New Ohio Report: Cupp-Patterson Plan Creates Adequate School Funding but Must Be Corrected for Equity

Ohio’s legislature will soon hold hearings on a new, much touted, desperately needed, bipartisan school funding plan. The plan was developed and proposed by Rep. Robert Cupp (R) and Rep. John Patterson (D), and has now been formally introduced as House Bill 305.

Ohio’s current school funding formula is so dated and so badly underfunded that 503 of the state’s 610 school districts are currently either capped or on guarantee; they have been receiving from the state just what they got last year and the year before and the year before that.  The new Cupp-Patterson plan was designed to flip that situation and restore the awarding of formula-calculated funding to at least 510 districts.

The new formula was developed to establish a base cost per enrolled student, an amount which every district would receive through combined state and local funding. Everybody agrees that the new formula would begin to create an adequate funding floor.

But huge concerns have arisen since last spring when the formula was first announced. Once the computer runs were released to show how the new formula would treat each of the state’s 610 school districts, it became apparent that many of the state’s very poorest districts—especially poor urban districts with concentrated poverty and rural districts—would end up with meager funding increases, or, in some cases, no additional funding at all, while some of the state’s wealthiest exurban school districts would receive huge increases in state funding.

While the new Cupp-Patterson Plan produced an adequate school funding floor, it failed to achieve equity. Part of the reason is obvious: the outer ring suburbs are rapidly growing, and a higher per-pupil state funding system will add funding as students move to a school district. But until now, nobody has clearly explained what is causing the proposed formula to deny additional funding to the state’s poorest school districts—three of them currently being punished by autocratic state takeover, ten of them threatened with state takeover, and Cleveland under its own form of state supervision.

Last week, however, Howard Fleeter, an expert on Ohio school finance since the early 1990s, published a report for the Ohio Education Policy Institute to evaluate the proposed Cupp-Patterson formula.  In his new paper, Fleeter dissects the history and complexity of the state’s foundation formula along with the history and complexity of the way the state calculates categorical funding—the special funds the state awards to school districts in addition to basic aid for special services—special education, gifted, English learners, transportation, career-technical, and students in poverty.

Fleeter’s paper is extremely technical.  Even as a non-expert reads the new report, however, what becomes clear is that the very complexity of the calculations and the choice of particular factors has disadvantaged the state’s poorest school districts.

One Problem with the Foundation Base Cost Calculation

Any school funding formula is comprised of a state contribution and a local contribution which together add up to a base cost amount. The purpose of the formula is to deliver additional state aid to school districts whose fiscal capacity is lower. While he affirms much of the way the basic aid formula is calculated, Fleeter criticizes one area of the calculation. His concern is the way community median income is being used to calculate the local contribution to the formula. The proposed formula considers the size of the school district’s property tax base and also measures community income as a proxy for the community’s capacity to pass local operating levies.  The assumption here is that wealthier voters will more easily be able to afford to vote for tax levies.

The proposed formula measures income through a complicated calculation called local capacity percentage which is based on median income. Fleeter explains that the way the tiers are set fails entirely to distinguish high income from very poor communities. Fleeter provides an example: “Northern Local School District in Perry County has a median income of $41,826 while Orange City School District has a median income of $93,421 (more than twice as much), and yet both have the same local capacity percentage, which is clearly inequitable.”  The Northern Local School District in Perry County is the extremely poor rural school district where the DeRolph school funding equity lawsuit originated.  Orange City School District includes the very wealthiest communities in Cuyahoga County—greater Cleveland.

Problems with the Calculation of Categorical Funding

Fleeter also considers the mass of calculations which determine categorical funding levels, and he devotes much of his analysis to the way the proposed formula treats the school districts which serve a large number or a concentration of students living in poverty. Ohio’s current formula fails to support these districts even as the state punishes them with punitive measures—most notably state takeover.  Fleeter believes Ohio needs to assist these school districts with significant additional resources: “National research indicates that economically disadvantaged students typically cost at least 30% more to educate than do non-disadvantaged students. However… Ohio’s current formula only provides additional funding at less than 20% of the base cost…. Funding is an even lower percentage in districts with less than 100% economically disadvantaged students.”

In an appendix, Fleeter traces a history of state funding problems for school districts serving children in poverty: “The following points provide a summary of the main issues relating to funding for economically disadvantaged students in Ohio:

  • For much of the past 30+ years, funding for economically disadvantaged students has increased at a far slower rate than the foundation level. Even worse, poverty funding has actually decreased by 13% from FY09 to FY18.
  • Since 2001, the rate of increase in the number of low income students has been nearly 3 times as great as the rate of increase in state funding for these students.
  • Funding for economically disadvantaged students in Ohio has become significantly more structured and restricted in the past 15 years as funding has been focused on programs related to the additional needs of these students and away from unrestricted grants.
  • There has never been an objective study to determine the adequate level of funding for the programs needed to serve economically disadvantaged students.
  • The focus on funding programs for economically disadvantaged students has largely ignored the impact of poverty on the social and emotional needs of low income children. These issues need to be addressed alongside – and arguably before – the academic needs of these children.”

Fleeter examines several reasons why the new school funding plan does not solve the problem.

Historically, the state directed assistance to school districts serving very poor children with what was called Disadvantaged Pupil Impact Aid—later replaced after the DeRolph litigation with Targeted Assistance and Capacity Aid. In a series of calculations, Fleeter demonstrates that under the new Cupp-Patterson plan, the total of $987.3 million for these two programs, “would still be 20.3% below the actual FY 19 post-cap funding levels for Targeted Assistance and Capacity Aid.”

In the first place, the targeting of funding for disadvantaged students is part of the plan’s six-year phase in.  Over the period of the phase in, school districts would not receive all of the money until the whole plan were fully phased in. “Additionally, the state average base cost amount would increase to $7,190 in FY 20 under the Cupp-Patterson plan. Thus, the per-pupil amount of economically disadvantaged funding received in FY 20, even if there were no phase-in, would only be 25.6% of the new base cost.”

Problems with the proposed formula also derive from the way it counts students for Targeted Assistance. The plan uses overall enrollment instead of Average Daily Membership to calculate Targeted Assistance. (Overall enrollment counts students in charter schools and students receiving vouchers.)  The substitution of overall enrollment for ADM affects the mathematical calculation, making urban districts look wealthier than they actually are. Changing the method of counting students deprives school districts of millions of dollars annually.  For example, Cleveland would lose $27.6 million from the amount of Targeted Assistance it currently receives; Columbus, $27.1 million; Dayton, $21.0 million; Toledo, 19.1 million; Youngstown, $13.54 million; Cincinnati, $11.4 million; Lorain City, 10.1 million; Euclid, $4.7 million; Lima, $4.0 million; and Mansfield, $3.0 million.

Fleeter comments “When providing testimony in support of their plan, members of the Cupp-Patterson work group explained the above outcomes by saying that the number of students educated in the district is in fact the more appropriate measure for determining wealth than is the number of students who live in the district. While this is certainly true for the calculation of an input-based base cost measure, it is less clear for a measure that is designed explicitly to help less wealthy districts keep pace with their wealthier neighbors in providing educational opportunities for their students. Moreover, regardless of the theoretical merits of one student count versus another for making a per-pupil wealth calculation, the funding impact was clearly that high poverty urban districts lost so much revenue from Targeted Assistance under the initial Cupp-Patterson proposal that most of them ended up on the guarantee or with much smaller revenue increases than did the wealthier districts in the state.”

Again and again, Fleeter emphasizes the urgent need for the state to address the needs of school districts serving concentrations of poor children. He castigates legislators for proposing a formal study of the needs of students in these school districts but failing to fund such an investigation: “Finally, HB 305 would direct the state to undertake a study of the true cost of educating economically disadvantaged students in Ohio. Such a study has never been undertaken in Ohio. The final version of the FY 20-21 state budget did include a provision directing the Ohio Department of Education to oversee such a study; however, no funding was earmarked for this purpose. The state needs to be encouraged to find a way to fund and complete these studies in the FY 20-21 biennium.”