Tuesday, December 18, 2007

Unconstitutional: What does it mean?

Nearly everyone has heard it said that the Ohio Supreme Court has ruled on four separate occasions that our current school funding system is unconstitutional and must be fixed. But very few understand what is wrong with it. As always, a little history is helpful.

First off, what is it that the Ohio Constitution actually requires? This is what Article VI, Section 2 says:

§2 The General Assembly shall make such provisions, by taxation, or otherwise, as, with the income arising from the school trust fund, will secure a thorough and efficient system of common schools throughout the state;
One challenge this creates for the officials of the State government is figuring out how to connect funding with the Constitutional standard of thorough and efficient. What they ultimately decided to do was find out how much the top-performing districts in Ohio are spending on a per student basis, and then make the assumption that if every district could spend that amount per student, they all could perform at the same level as the top-performing districts. Let's call this the Target Funding Amount*.

But where was the money going to come from? It was clear that Ohio's long-standing tradition of using local property taxes to fund schools was going to need to continue, as the state income tax system could not generate sufficient funding alone without a massive tax rate increase – something politically impossible. It was also clear that the value of properties in school districts varied widely from the wealthy enclaves of our metro areas to the poor areas of Appalachia. The General Assembly created an element called the Charge Off to take this wide range of property values into account.
The Charge Off is an amount equivalent to the income produced by a 23 mill local levy, and it is deducted from the Target Funding Amount to arrive at the State Aid Amount* – the amount the State needs to send to a district to supplement the district's funding from local property taxes. The effect is that wealthy districts have a large Charge Off and therefore receive a much smaller State Aid Amount than does a poorer district.
This seems fair. So what is the problem?

It is that the General Assembly does not allocate enough money in the Biennial Budget to pay out the aggregate State Aid Amount the above process requires. The Governor and the General Assembly have the difficult task of deciding how much money to allocate to a wide variety of state-funded programs, including Medicaid, and while schools are one of the top priorities, they are not the only one.
The consequence is that the State Aid Amount is tweaked in the budgeting process. No district gets the full State Aid Amount. Instead the funding is based on a notion called the Formula Amount, which is set by the General Assembly during the biennial budget process. It is typically much less than the Target Funding Amount, and that is what has led to the lawsuits.
The primary lawsuit is often called DeRolph v. State of Ohio. Nathan DeRolph was a student in the Northern Local School District in Perry County, one of the poorer areas of the state. The complaint, filed by the Ohio Coalition for Equity and Adequacy of School Funding, representing over 550 Ohio school districts, was that the State of Ohio was failing to meet the "thorough and efficient" clause of the Ohio Constitution. The trial judge agreed, declaring the existing funding system to be unconstitutional. The State of Ohio appealed, and the Appellate Court overturned the trial court, saying essentially that the current system is okay. The Coalition appealed that ruling to the Ohio Supreme Court, who restored the ruling of the trial court – saying that the Ohio school funding system is indeed unconstitutional. The Supreme Court ordered the General Assembly to come up with a new funding approach, preferably one with less dependence on local property taxes, but to date the General Assembly has not done so.

It is within the prerogative of the Supreme Court to dictate the form of a funding system it would deem to be constitutional, but it has not – wisely in my opinion. The Supreme Court is not the appropriate branch of government to be making decisions about the allocation of monies in the State's budget. And so we are left in a Constitutional quandary: a funding system which has been ruled unconstitutional by the judicial branch, and a legislative branch which refuses to change it.

There are two efforts underway to amend the Ohio Constitution to change the way schools are funded. The first is Getting It Right For Ohio's Future, a campaign to put an amendment on the ballot that would take the allocation of school funding away from the Governor and the Legislature and grant it to a commission appointed by the State Board of Education. Getting this amendment on the ballot requires the signatures of 402,000 Ohio voters on the petition, but so far (thankfully) that effort has fallen short.

More recently, State Senator J. Kirk Schuring (R-Canton) has proposed an amendment in the Ohio Senate which would dedicate a fixed percentage of state tax and lottery receipts to education. The idea is that as state income grows, school funding would grow automatically. The Columbus Dispatch published an Op Ed piece calling this a bad idea. I agree.

These funding systems which automatically grow are the brass ring for the unions representing the teachers and other school employees. Around 90% of the cost to run any school district is the salaries and benefits of the faculty, staff and administrators. The unions would like to see school funding grow automatically because they believe it takes the pressure off local school boards to sell their communities on more and more property tax levies to pay their ever increasing salaries and benefits.
But that is a false belief – at least for teachers in the more affluent school districts such as Hilliard. If the State of Ohio gains greater control over school funding, the priority will be to allocate more to the poorer districts and less to the affluent districts. The affluent districts will be expected to continue to pass local tax levies if they want to spend more money per student (e.g. on teacher salaries) than whatever amount is set as the state funding standard.

In the end, these proposed funding amendments would cause communities like Hilliard to pay more combined state income and local school tax while having less control of how the massive state component is spent (because affluent districts have too little representation in the General Assembly).
So am I satisfied that the current funding system is fair to all Ohioans? Certainly not. There are districts truly in need of greater funding support, and frankly the money will need to come from affluent districts like Hilliard, Dublin, Upper Arlington, Bexley and New Albany.

But let's not let the lobbyists of the teachers' and school employees' unions have a loudest voice in the State House. We all need to be telling the Governor and our state Senators and Representatives what we want.
As is always the case in a democracy, apathy and silence are very expensive.

*These are labels I coined for use in this article.
The source for most of the factural information in this article is the "Ohio School Finance Handbook" by Robert G. Stabile (2002 edition).


  1. All Schuring's plan does if freeze this year's education budget and create a stabilization fund for up and down years. There is no new money and does not reduce the need for property tax levies.

  2. It boggles the mind that the backdrop for the money crunch is that Ohio went from one of the lowest to one of the highest taxed states over the past few decades.

    There's never enough money unless you're printing it.

  3. There are many things contributing to this:

    1. I don't mean to harp on this, but 90% of the cost of running a school district is the salaries and benefits of the teachers, staff and administrators. I think that in many districts, and particularly since the advent of teachers' unions, the rate of pay increases for teachers has been higher than other jobs in the community. That doesn't mean teachers are overpaid now - I think it is more likely they were underpaid in the past. But whatever one's feeling on this, the fact is that this is the cost component of education which has changed the most.

    2. On the revenue side, Ohio has changed from a heavily industrialized state to one with a small and shrinking industrial base. Those factories paid lots of school taxes, and supported mature communities with a mix of families with kids in school and empty nesters. These kinds of communities are very different than the no-industry communities like Hilliard, which grew primarily because families with kids wanted their kids to attend those schools.

    3. There are many areas of the state which rode the upside of the 20th century industrial boom, growing from nothing to major magnets for job seekers from all over. I'm a proud Appalachian whose family made such a move, but in the opposite direction of most - after 150 years in Ohio, my granddad and dad moved our family to WV to work in the chemical plants around Charleston. The much greater migration was from WV and KY into OH and MI to work in the auto factories and steel mills.

    While those industries are much smaller than they used to be, and employing a fraction of the labor force they once did, the people have remained.

    Part of the reason they do is that we've developed a policy of subsidizing their choice to live in an area with high unemployment. Part of that subsidy is the state support of their schools: We pay not only to run our own school system, we pay a share of the cost of running theirs as well.

    The cold hard truth is that those areas are not likely to ever recover, and we need to encourage those folks to once again move to a better place, like their parents and grandparents did 60 years ago. The only way I know how to do that is make it more uncomfortable to stay than it is to leave.

    ... there are lots of other factors, such as the sudden upswing and concentration of immigration, the burden created by NCLB and other oversight systems, and attention that needs to be paid to security. But it's the ones I list above which I think are most significant.

  4. Good points... but let's take a macro view instead of a state-level view.

    Don't you agree that the sum total spent on education nationwide in 2000 compared to 1950 has vastly increased even after adjusting for inflation? Why have education costs risen over the rate of inflation for many decades - with no let-up in sight?