Friday, April 25, 2008

Getting it Wrong for Ohio's Future

Once again, this is instigated by an important question asked within the comments of a prior post. Here is the comment:

I have a question about state school funding and permanent levies. Once there is a state solution, will district-by-district levies be phased out even if they are called "permanent"? If not, and a state funding solution is coming soon, why lock ourselves into another permanent levy now? Why not wait and see what the solution is, especially if it raises funds from increase sales tax or income tax? Once there is a state solution, will there be no more district by district levies?

You ask a very good question regarding what happens to permanent levies which had been enacted prior to some potential new funding scheme. The final answer will depend on the actual legislation that is enacted into law, but we can look at one possibility that's on the table.

A group called Getting It Right For Ohio's Future has proposed an amendment which deals with this through a phase-in procedure. It goes like this:

  • The first three years after approval are business as usual. If our district needs more money, we'll need to pass a levy.
  • In the 4th-6th year, each district must keep its current levies in force up to a maximum of 34 mills. We are currently at 42 mills, so presumably this means any new levy we pass from now on would be cancelled and another 8 mills mills knocked off our current property taxes.
  • In the 7th-12th year, 2.33 mills of property taxes would be knocked off each year so that by the 13th year, our required contribution to our own funding will have been reduced to 20 mills.

Sounds pretty good, albeit a long way off. The kids who are in school now will have graduated by the time this amendment would be fully phased in.

But this amendment is a trap being set to catch the suburban districts, and they're counting on our not caring enough to really dig into the meat of the thing. The bait is the promise of lower property taxes, and that's all the supporters of this amendment (notably the teachers' unions, our Superintendent, and even our own School Board!) want us to hear.

There's much more to it. I wrote about this a year ago, when it looked like this amendment might be up for voter approval in Nov 07. Fortunately, they failed to collect the 400,000 petition signatures required.

What are the traps? There are several:

  1. The first and most obvious is that the money to fund this new system won't just fall from the sky. If local property taxes go down, it means state income taxes, state sales taxes, corporate taxes, and who knows what else will have to go up. The amendment supporters have so far refused to answer what the net effect will be on Ohio families - how much our total tax burden will change. After all, a tax is a tax to us. Is the total going up or down? I think it is clear that it will go up, or there wouldn't be any reason for the amendment in the first place.
  2. While this amendment requires a school district to continue to tax its property owners at least 20 mills toward the cost of running the local school district, this does not mean that this 20 mills plus the money from the state will even come close to what we currently spend to run our district. So the amendment continues to allow local school districts to tax themselves over and above the 20 mills as necessary to fund the programs the people of that community desire.
  3. Current Ohio law requires the county auditor to adjust property tax millage rates to counteract the effect of increasing property values. If a 10 mill levy causes $500 to be added to your property taxes, then it doesn't matter how the appraised value of your home changes in the future, you will continue to pay exactly $500. This amendment removes that protection. If your property value increases 20%, your property taxes will go up 20% as well.
  4. There's an extra-special trap for the senior citizens. Supporters of this amendment will say that it exempts the first $40,000 of "market value" from taxation. However, it is only the "required" portion of the local contribution - the 20 mills - which has this exemption applied.

    Any additional local levies, as discussed in the previous point, have no such exemption. By the way, the "assessed value" of a piece of property is only 35% of the "market value" so that $40,000 gets reduced to $14,000 before the millage is applied. The value of $14,000 at 20 mills is $280.

    I won't say that's insignificant - $280 is a lot of money to some of our seniors. But remember, they'll be paying on the full assessed value for any additional local taxes we levy, and those taxes will go up automatically if future appraisals declare their home value to increased. I'm not confident that seniors would see any savings at all versus the current system.

We have to understand that the loudest voices regarding public schools in the halls of our statehouse is not Jane and Joe Public - it's the lobbyists from the teachers' union and the construction industry (who is building all these new schools around the state) who get the ear of our elected officials. These organizations make significant campaign contributions to any candidates who would be in a position to tilt the tables in their favor - all the way to local school board races by the way.

There's even an interesting 'treat' in the amendment designed to garner the support of local politicans, like Mayors and City Council members: the establishment of a "Local Government Trust Fund." While it would be initially funded at the same level as current state grants to local government, the amendment calls for the funding to increase annually at the same rate as the personal income of Ohio citizens. Again, we would have a funding mechanism that increases automatically without voter approval. The local politicians have got to love that, especially since it's the State government that takes the heat for the higher taxes.

This amendment is not designed to benefit the general public. It was crafted to create a school funding mechanism that protects the income streams of school employees and suppliers by removing the risk that local communities might turn down a levy. You might not care who your representative on the State Board of Education is right now (ours is Michael Cochran), but you would if this amendment passes, for the State BOE gets to decide how much money our schools are allocated from the State budget - not the Governor or the General Assembly. In fact, they get first dibs on the State treasury.

Did any of our School Board actually read this amendment before they threw their support behind it? One member of Worthington's BOE certainly did...


  1. Thanks for the explanation. It's a complex issue. Hopefully this amendment will not get on the ballot before there is full detailing of where the money will come from. A tax is a tax, even if it comes from a different pocket. It seems like with the option for districts to raise additional money for their schools by passing extra levies, there would be the potential over time to end up with the same disparity between the "have" and "have not" districts in the state. I am not sure if Fund the Child addresses this in a better way. I will try to go to the Ted Celeste meeting and ask about Fund the Child versus the proposed amendment. Thanks again Paul.

  2. The judgment of the Ohio Supreme Court does not mandate that all inequity between districts be eliminated. Their requirement is that the state government deal with the Have-Not districts, but only to the extent that they "Have-Enough." Their opinion specifically states that districts are free to tax themselves above state-mandated levels.

    The Fund the Child effort, here in Ohio at least, does not try to address inter-district inequities, but rather intra-district inequities.

    The key concept is that funding will follow the kids, so that if there is a significant migration of kids from one school to another within a district, the funding will automatically follow.

    In a Dispatch editorial on March 21, 2008, it was suggested that since seniority plays a big role in the assignment of teachers, the most experienced teachers tend to migrate to the schools with the least difficult kids - the very kids who could most benefit from the skills of an experienced teacher. With Fund the Child, the parents could shift their kid from a poorly performing school to a better one, and cause the funding associated with their kid to follow.

    This has some of the same concepts as a voucher system, in that the best schools attract both kids and funding, while the underperforming schools get starved out.

    Opponents to Fund the Child say it's a disguised method for sending more funding to charter schools. I don't necessarily think that's a bad thing, but Ohio's approach to charter school has problems, the first among them that they are allowed to be operated as for-profit entities.

    I very much like the idea of a voucher system as proposed by Milton Friedman. This isn't it.