OHIO BUDGET School officials say provision would erode revenue

The bill contains a provision to phase out property tax on business inventories.
By JEFF ORTEGA
VINDICATOR CORRESPONDENT
COLUMBUS -- The head of the Senate Finance Committee said changes are coming to a tax provision in the proposed two-year, $49.2 billion state budget that schools say could eventually cost them millions of dollars in property tax revenue.
"We will make adjustments on the inventory language," state Sen. Bill M. Harris said Friday.
Harris, an Ashland County Republican and finance committee chairman, was speaking of a provision in the budget bill that would accelerate the rate at which the property tax on business inventories is phased out.
Business inventories are currently taxed at 23 percent of their true value.
The law provides that the assessment rate is to be reduced by 1 percent per year. But the budget bill, if enacted, would speed that up to 2 percent a year beginning in tax year 2005.
The Legislative Service Commission, the Legislature's research arm, says the proposal would cost school districts and local governments about $35 million in revenue in 2005, which would grow with time.
Because of the reduced property valuation, the state would make up about $10 million of that reduction in 2005 through the school funding formula, the commission said.
School advocates say that proposal would hurt schools' local tax base.
Other concerns
And they're also concerned about two other tax-related provisions: ones that would eliminate the state's reimbursement of the property tax exemption on the first $10,000 of a business's tangible personal property over a 10-year period, and those that would reduce the taxable value of manufacturing and machinery after 2003.
"It could have a devastating effect on school districts in future years," said Fredrick B. Pausch, director of legislative services for the Ohio School Boards Association.
Discovery of the tax provisions came after Senate Republicans unveiled a two-year budget in the Senate this past week.
The proposed spending plan would add $245.7 million more in state funds for public schools in the next budget period that begins in July than the budget the House approved in April.
The Senate's budget would also add $225 million more in state funds to support state universities and colleges in the next two-year period than the bill approved by the House.
Effects on local tax base
Pausch credited GOP senators for the additional aid, but said the proposed tax changes would take money away on the local level by taking away the tax base.
Minority Democrats say they also have heard concerns about the proposals from schools, particularly on the proposed machinery valuation reduction.
GOP Senate leaders said they expect finance committee and full Senate consideration of the budget to come next week.
That would set up a possible conference committee between House and Senate lawmakers to iron out differences between the budget proposals.
The current two-year, $44 billion state budget runs through June 30.