Last week, Ohio lawmakers overrode a governor’s veto, prohibiting schools from proposing emergency levies to maintain fiscal sustainability.
The reasoning used by lawmakers was that levies like these are a contributor to property tax burden in the state.
Supporters of the bill argued that even though these levies required a vote from the people who would be subject to the tax, that voters did not know what they were agreeing to. According to them, eliminating the tax would stop voters from being duped.
It’s an interesting argument, but not one with a lot of merit.
It seems that simply changing ballot requirements for transparency could have achieved the effect of solving the information asymmetry problem.
Now districts are down another tool for ensuring fiscal sustainability.
Why do schools need local fiscal tools like this?
Why not have schools more dependent on the state for funds and less so on the will of local voters?
In the extreme, why doesn’t Ohio follow the lead of Hawai’i and eliminate school districts altogether?
A classic paper by 20th century economist Charles Tiebout gives us a reason that we may want to preserve local fiscal tools like this.
Tiebout’s model of “Tiebout sorting” is built on the idea that people have choices about which jurisdiction they wish to live in.
Different local jurisdictions can provide different mixes of public goods and collect different levels of taxes to finance those goods. That means people can move to communities that provide them with their needs.
Certain communities in Ohio have high taxes, good schools, and safe streets, appealing to families with children.
Others have lower taxes and amenities like senior centers, which can appeal to people who are retirement-age.
Still others can have their taxes allocated toward things like safety in entertainment districts, appealing to young professionals.
Strategies like school finance equalization can make it easier to deal with equity issues — people who do not have the flexibility to move jurisdictions based on their public goods needs.
But overall, allowing communities to decide for themselves how much to raise for public goods and how to spend it allows for a diversity of communities that makes the state as a whole stronger.
In the 1970s, the state of California went through its own citizen-led property tax revolt.
Spurred by housing prices that had more than doubled from 1970-1978, voters passed a citizen initiative that fixed property taxes in place across the state, with only small changes allowed over time.
This has led to some problems.
Individuals and corporations have been given an incentive to sit on properties for decades without making improvements to the properties to avoid increases in property taxes.
Schools and local governments are not able to raise money at the rate of increases in costs.
This has been part of the policy landscape that has led to an exodus from the state over the past decade: things just don’t work there anymore.
Despite the troubles Ohio has had in its post-industrial era, the state still has a lot of positives.
Housing and energy costs are still low compared to the rest of the country, cost-of-living-adjusted poverty is below average statewide, and the state is still an attractive place for people to start businesses and raise families.
Blunt approaches to local government finance will only make it harder for communities to provide the range of lifestyles that will make the state economy dynamic decades into the future.
This commentary first appeared in the Ohio Capital Journal.