School Funding Matters

Funding for public education in Ohio represents a large share of the state's budget.

According to the Office of Budget and Management, the amount set aside for school funding is approximately 36% of the total General Revenue Fund. But that is only part of the story.

Most states, including Ohio, fund schools through a combination of state, local, and federal funds.

Federal funds make up only about 8% of the total.*

While it is a major portion of the state's budget, state spending for schools represents 46%.

The remaining 46% of funding for schools comes from local taxpayers.

*These figures include funds for school operations. Separate state and local funds pay for school construction and renovation.

The state funding figure includes revenue from the Ohio Lottery. In 2006, the total lottery proceeds that went to education was $646.3 million (approximately 7% of state funding for education at that time).

For the school year 2007-08, these sources of revenue provided a total of $16.2 billion for Ohio schools

• $7.9 billion local
• $7.7 billion in state
• $1.3 billion in federal.

How is State Funding Determined?

Basic Aid

The state starts by determining how much it should cost a school district to provide its students with a basic education - in other words, to educate pupils with no special needs or support requirements.

Currently, the formula is based on certain education "building blocks" as measured by:

• Average teacher salaries
• Average salaries of support staff
• Average classroom sizes
• Average costs for maintenance and overhead

The amount is translated into a basic cost per student, or the foundation amount. For fiscal year 2009, the foundation level is $5,732 per pupil.

Local Districts' Share

Ohio's aid formula assigns a responsibility to each local school district to pay a portion of the foundation amount. Generally, this local share equals the amount of money that the school district would raise with a 23 mill (2.3%) property tax. This amount will vary from district to district depending on property values.

The state also provides funds for costs outside a basic education such as:

• Supplemental funds for special education, vocational education, and transportation costs
• Poverty Based Assistance to help schools with additional costs they may incur for educating economically disadvantaged students
• Parity aid to offset differences in school districts' ability to obtainlocal dollars from property taxes (beyond the required local share)
• Finally, a guarantee provision (known as transitional aid) provides that each school district should receive no less state revenue in the current year than it received in the preceding year.

Poverty Based Assistance, parity aid and the guarantee provision do not require a local share match. But the state requires an additional local contribution toward costs above a basic education such as special education, vocational education, and transportation costs.

The amount of this additional local contribution cannot exceed the amount a district could raise with an additional 3.3 mill property tax. So the local share of education costs for basic and supplemental costs combined can reach a maximum of 26.3 mills. Districts whose actual property taxes are less than 26.3 mills receive additional revenue from the state to bridge the gap.

The Ohio Supreme Court ruled the state's funding system unconstitutional four times. Since the final ruling in 2002, funding increases for education have just kept up with inflation - with state and local contributions increasing 15.7%, compared to a 16% percent rise in the Consumer Price Index. This at a time when costs increased due to state and federal mandates (including No Child Left Behind) and increases in energy and health care costs.

Although property reappraisals by tax assessors historically have resulted in districts' having increased property valuations, districts do not collect more tax revenue as a result. Since 1976, Ohio law has required districts to adjust tax rates to offset increases in property values caused by reappraisal. The Ohio Constitution prohibits districts from collecting taxes on the "growth" in property value.

That means that the tax may be collected at a lower rate than the state foundation formula uses to determine the local share. In other words, the state charges districts for the "growth" in property values when computing their local share even when they don't collect "growth" in local tax revenue. This phenomenon, known as "phantom revenue," varies with growth in values varies among districts.

The method for determining the foundation amount (currently $5,732 per pupil) has been a source of controversy. The current formula relies on a sample of districts who are able to meet state report card standards while spending a relatively low amount per pupil, which has been viewed as an indication of efficient spending. Opponents content these districts display mediocre results on broader performance measures and were selected on the basis of spending at the state-determined minimum level.

• The state no longer adjusts for differences in costs in different geographical regions.
• The state share of special education is funded at only 90%.
• Funding for the needs of pupils in poverty is addressed through multiple computations with numerous restrictions.

Problems with the Current System

For more than 15 years, Ohio schools have operated under an education system that the courts have declared unconstitutional. The landscape of school funding in the state has changed in that time.

Signs of progress

On some fronts, improvements have been realized. Education Week's Quality Counts report gave Ohio an F for equity and a C for adequacy in school funding in 2001. For 2008, Ohio received a B+ for equity and C+ for spending. A similar report from Education Trust found that Ohio had reversed inequity in per-pupil spending from 1999 to 2005.

Today, the state share of school funding has climbed to just over 50%. Base aid increased from $3,550 per pupil in 1997 to $5,403 in 2007. Nearly 40% of the state budget is appropriated to K-12 public education in 2009, compared to 34.5% in 1992.

Unresolved issues

Despite some signs of progress, however, Ohio's school funding system still...

relies heavily on property taxes,
results in inequities among districts,
leaves many districts routinely scrambling for dollars,
isn't tied to effective strategies,

...and, by most accounts, is unconstitutional.

What remains to be done

The responsibility for resolving Ohio's school funding problems lies with the state government. The court system can't impose reform or penalties for failing to meet constitutional standards because it removed itself from the case in 2002 and no new cases have been filed.

But the patchwork of fixes to date leaves many of the original problems unresolved.

A bevy of levies: State law, in a requirement referred to as House Bill 920, caps the amount local school districts can raise from property tax revenue with each levy. To cover their rising costs, districts must go back to the ballot to renew or replace existing tax levies. As a result:

• In 2007 alone, about a third of all school districts placed a levy on the ballot for a total of 200 school levies. Of those, 53% passed.
• In the past five years, more than 1,000 levies were proposed and about half passed.
• In 2008, 165 levies appeared on the ballot in March, of which only 46.06% passed.
• Only 28% of the 32 levies on the ballot in August 2008 passed. Those on the ballot in November 2008 fared better,with more than half passing. 

Proponents of the cap maintain that it protects property owners from unvoted tax increases, making local school districts more accountable to voters. Opponents argue that it places an unfair burden on local school districts and creates levy fatigue for voters and educators, a distraction from other education issues.

Learn more about how local districts are affected.

Inequities: While some data indicate that the gap between Ohio's richest and poorest districts has narrowed, other reports indicate the state still has a way to go before all students have equal opportunity. The range in spending per pupil is large, with property-rich districts spending as much as three times as much per pupil as those with low property values.

Even as averages improve, some areas still suffer. For example, the disparity between rural Appalachian districts and the state average has not closed, with a gap of $440 per pupil in 2006. Evidence of different financial situations can be seen by comparing crumbling facilities in some districts to college-campus like high schools in others, outdated textbooks in one to a laptop for every student in another.

How much is enough? There has been no consensus on how to assess the cost of educating average students in Ohio, let alone disadvantaged students or students with disabilities. It remains unclear how much funding is needed to provide all our children with an adequate education and whether the money being spent is being directed at strategies that work. It will be crucial to the success of school funding reform that as a state we first decide what needs to be done to provide a thorough and effective education system before we decide how much should be spent.

Learn more about linking out school funding to best practices..

The property tax question: The basic mechanism of how Ohio pays for public schools has not changed. The state has yet to address whether a system that relies on local property taxes is the best approach, or whether other ways to help fund public education (such as a dedicated income tax or sales tax) would be more efficient and fairer.

Make a difference

With political attention now closely focused on the issue of school funding, Ohio citizens have a unique opportunity to decide what kind of schools they want and how to pay for those schools.

Find out how you can make a difference.