The graphic above shows the projected financial picture of the Marysville School District over the next four years. The red line projects the increasing expenses of the district while the blue line shows the diminishing revenue. Where the two lines cross represents the point at which revenue does not cover expenses and the district must dip into cash reserves to make up the difference. The green line represents those carryover funds which are projected to be depleted by 2026. (Graphic submitted)
Despite kicking the tires on the idea of an income tax levy, it appears the Marysville School District will opt for a traditional property tax measure when it returns to the ballot.
District Treasurer Todd Johnson updated the board of education earlier this week on the input from various surveys and focus groups.
Johnson’s recommendation was to put a 10-year operating levy on the ballot in May of 2023. The size of the levy would be determined closer to the election year but should fall between 7 and 8 mills, generating $6.5-7.5 million annually.
The need for the operating levy has been forecast by the district for several years. Though the district’s cash balances are currently in the area of $28 million dollars those reserves are about to be eroded as the district’s expenses begin to outpace revenue next year.
Traditional increases in operational expenses, including salaries and benefits, coupled with an annual reduction of tangible personal property tax reimbursements by $600,000 each year. At its peak, the district collected around $9 million from tangible personal property tax, which was levied on the machinery, equipment and inventory of businesses, but the funding mechanism was phased out in 2009 by the state of Ohio. The state provided payments to offset a portion of the lost tax, but those payments annually reduce and will be gone altogether in 2026.
Johnson explained that as the district eats into its cash reserves to meet expenses, the carryover funds will be gone by 2026. He said three solutions could keep the district out of the red – budget cuts, a property tax levy or an income tax levy.
Johnson said the budget cuts were not seen as a viable option by survey respondents or the focus groups. He said a reduction of 30-40 staff positions would be needed to stave off the deficit and the revenue shortfalls would reappear year after year.
Although Marysville does not have a current income tax on the books, neighboring Fairbanks, Jonathan Alder and North Union all do, ranging from 1-1.25%. District officials had felt the option might appeal to certain segments of voters.
Income taxes are not collected on social security and can be more appealing for seniors to approve. They also allow for revenue to increase as wages of residents increase, allowing districts to ask for money less frequently.
The disadvantage of an income tax is that businesses, as entities, are not subject to the tax. Only residents living within the district pay into the tax. Income taxes also tend to place more of a burden on higher income families.
“A small percentage of people carry a large percentage of the financial weight,” board member Dick Smith said.
Property taxes are a stable source of income, allowing residents and businesses to spread the burden across all who reside in the district. The disadvantage of a property tax is that it does not generate more money as the district grows and it can disproportionately impact those on fixed incomes, like seniors.
Johnson said the response from the focus groups and surveys made the district’s path pretty clear.
“I would say a lot of people saw the value in the income tax in that it would provide that revenue growth but at the same time everyone talked about how difficult it would be to pass,” Johnson said.
Johnson said the focus group members, even those involving a collection of seniors, said voters would not be comfortable blending school finances with an income tax.
“The community is just not really used to income tax when it comes to school taxation,” Johnson said.
Among younger voters and parents, the idea that municipalities already draw income taxes was a sticking point. Superintendent Diane Allen said commuters noted that they pay an income tax where they work and are then taxed by the city of Marysville, with no credit being given back locally. She said many respondents said to avoid a third tax on their incomes.
“We heard some very bold statements about staying out of income tax for that reason,” Allen said.
Johnson said the board would need to make a final decision on the levy by January of 2023 in order to be on the ballot in May of 2023.
New board member Jermaine Ferguson asked why the district is waiting so long to get on the ballot. Johnson said the district didn’t want to ask voters for money before the cash reserves became depleted.
“What we put on, we want our best opportunity to pass and not run multiple campaigns,” Allen said.