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Financial formula starts with Voinovich
By Dennis J. Willard
Beacon Journal Columbus Bureau
Published on Wednesday, Mar 18, 2009
COLUMBUS: In this space Tuesday, we explored the fact that Gov. Ted Strickland's education reform plan robs from the poor and gives to the wealthy districts.
Districts like Akron and Canton would receive little or no additional state funding in the next two years, while the money going to many property-rich districts would rise so rapidly that the governor was forced to limit the growth to 15 percent.
It might seem crazy and contradictory, and in ways it is, but Strickland did not create the problem that he must resolve to truly transform the funding system.
To understand why the new funding formula initially rewards the rich and deprives the poor, you have to go back 16 years, to 1993, when then-Gov. George Voinovich, his budget director, Greg Browning, and legislative leaders were trying to find a way to win a school funding lawsuit filed against the state two years earlier.
Children were prisoners of their geography, in large part because the wealth of a school district was determined by the amount of money that could be raised through local property taxes.
In the two-year budget passed in 1993, Voinovich, Browning, House Speaker Vernal Riffe, D-Wheelersburg, and Senate President Stanley Aronoff, R-Cincinnati, pulled off a nifty little trick.
They started a process that would shift hundreds of millions of dollars to property-poor districts without gutting their own
state budget or jeopardizing their power through raising taxes.
Instead, they slyly manipulated the funding formula at the time by increasing something known as the ''charge-off'' from 20 to 21 mills over a two-year period.
The charge-off is the minimum local property tax the state assumes is being assessed and raised in a community for public education.
The state would set the amount of money to be paid for a child's basic education and apply the local contribution, or charge-off. Almost always, the local contribution wasn't enough to cover the entire cost, so the state made up the difference.
For example, if the basic-aid amount is $5,000, and a local district raises $3,000 per pupil with its charge-off, the state would contribute $2,000 per pupil to the district.
The more a district raises per pupil with each mill of property tax, the less the state has to kick in to the basic-aid amount. Conversely, the less a district raises with each mill, the more the state pays.
State loses lawsuit
In 1995, after the state lost the funding lawsuit in a Perry County courtroom, Voinovich and Browning decided to direct even more state funds to poorer districts by raising the charge-off from 21 to 23 mills over two years.
Every district potentially was a loser — especially those high in property wealth, because they could raise more money per mill.
The money that the state saved was placed into an Equity Fund and distributed to poor districts.
At the same time, Voinovich and Browning proudly boasted they were raising the basic-aid amount from $3,035 to $3,500 in two years — a feat that cost them little but required local voters to raise their taxes.
Sixteen years ago, Robin Hood was alive and well, and in Ohio he looked like George Voinovich.
At the time, Voinovich said Robin Hood was a hero of his when he was growing up.
Suddenly, the state was assuming that districts were levying 3 additional local mills for schools. Districts like Copley-Fairlawn, currently on the receiving end of Strickland's plan, were forced to raise more money locally because Columbus dollars were drying up.
In return, the state could shift more of the state's pool of funds to districts that raised fewer local dollars with the 3 new mills.
The ruse didn't work.
Two years later, the Ohio Supreme Court ruled that the way the state pays for schools was unconstitutional and ordered an overhaul of the system.
From 1993 until Strickland unveiled his budget this year, the ongoing manipulation of the charge-off has created a ''phantom revenue'' problem in local districts, so called because the state assumes schools are levying and bringing in tax dollars when they are not, and this reduces state aid accordingly.
The phantom revenue problem became so pronounced, the legislature created something called ''Gap Aid'' to reimburse districts when their effective millage dropped below 23.
Today, more than 400 of the 614 school districts in Ohio have fewer than 23 effective mills.
To Strickland's credit, he is attempting to restore the charge-off to its pre-1993 level of 20 mills and address the phantom revenue problem.
The governor also understands he cannot convert the current funding system to one based on research of what works and what it costs without reducing the charge-off.
Unfortunately, Strickland is doing it on the cheap. He is blaming the economy. Privately, his advisers and political brain trust are undertaking the same calculations his predecessors made regarding the risks of raising taxes to fix schools.
Either way, wealthy districts win and poor districts lose initially.
Pari Sabety, Strickland's budget director, told the Beacon Journal on Monday that the increase in state funding to wealthy districts is a one-time phenomenon to address the reduction in the charge-off from 23 to 20 mills.
Districts must look at how they will fare once the model is fully implemented over an eight-year period, Sabety said.
She's right, but the governor, and now the legislature, have other options.
If addressing the charge-off reduction is a one-time hit that the state must take to fix the problem, then why not use one-time federal stimulus money and create a separate line-item for the expenditure?
Most districts at 20 mills
Three mills on the statewide property tax duplicate is worth about $724 million. Now the state's price would be lower than that figure, because a majority of districts are already at 20 mills.
Strickland boasted that his budget increases funding for education by $925 million over a two-year period, but that figure is almost meaningless when one considers it includes the money going to reimburse wealthy districts for up to 3 local mills of property taxes.
This is new state spending, but these dollars are replacing, not supplementing, money already in those districts.
The governor cannot insist he has used every possible dollar for schools because, in at least one case, he decided against passing on more federal stimulus dollars to educate children.
Sabety and Strickland used conservative estimates based on the U.S. House-passed version of the federal stimulus act in putting together their two-year budget proposal.
When President Barack Obama signed the American Recovery and Reinvestment Act, there was $102 million more in Ohio's Title I and IDEA (Individuals With Disabilities Education Act) money than Strickland and Sabety had budgeted.
The federal bailout money going to education in Ohio increased from $820.5 million to $922 million, but the two-year budget did not change from Strickland's original plan, and funding for education in the governor's budget did not increase by $102 million. In effect, like lottery profits, the infusion of additional federal bailout dollars intended for education freed up other state and federal dollars for the governor and the legislature to spend as they wished.
So Strickland, as the modern-day Robin Hood in reverse, continued to take from the poor to give to the wealthy, use federal dollars earmarked for poor and special education children to change the funding formula, and withhold an infusion of federal dollars destined for classrooms to spend on other programs.
Regardless of his good, long-term intentions, there is little wonder why the man in the tights, and his budget director, are feeling the pressure.
Dennis J. Willard can be reached at 614-224-1613 or dwillard@thebeaconjournal.com.
COLUMBUS: In this space Tuesday, we explored the fact that Gov. Ted Strickland's education reform plan robs from the poor and gives to the wealthy districts.
Get the full article here.
Comments
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Tallmadge, OH
Posted 06:22 AM, 03/18/2009
What ever happend to school funding reform? I don't see any in what Stricknine has proposed. All I see is real estate taxes used more then ever contrary to the OSC ruling to fund the schools while my right to vote on school funding levies is eliminated.
As for the suburban districts, it's about time the state contributes more to them. The cities have always gotten more of the school funding pie then the suburbs. Why? The cities have the worst OGT results and graduation rates. Every student in the big cities or the suburbs should get exactly the same. If the suburbs got more, their graduation rates would increase and test scores would be higher.
It's time to stop using school funding to provide welfare for free breakfast and lunch to city students. Use welfare funds instead, which is what it should be called.
The truely sad part is the large number of city parents who don't give a darn about their kids getting a good education. Just go to their schools on parent-teacher night or a PTA meeting to observe how truely sad it is.
Akron, OH
Posted 12:44 PM, 03/18/2009
@ OldManGrump
- Isn't that the truth. How long algo was that rulling handed down and still due to the folks in Columbus we continue to have levies.
