily operations. The funds would support staff salaries and benefits, supplies, curriculum, textbooks, academic programs, utilities, transportation and wrap-around services. Without it, district officials warn that maintaining current staffing levels and programs is at risk. The funding squeeze Much of the district’s financial pressures stem from shrinking state funding—which makes up 39% of district revenue—combined with rising costs. While the district received $15.2 million in state aid in fiscal year 2010, it now receives just $14.6 million, a decline despite 15 years of inflation and increased expenses. That amount is expected to drop by another $600,000 in the coming year. “If the state were to have given Amherst just a 2% inflationary increase over the last 15 years, we should be getting maybe $20 million, which probably would be enough to not actually have a levy on the ballot right now,” Amherst Superintendent Mike Molnar told cleveland.com. Property taxes make up the largest portion of the district’s funding, around 43%. While property tax reappraisals in 2023 added around $1.2 million in additional revenue, the expected $600,000 loss in state funding cuts that gain in half. Adding to the challenge, Lorain County Commissioners recently approved property tax exemptions that will reduce the district’s property tax revenue by more than $840,000—not only negating the property tax bump, but putting the district in the red by hundreds of thousands of dollars. “Exemptions for veterans, senior citizens – we support those things. We’re not against them,” Molnar said. “The issue is that the system is set up so that our revenue comes from those taxes. So, every time they cut the tax, the result for our school district is loss of revenue.” Ohio’s property tax system adds another layer of complexity. Before 1976, voter-approved property taxes could climb as property values increased. House Bill 920 changed that by requiring tax rates to drop when property values go up, so most levies bring in about the same amount of money year after year. The main exception is school district operating taxes, which won’t fall below a “20-mill floor”— a safeguard to ensure schools don’t lose too much funding. Molnar said that in 1976, 26 mills were levied to run Amherst schools, but today, adjusting for inflation, those 26 mills are only worth 3.7 mills. Since then, he said Amherst voters have approved 54.3 mills for operating the school district, which today are worth only 14.7 mills—below the 20-mill floor. “That’s the impact of not allowing property values and our income to increase naturally,” Molnar said. “It causes that cycle of us going back to the community to ask for more levies over and over and over again.” What’s at stake After stretching its reserves for more than a decade, Amherst has entered a cycle of accelerating deficit spending. In fiscal year 2022, the district ended with a cash balance of $21.7 million. Growing deficits over the last three years have reduced that balance to $13.9 million. District forecasts show annual deficits could exceed $6 million next year and climb to $7-8 million in fiscal year 2027. If Issue 16 fails, the district would need to reduce staffing by $3 to $4 million next year, eliminating 20-35 positions including teachers, administrators, counselors, social workers, classroom aides, maintenance staff and bus drivers. Essential classroom needs such as supplies, curriculum, textbooks and technology would also face cuts of $1 to $2 million. Rather than a property tax increase, Amherst’s Board of Education opted for an earned income tax, which officials say is fairer and more sustainable. The earned income tax applies only to wages and self-employment income, so each taxpayer’s contribution grows or decreases with their income. It does not tax Social Security, pensions or investment income—protecting seniors and retirees on fixed incomes—but ensures that homeowners with tax abatements and renters contribute to school funding. “One of the reasons an income tax levy was chosen was to not continue to attack property owners, which seems to be where everything has fallen the last couple of decades,” Molnar said. “We thought that an income tax was more aligned with how much income you’re bringing in, compared to property tax which is based on the value of your home. So, if you were to lose a job or your income was drastically reduced, then that would also reduce your taxes to contribute to the school district.” Molnar credits the district’s ability to hold off placing another levy on the ballot for more than a decade to its track record of fiscal responsibility. He said that Amherst currently spends about $12,500 per student—well below the state average of $16,000—ranking 37th lowest among Ohio’s 606 school districts in expenditures per student. Amherst also ranks 605th out of 606 districts in total revenue per student, receiving about $12,000 compared to the state average of $18,000. “Issue 16 is not in preparation for something major happening. We’re deficit spending now,” Molnar said. “We’ve done our job, we’re not wasting money and we’re really good at being fiscally responsible. We shouldn’t have to fight for funding and convince our community to pay more because of this broken system.”
