Saturday, February 14, 2009

Who Won?

It's been a little over two weeks since the Governor announced his proposal for fixing public school funding in Ohio, and I haven't heard anyone say yet that they understand it.

On February 3, 2009, the Columbus Dispatch published a table that said Hilliard City Schools would get $35.6 million in state funding for FY10, and $38.2 million for FY11. The $35.6 million was portrayed to be a 1.9% increase in funding from FY09, implying that the FY09 funding was $34.9 million. However, the official SF-3 report from Ohio Department of Education says our current funding is $37.6 million. So why did the Dispatch report that we were getting an increase?

I don't know – I can only try to deduce some possibilities based on other evidence, as neither the Governor nor the Dept of Education have been forthcoming with the details of the calculations that will replace the current SF-3 formula. Someone knows them of course; otherwise the Office of Management and Budget couldn't have come up this district-by-district report of projected funding under the new plan (thanks to Marc Schare, School Board Member at Worthington Schools, for the link and the observation).

One possible reason for the difference is that Hilliard City Schools is currently "on the guarantee," which is a provision of the law passed during the Taft Administration which phased out Personal Property Tax for businesses. Since the main recipient of this tax was the school districts, the law guaranteed that as the PPT was phased out, school districts would be guaranteed to get state funding of an amount no less than they were getting before the PPT was eliminated. This guarantee for Hilliard, which is theoretically funded by the new Commercial Activity Tax collected by the State on the revenue of business, amounts to $3.6 million on the current SF-3.

In other words, if this $3.6 million guarantee were subtracted from the current $37.6 million in total funding, our current state funding would be $34 million – in the ballpark of the number implied above. Since this transitional aid guarantee exists to correct a technical issue in the current funding system, one could make an argument that an apples-to-apples comparison of the old system to the proposed system has to ignore this guarantee amount.

It would be a stupid argument of course. At the end of the day, it doesn't matter what the individual component numbers are – it's the bottom line. And the bottom line is that we get $37.6 million from the state right now, and this Dispatch table says we would get $35.6 million in FY10 under the Governor's new plan. 
That sounds like a haircut to me.

But those aren't the only numbers floating around. The OMB report referenced above says that our FY10 funding will be $53.9 million, a whopping $19 million – 54% – increase over our current funding. In FY11 it would be increased 5% more to $56.7 million.

How is that even possible? Where will that kind of money come from?

You could argue that we've deserved this all along. After all, we've had tremendous growth in our district, from 12,005 students in 1999 to 15,150 at the end of FY08, while our state funding has been essentially flat. That growth has been entirely funded with local property taxes, which is why our tax bills skyrocketed. I think you could also say that had we been receiving this kind of money over the last decade or so, we wouldn't have needed so many local levies. At least not the last one, which raises just about $20 million per year.

I have been predicting for years that any fix the state government came up for the school funding formula would give us less money, not more. If these OMB numbers are true, I've been dead wrong. As we are listed on this report as a district of the most affluent kind ("very high median income, low poverty"), I expected the money to continue flowing from us toward the rural districts who are the poster children for what is supposedly wrong with the current system. However, Northern Local School District in Perry County, the point of origin for Derolph v. State of Ohio, the lawsuit which was before the Ohio Supreme Court when it ruled the current funding system to be unconstitutional, is getting an increase of only 27% ($3.2 million) in FY10, and a half-million more in FY11.

In fact, the Dispatch reported in a February 8 article that "The three poorest districts in Ohio, and 24 of the bottom 50 based on property value per pupil would suffer state funding cuts over the next two years." I sure that's not what these districts expected. But it may well be an indicator of the good job Governor Taft and the General Assembly did in addressing the funding balance problem that gave rise to DeRolph in the first place.

So what's going on?

Governor Strickland came to office having made a lot of promises to organized labor, as one would expect from a Democratic candidate. Arguably, the most powerful labor union in the state is the Ohio Education Association (OEA), representing teachers and other certified/licensed staff, followed closely by the Ohio Association of Public School Employees (OAPSE). While the bulk of the population in the state may lie in the rural and urban areas, the money is in the suburbs. Politicians need votes to get elected, but they need money to run their campaigns. I suspect that a lot of that money comes from the well-paid suburban teachers and staff.

Could it be that the school employees in the suburban districts have come to realize that the people of the suburbs are just about tapped out, and that they told the Governor that if he wanted their continued campaign support, he had better do something about the crisis on the horizon?

So is this good for us – the citizens of our school district? Well, we have to start by saying that the State of Ohio, unlike the US Government, cannot just print money to fund programs. While a little money can be borrowed for specific purposes via the sale of bonds, for the most part a new dollar spent has to be underwritten by a new dollar of tax collected. There's no way the Governor can pay for his new school funding program by increasing the tax burden on Ohio's citizens and businesses.

That's where the other side of his plan comes to light. Although the details are not clear, his plan has "incentives" for local school districts to reconfigure their portfolio of revenue-producing levies such that the amount collected locally is reduced, while simultaneously being converted to a form that allows your tax bill to go up with the appraised value of your property. So if the Governor needs to raise say the state income tax to pay for this, our property taxes should be reduced enough to offset some or all of it. That's a theory anyway.

The net effect will be exactly what I think the OEA has always been after: taking the decision about how to fund and manage a local school district away from the community and giving it to the state government – the state government that can be influenced (controlled?) with generous campaign contributions from the union, because the public in general doesn't bother to pay attention to the nitty details of government.

Some are calling this kind of movement the socialization of America. I know that the votes we take on how to fund our schools is one of the last situations in which taxpayers can directly control amount of money a public body has to work with (township governments are another). In nearly every other case, the amount we get taxed and the amount they spend is controlled by elected officials, who respond more to campaign contributors than to the public.

Many people in our community, including the entire senior leadership of our school district, have long wanted the state to take over more responsibility for local school funding.

I fear their wish is coming true.


  1. Spot on Paul. From the first moment I saw the plan I thought: "uh oh. Strickland gets it. He understands the only way to get something passed is to pay off the suburbs." A simple redistribution of wealth favoring poorer districts was never going to happen. By obscuring "winners and losers" while at the same time garnering the support of the unions, he has set up an a nice glide-path towards more socialism.

    There's the old story about a frog who doesn't know he's being cooked because the heat is turned up so gradually. Strickland is taking over local control of schools in much the same way: a very gradual, semi-painless way. He knows the only political way to strip freedom is to have it appear to benefit the middle class. He's betting on short-term thinking trumping long-term vision, and as strapped as people are by constant levies it will likely work. The middle class will find they've been duped only long after the fact (as we are only beginning to learn with Social Security, which was supposedly money set aside but almost immediately became pay-as-you-go).

  2. Paul:

    Details about the calculation can be found here:

    The calculations provided by the dispatch are only as good as the data that ODE has on each district.

  3. Thanks Marc. I am compelled to try to build a spreadsheet that hopefully reproduces the numbers. Have already done that per chance?


  4. I haven't done a spreadsheet because I think there is little chance of this plan becoming law in its current form. There would have to be a massive statewide tax increase in 2011 to pay for the second biennium phase-in and that tax increase would cripple Ohio's economy.

    If you attempt a spreadsheet, have a look at their sample in the zip file. The sample contains detail not included in the text.

    We have a levy coming up in May and as part of that levy, we are promising (in writing) that any unexpected revenue as a result of the Governor's plan or the federal stimulus package that doesn't come with associated mandates will be used to reduce the size of the next levy. It's sort of like "governor's plan insurance" for the taxpayer. This way, our voters don't have to guess what might happen in state legislation. A draft of that proposal is here:

  5. Marc:

    Thanks. Interesting resolution.

    Seems like a really good move would be for your Board to get the WEA and your OAPSE local to pass their own resolutions in support of your 'no new taxes until 2013' clause. Otherwise I think they will be tempted to use the 'you do so have more money' argument in their next bargaining period, in 2011. It would make a powerful statement to the public, I would think.

    It's interesting that the descriptive material in the documents you provided says that there are matters of compensation that will remain to be negotiated at a local school district level.

    I think that's a good thing of course to have local control, but it will be interesting to see what influence this new plan might have to the negotiating strategy the OEA promulgates to the local unions. After all, their lobbying efforts must surely have resulted in some new 'hooks' for them to use that aren't necessary engage by the current contract forms, which have a lot of commonality statewide.

    For example, the new plan enables school boards in the 'less desirable' districts to offer significantly higher salaries than before in order to attract teachers that apparently would otherwise rather not teach at all. After all, the document claims that sometimes hundreds apply for a few positions in a 'desirable' district. Do the scores who don't get one of those few jobs just go get on at Wal-Mart and wait to apply the following year rather than give Scioto County a try? How much of an incentive do you have to pay a new young teacher to take a job in Lawrence County - and stay there?

    And to my point, what kinds of pressures will that bring to salaries in the 'desirable' districts? Will those teachers expect that the 'premium' they get versus their colleagues in the poor districts remains the same? What happens when the pay grids in Meigs County starts to look like Franklin County?

    I hope the Ohio School Boards Association is working at least as hard on a strategy for you and your local board colleagues around the state. But then I've never been too sure which side the OSBA sits on.


  6. Paul, I think we are going to hear a variety of scenarios on this subject. How the districts choose to communicate this clearly to the public is crucial

    I believe there should be a full court press once the smoke settles explaining this program.

    Paul your group leadership which you all have done a great job on
    most likely will have to assist with this.

    I would propose at this point a freeze on spending levels in HCSD given our economic situation. Things are certainly not getting better in the short term. We are going to be hit I believe with another levy next February or May at the latest. This will be significant I believe and will not take into account all of the new iniatives proposed by the Gov.
    All day K, more school days,
    nurses being mandantory.
    The individual homeowner is going to get this bill lets be honest about it.

    It would be great if the district, HEA, OAPSE and employees had some direct dialogue with the public
    on what their ideas are to fund the increases in raises, benefits
    new programs etc.

    We voted yes on the last levy and will have to do so again next year.
    It would be nice for a change instead of laying the guilt trip
    on the individual taxpayer for some
    specific ideas come from our district entities.

    Each of us should plan on some very large increases and try and save a little toward that new increase so the effect will not be too drastic.

    The burning question is will only the homeowner have to come to the
    party to produce new revenue and continue to fund business as usual.

  7. Interested item in the Dispatch this evening - "Govenor's Education plan faulted in new report."

    Article link at:

    or direct link to the Fordham report at:

  8. Thanks Kel!

    Here's a clickable link to the Fordham Institute report. These guys are admittedly biased from their conservative perspective (as am I), but this report is worth reading. Perhaps the most direct point of agreement I have with the report is this statement, found on page 7:

    No doubt this plan can serve the purpose of protecting and (if the economic downturn permits it) increasing jobs in K-12 education.

    This really is a jobs bill for the education industry, and should be evaluated as such.

    I'm still working on fleshing out the revenue allocation formula the Office of Management & Budget has developed to quantify the Governor's plan. Been stuck on a work project lately...

  9. What an excellent, easy-to-read analysis and report from the Fordham Institute. I highly recommend everyone to read it. My highlights:

    Ohio needs to fund students, not teachers, administrators, or programs, and to measure performance at every level—district, school, and classroom—and let money and students flow from less to more effective uses.

    What we have now is a finance system that is focused on maintaining programs and paying adults, not on searching for the most effective way to educate our children.

    Schools need to experiment with technologies that might change teacher and student work, but the financing system forces them to spend all their money on a fixed set of organizations,programs, and people.

    And the lowlight, sobering statement:

    No state or community in the country has succeeded in raising even a majority of its poor and minority students up to minimum performance standards, or eliminating huge disparities in high-school graduation or college-going rates.