House Bill (HB) 1
Overview
HB 1 would enact sweeping changes to property taxation and income tax rates, and have a devasting impact on public libraries as currently written.
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. In order to make up the difference in the estimated loss to the Public Library Fund (PLF), the PLF percentage would need to be adjusted to at least 2.0% of the General Revenue Fund. Currently the PLF is set at 1.7%.
Local Impact
Loss of local tax revenue:
- HB 1 proposes to eliminate the 10% property tax rollback on Class 1 property, reduce the real property assessment rates from 35% to 31.5% on both Class 1 & 2 property, and includes a gross domestic product deflator formula for future reductions in the property assessment percentage. In this regard, the Legislative Service Commission (LSC) is estimating the loss to local governments, including public libraries, to begin at $239 million in Tax Year 2024. In addition, we know that public libraries currently receive about $40 million from the rollback on Class
1 property. - 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.
- 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.
