MANSFIELD — Residents of the Madison Local School District will decide the fate of a new 1.5 percent earned income tax at the ballot box this November.
If approved, collection of the income tax would begin in tax year 2026, with collection starting in 2027.
The school board voted earlier this year to stop collecting a property tax levy approved in 2023 if voters approve the income tax. That change would take effect on January 1.
The proposed income tax would generate $6.27 million each year in operating funds for the district; the 2023 property tax that would be eliminated generates $2.94 million each year.
In other words, the district’s annual operating revenue would increase by about $3.33 million.
Keep reading to find out what income would be subject to tax, who would have to pay the tax and why district officials say there is a need to increase operating revenue.
What is an earned income tax?
Residents would only pay taxes on earned income like wages, salaries, and other compensation and net earnings from self-employment (including income from partnerships), according to an FAQ page on the district’s website.
Other compensation and net earnings from self-employment would be taxed only to the extent the income is included in one’s modified adjusted gross income.
The tax would not apply to Social Security, retirement pensions, alimony, child support, unemployment and workers’ compensation, welfare benefits and disability benefits.
Capital gains, interests, dividends, trust distributions and profit from rental activities would also excluded from the tax.
Who would have to pay this tax?
Residents of the school district would have to pay, regardless of where they work. Non-residents would not have to pay the tax, even if their employer is located in the district.
What would the funds be used for?
Funds would be used to cover general operating expenses like salaries and benefits, utilities and facility maintenance, transportation and bussing and instructional costs.
What would this levy cost me?
An income tax levy would cost $15 for every $1,000 of earned income. (Residents can multiply their earned income by .015 for a more precise calculation of how much they would pay).
However, the Madison Local school board voted in July to stop collecting a 7.5 mill property tax levy if the income tax levy is approved.
The 7.5 mill property tax levy was narrowly passed in 2023. School district leaders later said the levy is generating about $700,000 less annually than they expected.
That levy cost homeowners approximately $200 a year for each $100,000 of the county auditor’s appraised value for tax year 2024, based on the county auditor’s effective millage rate.
Residents can find the current value of their property by using the search tool on the Richland County Auditor’s website. They can also call the auditor’s office at 419-774-5501 and ask for the real estate division.
District officials say they hope earned income tax will shift burden away from those on fixed income
Swapping out a property tax levy for an earned income one aligns with the district’s new taxation policy.
Madison officials said the goal is to minimize the impact of school taxes on retired residents and those with fixed incomes.
“It’s going to shift a little more burden onto our younger population and our working population,” Supt. Rob Peterson said in July. “But those are the people who have kids or grandkids in school.”
School officials say they’ve made cuts amid rising expenses, flat funding
In addition to expecting more from the 2023 property tax levy, school leaders were also expecting more funding from the state of Ohio.
Over the last several budget cycles, Ohio lawmakers have been phasing in a public school funding model nicknamed the Fair School Funding Plan.
The model was meant to address inequities in school funding across the state, but was only partially implemented in the most recent biennium budget — which outlines state funding for schools for the next two fiscal years.
“There was an anticipated funding increase from the state with the full implementation from the Fair School Funding Plan,” said Melissa Walker, a school board member speaking on behalf of the levy committee.
“Unfortunately, legislation chose to move away from fully implementing that, which led to us receiving flat funding from the state with the same increase in expenses that households are seeing.”
One of the biggest cost increases impacting Madison is employee health insurance.
“In the last 3 years, health insurance premiums in the district have risen by 1.6 million dollars,” Walker said.
“What the district pays in health insurance costs is determined by the negotiated agreement, so there is not much flexibility in the options that are offered,” she added. “The district continues to seek out ways to curb healthcare expenses, as it is one of the largest expenses in the district.”
Supt. Rob Peterson said even if the income levy passes, the district will need to continue looking for cost savings and keeping a close eye on staffing.
But he also emphasized the cost-saving measures the district has already made.
“We’ve cut 41.5 staff positions over the last five years. The maximum raise we’ve given over the last two years is 2 percent, which is not exorbitant,” Peterson said.
“Our beginning teachers’ salary for the 2025-2026 school year is $37,754 and we pick up part of their retirement contribution.”
What would happen if the levy doesn’t pass?
Walker said raises for teachers could be on the chopping block if the levy doesn’t pass.
Approximately 80 percent of the school district’s operating funds are spent on salaries and benefits, which Walker said is “common in the service industry.”
“A lot of community members expressed concern when the teachers and board could not reach an agreement for the union contract,” Walker said, referencing lengthy negotiations with the Madison Local Education Association earlier this year.
“One of the sticking points was wages, with the board not being able to provide what the teachers asked for and deserved,” Walker added. “If this levy doesn’t pass, the district would be forced to freeze teacher salaries in order to remain solvent.”
Schools administrators have also said if the levy doesn’t pass, Madison will have to implement additional cost saving measures — like closing Mifflin Elementary School and bringing back pay-to-participate fees for sports and extracurriculars.
Nevertheless, officials have stated these changes may be necessary regardless of the levy’s outcome due to declining enrollment and rising costs.
“Passing the levy preserves the neighborhood schools now and gives us more time and flexibility to discuss options prior to making any difficult decisions,” Walker said.
The same goes for pay to participate fees.
“While rising costs may eventually require modest fees, levy support allows us to protect programs and keep them accessible for as long as possible,” Walker said.
“We want to be transparent with families. Levy funding provides stability now and allows us to keep extracurriculars open to all students now without an immediate financial barrier.”
Walker said passing the levy would give the district time and flexibility to explore cost saving measures, seek outside funding and minimize or delay future fees.
“We believe extra curricular activities are an essential part of education. Our commitment is to do everything possible to keep them affordable and accessible to every student,” Walker added.
“Levy support is the most important step we can take right now to protect these opportunities for our kids.”
Administrators say income tax would put the district on solid financial footing
Earlier this year, officials said they are recommending a rate of 1.5 percent because it would generate enough to put the district on solid financial footing.
The Government Finance Officers Association recommends school districts maintain a minimum cash reserve of 60 days’ worth of operating expenses. Walker said that recommendation exists so that school districts can continue operating even if tax payments were to come in late.
“For the last several years, with the extra property tax levy funds, we have had 9 days or less on hand at year end, or less than half of one payroll,” Walker said.
Madison ended its recent fiscal year on June 30 with just two days’ worth of rainy day funds.
“Ultimately our goal is to get to a 60-day cash balance which provides some financial stability for our district. It’s not exorbitant, but it puts you on pretty solid ground,” Peterson said.
“The 1.5 percent was the lowest that could get us to that point.”
