CLEVELAND, Ohio – A little relief could be on the way for some Ohio cities and villages under a new revenue-sharing proposal from Gov. John Kasich, while others would have to cope with less money from the state.
These proposed changes come after state lawmakers and Kasich earlier slashed by nearly half the money for municipalities and townships from what is called the state’s Local Government Fund.
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Part of the governor’s budget
State lawmakers are working on a two-year budget that could impact cities, villages and townships across Ohio.Rich Exner, cleveland.com
The changes are part of Kasich’s proposed two-year budget. (Read more details here.) The proposal still needs approval from the Ohio House and Senate. Final decisions likely will not be made until late June.
Kasich is proposing that part of the formula for handing out money to local governments be tied to each community’s ability to raise tax dollars on its own.
Winners and losers
The biggest loser in the state would be Cleveland, which this year increased its income tax to 2.5 percent in part to replace money lost from earlier state cuts.
Under the new proposal, Cleveland would receive $2.1 million less in 2019 than the $25.3 million it is expected to receive this year, according to estimates released by the state’s Office of Budget and Management.
One reason Cleveland would lose is that the proposed formula is based in part on tax collections and population. Cleveland receives a lot of tax money from thousands of “part-day residents” – workers downtown and in University Circle – who don’t count in the population.
The next biggest losses would be for Cincinnati ($1.2 million), Dayton ($387,000), Columbus ($308,853) and Canton ($88,320).
Parma would benefit the most, with an additional $445,775 in 2019, the state estimates.
Others gaining at least $250,000 would be Toledo ($384,333), Trotwood ($332,609), Hamilton ($307,081), Lorain ($87,057) and Riverside ($261,878.)
What are the trends?
Within Cuyahoga County, the trend is that cities where people work tend to be hurt the most, while largely residential ares would gain the most money from the state.
Among the biggest losers in Cuyahoga County – by percent – would be Cuyahoga Heights, Independence and Mayfield. The top three gainers by percent would be North Royalton, Olmsted Falls and Chagrin Falls Township.
What is the Local Government Fund?
The Local Government Fund — created as a way for the state to share tax money with local cities and villages — dates to the Depression.
In 1934, with foreclosures running high and property tax revenues down, the state reduced property tax rates and promised to share a portion of the new state sales tax with local governments.
Then, when Ohio created a state income tax in 1972, a designated portion of the taxes collected was set aside in the Local Government Fund for cities that already had municipal income taxes of their own.
When was the fund cut?
With the state facing a budget shortfall in 2011, the budget Kasich signed permanently cut the amount of money shared with cities and villages roughly in half.
The new proposal suggests changing the formula for distribution of 20 percent of the Local Government Fund. The projections provided through 2019 are for the first two years of a phase-in of changes, covering 10 percent of the Local Government Fund.
Reported with Jackie Borchardt from cleveland.com’s Columbus bureau.
Rich Exner, data analysis editor for cleveland.com, writes about numbers on a variety of topics. Follow on Twitter @RichExner.
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