Proposed Changes to TPP and SB3 Reimbursements Mike Sobul Ohio Department of Taxation

Overview  The Governor’s budget proposal plans significant changes to the reimbursement of TPP replacement dollars  It also proposes changes to SB3 (public utility) reimbursements

Overview  The concept of how the new phase-outs will work are the same for both TPP and SB3  For schools, there is not a defined date by which the phase-out will be complete (other than current law for emergency and inside debt levies)  The amount phased down in any given year is capped at two percent of total defined resources

Overview  Under current law, the direct TPP reimbursements for fixed-rate levies are phased down from FY 2014 through FY 2019  In FY14, reimbursements are 9/17 ths of the prior year, declining by 2/17 ths each year thereafter  70 percent of CAT revenue is earmarked for schools indefinitely, with dollars not needed for direct reimbursement to be allocated for currently undefined school purposes

Overview  Currently, voted bond levies that qualify for reimbursement are to be reimbursed for the life of the levy  Emergency levies are to be reimbursed in full through FY18 as long as the levies remain in place  Neither of these provision are proposed to be changed in the executive budget, nor is treatment of inside debt levies

Overview  Under current law, reimbursements of fixed-rate levies under SB3 are to continue through August 2017  To continue receiving reimbursements through 2017, the annual test that has been in place for school districts (the test does not apply to JVS) must continue to be met  Currently, all JVS and only 133 schools receive reimbursements for current expense levies (a hand full of schools also receive fixed-rate non-current expense reimbursements)

Overview  As with TPP, bond levies are reimbursed for the life of the levies and emergency levies through 2017 as long as the levies remain in place (this would not change under the current proposal)  Any money generated by the KWH or MCF tax in excess of what is needed for reimbursements is used to equalize 0.5 mill maintenance levies under the OSFC program. Additional revenue beyond that is currently transferred to the state GRF

Executive Budget Proposal  The budget proposal would change the phase out of both the TPP and SB3 fixed-rate reimbursements  In FY12, each program’s reimbursements for current expense fixed-rate levies would drop by the lesser of the total reimbursement or two percent of FY10 total resources (potentially, a maximum drop of four percent of total resources)

Executive Budget Proposal  Total resources are defined as follows:  FY10 PASS payments (before transfers and adjustments)  FY10 payments under “Funding for Joint Vocational SD”  One-half of TY 2008 real and PU CE property taxes  One-half of TY 2009 real and PU CE property taxes  2009 CE telephone property taxes  FY10 CE income taxes  FY10 TPP CE and emergency reimbursements  FY10 SB3 CE and emergency reimbursements  Homestead and rollbacks associated with levies above Total resources do not include other locally generated dollars or federal restricted dollars

Executive Budget Proposal  Reimbursements for fixed-rate non-current expense levies (other than inside debt levies) have a straight phase-out not tied to resources  Those phase-out in 25% increments, beginning in FY12  The three payments per year are reduced to two, with the August (3/7 ths ) and October (3/7 ths ) payments combined into a single 6/7 ths November payment

SB 3 Proposal  Only 14 districts have CE reimbursements greater than 2% of resources  Only 5 JVS have CE reimbursements greater than 2% of resources

TPP Example  I will do examples of three districts in Montgomery county, Huber Heights, Northridge, and Valley View  In addition to CE fixed-rate levies, Huber Heights and Valley View have non-CE fixed rate levies

TPP Example DistrictCE FY 11 Reimb.Total ResourcesReliance Ratio Huber Heights $1,850,884$58,958, % Northridge $2,802,496$17,552, % Valley View* $197,291$16,032, % District2% of ResourcesFY12 PaymentFY13 Payment Huber Heights $1,179,162$671,7220 Northridge $351,058$2,451,438$2,100,380 Valley View* $320,64800 *Valley View’s reimbursement and resources are reduced by $69,753 for an expired/reduced levy

TPP Example--Northridge CE FY 11 Reimb.FY12 PaymentFY13 Payment Northridge: Current Law $2,802,496 Proposed Law $2,802,496$2,451,438$2,100,380 FY14 PaymentFY15 PaymentFY16 Payment Northridge: Current Law $1,483,674$1,153,969$824,264 Proposed Law $1,749,322$1,398,264$1,047,206 FY17 PaymentFY18 PaymentTotal FY Northridge: Current Law $494,558$164,853$9,726,310 Proposed Law $696,148$345,090$9,787,848

TPP Example—Non-CE DistrictNon-CE FY 11FY 12FY 13 Huber Heights $38,241$28,681$19,121 Valley View $26,244$19,683$13,122 DistrictFY 14FY 15 Huber Heights $9,5600 Valley View $6,5610

TPP Other Issues  Again, voted bond levies, emergency levies, and inside millage debt levies are treated the same as under current law  Remember, any levy must still be in place after 2010 for reimbursements to continue  Any of these calculations are appealable for 2 years, so check carefully what we did