New Ohio Budget Will Demonstrate What Our State’s Leaders Value

I have never observed such a sense of urgency among educators and parents as we wait to see the compromises that will come out of Ohio’s House-Senate budget conference committee as soon as this afternoon. The Ohio Legislature must pass a budget and send it to Governor Mike DeWine for his signature by Thursday, the beginning of the FY 2022-2023 biennium.

One reason anxiety is running high is because the Ohio Senate has put off acting on a House-passed, brand new, school finance formula that experts say would comply with the demands of the Ohio Constitution for the first time since the Ohio Supreme Court found our state’s school funding unconstitutional 24 years ago. The Ohio Senate allowed legislation for the new school funding formula to die on December 31 at the end of the session by refusing to consider or vote on the bill after the House passed it earlier in the month.

Senate leaders argued they needed more time to study the plan, which the House reintroduced as Issue 1 last winter. When the Senate again failed to act, the House inserted the Fair School Funding Plan into its version of the next state budget, but the Senate didn’t respond until early June, when Senate leaders inserted their own substitute school funding plan—without significant discussion—into the Senate’s version of the state budget.

The House Fair School Funding Plan was developed by legislators, educators, and school finance experts over three years, while the Senate’s alternative merely appeared. The state’s seasoned school funding expert, who has studied and reported on our school funding system since the early 1990s, Howard Fleeter has explained not only that Senators based their new formula on outdated property valuation and median income data, a problem guaranteeing that the Senate’s plan won’t keep up with inflation, but also that the Senators failed to correct a mistaken calculation in the old formula that mismeasures each school district’s capacity to generate property tax revenue.

Why does all this arcane stuff seem frankly frightening to parents and teachers and school superintendents? Here are two experts dissecting the ongoing deterioration of Ohio’s method of funding public education, which left all of the state’s 610 school districts with state funding frozen at the FY 2019 level throughout the past two school years, and which previously had left over 80 percent of the state’s school districts on hold-harmless guaranteed funding or with state funding capped.

  1. In April, outlining Ohio’s urgent need for the Fair School Funding Plan, Policy Matters Ohio’s state fiscal expert Wendy Patton explained: “Even as policymakers have expected public schools to do more, they have cut state aid to public schools over time, by allowing it to be eroded by inflation and diversion of funds to charter schools… and vouchers… As a result, public schools have increasingly relied on local resources, which causes unequal funding…. This is because our state’s school funding system relies heavily on property taxes, which advantages wealthier districts… As corporations eliminated jobs with living wages in Ohio, racial discrimination in employment and government-sanctioned segregation forced Black, Indigenous and other people of color into neighborhoods of concentrated poverty…. Schools in these communities need additional resources, but the declining local tax base cannot generate what’s needed. Many rural and small-town districts have faced economic challenges that make it hard for them to provide local funding.”  Overreliance on local property taxes was specifically found unconstitutional in the Ohio Supreme Court’s decision in DeRolph.
  2. In May 6, 2021 testimony to the Senate Education Committee, Howard Fleeter described how the framers of the House’s Fair School Funding Plan designed the plan to address what has been alarming and  long-standing inequity in Ohio school finance: “Funding for economically disadvantaged students in particular has lagged well behind the growth in the number of such students over the past 20 years (funding has increased 22% while the number of (these) students has increased 61% since FY01)… Studies in other states have indicated that the additional costs of educating low-income students are typically 30% or more… Targeted Assistance and Capacity Aid should be retained as is the case in the HB110 funding formula (the Fair School Funding Plan).  These two formula components supplement formula funding by providing additional funds to low wealth districts that lack the tax base to pursue local educational initiatives in the same manner that wealthier districts can through local levies.”

Thankfully, both chambers of the legislature say they will agree to eliminate the state’s punitive and disequalizing school district deduction method for funding vouchers and charter schools—a method which deducts a state-set fee for each voucher or charter school tuition right out of the local budget despite that the school district’s state per-pupil foundation assistance is in many cases less than the cost of the voucher or charter school tuition. But despite this important reform, the Ohio Senate’s school funding plan exacerbates several other problems for public schools on top of the primary problem of our dated, inequitable and inadequate school funding formula. The Senate’s budget hurts public schools by:

  • expanding  the size of each taxpayer funded, private school voucher from $4,650 to $5,500 for K-8 students and from $6,000 to $7,500 for high school students;
  • adding a neo-voucher tuition tax credit program for families with income below $300 percent of the federal poverty line;
  • creating taxpayer funded education savings accounts for home schooling;
  • permitting widespread scattering of charter schools across all the school districts in the state, while in the past their location has been limited to so-called “challenged” school districts; and
  • requiring that school districts sell or lease a school building to a charter school if the public school building was used in the previous school year for academic instruction for students at less than 60 percent of building capacity.

All this is in addition to the Ohio Senate’s proposed 5 percent cut in income taxes. Policy Matters’ Wendy Patton presented testimony demonstrating that only the wealthy will benefit from what the Senate is proposing: “Nearly half of the tax reduction would go to those in the top 5%, who are paid more than $221,000 a year. The top 1% percent, who have income of at least $526,000, would average a cut of $1,712 and receive a quarter of the tax reductions. The tax reductions in the Senate bill come on top of huge tax cuts the richest Ohioans have received over the past 16 years. While lower-and middle-income Ohioans on average saw little change or paid more in state and local taxes, the top 1% received more than $40,000 a year in tax cuts.”

Despite Patton’s warning, Gongwer reports that Senate President Matt Huffman explained last week that new higher revenue projections for the upcoming biennium in addition to American Rescue Plan funds might push him to increase tax cuts above the 5 percent already proposed in the Senate’s early June budget. Huffman has declared that higher revenue must be spent on one-time expenses this year instead of long-term investments in education or other programs.  However, he has failed to acknowledge that the tax cuts he is proposing—based on this year’s revenue—would not be rescinded at the end of this year. These tax cuts would be permanent unless the legislature subsequently raised taxes.

Alarm about House-Senate budget negotiations is not limited to public school supporters.  In a letter last week to legislators and Ohio Governor Mike DeWine, 97 state and local organizations identified problems in the Ohio Senate’s version of the budget: “It removes the plan to fairly and equitably fund our K-12 schools, dismantles the state’s foundation for ensuring high-quality child care, and removes critical funding to expand broadband access to our neighbors across the state. Another change will lead to fewer affordable housing options for low-income seniors, people with disabilities and parents trying to provide a better life for their children… All of these changes will be damaging to the long-term health and well-being of children, adults and families… particularly Ohioans with low wages… State lawmakers have cut income taxes for the wealthiest Ohioans for 16 years and Ohio continues to fall behind the nation on jobs, wages, and overall quality of life.”

The Plain Dealer‘s editors castigate the lack of moral principle in the Ohio Senate’s proposed budget: “The Senate says it’s just being frugal but the numbers belie that. Its proposal would add to inequities in school funding while perpetuating divisions over something that should unite Ohioans of all political stripes—the need to invest in our children.”

This blog has examined Ohio’s Fair School Funding Plan here.