State cuts major headache for agencies

DAVE MOSIER/independent editor

Although the economy is slowly recovering from the devastating recession that began in 2008, local government entities — and schools in particular — are reeling from the loss of state funding from the current biennial budget and other factors.

Ohio’s budget for 2012 and 2013 cut local government funding by a billion dollars, while, locally, schools and other government entities saw a decrease of $4.6 million from the current biennial state budget.

That includes a $3 million loss for county school districts, a $1.1 million loss for county entities, including townships, and $220,000 for the city of Van Wert. County libraries, which include Brumback Library and Delphos Public Library, saw decreases of $63,000 from the current biennial budget.

Tax reimbursements provided by the state to local governments and special districts were down by $582.5 million statewide in 2012-13, compared to the prior two years, a loss of nearly two-thirds. Losses in this category included:

Tax reimbursements for the Tangible Personal Property Tax — This comprised the largest source of revenue loss to local governments, accounting for a loss across the state of $640 million in 2012-13 compared to 2010-11. This reimbursement comes from the Commercial Activity Tax (CAT), and phase-out of that reimbursement was already on the books: local government share of revenue collections from the CAT was to decline from 30 percent to 19.4 percent, a decline of about a third. Under the current state budget, the phase-out was accelerated. The 4,156 levies or jurisdictions impacted by this cut saw their funding decline by 74.1 percent in calendar years 2012-13 from funding levels received during the prior two years, under the former biennial budget, during 2010-11.

Tax reimbursements for Public Utility Tax — Cuts to local governments in these funds totaled $87 million statewide when compared to what was received in the prior biennial period, an 80 percent decline. This source, though smaller than the other tax reimbursement, was not being phased out.

Local Government Funds, instituted to help counties deal with poverty and plummeting property values during the Great Depression, are cut in the current budget by 25 percent in fiscal year 2012 and 50 percent in fiscal year 2013. The loss in aid comes from two revenues streams of the LGF:

Mike Ruen, treasurer for the Van Wert City School District, said the loss of tangible personal property tax has been devastating for the district. The district has gone from a high of $2.25 million in personal property tax collections in 2006 to essentially nothing now that the tax has been phased out. While the district was receiving reimbursement for several years from the state to make up for the personal property tax revenue loss, those reimbursements were also phased out earlier than originally promised.

The loss for the district, Ruen said, is huge. “The loss of tangible personal property tax really hit us,” Ruen said.

Troy Bowersock, Lincolnview Local School District treasurer, said that his smaller district collected a high of $340,000 in tangible personal property tax receipts, adding that those dollars are now all lost due to the phase-out of the tax.

While county school districts are, for the most part, seeing some increased dollars from the recent property revaluations, Van Wert City Schools saw much lower increases than Lincolnview and Crestview, largely because agricultural valuations saw the highest increases, compared to residential and commercial real estate, which saw some overall declines.

In addition, House Bill 920, passed in the 1970s to combat ultra-high property values, essentially keeps real estate payments level for areas with little new development. For Van Wert County, that means that increases in valuation area largely offset by decreases in state foundation money because of HB 920.

Bowersock said his district received approximately $3.9 million in state foundation revenue for the current fiscal year — approximately 50 percent of the district’s budget — but added that number is less than was received in 2008, while costs have risen substantially over that same time period.

“That’s an awfully large piece of the pie,” he noted.

School districts with income tax levies have seen increased revenues from those levies, but the increase has been far too little to offset cuts in state funding, Ruen added.

All government entities, including schools, have also been hard-hit by low interest rates. Where investments were earning 4-6 percent, and sometimes more, prior to the 2008 recession, interest rates are now under 1 percent.

“We used to earn $300,000-$400,000 a year in interest, but now earn about $25,000,” Ruen said.

Another factor is also impacting area school districts financially: open enrollment. But while open enrollment has been beneficial to Lincolnview and, to a lesser degree, Crestview, it has been a huge negative for Van Wert City Schools.

One big problem with the current open enrollment process is that, when a student leaves one district for another, the student’s “home” district not only loses the student’s share of state foundation money, but also his share of local tax revenues as well — a “double whammy” for the student’s former district.

Ruen said Governor John Kasich has pledged to stop that practice, but he added that hasn’t happened yet.

Local government entities other than schools have also seen funding losses from Local Government Fun cuts, as well as the loss of estate tax and personal property tax dollars.

Municipalities and township governments saw a 25 percent cut to Local Government Funds in 2012, that deepens to 50 percent at the start of 2013 — the second year of this budget period. The loss of hundreds of million more looms as the estate tax, levied on just 8 percent of the wealthiest Ohio estates, is eliminated next year.

Both County Auditor Nancy Dixon and Van Wert Auditor Martha Balyeat say that losses in state funding have been substantial, with county losses from Local Government Fund receipts estimated at $600,000 this year alone, from two years ago.

Dixon said the county is supposed to receive approximately $744,000 in the second year of this biennial budget. That compares to $964,821 in 2012 and $1.3 million in 2011, the year before the latest LGF cuts took effect.

The losses have schools and other local governments wondering what cuts they will need to make in the future to deal with funding cuts. That problem for schools is exacerbated by the fact that no information has been forthcoming on what state foundation funding will be for the coming biennial budget. For school treasurers who have to make five-year forecasts based on current and future funding, the situation becomes a guessing game.

“It kind of makes it difficult for planning purposes,” was Bowersock’s understated response to the state-funding situation.

The funding situation has also been a driving force behind Balyeat’s requests to Mayor Don Farmer for more advance planning in connection with the city’s General Fund — the biggest recipient of state tax revenues.