Westerville board weighs earned‑income levy, shifting reserves as state school funding falls short

The Westerville City Schools Board of Education discussed on June 9 moving millions from the district general fund into separate capital and termination‑benefits accounts and signaled interest in asking voters this fall for an earned‑income tax to cover an ongoing funding gap created by reductions in state school aid.

District staff said the state funding picture has deteriorated: "The cost of education in Ohio is a shared responsibility between the state and the local community," said district staff member Nicole during a work session, and the district has already lost formula funding this school year. Nicole said the district had “lost $4,000,000 in state formula funding” from last year to this year and that the district’s revenues and expenses are “upside down by over $20,000,000 a year.”

The board’s discussion moved beyond the state budget to practical steps the district could take locally. Staff proposed creating or replenishing two dedicated funds: a termination benefits fund to cover retirement and severance payments and a capital projects fund for equipment, technology, roof and HVAC work, bus and vehicle replacements, and other fixed assets. The district proposed transferring roughly $6.6 million to the termination benefits fund and approximately $40.6 million to a capital projects fund now, with a wider ten‑year spending allowance noted for capital projects.

Why it matters: the district’s presenters said state aid has not kept pace with costs. Nicole repeatedly urged that local officials press the legislature for a larger state share while the board determines what to ask voters locally. "We need to generate $20,000,000 a year at least more year over year," Nicole said, summarizing the scale of the gap.

Key details from the meeting

- State budget context: Presenters described shifting state allocations under the current biennial process and warned that proposals in the General Assembly could further limit local flexibility. The board heard about a House proposal to cap districts’ fund balances and a Senate proposal that preserves the Fair School Funding formula but still leaves many districts with lower state shares.

- Transfers proposed: Staff outlined a plan to move operating‑fund expenses that qualify as capital (technology, HVAC, instructional material purchases with useful lives of 5+ years) into a capital projects fund and to move anticipated severance obligations into a termination benefits fund. The amounts shown in the staff spreadsheet were $6.6 million for termination benefits and $40.6 million for initial capital funding; staff said projects in scope over 10 years would total about $50.8 million.

- Deferred needs and permanent improvement revenue: Carrie Dennis, district staff, summarized deferred facility and operating projects and the wider backlog: "Grand total for all of the things ... $365,195,424 if you renoed north," she said, referencing the facility master plan figures that include a possible full replacement or major renovation of Westerville North High School. The district also noted recurring permanent‑improvement (PI) revenue of roughly $9 million a year that currently pays for buses, custodial and AV equipment, roofing and similar work.

- Levy options and timing: Board members and staff discussed two broad local options: property tax levies (mills) and an earned‑income tax. Staff said an earned‑income tax of roughly 0.75% could produce a substantial portion of the revenue the district needs but that an income tax has an 18‑month phase‑in for full collections. Property tax levies follow a tax‑year timeline and would require a board resolution to place a question on the November ballot; staff said a motion to certify a property levy would need to be on the June 23 agenda to meet county deadlines. Several board members said they were leaning toward an earned‑income levy for November, but no formal levy resolution or vote occurred at the June 9 meeting.

- What would change for taxpayers: Staff explained technical differences: property levy collections are certified and tied to a millage amount; income taxes are levied on resident income and can be structured as "earned income" only (wages) or traditional (broader income). The district shared Department of Taxation estimates for how much revenue different rates would generate; staff noted those figures are updated annually.

What was decided and what’s next

- No formal levy or transfer motion passed at the June 9 meeting. Instead, the board directed staff to prepare a resolution for the June 23 meeting to place a property tax question on the ballot if the board chooses to do so and to return detailed levy language and updated revenue estimates as state budget activity completes.

- Staff said the district would present a detailed transfer resolution for the board to consider at a future meeting (June 23 was named as the next step). If the board approves transfers, staff said the accounting change would move expenses from the general fund to the new special funds but would not create new revenue.

Context and background

Westerville City Schools’ finance presentation summarized multiple drivers: a multibiennial phase‑in of the state's Fair School Funding plan, categorical funding shortfalls (special education, economically disadvantaged supplements), rising construction and replacement costs, and local limits on voted levy growth tied to state law (House Bill 920). Staff and board members said choices by the legislature about property tax reform, reimbursements for older levies, or caps on balances could affect the district’s credit rating and long‑term capital plans. The district has previously pursued a facilities bond and is on a ranked list for state facility assistance under the Ohio Facilities Construction Commission; staff said that list still places several districts ahead of Westerville.

What to watch

- June 23 board meeting: staff expects to return with a formal transfer resolution and, if requested by board members, a property levy certification to the county for placement on the November ballot. Staff also expects updated tax‑revenue tables from the Ohio Department of Taxation before the board must finalize ballot language.

- State budget action: the board will continue outreach to the governor’s office and the General Assembly as lawmakers complete conference committee negotiations.

The board did not take a final policy vote on a levy or transfer on June 9; the meeting closed after the work session and the board moved to executive session.