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Proposed Changes to TPP and SB3 Reimbursements

Proposed Changes to TPP and SB3 Reimbursements. Mike Sobul Ohio Department of Taxation. Overview. The Governor’s budget proposal plans significant changes to the reimbursement of TPP replacement dollars It also proposes changes to SB3 (public utility) reimbursements. Overview.

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Proposed Changes to TPP and SB3 Reimbursements

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  1. Proposed Changes to TPP and SB3 Reimbursements Mike Sobul Ohio Department of Taxation

  2. Overview • The Governor’s budget proposal plans significant changes to the reimbursement of TPP replacement dollars • It also proposes changes to SB3 (public utility) reimbursements

  3. Overview • The concept of how the new phase-outs will work are the same for both TPP and SB3 • For schools, there is not a defined date by which the phase-out will be complete (other than current law for emergency and inside debt levies) • The amount phased down in any given year is capped at two percent of total defined resources

  4. Overview • Under current law, the direct TPP reimbursements for fixed-rate levies are phased down from FY 2014 through FY 2019 • In FY14, reimbursements are 9/17ths of the prior year, declining by 2/17ths each year thereafter • 70 percent of CAT revenue is earmarked for schools indefinitely, with dollars not needed for direct reimbursement to be allocated for currently undefined school purposes

  5. Overview • Currently, voted bond levies that qualify for reimbursement are to be reimbursed for the life of the levy • Emergency levies are to be reimbursed in full through FY18 as long as the levies remain in place • Neither of these provision are proposed to be changed in the executive budget, nor is treatment of inside debt levies

  6. Overview • Under current law, reimbursements of fixed-rate levies under SB3 are to continue through August 2017 • To continue receiving reimbursements through 2017, the annual test that has been in place for school districts (the test does not apply to JVS) must continue to be met • Currently, all JVS and only 133 schools receive reimbursements for current expense levies (a hand full of schools also receive fixed-rate non-current expense reimbursements)

  7. Overview • As with TPP, bond levies are reimbursed for the life of the levies and emergency levies through 2017 as long as the levies remain in place (this would not change under the current proposal) • Any money generated by the KWH or MCF tax in excess of what is needed for reimbursements is used to equalize 0.5 mill maintenance levies under the OSFC program. Additional revenue beyond that is currently transferred to the state GRF

  8. Executive Budget Proposal • The budget proposal would change the phase out of both the TPP and SB3 fixed-rate reimbursements • In FY12, each program’s reimbursements for current expense fixed-rate levies would drop by the lesser of the total reimbursement or two percent of FY10 total resources (potentially, a maximum drop of four percent of total resources)

  9. Executive Budget Proposal • Total resources are defined as follows: • FY10 PASS payments (before transfers and adjustments) • FY10 payments under “Funding for Joint Vocational SD” • One-half of TY 2008 real and PU CE property taxes • One-half of TY 2009 real and PU CE property taxes • 2009 CE telephone property taxes • FY10 CE income taxes • FY10 TPP CE and emergency reimbursements • FY10 SB3 CE and emergency reimbursements • Homestead and rollbacks associated with levies above Total resources do not include other locally generated dollars or federal restricted dollars

  10. Executive Budget Proposal • Reimbursements for fixed-rate non-current expense levies (other than inside debt levies) have a straight phase-out not tied to resources • Those phase-out in 25% increments, beginning in FY12 • The three payments per year are reduced to two, with the August (3/7ths) and October (3/7ths) payments combined into a single 6/7ths November payment

  11. SB 3 Proposal • Only 14 districts have CE reimbursements greater than 2% of resources • Only 5 JVS have CE reimbursements greater than 2% of resources

  12. TPP Example • I will do examples of three districts in Montgomery county, Huber Heights, Northridge, and Valley View • In addition to CE fixed-rate levies, Huber Heights and Valley View have non-CE fixed rate levies

  13. TPP Example *Valley View’s reimbursement and resources are reduced by $69,753 for an expired/reduced levy

  14. TPP Example--Northridge

  15. TPP Example—Non-CE

  16. TPP Other Issues • Again, voted bond levies, emergency levies, and inside millage debt levies are treated the same as under current law • Remember, any levy must still be in place after 2010 for reimbursements to continue • Any of these calculations are appealable for 2 years, so check carefully what we did

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