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Budget Cuts Coming for Schools as State Deals With Revenue Crisis

Solon Schools Treasurer Tim Pickana weighs in on school finance issues during panel discussion Thursday

For now, school district officials can only guess what kind of hit their budgets will take as the state attempts to fill an eye-opening $8 billion budget hole.

But it's safe to assume it's going to be bad.

Experts on state budget and school funding, who spoke to school district leaders from across the area during a forum Thursday in North Olmsted, delivered somber news. They said everyone, educators included, is waiting to see what Gov. John Kasich delivers in his proposed two-year budget, expected before March 15.

Tim Pickana, the treasurer for Solon City Schools and a member of Thursday's expert panel, said school districts are experiencing an "unprecedented time" right now in terms of funding.

"Everything is on the table and anything and everything can be discussed" for cuts, including education funding, Pickana said.

"We are going to be in a reaction mode so it's sort of a wait and see and holding our breath until we know more," he added.

Effect on Solon

Not only are districts looking at possible 10 percent to 20 percent cuts to their state funding, but many school districts will soon lose massive amounts of revenue because of the loss of tangible personal property tax, which will be phased out starting summer 2013.

The amount of funding school districts receive from the state varies by district. School districts with high property values like Solon generally receive much less state funding. Solon receives about 4 percent of its roughly $66 million operating budget from the state. 

Other districts can receive as much as 70 percent of their funding from the state, Pickana said.

The much more dire situation for Solon is the loss of tangible personal property tax revenue, a tax eliminated by reform laws in 2005 designed to improve the business climate in Ohio.

Solon is one of the districts most affected by the loss of tangible personal property taxes – about 17 percent of Solon's operating revenue comes from the tax.

According to the phaseout schedule, Solon could lose about $5 million a year starting in 2013. That number would reach the full $11 million by 2018.

But Michelle Francis, a lobbyist for the Ohio School Board Association, said one thing school districts need to pay attention to is the possibility of legislators deciding to begin the tangible personal property phaseout this summer instead of 2013. 

Francis said that move is budgetary "low-hanging fruit" and would save the state hundreds of millions of dollars – but be a catastrophic blow to Solon and other school districts.

'Overwhelming challenges'

The reason everything is on the table is that Ohio is dealing with an $8 billion budget gap, not to mention an extra $2 billion plus interest to pay for a decision to extend unemployment benefits last year, said State Rep. Nan Baker, a second-term Republican who represents a West Side district.

"We have overwhelming challenges," she said.

Baker said legislators do not want to raise taxes in this economic climate and that the focus is on creating new jobs and boosting state revenue.

How did Ohio get into this mess? 

Zach Schiller, research director for Policy Matters Ohio, said the economic crisis plays a part, but he drops the blame on policy decisions made in Columbus.

He said Ohio is experiencing a "revenue crisis" – the state is bringing in $6 billion less in revenue than it did in 2006-07. The 2005 tax changes – reductions in personal income taxes and tangible personal property taxes included – have cut into state revenue but not done their intended job of increasing business activity

"Ohio has continued to lose ground to the rest of the country," Schiller said.

Want to fix the budget crisis yourself? Check out this deficit simulator at the Columbus Dispatch.

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