{"id":1612,"date":"2025-08-27T18:02:23","date_gmt":"2025-08-27T18:02:23","guid":{"rendered":"http:\/\/www.oepiohio.org\/?page_id=1612"},"modified":"2025-08-27T18:04:28","modified_gmt":"2025-08-27T18:04:28","slug":"oepi-analysis-of-property-tax-provisions-in-the-fy26-27-state-budget","status":"publish","type":"page","link":"http:\/\/www.oepiohio.org\/index.php\/ohio-school-levy-data\/property-tax-research\/oepi-analysis-of-property-tax-provisions-in-the-fy26-27-state-budget\/","title":{"rendered":"OEPI Analysis of Property Tax Provisions in the FY26-27 State Budget"},"content":{"rendered":"\n

Ohio\u2019s budget process reached what typically would be completion stage on June 30th<\/sup> when Governor Mike DeWine signed HB 96, the FY26-27 biennial budget bill. However, the Governor\u2019s signed budget bill included 67 line item vetoes, several of which apply to property tax provisions impacting Ohio\u2019s school districts and other local governments. As a result, Ohio\u2019s FY26-27 budget process is not yet completed, as the Ohio House and Senate weigh whether to attempt veto overrides (which require 60% of the members in both the House and Senate) of these provisions. The House had initially scheduled 3 budget provisions for override votes on July 21st<\/sup>, however only 1 measure was overridden at that time. No further override votes are currently scheduled in the House, and the Senate has not yet scheduled any veto override votes. <\/p>\n\n\n\n

HB 96 Main Property Tax Provisions<\/strong><\/p>\n\n\n\n

This OEPI memo provides an overview of the 5 main property tax related provisions in the FY26-27 budget. The first four provisions will each provide property tax relief in different ways, while the fifth provision eliminates certain types of levies and will actually lead to increased property tax burdens. <\/p>\n\n\n\n

1.<\/strong>     Carryover Cash Balance Cap<\/strong> <\/p>\n\n\n\n

(<\/strong>Vetoed, not yet overridden)<\/em><\/strong><\/p>\n\n\n\n

The cash balance cap was first introduced in the House version of the budget requiring the county budget commission to reduce current expense property taxes for the following year by the amount necessary to reduce each districts carryover cash balance to 30% of operating expenses. Under the House proposal, 478 districts above the 30% threshold would stand to lose $3.73 billion in property tax revenue based on Fall 2025 cash balance projections. The Senate modified this provision by raising the threshold to 50% and exempting permanent improvement expenses from the threshold calculation. 258 districts have an FY25 cash balance above 50% and would stand to lose $1.361 billion in tax revenue.<\/p>\n\n\n\n

Conference Committee further modified this provision by establishing a threshold of 40%. 370 districts have an FY25 cash balance above 40% and would stand to lose $2.273 billion in tax revenue.<\/strong> The Conference Committee version also provided for a sliding scale to reduce the impact of the cap for districts whose cash balances are below $10 million. Districts with cash balances less than $2 million would see zero reduction, between $2 and $4 million would see a 25% reduction, between $4 and $6 million would receive a 50% reduction, and between $6 and $10 million would receive a 75% reduction. Along with a provision exempting certain low spending school districts, $106 million in tax reductions are averted due to the sliding scale, reducing the impact to $2.167 billion<\/strong>. In most school districts the carryover balance cap would initially be a one-time reduction, however, the confusion for taxpayers and destabilization for school districts of operating right at the cash balance threshold would be ongoing. <\/strong><\/p>\n\n\n\n

The Governor vetoed the cash balance cap provision, <\/strong>and it was not one of the items scheduled for an override vote on July 21st<\/sup>. <\/p>\n\n\n\n

2.<\/strong>     Inclusion of Emergency & Substitute Levies in the 20 Mill Floor Calculation<\/strong><\/p>\n\n\n\n

(<\/em>Vetoed, not yet overridden)<\/em><\/strong><\/p>\n\n\n\n

The Senate version of the budget included a provision that emergency and substitute levies be included in the calculation of the 20-mill floor for traditional K-12 districts and the 2-mill floor for JVSDs. Conference Committee retained this provision and included incremental growth levies, conversion levies, and the property tax portion of combined income tax and property tax levies in the floor calculation. This provision would take effect beginning with taxes paid in 2026 and would occur as each district goes through its next reappraisal or triennial update. <\/p>\n\n\n\n

OEPI calculates that 190 of the 381 districts currently (as of December 2024) at the Class I 20-mill floor have emergency and\/or substitute levies in place. In the HB 129 Fiscal Note LSC estimates that by tax year 2028, 237 districts <\/strong>will be impacted by this provision and are estimated to see a property tax revenue reduction of $127 million<\/strong>. <\/p>\n\n\n\n

LSC notes that this tax loss is due to a reduction in the growth of school district\u2019s property taxes<\/em> and it does not cause actual negative growth for any district (i.e. districts will not get less tax revenue than they have currently, but rather will not receive as much growth as if they were still at the 20-mill floor). The loss in growth will be ongoing until the district returns to the 20-mill floor, which for many districts may take many years (if ever). <\/p>\n\n\n\n

The Governor vetoed this provision<\/strong>, and a scheduled override vote did not take place as planned on July 21st<\/sup>. <\/p>\n\n\n\n

3.<\/strong>     Expanded County Budget Commission Authority<\/strong> <\/p>\n\n\n\n

(Vetoed, not yet overridden)<\/em><\/strong><\/p>\n\n\n\n

The Senate version of the budget inserted a provision which allows \u201ccounty budget commissions (CBCs) to reduce millage on any voter-approved tax levy aside from a debt levy if the commission finds it reasonably prudent to avoid unnecessary, excessive or unneeded property tax collections.\u201d <\/strong>This provision would apply to schools and all other local governments that have voted levies in place. <\/p>\n\n\n\n

Conference Committee retained this provision and added several provisions relating to \u201ctax budgets\u201d, including one which requires local governments to submit a stated intent to collect increased revenue due to inside millage or the 20-mill floor. <\/p>\n\n\n\n

While CBCs in theory already have authority to not fully collect property taxes, in practice it is rarely exercised. Including this provision in the budget makes it far more likely that this authority will be exercised, which is problematic in several ways. <\/p>\n\n\n\n

Apart from the reduced revenue collections, there are legal questions about allowing the three- person CBC to override the approval of a majority of voters who authorized the levies in question, not to mention that these very same levies required approval by the very same CBC to get on the ballot in the first place. <\/p>\n\n\n\n

Furthermore, more than half of Ohio\u2019s school districts overlap into more than one county. Voters who live in a county that is not the \u201cprimary\u201d county of the school district are unable to vote for the members of the CBC who would  have authority over their taxes and public services. <\/p>\n\n\n\n

The Governor vetoed the CBC authority to reduce millage on voted levies<\/strong>, and a scheduled override vote did not take place as planned on July 21st<\/sup>. <\/p>\n\n\n\n

4.<\/strong>     \u201cPiggyback Property Tax Exemptions<\/strong> <\/p>\n\n\n\n

(Enacted)<\/em><\/strong><\/p>\n\n\n\n

The Homestead Exemption was first enacted in 1971. It currently provides a property tax credit to eligible homeowners equal to the taxes charged on $28,000 in assessed value of their property ($9,800 of taxable value). Essentially the first $28,000 in home value is exempt from taxation. You must be over 65 with an income less than $40,000 or permanently disabled to qualify. <\/p>\n\n\n\n

The 2.5% \u201cowner occupancy\u201d tax credit was first instituted in 1979.  It applies to a dwelling unit if occupied by the owner, plus up to one acre of land. <\/p>\n\n\n\n

The \u201clost\u201d tax revenue from both of these credits are currently reimbursed to schools and local governments by the state. <\/p>\n\n\n\n

Conference committee inserted a provision to allow county commissioners to double (i.e. \u201cpiggyback\u201d) these 2 existing tax credits, benefitting eligible taxpayers but with no state reimbursement to local governments<\/em>. <\/p>\n\n\n\n

According to data on the DEW website, the February 2025 Homestead Exemption amount to a $99.9 million credit to Ohio homeowners. This credit reflects the amount by which the first of 2 property tax payments for 2024 was reduced. As the 2nd<\/sup> payment by taxpayers for 2024 was due in June 2025, the total value of the Homestead Exemption in the 2024 tax year would be $199.8 million (<\/strong>double the January amount). <\/p>\n\n\n\n

Similarly, DEW shows that the January 2025 (first half of 2024 taxes) 2.5% Owner Occupancy credit was $85.7 million.  Thus, the total value of the Owner Occupancy credit in the 2024 tax year would be $171.3 million. <\/strong><\/p>\n\n\n\n

Combining the above two totals reveals that the potential revenue loss to school districts if all counties exercised the piggyback authority on both the Homestead Exemption and 2.5% Owner Occupancy credit is $371.1 million. <\/strong>While it is highly unlikely that all 88 Ohio counties would choose to exercise this authority, these figures do illustrate the potential revenue loss to Ohio schools is not insignificant. <\/p>\n\n\n\n

This provision was <\/strong>not vetoed<\/strong> by the Governor and is now part of the Ohio Revised Code<\/strong>. <\/p>\n\n\n\n

5.<\/strong>     Elimination of Property tax Levy Options<\/strong> <\/p>\n\n\n\n

(Vetoed, successful override vote in the House, pending Senate override attempt)<\/em><\/strong><\/p>\n\n\n\n

The Senate version of the budget inserted a provision to eliminate the following levy types:<\/p>\n\n\n\n