Changes to Ohio K-12 State Funding
The recent increase in Ohio property values is significantly affecting local property taxes and school funding. In tax year 2023, some homeowners experienced a rise in their home's taxable value by as much as 45%, with the statewide average around 35%. While this can lead to higher local property taxes, the effect is not always directly due to Ohio's inflationary tax reduction factor. Nevertheless, for state funding purposes, districts with increasing local property values are considered wealthier per pupil. Since Ohio’s school funding model heavily relies on local capacity, primarily through taxable property values, this can shift the balance of funding.
The Ohio Department of Education & Workforce Development (ODEW) has prepared FY 2025 funding simulations using 2023 property values. These simulations now incorporate two-thirds of the 2022 reappraisal changes and one-third of the 2023 reappraisal changes when calculating the local share. As a result, the state's per-pupil contribution is expected to decrease in FY 2025 compared to FY 2024. Specifically, state funding for schools is projected to drop by $452.2 million for the "Calculated FSFP Foundation Funding" line from FY 2024 to FY 2025. This reduction suggests that districts will see a decline in their overall funding.
For 292 districts, including MCSD, state funding will decrease in FY 2025. The number of districts relying on "guarantee" funding, a temporary measure to maintain funding at FY 2020 and FY 2021 levels, will increase. In FY 2024, about 155 districts were on this guarantee, but by FY 2025, it is expected to rise to 191.
MCSD will be particularly affected, with projections showing that for every $3 in new property taxes collected from the 2023 reappraisal, the State of Ohio will reduce state aid by $2, leaving $1 for the school district. Additionally, for every $10 paid in property taxes by Middletown residents, $7.40 goes to the school district, with the remaining $2.60 allocated to other Butler County taxing entities. Long-term, Ohio districts will face increasing pressure to raise local revenue through operating levies, as state funding continues to decline due to the impact of rising property values.
