Thursday, July 30, 2009

New School Funding Law

The debate about how to fund Ohio's public schools has been raging for years, most famously via the DeRolph vs State of Ohio lawsuit. All most folks understand about this lawsuit is that it concluded that "funding schools with property taxes is unconstitutional." The leaders of the group opposing the operating levy being voted on in South Western City Schools next week make this a key part of their platform. However, neither these folks nor anyone else I've heard make this assertion can answer the question: "okay, so what kind of tax do you want to pay to support our schools?"

Governor Strickland has touted his "Evidence Based Model" (EBM) as the solution to the problem raised in the DeRolph case. A good chunk of this approach was incorporated into the 2010-2011 Biennial Budget, signed into law by the Governor on July 17, 2009 (with a substantial number of line item vetoes).

So how is the EBM different than the old funding model?

In terms of outcome for Hilliard City Schools, the answer is – not much. More on that later.

From a philosophical standpoint, the difference is this: The authors of the old funding model knew they didn't understand how all the moving parts in the various local school districts fit together to make a district either "thorough and efficient" (the Constitutional language), or not; while the authors of EBM believe they do.

In the old funding system, all of the 600+ public school districts in Ohio that meet certain performance indicators are put on a list, sorted by their per-student spending. The top and bottom 5% are thrown out, and the rest averaged to come up with a number. The theory is that even without knowing exactly how those well-performing districts spend their money – and it varies from district to district – if all districts are given this amount of money, they too should be able to have a well-performing district. Just for illustration, let's assume that this number is $6,000/pupil. If you have 10,000 pupils in your district, you should be able run it for $60 million/yr.

So how do property taxes fit in? Two ways. First, the primary adjustment to the state funding formula is called the Charge-Off. It is the amount of money that would be raised with 23 mills of local property taxes, and it is subtracted from the basic funding calculation. So let's say that in our example district of 10,000 pupils, the property has value such that 23 mills would generate $40 million in local property taxes. In that case, the State would subtract $40 million from $60 million to determine that the State's share of funding for our district would be $20 million.

This whole system makes perfect sense in my opinion. So why was DeRolph filed in the first place, and why did the Supreme Court say to chuck out property taxes as a funding mechanism?

It was because the Governor and the General Assembly never actually used this method to determine the base funding amount (ie the $6,000/pupil in this example). This money would have to come from the State's biennial budget, and school funding competed with a lot of funding demands, including big ticket items like Medicaid and law enforcement. So in the development of the budget, the Governor and General Assembly would need to make tough decisions how much to allocate to schools and these other funding needs, and how much new revenue could be raised with additional taxes. In the opinion of the education community, the public school funding was always shortchanged. That's why over 500 school districts ended up joining the DeRolph case.

The first attempt to replace the old funding system was a constitutional amendment, championed by a group called Getting It Right For Ohio's Future. Our Superintendent was very much in favor of this amendment, and convinced our School Board to support it as well. While GIRFOF might have solved the constitutional problems raised by DeRolph, in the process of doing so, it would have vested the Ohio Department of Education with the power to dictate how much of the state budget would be allocated to education, regardless of what impact it would have on every other funding need. In the opinion of the GIRFOF supporters, if we wanted all those other programs to be funded too, all we had to do was raise taxes.

Neither Governor Strickland nor the General Assembly supported GIRFOF, primarily because it would give the Department of Education first dibs on the state treasury without needing to seek approval from either the Governor or the General Assembly. GIRFOF took control away from local voters, the Governor, and the General Assembly, and gave it all to the Ohio Board of Education. Slick move on the part of the educators.

So the Governor came up with his own plan – the so-called Evidence Based Model. The claim of the EBM supporters is that they do understand what components are required to construct and fund a thorough and efficient school system. So they tell you how many teachers, principals, nurses, maintenance people, etc that you need based on the number of students in your school district. Here is an example calculation – obtained from the Ohio Office of Management and Budget.

Then – guess what – they reduce the amount of funding a district gets from the State based on the amount of money that would be generated by 20 mills of local property tax levies. Each school district is expected to continue to levy sufficient property taxes to fund a 'fair portion' of the cost of running their schools. So how is that different than the current plan?

Like I said above – not much. The Governor's EBM plan, now enacted into law, would provide $35.6 million in State Foundation Aid to Hilliard City Schools in 2010. As can be seen in our July SF-3 report, our State Foundation Aid under the old system would have been $34.6 million. To me, it seems like an argument about how you make the color Green. You say you add Blue to Yellow, I say you add Yellow to Blue. Does it matter since the outcome is the same?

I am particularly suspicious of a number in the new EBM calculations called the Ohio Instructional Quality Index (OIQI). This is a number with a 6 digit decimal fraction that is used to tweak the amount of money a district is supposed to get from the state to pay teacher salaries. It is supposed to be a factor calculated using various demographic characteristics of the people of a school district, including the number with college educations, the wealth per pupil, and certain poverty measures. The calculation is not codified into law – only this number with the six digit decimal fraction, district by district. It smells of being a 'knob' the legislators can twist to change the distribution of tax money without being detected on anyone's radar.

For Hilliard City Schools, this number is 1.154997. For Dublin, it's 1.035579. In this calculation, the larger the number, the more you get from the state to pay teacher salaries. Upper Arlington's factor is 0.914789, meaning that if their student profile were exactly the same as ours – same number of kids in the various grades and categories – they would get 12% less from the State to pay teacher salaries. Both South-Western City Schools and Columbus City Schools have similar factors: 1.460040 and 1.509988, respectively. This means those two districts would get about 30% more per student to spend on teachers. Of course, a district can spend whatever they want on teacher salaries as long as they fund the excess with local taxes.

The law describes 11 different teacher categories, and uses the enrollment data to determine how many of each kind of teacher are needed. In our case (example), we supposedly need 1044.5583 total teachers. You multiply that number by $51,407 (the State's number for average cost of salary and benefits for teachers), and you get $53,697,608.5281. Now multiply that by our OIQI of 1.1550, and you get $62,020,738 – and that's how much we should have to spend for 1,044 teachers.

But guess what – the property tax Charge Off still exists. In the EBM plan, it is based on 20 mills rather than 23 mills, but the concept is identical. The effect is that districts with high property values pay a greater share of the cost of operating their schools than do districts with low property values.

At the end of the day, the process of budgeting at the State level has only so many variables: a) how much revenue is projected to come in; and, b) how is that revenue to be distributed among various agencies, departments and programs. The reality in our great State is that the revenue side of that equation has tanked, along with the rest of the Rust Belt economy.

To a large degree, the education community acts like they don't care about the state of the economy – they want the schools to be funded as well or better than ever before, and since nearly 90% of school funding goes to pay compensation and benefits, the education community is essentially saying that they want to be paid in the same way as always, regardless of what has happened to the rest of us, and regardless of what impact that has on other State programs.

The process of negotiating union contracts and state budgets have something in common – they are an adversarial activity. That means that a debate takes place, and the outcome is determined by how well one side argues its case vs the other. Sometimes the argument takes the form of a threat, as is the case in South-Western City Schools where the educators have told the community to fork over more money in property taxes or they'll take away extracurricular activities.

The adversarial process works well as long as both sides have equal power, knowledge, savvy and motivation. The problem we have in America is that we have become almost completely apathetic to all things political.

All these crazy technical details exist in the school funding law because those on the side of the educators have knowledge, savvy and motivation, which gives them power. On the other side of the table is a public that mostly doesn't give a damn, and is certainly lacking the motivation to really dig into this stuff and take a stand.

A group of us have formed for the purpose of changing that imbalance of power. We want our fellow community members to be informed, savvy and motivated.

Will you join us?

Sunday, July 12, 2009

A New Kind of Double-Speak

Our state is in a jam. Unless drastic action is taken, the State of Ohio could find itself going the way of California – issuing IOUs in the place of paying its debts. Backed into that corner, Governor Strickland and the General Assembly have finally given in to the powerful gambling lobby and agreed to allow several very "lucky" horsetrack operators to add video slot machines to their repertoire of gaming choices.

In announcing that decision, the Governor said "We have reached a final agreement on a budget that is not only balanced, but invests in education without raising taxes on Ohioans."

However, as reported by The Columbus Dispatch in their July 11, 2009 story, the education community pointed out that the Governor was continuing an old shell game in regard to education funding.

Remember how when people of Ohio were being sold on the idea of a State Lottery, the big selling point was that the profits would go to support our schools? It turns out that while indeed all the Lottery profits are wheeled in the front door of school funding, a nearly equal number of dollars are sneaked out the back door to fund other priorities. The net effect is that education gets no new dollars.

The same game is being played with this video slot machine scam. Except this time Governor Strickland is pulling a new strategy – telling the truth, kinda, and only after the fact.

According to the Dispatch, when Strickland was confronted about this, his answer was...

"The difference between what we're suggesting and what has happened in the past is that we're being fairly candid about what we're going to do."

In other words, it's okay if prior to the decision the truth was distorted (ie – implying that the new tax income from these video slot machines would generate additional money for the schools) as long as after the decision is made the truth comes out, if someone bothers to ask.

This whole thing about the video slots stink. The voters of Ohio shot it down four times. The Governor said during his campaign that he was against expanding gambling in Ohio. Yet when things got tough budget-wise, he ran right to the arms of these seven track operators and gave them a monopoly on the market they've always wanted. If you're going to have video slots, why restrict it to just these seven operators? Don't other Ohio businesses deserve a chance to supplement their revenues with video slots as well?

I think we know the answer. There were favors to be repaid, and new favors to be earned…

Saturday, July 4, 2009

Announcing is a non-partisan group of residents and business owners in the Hilliard City School District working for the preservation of our excellent schools through sustainable economics.

I'm proud to be one of the founders of this group, and excited about being one of our candidates for School Board this November. I am joined by Don Roberts, a family law attorney and father of three, and Justin Gardner, an accountant and auditor, and a brand new parent. will continue as the place where I post longer stories about things that alarm me, or aren't making sense, about the leadership of our schools. will function primarily as our campaign website, structured to make finding information easy for folks we're just getting to know.

We are not alone in this kind of community activism in regard to schools. You are invited to visit and Citizens for Fiscal Responsibility and Accountability (New Albany) to learn what folks there are saying about the way the leadership of their schools are failing their communities.

More to come…