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November 3 - 1.5% EARNED INCOME TAX OPERATING LEVY – FREQUENTLY ASKED QUESTIONS

Crestwood Strong

This document will provide information regarding the following questions: 

 

1. What issue will be on the ballot this November?

2. Why is the District on the ballot?

3. What has been done in the past to address District finances?

4. What will happen if the levy does not pass?

5. What income is taxed with this levy?

6. Why did the Board seek an income tax for this levy?

7. What effect will this levy have on my property taxes?

8. How long will this levy last the District financially?

9. What other Districts have income taxes?

10. How will the tax be collected from the taxpayer?

11. Where can I find resources for the November election?

 

1. What issue will be on the ballot this November? 

 

The Crestwood Local School District is seeking to pass its first operating levy since 2012 and only the second since 1992 on November 3, 2020. The levy is a 1.5% earned income tax. The levy is continuing and would not go into effect until January 1, 2021. The funds from the operating levy would make up for the shortfall in the Crestwood budget, bridging the gap between what the state and federal governments pay and the actual cost of operating the school. Annual operating expenses include staff, textbooks, equipment, food service, transportation, fuel, maintenance, and repairs, etc.  

 

2. Why is the District on the ballot? 

 

Crestwood Local Schools has only passed an operating levy for additional operating funds twice since 1992. Because of this, the District is operating on the second-lowest amount of property tax millage in the County. (Source: https://www.tax.ohio.gov/tax_analysis/tax_data_series/school_district_data/publications_tds_school.aspx) Crestwood is also receiving less in State funding. Since 2018 Crestwood has lost over $916,000 in State funds, and it is anticipated to lose even more in Fiscal Year 2021. The District is also on what is called the State funding “guarantee.” This means that unless the State changes the school funding formula that is currently in law, Crestwood Local Schools will continue to receive the current level of State funding with no increase in revenues and possibly more reductions in state funding. The combination of these issues with the rising operating costs (personnel costs, utilities, maintenance, transportation, etc.) will result in the District running a deficit that will grow to over $1.5 million in just 3 years and 2.25 million in 4 years. (Source: Ohio Department of Education website: Keyword – Five Year Forecast http://education.ohio.gov). 

 

3. What has been done in the past to address District finances? 

 

The District is continually working to find ways to ensure the effective stewardship of public dollars. Since the 2016-17 school year, Crestwood Local has saved its budget over $2.2 million by reducing its staff through attrition and reductions. These reductions have included 14.5 certified positions and four non-certificated positions. Since 2012 the District has reduced over 30 full-time equivalent staff members.  

 

4. What will happen if the levy does not pass? 

 

Crestwood Local is committed to providing the best education possible to its students but can only operate within the resources that are available. If the levy fails to pass in November, the District must consider additional budget cuts as well as other avenues of increasing revenue through continued classroom fees and additional pay-to-play/extracurricular fees in order to address the increasing deficit. However, without a significant change to the State funding formula, the issue of expenditures increasing more than revenues will continue. Therefore, the District will likely have to place another operating levy on the ballot.


 

5. What income is taxed with this levy? 

 

School districts are permitted to levy the tax, subject to voter approval, on an alternate tax base that includes only wages, salaries, and other compensation and net earnings from self-employment (including income from partnerships), to the extent the income is included in modified adjusted gross income (MAGI), of the residents of the school district. The tax excludes all other types of income and deductions that are included in the traditional income tax base (interest, dividends, capital gains, pensions, etc.).

 

The earned income tax base is calculated by first determining wages and other compensation. Then, the taxpayer determines net earnings from self-employment. These amounts are only taxable to the extent they are 1) included in the taxpayer’s MAGI, and 2) received while the taxpayer is a resident of the taxing school district. These amounts are all reported on the taxpayer’s SD 100.

 

Additionally, there is occasionally a final adjustment when Ohio does not conform to changes made to federal law for Ohio income tax purposes. Please see tax.ohio.gov to determine if this adjustment is applicable in any given year.

“Modified adjusted gross income” (MAGI) is defined under Ohio law as Ohio adjusted gross income plus the taxpayer’s business income deduction for the tax year.

 

Income that is not taxed: 

retirement pensions; social security benefits; disability and survivor benefits; annuities, IRA distributions; capital gains; interest, dividends; railroad retirement benefits; welfare benefits; child support; property received as a gift, bequest or inheritance; and workers’ compensation benefits. (source: Ohio Department of Taxation – Guide to Ohio’s School District Income Tax http://www.tax.ohio.gov)

 

6. Why an income tax for this levy? 

 

A variety of options were considered before placing an income tax on the ballot. After taking into consideration the current taxes already in place, the demographics of the District, and how each option would affect the various taxpayers, an income tax was decided upon. This option was the best as a matter of fairness to the District’s property owners. Unlike property taxes, the income tax is based on what the taxpayer actually earns rather than what the value of your property is determined to be. This allows for the tax liability to go down if a taxpayer takes on a lower-paying job or suffers a job loss, etc.. In contrast, a property tax would not change under these circumstances. An income tax shares the burden of supporting the District among all residents, and not just property owners. It also does not place an undue burden on retirees since the income tax DOES NOT TAX social security benefits, retirement pensions, IRA distributions, annuities, and disability and survivor benefits.

 

7. What effect will this levy have on my property taxes? 

 

Your property tax will decrease by the end of 2022 due to the fact the elementary school bonds will be paid off. This will be a reduced property tax of 2.29 mills. 

 

After reviewing and analyzing this data, Treasurer Sarah Palm recommended to the Board of Education at the August 11, 2020 board meeting that we could choose not to collect on the $1.4 million dollar levy that was renewed in November of 2019. This would cause a tax decrease for homeowners, for example a homeowner of a $100,000 home would realize a savings of $129.24 if the levy were to be repealed. Additionally, as previously stated the Bond Levy will be expiring in 2022 and would save the homeowner of a $100,000 house $54.82, and the Classroom Facilities will be expiring in 2022 and would save the owner of a $100,000 home $15.31.  

 

8. How long will this levy last the District financially? 

 

A school district operating levies last approximately five years before most Districts would have to seek additional local funds. While no District can predict exactly what State and Federal funding will look like in the future, much of the decision hinges significantly on what the State of Ohio does with school funding. But we project that this levy would fund the District for a minimum of 10 years.  


 

9. What other Districts have income taxes? 

 

There are currently over 600 public schools in Ohio. As of January 2019, there are 197 school districts that have an income tax.

 

10. How will the tax be collected from the taxpayer? 

 

The school income tax is collected in the same manner as the state income tax: through employer withholding, individual quarterly estimated payments, and annual returns. Employers are required to withhold the tax and submit payments to the State under the same rules and guidelines as they currently use to withhold the state income tax. An exception to this rule is in regard to Federal Government employees. The State of Ohio cannot force the Federal Government to withhold income taxes. Therefore, these individuals would be required to pay the school income tax either quarterly or annually if withholding is not done voluntarily by their employer. The Ohio Department of Taxation has contacted each business in Ohio and informed them of their obligation to withhold the tax. Employers must ask employees which school district they reside in. Employees will be responsible for reporting the correct school district to the employer. Although your employer is required to withhold the school income taxes from your pay, just like State income taxes, it would be a good idea for you to make sure that the tax is being withheld on your check beginning in January 2021 if the levy were to pass. Individuals subject to the tax are required to file an annual school district income tax return annually with the State of Ohio. (source: Ohio Department of Taxation – Guide to Ohio’s School District Income Tax http://www.tax.ohio.gov)  

 

11. Where can I find resources for the November election? 

 

Information for the November 2020 election, once the filing is complete, can be found at the Portage County Board of Election and can be accessed through the Portage County Board of Elections website (https://www.co.portage.oh.us/board-elections). You can receive absentee voting/ ballot information at https://www.co.portage.oh.us/board-elections/pages/absentee-voting. If you need to register to vote, please find this information on the following link. https://www.co.portage.oh.us/board-elections/pages/voter-information





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