Sunday, February 14, 2010

State Funding Guarantee

This is amplification of a story the Columbus Dispatch published with Jim Siegal's byline in the Sunday, February 14, 2010 edition of the paper. The original article is here, and should be read prior to my comments below (if the other link doesn't work, here is a backup copy of the article).

The only comment I have is that the story (as published) doesn't explain why the guarantee amounts have increased so much for districts like Hilliard. Seeing Hilliard's numbers go from $3.6 million to $15.6 million makes it look like we're getting a boatload of new money, and that's not helpful to district leaders trying to help voters understand that State funding is going down, not up.
The truth is that the total amount of money we're getting from the State in FY10 is actually less than we received in FY09.
Every once in a great while, the State significantly changes the algorithm it uses to allocate State funds to the 600+ school districts across Ohio (they make little tweaks all the time in the biennial budget process). While some school districts might have a large windfall with such a change, other districts, particularly the so-called wealthy suburbs, often take a substantial hit. To fix that, a "transitional aid guarantee" is employed to make sure the funding to such a district doesn't go down in the changeover from the 'old' algorithm to the 'new' algorithm.
The prior funding system - which you can call the "SF-3" system - had such a guarantee, and in the last year the SF-3 algorithm was applied Hilliard did indeed receive the $3.6 million in transitional aid guarantee that was reported in the story. However, this was added to $33 million of Basic State Aid and other funding components to bring Hilliard's total Foundation Aid to $37.7 million. Other adjustments took it down to $34.5 million.
With the new system, the PASS form shows that the basic state aid and other funding components come to $21 million, well less than the SF-3 algorithm, which is why $15.4 million in transitional aid guaranteed was added - to bring the total back to the same ballpark as the SF-3 system. After 'other adjustments,' the actual state aid is now $34.1 million, or $400K less than under the old system.
By the way, the 'wealthy suburbs' are doing the yeoman's share of funding State Foundation Aid other school districts. The Dept of Ed publishes a spreadsheet called the CUPP Report which includes a statistic called "District total SF3 AID as a % of Income Tax Liability." What that means is that if a district gets back exactly as much State Foundation Aid as its residents pay in state income tax, then this statistic would be 100%. When the percentage is less than 100%, the school district is a net payor – its residents pay more income tax than the school district gets back in school funding from the state. For the districts named in the Dispatch story, here are the values for this statistic:
Worthington: 17.0%
Reynoldsburg: 98.5%
Gahanna-Jefferson: 16.2%
Hilliard: 40.5%
Dublin: 9.5%
Olentangy: 3.4%

This means that in FY09, the people of the Hilliard school district paid $85 million in state income taxes, but we got back only $34.1 million in State Foundation Aid for our schools.
Whitehall and Hamilton Local schools were both over 200% by the way. They received more than twice as much money from the State as their residents paid in state income tax.
[note that this isn't a discussion about 'fairness' – only an explanation about how things work]
The Dispatch has been doing an important public service bringing these various aspects of public school economics to light. Unfortunately, most of the public remains apathetic to these matters. Public school leaders have a lot of work to do to break through this apathy, and I for one appreciate the help.


  1. By the way, the reason Columbus Schools gets zero guarantee money in the new system is that the new system grants them more money that the old system:

    Old: $231.2 million (with guarantee)

    New: $233.0 million

  2. The overall amount of guarantee money is nearly double what it was in the old system. (That should give you some idea how much this new system will ultimately cost even though it is far from fully implemented.)The new funding system shifts large amounts of money to urban and poor rural districts and away from suburban districts. The amount of the guarantee is an indication of what your district is not entitled to under the new formula. The state share and ECF more heavily weight wealth issues that the previous foundation system.

    When, or rather if, the state can afford to continue to phase-down the charge-off to 20 mills, your guarantee may also drop, but not by much.Since your costs will continue to rise, especially if your district is required to implement some or all of the EBM components, local taxpayers will likely not see relief,

    The new formula will increase total state funding to districts and increase the state's share of overall cost, but suburban districts will actually become more reliant on local property taxes in the long run.

  3. Thanks Colleen.

    Yeah, I don't see any good news at all on the funding front for school districts like ours.

    A few years back, Gordon Gee threatened to convert Ohio State into a private university if the State of Ohio kept cutting back on the funding. I wonder what would happen if a community decided to form its own private/charter school district, and abandoned the public school system.

    Colleen Grady is a former member of the State Board of Education and a former member of the Ohio House of Representatives. She writes the State of Ohio Education blog with Susan Haverkos, a sitting member of the State Board of Ed.

  4. I saw this article in the Sunday paper and cringed. We are certainly facing an uphill battle. And Paul, you are certainly right... The time to talk about this is NOW!!

  5. SJ is absolutely correct. Time is running out.

    Had the board and admin taken previous suggestions seriously we could have made some adjustments to hold the fort. As usual though
    the community "doesnt get it"and we are no closer to a solution or a compromise.

    The owners of the district, supposed to be the citizens, unfortunatly not !.....
    should not be faced with an increase contribution amount for at least the next 2 to 3 years.
    For many it will cause a lot of continued hardship and possible further financial losses. Too many are out of work, underemployed, paying huge medical costs, no pension, no retirement,
    no raises, cuts in pay etc

    The clock is ticking, will a new agreement be forged taking into account the many challenges our citizens are facing. This needs to be

    We are fortunate to have 1 new board member who has a financial and caring understanding of what is happening in real terms in the community and how adversly this economy has affected many, many people. Will the other 4 members come forth and insure that we hold the line, make some adjustments,
    and insure that our graduating juniors and seniors over the next two years receive their diplomas with out interference

    We are spending close to $11,000 per student and this is a significant amount. A vast majority is spent in about 85% of
    the budget. Cutting continually the 15% instead of focusing on the 85% is just delaying the inevitable

    We need some serious attention to
    the largest part of our budget.
    Without addressing our spending in the next agreement we will be forced to go to the voters with huge tax increases that we cannot afford.

    The community passed the last levy
    and supported the schools. When is the rest of the group going to step up ?