Taxing sales to fund Ohio schools?

COLUMBUS, Ohio (AP) — As Ohio considers new ways to pay for public schools, legislative analysts said Wednesday one option is to replace local property tax revenue with an increase in the state sales tax, but they cautioned that it might be a risky move.

To raise the more than $9.9 billion that's needed, policymakers would need to more than double the sales tax rate — from 5.5 cents on the dollar to 13.2 cents.

It's one of many ideas being kicked around by an Ohio House subcommittee laying the groundwork for a new state funding formula for schools.

Jean Botomogno, principal economist for the Ohio Legislative Service Commission, said in a memo that such a steep increase could affect how much the tax brings in because people don't like to spend as much when the tax rate on their purchases is high.

Wednesday's hearing on school tax policy was the second held in the Republican-led House as Gov. John Kasich works on a new strategy for doling out education dollars. Ohio's current formula has been repeatedly declared unconstitutional for relying too heavily on property tax revenues that tend to be higher in wealthier districts.

Howard Fleeter, of the Education Tax Policy Institute, told lawmakers a balance of state and local taxes is needed to keep any future system stable and fair.

"Taxes at both the state and local level play a clear role in the reliability of the funding system over time, and taxes at the local level also play a role in the equity of the funding system," he said.

Basic state aid to schools rose in the last state budget, but total education dollars fell by an estimated $2.9 billion. That was due to the loss of federal stimulus dollars and a decision not to offset district losses from the phase-out of a targeted tax on business property.

A report by Public Finance Resources Inc. found more than 40 Ohio school districts would need to get voters to agree to another 5 mills of taxation — or $250 a year for every $50,000 of home value— to replace the loss of the tax in 2013. One district — St. Bernard-Elmwood Place in Hamilton County — would need almost six times that to offset the loss: 29 new mills, or $1,450 a year for the owner of a $50,000 home.

Fleeter said Ohio is 36th among the 50 states in its state-level tax burden, but seventh in terms of local tax burden.

That statement prompted the 124,000-member Ohio Education Association, the state's largest teachers' union, to push for Kasich's new funding formula to put a priority on restoring state funding for schools.

"Currently, the school funding system in Ohio represents a patchwork of fixes that is overly complex and unexplainable. It relies far too much on the local property tax base to finance public education," the group said in a statement. "As a result, Ohio students are watching opportunities slip away in the arts, physical education and advanced and foreign languages, not to mention the lack of resources for textbooks and computers."

Rabbi A.D. Motzen, of Agudath Israel of America, suggested Ohio offer tax credits to businesses or individuals willing to fund scholarships that could be used to pay tuition costs at nonpublic schools.

He said it's a "money follows the student" approach that's been enacted in 11 states.