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Property Values and K12 State Funding Decreases

By Ernie Strawser posted 02-22-2024 09:53 PM


Historic increases in property values and their impact on local property taxes are generating a great deal of attention. Some homeowners experienced a reappraisal increase in their home’s taxable value by as much as 45% in tax year 2023. The lowest countywide reappraisal in Ohio was 15%, and countywide averages across the state were 35%.  School property tax bills, as well as those for other local governments, can increase along with property values – but not always.  For many schools, local property taxes will not increase as much as property values because of Ohio’s inflationary tax reduction factors, sometimes referred to as HB 920.  For state funding calculations, all districts will be wealthier per pupil if their local property values increase year-over-year.  Ohio’s Fair School Funding Plan (FSFP) formula relies most heavily on local capacity, the majority of which is based on taxable property values.

The Ohio Department of Education & Workforce (ODEW) prepared FY 2025 funding simulations using tax year 2023 property values.  The FY 2025 simulations will now include two-thirds of the 2022 reappraisal change and one-third of the 2023 reappraisal change in the calculation of the local share of school funding. As a result, the state’s per-pupil share of the base cost under the FSFP is estimated to decline from FY 2024 to FY 2025. The state’s FY 2025 estimates show that state funding to schools for line “H1” (the calculated FSFP Foundation Funding before phase-in) decreases by $452.2 million from FY 2024 to FY 2025.   A reasonable conclusion from a reduced state share and an increased local share is that districts would see a decrease in funding from FY 2024 to FY 2025. 

The simulations show that 292 districts could see their phased-in line H foundation funding decrease in FY 2025 compared to FY 2024.   This could cause an increase in the number of districts that are guarantee districts which receive temporary transitional funding to guarantee their FY 2020 and FY 2021 funding levels. In FY 2024 about 155 districts were on the guarantee, which represented a recent improvement. However, the improvement could stop in FY 2025 with 191 districts expected to be on the guarantee (Line H1 calculated FSFP funding at 100%). 

In summary, the increase in property values, even when averaged over three years, will have a significant impact on state funding to schools. Many districts will see their state funding decrease from FY 2024 to FY 2025. Some will see their funding decrease to the point that they will return to their FY 2020 base level of funding, making them guarantee districts. Longer-term pressure to increase the local capacity and shrink state share will occur as the tax year 2022 and 2023 reappraisals are fully recognized over the next four years.  


By Ernie Strawser,

and Megan Homsher,