Formula Fight in Ohio: Big Questions about New Directions

Last Updated: May 30, 2013

This article appeared in the May 2013 Rural Policy Matters.

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Much of this year’s Ohio education policy debate has focused on the continuing search for a new school finance formula. Ohio school districts have been operating under the funding system that was in place in 2009, which included guarantee aid — a hold-harmless provision to maintain state funding levels for local districts — and extra funding for schools “demonstrating excellence.”

Governor John Kasich campaigned to change the formula during the 2010 election cycle. He released a revised school finance formula earlier this year as part of the biennial budget process. (Editor’s note: See last year’s RSFN coverage of this ongoing process here.)

Kasich Budget Provisions

Prior to releasing actual budget figures Kasich had promised that “if you’re poor, you’ll get more.” However, once the proposed formula was released, it became clear that many small, poor, and rural districts would see little increase and many would see their state funding reduced. On the other hand, many higher wealth districts would see increases, some very significant. The formula would provide larger increases to districts with growing enrollment or rapid declines in property values, primarily impacting suburban students. Overall, 60% of the state’s 613 districts would receive no additional funding under Kasich’s plan. None of the school districts in the twelve Appalachian counties would receive increases under the plan.

The governor’s budget figures were not the result of adequacy studies or other considerations of the cost of education for Ohio students. Instead, the plan seeks to reduce per pupil differences in the amount of funding the state provides to districts.

Since 1906, Ohio’s finance system has provided higher per pupil state funding for students in poor districts and those with low property wealth in order to help even out overall funding disparities among districts. Providing more uniform per pupil state funding would lead to potential windfalls for some wealthier districts, particularly those that were previously receiving little state aid because of their high local property values.

One part of the Kasich formula is based on millage value in wealthy districts. It would require a 20-mill local property tax and would make up the difference between the amount generated by each district and the amount that would be generated by a district with $250,000 in property value per student. Some legislators, including Rep. Debbie Phillips (D-Athens), have pointed out that the current system requires 22 mills so basing the formula on 20 mills actually relieves high property value districts.

Another part of the Kasich formula takes property values and income into account. It would continue the “guarantee aid” for two years to prevent funding loss as a result of the new formula.

Kasich’s education budget also reflects his policy priorities. It would increase charter school funding and authorize districts to set up teacher merit pay plans. It would also significantly expand the state’s voucher program to cover families at twice the federal poverty level. In some districts, this means students could receive a voucher to attend private school that is larger than what the state would pay for students in their home public school. If implemented, nearly half of Ohio students would be eligible for tax-supported vouchers for private schools. The budget also includes a $300 million “Straight A Fund” that would offer competitive grants to schools for several types of innovation.

Kasich has also proposed a small business tax cut and reduced income tax rates.

Notably, Ohio has recently implemented a number of other costly education policy changes, including a 3rd grade reading guarantee, a new teacher evaluation plan, and new curriculum standards.

Rural Impact

Kasich’s assistant policy director for education says poor rural districts are not getting increases in the proposed formula because rural land has increased in valuation while property values in urban and suburban areas have decreased. “This represents reality,” said Richard Ross, director of the Governor’s Office of 21st Century Education.

But rural school advocates challenge these claims. “This can’t be the new reality. I can’t cut any more,” said Tom Gibbs, superintendent of both Warren Local and Fort Frye Local schools in Washington County.

Other supporters of the new formula have said that rural places are “richer” now based on rising crop prices and new oil and gas drilling. Some rural districts have signed deals with oil and gas companies to allow fracking on school property. But rural citizens say that it is much too early to realize any benefits.

Earlier this year, rural districts held a news conference to push for changes to Kasich’s proposed formula. They dispute Kasich’s claims that the formula reflects changes in enrollment and property values and say their property values have also declined in recent years.

Amid these ongoing financial struggles, there have been calls for consolidation of rural districts. Many rural people believe the threat to the loss of guarantee aid is a push toward closure and consolidation. Several superintendents have pointed out they already share services across districts lines to save money. Mark Neal, superintendent of Tri-Valley Local Schools in Muskingum County, said rural schools already serve as “prototypes of efficiency.”

A school superintendent from the small Franklin district who spoke out against the plan was placed under investigation for possibly illegal political activities using public resources. He had cited Kasich’s promise that “if you’re poor, you’re going to get more” in a letter where he called that statement untruthful and urged political action. Ultimately, no charges were brought against him.

House offers budget alternative

In April, the House released its version of the state budget with a different formula for funding schools. Various estimates peg the House’s overall education budget between $50 million to $200 million less than the Kasich plan, and there are other differences as well. For example, the number of districts on aid guarantees is cut in half, and only 63 districts are capped in the amount of state funding they receive, compared to 364 under the Kasich plan.

Supporters of the House plan say it suggests the prospect of future increases in funding for many more districts. An Ohio Legislative Service Commission analysis shows that rural districts would receive higher funding increases under the plan. However, critics of the House budget note that the bottom line for basic aid is actually reduced. In addition, the House budget moved transportation support into basic aid; it has been a separate line item allocated in addition to basic aid.

After the legislature made major cuts to education funding in 2010, over $1 billion in new tax levies have been placed on local ballot initiatives. More than 130 tax issues were on ballots in May 2013. Approximately three-quarters of these measures have been property tax levies. Rural districts have particularly struggled to convince local voters to pass levies. These struggles have been due, in part, to prior consolidation, which citizens say has destroyed the school-community bond in many places.

Ohio is notable for having four decisions in its DeRolph school finance lawsuit that found the funding system unconstitutional. The Ohio constitution requires delivery of a “thorough and efficient” education. One of the key findings in the case was that the base student cost was not related to any determination of an adequate level of funding. The Ohio Supreme Court also found that the state finance system relied too heavily on local property tax to pay for schools. One significant result of the DeRolph case was that school facility funding was increased and many poor districts were able to build much-needed new schools. However, the Ohio Legislature has yet to change the formula to meet constitutional standards. Leaders of the coalition of districts that brought the lawsuit have said that former Ohio Governor Ted Strickland’s “evidence-based” funding plan would have come the closest to passing constitutional muster.

The Ohio legislature has a June 30th deadline to pass the budget.

Read more:

Background on the Kasich plan:

Read the plan here:

Editorials refuting the advertised benefits of Kasich’s formula:

Coverage of rural/suburban/urban disparities in Kasich plan:

Coverage on investigation of Ohio school superintendent:

Response of rural districts to Kasich plan:

Rural school issues, including consolidation and technology:

Background on the Ohio House’s budget and school funding plan:

Ohio’s rural schools and levies:


Read more from the May 2013 Rural Policy Matters.