Senate Republicans Introduce Bold Budget Implementing Flat Tax and Substantial Property Tax Reform
COLUMBUS—As Vice Chairman of the Senate Finance Committee, Senator Brian Chavez (R-Marietta) played a critical role in designing a bold budget plan that reduces the state income tax to a single flat tax rate, reforms Ohio's burdensome property tax system, maintains a significant investment in funding education by rewarding performance, and implements a visionary strategy for economic development, including professional sports.
Next Gen 9-1-1
Included within the budget is significant support for Ohio's Next Generation 9-1-1 program. The bill revises the NG9-1-1 access fee allocation in two ways. First, it increases the allocation to the 9-1-1 Government Assistance Fund from 72% to 81.33%. Second, it reduces the allocations to the 9-1-1 Administrative Fund from 1% to .67%, to the 9-1-1 Program Fund from 2% to 1.33%, and to the Next Generation 9-1-1 Fund from 25% to 16.67%.
"This funding formula keeps the Next Gen 9-1-1 funding flat from previous budgets while providing more support to counties to operate their systems. There are 23 counties with levies to support 9-1-1 which should be able to remove or reduce them to help lower property taxes," said Senator Chavez.
Next Generation 9-1-1 technology provides Ohioans with advanced communication capabilities when calling for emergency services, such as text messaging. NG9-1-1 technology also supports more efficient emergency management by reducing the number of call transfers between 9-1-1 call centers with more precise identification of the location of callers using cell phones.
Support for Small Villages and Townships
Local communities are given significant support throughout the budget. Senator Chavez included within the Senate's plan an increase in allocation to small villages and townships. The amount allocated is raised from 10% to 12% through the State Capital Improvement Program (SCIP). An additional $10 million in FY 2026 is provided to be used for projects by townships of less than five thousand persons.
Implementing Substantial Property Tax Reform and Fairness
Ohioans have made it clear that they are fed-up with runaway property taxes. The threat facing retirees and others living on fixed incomes looms in the fear of losing a home paid for years ago due to unaffordable skyrocketing valuations.
“There is simply no excuse for property taxes to make home ownership unaffordable in Ohio,” said President Rob McColley. “This legislation is the first step in improving transparency regarding school levies that impact property taxes.”
The Senate's budget ensures that most levies will now be anti-inflationary, returning property tax levies to the original way they were intended to operate when Ohio's property tax system was put into place.
New Replacement Levies and new Emergency Levies will be abolished under the Senate's plan.
The Senate also wants organizations placing a levy on the ballot to better explain what it is for, and how much it would raise.
The law will require more transparency in describing exactly what the cost of a levy would be on a $100,000 home. This will ensure voters are better informed and understand the impact a levy will have on their property taxes.
The Homestead Exemption, which provides relief to the most vulnerable homeowners 65 and older, and to permanently and totally disabled Ohioans with household incomes of $40,000 or less, will also be updated. The maximum income levels to qualify would rise to $42,500, and the Homestead deduction would climb from $29,700 to $32,000. The income level and deduction will grow with inflation over time.
For families of public service officers who died in the line of duty, the deduction will climb from $56,000 to $59,000.
School districts that are carrying a cash carryover of more than 100% of their operating budgets will be prohibited from placing a levy on the ballot, protecting voters from the threat of unnecessary levies and higher property taxes.
At the end of this FY '24, Ohio school districts had a collective cash carryover of $10.5 billion. Moving forward, the Senate’s budget requires districts asking voters for additional dollars to disclose the percentage of their cash balance compared to their operating budget.
The Senate’s budget also empowers each county budget commission to reduce property tax collections under certain circumstances.
“These are kitchen table issues,” said Senator Cirino. “My colleagues and I believe we have struck the right balance of added accountability to taxpayers while allowing districts to carryover a higher percentage of their cash balance than currently proposed, with a new maximum of 50% of their operating expenses, with an allowance for balances to be applied to capital and maintenance projects within the next three years."
The Senate also reviewed tax exemptions that have existed for decades and cost the state millions in lost revenue. Exemptions such as the Political Contribution Tax Credit and the Data Center Credit that exempted sales tax on tangible personal property used to build those facilities would be repealed.
Maintaining the Final Two Years of the Fair
School Funding Plan with an Additional
Investment of More Than Half a Billion Dollars
The Senate’s budget invests an additional $633.9 million into K-12 education and pre-school special education, and continues implementing the final phase-in of "The Fair School Funding Plan."
This is on top of the additional billion dollars invested as part of the prior operating budget.
The plan also includes a new focus on performance, providing additional state aid to school districts that have received 4-to-5 star ratings on state report cards or that have shown significant improvement.
School districts that have substantial population growth will receive an Enrollment Growth Supplement to help defray the cost of growing enrollment.
The Senate maintains the guarantee included in "The Fair School Funding Plan" that ensures all districts will continue to receive at least the level of state aid they received in FY '21, regardless of reduced enrollments or substantial increases in district property valuations.
The large majority of districts will receive more funding, or at least the same amount, as they did in the prior year.
Final Phase Down to Fair Flat Tax
The General Assembly has driven the state income tax down over the last two decades, reducing the burden on Ohioans. Today, there are only two state income tax brackets, down from nine in 2015. Senate Republicans recognize the economic driver that has been, and are implementing a final phase-in of a flat state income tax.
The current top bracket of 3.5% will drop to 3.125% in tax year ’25 followed by the implementation of a 2.75% flat tax for tax year ’26.
"These tax cuts further our pro-growth agenda that has been paying off for Ohio in the last few years," said Senator Chavez. "These cuts not only reward our hardworking taxpayers with the breaks they deserve, they serve as magnets to our state for businesses from all over the world, as we have seen with high-tech companies flocking to Ohio.
“There are 14 states that have a flat tax,” said Senate President Rob McColley. “This budget maintains our commitment of reducing the tax burden on Ohioans over the last several General Assemblies.”
In fact, the Senate’s budget maintains the tax break for Ohioans earning up to $26,050. They will pay ZERO state income tax.
“This is good news for hard working Ohioans just entering or returning to the workforce,” said Finance Chairman, Senator Jerry Cirino. “Reducing the tax burden has generated substantial returns in the form of economic development."
Visionary Economic Development Driver
Leveraging Professional Sports
The Sports and Culture Facility (SCF) Fund brings a visionary economic plan that is a win-win for taxpayers and the economy.
The fund will help facilitate new opportunities for professional sports that help grow Ohio’s economy.
For the Brook Park (Cleveland Browns) Project, taxpayers are protected by not having to back the sale of bonds for which the interest would have to been paid out of the state's General Revenue Fund.
In the Senate's proposal there will be no interest payments on bonds, because there are no bonds, and the GRF will actually see growth from the incremental taxes for a very long time. This saves the state $400 million in debt service over the next 25 years and protects the state's credit rating.
During that time, the project is forecast to return $636 million to the state from incremental tax revenues, including an implied inflation factor.
The Cleveland Browns domed stadium and mixed-use development plan for Brook Park will be based on an evaluation “true-up” every four years over a total of 16 years. This is important and will assess every four years whether the targeted incremental tax revenue has materialized. Cleveland Browns ownership has committed $1.2 billion to the project and will place $50 million into an interest-bearing escrow account with the State of Ohio, with a supplemental $50 million line of credit to cover any shortfall of expected revenues forecast for the state.
This $100 million substantially reduces the state’s risk and demonstrates a stronger commitment to the transformational economic development projects planned for Brook Park.
In the budget, $600 million will be appropriated from the existing $3.7 billion Ohio Unclaimed Funds Program to support the Brook Park project.
To be clear, the State’s Unclaimed Funds Program will remain solvent and committed to paying people who have filed a claim with Unclaimed Funds.
All of the money used to start the program will be recoverable for people filing a claim until 2036. This budget invests an additional $2 million to help connect Ohioans with their unclaimed funds.
The money for the SCF will originate from funds that are at least 10 years old.
“This is a forward-thinking plan that acknowledges the economic impact professional sports has on our communities,” said Senator Cirino. “This program protects taxpayers, promotes growth, and is positive for the General Fund, while putting idle dollars to work that have been sitting in the state treasury, often for decades.”
Building a Strong Foundation of Housing for Ohio’s Future
The Senate makes a $100 million commitment to addressing the shortage of housing here at home.
The REDD program will invest $10 million for Residential Economic Development Districts that will help provide homes for a rapidly growing workforce in major metro areas that are hosting mega development sites.
$90 million will be directed into a revolving loan fund for local governments in rural areas to fund the cost of site preparation and infrastructure to support housing construction.
The Senate also restores the Housing Trust Fund, which has worked well over the years in determining which projects across the state should be approved for grants and loans.
These initiatives build on the strong foundation of the Welcome Home Ohio Program, passed as part of the last state budget, which provided $50 million for housing development.
The Senate’s Budget represents a balanced and conservative plan with responsible growth through less spending.
The budget is balanced and totals $60.23 billion in GRF dollars over the biennium.
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