District Public Utility Tangible Deregulation Reimbursement

Introduction

For several years, the state has been reimbursing public school districts for local tax losses resulting from deregulation of public utility industry in 2001 that culminated in the lowering of the assessment rates of some public utility tangible properties from 88% to 25%. Initially the law provided that school districts would be reimbursed for the losses associated with deregulation through 2018, but in 2006 that provision changed and an annual eligibility test for receiving reimbursement was introduced which progressively reduced the number of reimbursement eligible school districts every year. The test of eligibility entailed the comparison of the state foundation increases from FY 2002 to the current year with the inflation adjusted amount of the deregulation tax losses for each district. If the increase in foundation funding in that timeframe was greater than the inflation adjusted amount of the tax loss, it was deemed that the district had been compensated sufficiently through increased state funding and therefore was no longer eligible to receive any reimbursement. Every year a test of eligibility was done in the month of October to identify the remaining eligible school districts for reimbursement.

By FY 2011, there were only 128 eligible school districts for whom reimbursement for fixed rate levy losses was calculated by subtracting the amount of the state foundation offset from their current operating fixed rate levy losses to determine their direct reimbursement for these levy losses as well as a replacement for other (non-operating) fixed rate levy losses. Additionally, school districts were reimbursed for their fixed sum levy losses. A handful of school districts also received reimbursement for tax losses associated with inside debt levies.

Eligibility and Reimbursement in FY 2012, FY 2013 and Thereafter

Am. Sub. H. B. 153 introduced major changes in the process of identifying reimbursement eligible school districts and their reimbursement calculation.  The test of eligibility under the new law is predicated on the relationship of the reimbursement amount for operating levy losses to the total operating resources available to school districts.  If the ratio of the latest annual deregulation reimbursement for current operating fixed rate levy losses to the total operating resources of the district is smaller than a threshold percentage provided in law, the district is no longer eligible for reimbursement.  For eligible districts reimbursement is calculated according to the procedure outlined below. 

Eligibility

To identify the school districts that should still receive reimbursement for public utility deregulation of current operating levy losses, the ratio of 2011 Current Expense S.B. 3 Allocation to Total Resources must first be determined.  If this ratio is less than 2%, the district will not be eligible for reimbursement for fixed rate operating levy losses in FY 2012.  If this same ratio is less than 4%, the district will not be eligible for reimbursement in FY 2013 or any year thereafter.

  1. 2011 Current Expense S.B. 3 Allocation is the sum of payments received by a school district in FY 2011 for current operating fixed rate levy losses [Section 5727.84(17)].  In FY 2011 only 128 school districts were still eligible to receive any reimbursement for fixed rate levy losses.  This reimbursement came from a special fund set aside after accounting for state aid offset and was paid to school districts together with reimbursements for non-operating levy, fixed sum levy and any inside debt levy losses in two installments in September 2010 and March 2011 with the PASS payment distributions.
  2. Total Resources  is the sum of the amounts a school district has received for current operation in FY 2010 as follows [Section 5751.20(22)]:
    1. The state education aid for FY10 which is the amount that is shown on the PASS form for FY 2010 labeled ‘State Resources for the Foundation Funding Program’.
    2. Deregulation reimbursement for current operating fixed rate levy losses in FY 2010.
    3. Deregulation reimbursement for fixed sum levy losses in FY 2010.
    4. TPP reimbursement for current operating fixed rate levy losses in FY 2010.
    5. 50% of the real and public utility tangible property taxes excluding any JVS taxes for FY 2010.
    6. 50% of the real and public utility tangible property taxes excluding any JVS taxes for FY 2011.
    7. 100% of the general tangible property taxes excluding JVS taxes for FY 2011.
    8. Any school district income taxes for FY 2010.
    9. Any shared municipal income taxes under ORC Section 718.09 for TY 2009.

Reimbursement Calculation   

Sections 5727.85(C)(3), 5727.85(D) and 5727.84(H) of Am. Sub. H. B. 153 provide for the calculation of reimbursements for:

  1. Current Operating Fixed Rate Levy Losses in FY 2012 and FY 2013 as follows:
    1. If the ratio of 2011 Current Expense S.B. 3 Allocation to Total Resources is equal to or less than the threshold percentages of 2% in FY 2012 or 4% in FY 2013, then the reimbursement for these losses is zero.
    2. If the ratio of 2011 Current Expense S.B. 3 Allocation to Total Resources is greater than the threshold percentages of 2% in FY 2012 or 4% in FY 2013, then the reimbursement for these losses is the difference between 2011 Current Expense S.B. 3 Allocation and the product of Total Resources times the threshold appropriate percentage.
  2. Non-Operating Fixed Rate Levy Losses in FY 2012 and FY 2013 by simply providing to the district, 75% of its FY 2011 reimbursement for these losses in FY 2012 and 50% of the FY 2011 reimbursement in FY 2013.
  3. Fixed Sum Levy Losses in FY 2012 and FY 2013 by providing 100% of the reimbursement calculated for these losses in FY 2011.
  4. Inside Debt Levy Losses in FY 2012 and FY 2013 by providing 100% of the reimbursement calculated for these losses in FY 2011.

District Public Utility Tangible Deregulation Reimbursement Documents

Last Modified: 8/18/2014 4:02:48 PM