Friday, March 25, 2005

It's Time to Get Mad About Ohio's School Funding Crisis

[This is the latest installment of a column I write for a local chain of suburban Cincinnati newspapers.]

My wife takes care of the bill-paying at our house and this morning, she wrote a check for our property taxes. We’ve been hit with a $55.00-increase, attributable partly to the school levy for which we voted last year.

In the meantime, our school system, the West Clermont district, is being forced to make cuts, some of which will result in worsening student-to-teacher ratios.

Parents who have gotten wind of this are upset, understandably so.

Personally, I want people all over Ohio to be mad. But, our local school boards or district administrations shouldn't be the objects of our ire.

The fault is a byzantine school funding formula which has been judged unconstitutional four different times by the state supreme court.

That formula is a shell game that robs our schools and kids of money that voters authorize the schools to have. And nobody seems to know where that money goes.

Fundamental to getting a handle on Ohio's school funding mess is remembering that Ohio schools are financed mostly by local property taxes. In a sensible world, Ohio would follow a simple formula in obeying the state constitution’s provision that all our kids will receive the same educational opportunities. It might look like this in a Simulated District:
(a X b= c) = (d + e)

(a) State-Set Per Student Cost of Educating Student

(b) # of students

(c) Total Cost in Simulated District

(d) locally-generated property tax revenue

(e) state additions or reductions to local revenues insuring that the "revenue" side equals the "need" side.
But, Ohio’s school funding formula isn’t sensible!

It goes back to a law called House Bill 920. HB 920 was passed in 1976, a time of high inflation. Under the law, increases in property valuations (rooted in inflation), would not result in massive influxes of funds into school treasuries.

In fact, irrespective of increases in property values or authorized tax millages, HB 920 caps the amount of tax revenue that can be received by a school district on those properties.

The complicated system now in place is a confusing maze. Two of its confusing components:
Phantom revenue: The difference between what the state appears to be committed to providing students and what is actually provided.

Capped Property Valuation Revenue: As property values increase, school districts might be expected to receive greater revenues, thus enabling them to keep pace with inflation. But in fact, except for newly constructed housing, the revenues from already existing housing is capped. This is one reason why school districts are forced to go back to voters for levies of various kinds with such frequency.
In the past, these injustices were somewhat lessened by a “cost of doing business” allowance. It accounted for different community economic conditions. A ream of paper might cost more in Batavia than in Boardman, for example, thus effecting per-pupil educational expenses. But in his latest biennial budget, Governor Taft proposes doing away with this equalizing provision.

There are proposals on the table to rectify the state’s school funding mess, one of which I’ll discuss in my next column.


Anonymous said...

I don't know how Ohio's formula works, but I do know that when I lived in Missouri everyone criticized that formula for being so complicated. But a simple formula won't do all that we ask of it.

Let's take your simple formula: strictly speaking, a local district has no incentive to generate "d," just let the state pick up the tab.

So, most states have a maintenance of effort requirement. In Missouri it has been fashioned as a minimum levy.

But then that isn't fair to rural districts with a lot of ag land or poor urban districts with a lot of low-value property. They can't raise much money even with a higher-than-minimum levy. Similarly, an area with a lot of low-income people can't support a high levy even aside from any difference in property values. So then we ad an adjustment for differences in tax capacity caused by low incomes or land values.

But then policymakers think it would be good to encourage districts to have levies higher than the minimum, so they grant some bonus state aid to districts with higher levies. But wealthy suburban districts are better able to take advantage of those incentives than rural or urban districts, so the gap between rich and poor districts widens. Leading to more tweaks in the formula, which create new winners and losers.

And it goes on and on and on...

Yeah, simple formulas sound appealing, but unfortunately they usually won't do all we expect a formula to do.


Mark Daniels said...

Chip, thanks for stopping by and for leaving your comment. Actually, Ohio does have a "floor" requirement (in other words, a baseline "d") of all school districts.