Where Do Your School Taxes Really Go?

Property taxes, levies, millage and school funding can be confusing, but they affect every community.

In this episode of Report to the Office, OSBA President Mary Cleveland talks with Princeton City Schools Treasurer Christine Poetter about how school districts are funded, why local taxpayers are being asked to carry more of the load, and how those dollars support students, staff, buildings and daily operations.

They also discuss common misconceptions about school district finances, the difference between property tax and income tax levies, why cash balances can be misunderstood, and how community members can stay informed and involved.

Topics include:

• Where school funding comes from.
• Why property tax bills can change.
• How levy dollars reach the classroom.
• The role of the district treasurer.
• Why school funding is a community issue.

Understanding school funding is one way communities can better support students and public education.

00:00 Introduction
00:18 Where do your property taxes go?
00:50 Meet Christine Poetter
02:17 Biggest misconception about school funding
04:02 Main sources of school funding
05:21 Local taxpayers vs. state funding
07:30 Property tax levies vs. income tax levies
11:30 Millage and valuation explained
12:48 Why tax bills can change
15:23 How tax dollars reach the classroom
18:27 Why cash balances can be misunderstood
19:02 Schools are a people business
20:39 Hard financial decisions districts face
23:11 What every Ohio resident should understand
25:33 How community members can stay informed
27:17 Closing remarks

For more resources, training and advocacy updates from the Ohio School Boards Association, visit ohioschoolboards.org.

Transcript

SPEAKER_02 0:00

The following program is a presentation of the Ohio School Boards Association.

SPEAKER_01 0:05

Have you ever wondered where your property taxes actually go? Well, let's report to the office. I'm Mary Cleveland, and today we're going to tackle one of the most talked-about and least understood topics in public education, school funding. My guest today helps manage one of the most important and complex parts of a school district. The finances. I'd like to welcome Christine Petter, Treasurer of Princeton City Schools, which is located in Southwest Ohio. Welcome, Chris. Thanks, Mary. Thanks for having me. I am so happy you are here. You know, we know that school funding is a very, very uh topic that everyone is talking about these days. But before we get into that, I'd like for you to share a little bit about you, about the district, and about what does a treasurer do?

SPEAKER_00 1:08

All right. Well, I'm Chris Vetter. I've been a treasurer. This is my second career for over 20 years now. I started my career in the world of technology. I uh come from a family of educators. Uh my grandfather was superintendent of schools, my grandmother was a teacher, my aunts and unconscious uncles are teachers, my mother was a teacher, and my dad was a businessman, and I said I'm going to be just like dad. And look where I've ended up. So I'm in school business, and what a great field. And uh we can talk later about how to encourage more people into considering school business as an option. But uh I found my way to Princeton. It's been 10 years now. I started at a couple other smaller school districts uh in size, and now I'm at Princeton, which is, you know, on the larger side, not certainly not a Cincinnati public or a Columbus public, but we certainly have um we're a large district with uh many schools and many students to serve, and uh I'm really enjoying being here and look forward to the next few years too.

SPEAKER_01 2:17

I love that. Well, thank you so much. Um, as we start to dig dig into the questions, one of my very first questions, and I and I just want to kind of help people to understand, what would you consider to be the biggest misconception um people have about school funding?

SPEAKER_00 2:35

I think it is that we have more money than we need. I think people typically think school districts are just sitting on piles of money. And uh we certainly aren't. I mean, you wouldn't have seen the events of yesterday with so many school districts across the state being on the ballot if we um if we were just sitting around counting money all day, which we're which we're not. I mean, we're working hard um to spend taxpayer dollars carefully, but uh as as we'll talk probably a little bit about, how we're pretty much most of us flat funded until we pass that next levy. So it it is a challenge to um balance all that out. I know there's been a lot of conversation about cash balance, but that's also very tricky. I mean, you're rich right after you pass the levy, but again, it's flat and your expenses increase and your money coming in doesn't increase. So uh it's always a challenge for school districts and how we message that to the public.

SPEAKER_01 3:41

I I love that. Yeah, I I you know I wholeheartedly agree with you as we are always trying to help our public to truly understand um what is school funding. So, with that said, um can you share some of the main sources of the school funding in Ohio and how do they all work together?

SPEAKER_00 4:02

Okay. So basically, when you think about it, you think that we have money coming from local sources. Um, that's our tax dollars that our taxpayers pay to us, whether it's a residential, uh homeowner, whether it's agriculture, you know, our farmers, andor it's our business community, commercial and industrial. So those are our local sources that come directly to the district. Then we have our partners at the state who we have a funding formula and that determines how much funding comes to each district based on the current funding formula. We also have a little bit of federal dollars, and you know, um it it's not a lot of money. Uh, it was at risk at one point very recently. Of course, uh we would all miss that, right? We're we're using that money to support students. If we didn't have that, then we'd have to find another source for that, which would probably be more asking more money from our taxpayers. So uh while it's a little bit of money, there's still very important things around those federal funds, and we certainly can't discount their use and and how important they are to us. So those are the main buckets of of where we get our money. And how to support no, I'm sorry.

SPEAKER_01 5:22

Um, I was gonna ask you how much actually comes from the local taxpayers versus the state, since we're talking about that distribution.

SPEAKER_00 5:31

Yes, so that differs depending on the school district. So the state funding formula is looking at the district's ability to raise local funds. So, and that is typically um looked at by how much property valuation you have. So, how much are your homes worth, how much are your businesses worth, how much is your land worth. And um then there is um other ways like income is now in the income. How much do your residents make? And it's your residents, not necessarily children and your families that come to your school. So those are incorporated into the formula to decide how much you can raise locally, so i.e. pass another levy. Um, then the state ships in the other. So what we're seeing though is on what is happening with our funding formulas is uh the states contributing less, which causes the locals to have to contribute more. And we, you know, we just can't say, okay, we need more today. We have to ask our taxpayers to approve that increase. So that that is the challenge we're seeing. And you know, we just had that wonderful fair school funding formula that we spent a long time uh fighting for and get and having put in place. We're in years five and six of that phase in, six being the last year, but it wasn't completely um supported. I mean, it is phased in, but some of the ways that formula was um meant to meant to fund us were changed a bit. So uh that that is our challenge of making sure that we keep the state and uh our locals, you know, doing both their jobs.

SPEAKER_01 7:30

I love that. And I I want to go back and touch on something you you just spoke of. Um we know that income tax levies um are now something that many districts have uh felt the need to um place on the ballot. Can you talk a little bit more about the the income tax based levy versus a property tax levy and um what what the public is actually seeing because as we know that we're gonna we, meaning school districts, have the challenge ahead of helping people to understand the differences between the two.

SPEAKER_00 8:10

Yes, I have had the for I have been fortunate enough to work in a district that did have an income tax. So the important thing there is there are two different types of taxes. It's the traditional, which is uh all basically all income is taxed. And then there's the earned only, which does relieve um retirement, you know, seniors uh from paying that. So it is a little bit more of a popular tax to do an earned only, because then you can get your seniors to support that. And you know, we know seniors are great voters, so it does appeal to them. And you know what this what they're looking at is the numbers you're reporting to the state as your income, and then taxing that, you know, whether you're hearing a 1% or even more or less. But um, you know, traditionally, you know, decade plus ago, those taxes were popular in more rural areas um because farmers also supported them because a lot of their income is not income, but but based on putting money back into their business of farming. So those are popular out there too, because they own giant properties, right? Right. So taxing those giant properties is definitely uh difficult on farmers and agriculture. So uh those that that's what that looks like. You know, typically we had thought more um suburban and urban areas possibly might not be as supportive of those kinds of taxes because maybe the wealthier um families would live in those areas, and maybe their wealth, income wealth would have been taxed higher than their property. So those are very interesting things to look at now, but we're gonna see how that plays out, right? So we are seeing some suburban districts pass income taxes. And um those those it will be fun to see how that um moves throughout the years as those as those residents get used to paying taxes in that manner. You know, I don't I don't I don't know, you know, we'll have to wait and see uh how that goes because typically, you know, when we think about uh Princeton, you know, we have different communities with different financial abilities, right? Our residents in certain areas are are certainly more financially challenged than others. And uh we have some pockets of very wealthy communities, and how would they look at that? You know, how would they be impacted? Would people do the math, right? Right would people stop and do the math on how my property tax might be more or less than my income tax? But those are certainly things we're gonna learn from as more and more districts try this. Do they pass? Do they fail? If they pass, how do their residents like them? If it was a short-term, you know, if it was a you know, a five-year income tax, will it be renewed again? What will the renewal rate be like on that? Because property tax renewals were typically easier to pass than new money, right?

SPEAKER_01 11:18

Right.

SPEAKER_00 11:18

So uh those will all be fun challenges for us to see how that works as we move through getting some age on those new past income tax levies.

SPEAKER_01 11:30

Perfect. Well, speaking of, let's go back a minute now, let's talk about property tax uh levies or just property taxes in general. When people hear the words millage or valuation, we know their eyes glaze over. Can you explain that in plain English so people understand what we mean by that?

SPEAKER_00 11:52

So I think probably one of the best things for people to understand, and we all do it right when we go to pass new money that is related to a millage number, is just um work with your district and work with your county. Don't try to do the hard math yourself. All the counties have the ability to go in and find out personally what it's going to do to you. They have uh if you go to our county auditors page, you can go to your property and you can plug it in. What if a levy passed at this millage? And that's what we encouraged people to do when we had our new issue on the ballot in May of 25 is you can go to the county. Sometimes it's better to send them to a different source because you know, we're trying to pass the levy and maybe the trust isn't perfect there all the time. Uh, that's what we did. But we also have to uh put that in the ballot language, you know, and it's that cost. And I think, Mary, one of the more confusing things for people is, and we've heard that with this, you know, unprecedented rise in property values uh over the last several years, which has caused all these issues, that um districts like Princeton who pass a continuing levy or have a fixed levy, it is a fixed amount. And it is sending to that district that amount that was voted on. So if your levy was for $10 million, you're getting $10 million every year. However, residents may see their tax bill go up and down because it's looking at the ability of that area to raise that $10 million. And sometimes valuations increase in your neighborhood and they decrease in another neighborhood. So your taxes go up, but their taxes are going down. But it's really important to remember that the school district is getting that $10 million, they're getting what the level is passed for. And I think if people could under they they, you know, again, they think we're just sitting on a lot of money. That's that's the un kind of unfairness of it a little bit that our money stays so flat. We we have new construction. If you're living in a space that has, you know, empty land and they're building subdivisions of homes, of course you're gonna see more tax dollars. But if you're in an area such as Princeton where we're pretty much built out, right? We're pretty built out. We have lots of industrial and commercial space, but as far as residential, there's there are no subdivision areas going up in Princeton that are going to be significant. I think that's the part, and I when I tell the teachers and I'm walking, I'm going around the district explaining our forecasts, I said, it is like you getting the same salary for 10 years. Right. I said, so just re just remember our our dollar amounts when we pass continuing and fixed levies are for that amount. Um, if you have questions about your specific bill, it should not be going up unless your property value in your neighborhood is increased. That means somebody else is getting a break somewhere else. That's just how the system works.

SPEAKER_01 15:23

Absolutely. Thank you for sharing that because I do believe the way you just shared it, it's probably not how people understood it. So um the hope is that we are helping people to understand better um what is actually happening when we talk about school funding. So thank you for that. Um, a question I do have though is um if I pay property taxes, how does that money actually make its way to the classroom? Because that's another question I know people often wonder, you know, well, I said yes, but is it really making its way to the classroom?

SPEAKER_00 16:05

So you pay your taxes um possibly twice a year. You can pay all in January, all in the beginning of the year, or you can split it up into two payments.

unknown 16:16

Right.

SPEAKER_00 16:17

Um, and you pay your county. The county then turns around and pays us, and they Hamilton County will allow us to draw advances on that. They'll send us whatever tax dollars they feel they have at that time for Princeton or at the time for your school district in advances. That's how Hamilton County works. Um, and then at the end, so in the spring, you'll have a settlement where you get your entire entire amount based on what you've already received in settlement. So we get paid in theory twice a year from the county. Um then, you know, we have ebbs, our our our you know, we have ebbs and flows in cash and how it comes in. So we get big pays when we get these tax settlements, but you know, we're paying teachers, we're paying paraprofessionals, we're paying cafeteria workers and custodians, we're paying them all year long. And you know, we pay we pay 24 pays a year, they're getting the same amount all year long. So there do come times where um we're waiting for that next settlement payment to come in, you know, where we have to watch cash. Um, because we've received our first settlement, and now we're running into July, where you know, that first half of the tax year is kind of all paid out. We're getting ready to pay all our salaries. And, you know, sometimes districts have to be very careful about their cash flow at that time. The fun part of this and the cash flow conversation with the state is that where we have all this money, uh again, we are we are dependent upon when we receive these monies twice a year, our large paychecks typically from the counties. Um and in June, we still have a good amount of money. If you just passed a levy and you're getting that new money in, you know, your per your your cash balance might be a little high, but you're past a levy, you've got a high cash amount that you're trying to push for what three, five years, so you don't have to ask for more money. So you do appear a little rich at the start of your levy cycle, but we all know your your money coming in is gonna stay flat while your expenses continue to go up. So um, and you know, Mary, as as as most board members certainly know, but maybe residents don't know, is that 70 to 80 percent of what we spend our money on in school districts is our is our staff.

SPEAKER_02 19:02

Right.

SPEAKER_00 19:02

And um, those are those teachers and paraprofessionals and and principals and cafeteria workers and custodians that are all supporting uh all the good work we do for our kids every day. So um that's the major cost is is a people cost. We are a people business to support student achievement.

SPEAKER_01 19:26

So absolutely.

SPEAKER_00 19:29

Um that's how that money, all that money, I mean, districts are are tied to support, everything we do supports a kid. I mean, even though it may not be classified that way in some eyes, but I mean, you still have to put the roof on the building, even though, and that's still a roof covering students, right? But sometimes not looked at as a student expense, but more of an operation expense.

SPEAKER_01 19:53

So it all it all ties back to the student. Exactly. You're absolutely right. And I'm glad you use the roof analogy because oftentimes you put a roof on the building and and the public is like, what's going on? But to your point, um, do we want the roof to leak and impact the student's ability to learn? So, you know, even a roof on a building is part of what's necessary for the students to learn. So thank you for using that as an analogy. Um, one of the things I want to ask you specifically is can you give an example of one of the hardest financial decisions you've had to make or help had to help guide?

SPEAKER_00 20:40

I think um, as with, you know, I'm just gonna go back to the roof, the the money spent on infrastructure and capital for our facilities, you know, those school buildings and uh are very expensive. Um it's and and while it doesn't seem like it's paying for a teacher, paying for a textbook, or paying for a computer, or paying for food to serve children, it is still is still such important money to spend to protect the district asset, which is our school buildings. And that is where, I mean, just think of the number of hours students spend in our buildings. Um, some, you know, a lot of times more than they spend in their homes uh during certain times of the year. But um spending that money sometimes is really hard because it is so large and planning for it. I know we have we have that challenge at Princeton always, because we're always thinking of what new program can we do, you know, what can we do here? And it's really hard to to pull those reins back in a little bit and remember oh, we still have to pay parking lot, right? We we still have to take care of the heating and air conditioning because. And the roofs, everything that goes around buildings, because you know it's not you know, it's not fun to spend that money necessarily, and you don't immediately see how it touches a student or changes uh how they're learning in a day. But that keeping those buildings in place is really one of the hardest things I think we we do because it is such a large expense and um sometimes you know difficult to spend those dollars, but important.

SPEAKER_01 22:29

I would absolutely agree. Um, I know you know, and and we talk about it. Um the board and treasurer work hand in hand in looking at um what we're going to spend, when we're gonna spend, and doing all the that planning, and I concur with you the hardest part oftentimes is the infrastructure dollars, because we know that that's the one part that the public tends not to understand as much. So um thank you for that because I would concur with you on that. Um if every Ohio resident understood one thing about school funding, what should it be?

SPEAKER_00 23:11

I think um over the last you know several years, we have to remain uh people I think people need to stay involved and very aware of how the tax dollars are shifting out away from us. Um the state is is their portion of the pie is getting smaller. Locals are being asked, local taxpayers are being asked to do more, but it's not just local taxpayers. It the focus is being pushed away, even from the business community onto residential and agricultural supporting our schools. It used to be more of a partnership with business and resident agricultural sharing that burden, but definitely that has flipped. We need to be very aware of that shift. So I think it's really important while people don't, you know, people don't like paying taxes. We sure all do like all the benefits that those taxes do give us. And maybe you have to stop and take a moment to think about those. My tax dollars go towards schools, my tax dollars go towards fire and police, my tax dollars go towards so many things in our communities, all our local government government supports. I mean, yeah, if we could all live in a world where we didn't have to pay taxes, I don't I that would be right, great, right? But how do we pay for all those things that are currently paid for by taxes? And Ohio is a significant property tax focused state when it comes to schools and local governments. Um I don't know how, I don't know how we fix that. If we continue to dial back the state income tax, their their revenue source is decreasing. So of course, schools being one of their largest expenses is going to be impacted. I mean, it's really, really hard. And you know, we've all seen this, uh, the potential of the the property tax ballot issue. I mean, I I can't, you know, if that would pass, how would we fund all the things that property taxes fund? That's that will be our next uh thing, our state will have to figure out.

SPEAKER_01 25:31

Absolutely.

SPEAKER_00 25:32

If something like that would happen.

SPEAKER_01 25:34

Absolutely. Um, and to that end, um, you know, I want to um, as we're about to close, I want to bring it back to the community. From your perspective, from your office, from your vantage point, how would you suggest community members stay informed or even get involved?

SPEAKER_00 25:54

I think it's really important that you know, of course, your school board members, they're definitely for you. Um all your legislators in your area, very important that uh you communicate with them and let them know how you feel about supporting schools, definitely supporting other local governments. I think you just have to be very involved and start listening for those kinds of things. And it is hard when you hear about things that are gonna uh benefit your personal pocket, maybe, but you have to remember that our our communities without schools I I mean you just can't even imagine a world. We're we're we're preparing our kids uh for for their futures. I mean, you go to school uh every day to learn how to play in the sandbox with each other, you learn how to respect teachers and principals and and business partners that come into your communities. We we do so much for students in schools that isn't just um reading and math, right? Right. We teach them how to be good citizens and good members of the team, uh, all those things that you learn how to play well with others and how to be a contributing uh citizen in our communities.

SPEAKER_01 27:17

Absolutely, absolutely. Well, Chris, I do want to thank you so much again for coming here today and sharing um information that really helps um our listeners understand school funding um in a different way. You know, um understanding you know school funding, as I said before, is one of the most important ways we can stay informed and engaged within our communities. The more we understand, the stronger our schools will be we will become. So again, thank you, thank you, thank you. Um to everyone who's listening. Please um continue to report to the office, share, like, um, click those buttons as you can. Um but again, we really appreciate that you took some time to learn more about school funding today.