Update
OLC has had multiple meetings with members of House leadership and the bill’s sponsor, Rep. Adam Mathews (R-Lebanon), to convey our concerns with House Bill (HB) 1. We are continuing to meet with our local government and school partners at the state level on this legislation.

Even though it is vitally important to let legislators know about the impact this proposal will have on public libraries, it is also important to understand that this proposal is a starting point for having these discussions. The bill’s sponsor, Rep. Adam Mathews (R-Lebanon) understands that the current bill as introduced, is not the end goal. Attempts to simplify the tax code are a massive undertaking and not easily achieved.

OLC continues to analyze the impact of HB 1 on library funding. We know there are layers to this legislation and each could have an impact on Ohio’s public libraries. The first layer with the income tax changes would cut state funding for libraries by more than $74 million over the biennium. The second layer includes multiple changes to local property tax levies that could cause public libraries and local governments to lose at least $239 million.

State Impact
The 2.75% flat tax equals at least a $1.5 to $2 billion income tax cut and could reduce the
Public Library Fund (PLF) each Fiscal Year by $25.5 to $34 Million.

Local Impact
Loss of local tax revenue due to:

• Elimination of 10% rollback coupled with a reduction in assessment percentage on
  Class I Property from 35% to 31.5% (includes the rollback benefit to residential
  property owners and the reimbursement to local governments and schools for the
  cost of the rollback). Elimination of the 10% rollback on Class I Property –
  estimated loss for local governments is $658 million and estimated loss for
  schools is $1.2 billion per year.
• Potential impact on public library levies is at least $25-40 Million.
• Reduction in assessment percentage on Class II Property from 35% to 31.5%. For
  schools this will be a $264 million loss. We are trying to estimate the impact on
  libraries.
• Includes a second property tax reduction factor in addition to HB 920 that would
  automatically adjust a property owner’s tax rate downward when a home’s value
  goes up so that the homeowner would pay the same rate as they did before.
• Revises the 2.5% owner-occupied rollback credit, which becomes a flat $125
  credit and modifies the homestead exemption.
• Includes intent language to provide additional revenue to impacted local
  governments for FY24 & FY25, but just the first two years. It is important to note
  this is just “intent” language and is not a directive to a state agency or guarantee.

Rollback Spreadsheet
The OLC was able to obtain a spreadsheet with data listing the rollback (non-business credit), homestead exemption, and owner occupancy credit for public libraries. If you haven’t done so already, please review the spreadsheet below.

Tax Year (TY) 2022 spreadsheet

We know that some of this information is incomplete or possibly inaccurate and that some public libraries are completely missing from the spreadsheet. Please take a look at the spreadsheet and respond to us with any corrected information. The spreadsheet is by county. If your library boundaries cover more than one county, you will need to review the listing for each county. This information will help us as we discuss the overall impact this legislation will have on our local levies.

Testimony

The House Ways and Means Committee held its first hearing on the legislation on Feb. 28. The bill’s sponsor, Rep. Adam Mathews (R-Lebanon) provided testimony in support of the multiple tax changes being proposed. A video recording of the hearing is available on the Ohio Channel (testimony begins at the 11 minute mark). The committee has also heard proponent testimony from the Americans for Tax Reform, Ross County Auditor-elect Jeff Lehner, Lebanon Mayor Mark Messer, and the Americans for Prosperity.

Legislative Services Commission

HB 1 Fiscal Note and Local Impact Statement
The Legislative Services Commission has released its House Bill (HB) 1 Fiscal Note and Local Impact Statement.

It’s important to note that the LSC Fiscal Note is basing the impact of the proposed state income tax changes on the current rate of the Public Library Fund at 1.66%. We know that this estimate will be higher since we are currently funded in temporary law at 1.7%. With that said, LSC is estimating the PLF will be cut by $43 million in FY 2024 and $31 million in FY 2025. Additionally, with the proposed reduction of property tax assessment rates, local governments are estimated to lose $239 million in Tax Year (TY) 2024. In TY 2025 and thereafter, assessment rates would adjust downward, resulting in additional losses in FY 2026 and subsequent years. Out of that $239 million, we don’t yet know how much of it directly impacts public libraries.

The Ways and Means Committee announced that the LSC will be doing a presentation at the committee hearing the week of March 13 on the potential impact of the bill and providing further explanation.