SALEM — The second half of the Salem City School District’s five-year forecast for the 2025-2026 school year projects a mixed financial future for the district in the wake of new Ohio property tax legislation approved in December.

Treasurer Mike Douglas said that districts are now required to present the second half of their annual five-year forecasts in February to give state legislators more time to review before discussions begin for the biennial budget. He also stressed that the forecast is intended as a “30,000 view” of the district’s finances and only covers the General Fund. It is based on estimates, which he said were impacted by the approval of House Bills 129, 186, 309, and 335 on Dec. 19.

Douglas said that the district would be the most affected by House Bill 186, which he said will set caps for how much property tax increases after property value re-appraisals based on the Gross Domestic Product Deflation Factor which will limit tax property tax collection. Douglas explained that the bill also includes Temporary Tax Credit or “claw back provisions” which will retroactively apply that cap to tax years 2023, 2024, and 2025, and apply credits based on any overage paid to future tax bills.

“One of the big things of 186 is it’s doing this retroactively. They’re actually going backwards and looking at money that we’ve already collected in previous years and applying this tax bill to those years and there’s going to be a claw-back on money they’ll give taxpayers a credit which will reduce our collections going forward,” said Douglas. “We anticipate that House Bill 186 is going to cost us approximately $2 million in revenues over the next few years and expect to take the brunt of that in fiscal year 2027, because we’re going back to 100% collection reimbursement for tax year 25, and then the second half payment is due and later in FY27 we’ll see 50% of the estimated 26 tax year. What that means in layman’s terms is in FY 27 we’re anticipating seeing an about $680,000 loss in revenue and then we’ll see a more traditional phase out of that going forward through the forecast of about $460,000 each year.”

Douglas also highlighted House Bill 309 as a possible concern for the district. He said that the bill expands the power of county budget commissions to decrease the collection rates of levies “to bring taxes levied within levels that budget commission finds reasonable and prudent to avoid unnecessary collections” after they have been approved by voters.

“It gives the budget commission the authority to override our voters, in a nutshell. So, if we go out and get a levy passed at five mills, the budget commission can say on their whim after looking at stuff that we’re collecting too much and reduce our millage however they want basically,” said Douglas. “So, people who aren’t in our district and don’t know our community are going to make decisions on our behalf and for our voters.”

However, Douglas said that if the commission does opt to make such an adjustment, it is required to give the district a public hearing and explain its reasoning.

Amid these property tax changes the five-year forecast currently projects continued increases to the district’s end of year cash balance for the next three years, with a projected final balance for fiscal year 2026 of $10,697,560, an approximately 28.9% increase from fiscal year 2025’s final balance of $8,238,073. Fiscal year 2026 and 2027 are expected to continue this trend with projected balances of $12,975,478 and $13,666,786, respectively. However, the balance is expected to begin a decline in 2028 as expenses begin to outpace revenues with a projected final balance of $12,101,677 which will continue in 2029 with $9,744,301.

The forecast projects state funding to continue comprising most of the district’s funding at 54%, with real estate taxes projected as the second largest share at 37.1%. The district’s largest expenditures are expected to remain employee wages and benefits at 51% and 25%, respectively.

The board of education will meet next at 7 p.m. on March 16.