Ohio’s public school funding model is needlessly complex. So much so, in fact, that it can be extremely difficult to believe when trying to explain its oddities to friends and family. I’m often met with responses such as “that can’t be true”. With the recent lawsuits and closing of the Electronic Classroom of Tomorrow (ECOT), I decided to go on a bit of a quest to break down the model in the simplest terms possible, using ECOT and its relationship with the Columbus City School District as an example.
To be fair, breaking it down to the “simplest” terms isn’t as easy as one might think. To start, I must define two key terms from the Ohio Revised Code (i.e., state law) that significantly impact the way schools are funded.
The two main terms that needs to be explained are the “State Share Index” (SSI) and “Opportunity Grant”.
From the Ohio Department of Education: “State Share Index of each school district reflects the wealth of the school district as measured by property valuation and the income of the residents of the district calculated for the purposes of the distribution of the state funds through the foundation formula. The state share index is calculated based on a sliding scale that ranges from 5% to 90% with the wealthiest districts having an index of 5% and the least wealthy districts having an index of 90%. The state share index is meant to equalize the distribution of the funds among school districts.” The State Share Index is calculated for a school district using the following metrics:
- Valuation Index – three-year average valuation was used to calculate a valuation per pupil by district. That valuation per pupil was then compared to the statewide average valuation per pupil to create an index.
- Income Index – Median income from the Ohio Department of Taxation was used along with gross federal adjusted gross income by district per pupil in order to create an income index.
- Wealth Index – Compares the income index to the valuation index. Only when a district’s income index is less than the district’s valuation index and less than 1.5 is an adjustment made. This adjustment weights the valuation index at 60% value and the income index at 40% and has the effect of lowering the wealth of the district.
- State Share Index – The translation of the wealth index between 5-90 percent.
In layman’s terms, the state calculates the school district’s collective tax value and residential income to determine how much money the local taxpayers are expected to contribute to the district. In other words, the state has an explicit expectation that local districts will be funded by school levies.
The “Opportunity Grant” is simply the term used to describe the base funding amount per pupil as decided by the Ohio General Assembly (State Representatives and State Senators) and the Governor. For 2017-18, the base funding amount is $6,010 per pupil. I’ll refer to it as base funding going forward.
Also of note, since the SSI tops out at 90 percent, no district will actually get the full amount of “base funding”.
Brief wrap up: Each student in Ohio starts with a “value” of $6,010 in state tax dollars, then that amount is reduced based on the school district’s State Share Index so that the district ends up receiving only a percentage of the $6,010 in state tax funds.
The Columbus City School District is the largest public school district in the state of Ohio and, according to the Ohio Department of Education, has over 72,000 students within the district (72,991.77 as of January 12, 2018, to be exact). The State Share Index for the district has been calculated as 0.592467641, or 59.2467641% (to be exact).
So, as a result Columbus’s State Share Index, instead of receiving the full $6,010 per student from the state, the school district receives only 59.2% of that — $3560.73.
Overall, that figure has a huge impact on the district’s starting finances:
Right out of the gate, Columbus taxpayers are expected to make up nearly $179 million per year in school funding based on Ohio’s funding model.
The state also provides additional funding for students in six different special education categories, for students based on English proficiency (LEP), and for students in Career Technical education (in order to meet the additional services these students need). These amounts vary (see the chart below), but the additional amounts are all subject to a reduction based on the State Share Index, so Columbus suffers another reduction in state funding:
I need to clarify that there are additional funds in varying amounts that districts receive for transportation, preschool, gifted, K-3 literacy, etc., to name a few, and those vary widely among schools and districts across the state. In the interest of trying to keep this simple, I want to only focus on the base funding of students as that is consistent across Ohio (with the exception of each district’s unique State Share Index).
Finally, there is one additional key factor that affects the base funding amount that is more complex and it’s called the “Funding Cap”. The calculations for this are much more difficult to explain in layman’s terms, so I’ll provide some reading material about it at the end of the article. For Columbus City, the 2018 “Funding Cap Ratio” is precisely 0.697805081794 (69.78%). This means that as we go back up to that base funding amount for Columbus we had in the chart above of approximately $260 million, the law caps that amount based on the aforementioned Cap Ratio. Now Columbus’s funding chart looks like this:
To summarize so far:
- The state budget starts out at a base amount of $6,010 per pupil.
- After Columbus’s State Share Index is factored in, the amount drops to $3,560.73 per pupil.
- Then that amount is capped once again and reduced to a final amount of $2484.70 per pupil – only 41% of the original “base amount”.
Here’s where the “hard part” comes in explaining this all to friends and family (seriously, that might have been the easy part). Charter schools and “scholarships” or “vouchers” are not subject to any of these caps or reductions. And that’s where the ECOT story comes in.
Unless you’ve been living under a rock, you should know by now that ECOT was ordered to repay millions of dollars to the state and subsequently closed mid-year. At the center of that story is the story of school funding. Now, I’m not going to say another word about ECOT’s troubles – I have chosen to use ECOT’s funding in this example for two main reasons: First, it was conversations about ECOT that started me on this quest, and second, ECOT enrolled more students from Columbus City than any other school district (and conversely, Columbus had more students enrolled in ECOT than in any other charter school).
Charter schools receive their funding through their students’ home school district in a pass-through manner. What that means is that the money is all sent to Columbus City, and then the charter school receives its funding directly out of the Columbus City Schools budget. So while Columbus is receiving $2484.70 per pupil, the district pays a charter school at least $6,010 for each student who leaves to enroll in a charter school (such as ECOT; not including the categories receiving additional funding). This means that Columbus actually loses $3,525.30 in funding for each student who enrolls in a charter school.
Here’s a simple chart showing how that funding looks with the base amounts in increments of ten:
For every student who leaves Columbus and goes to a charter school, the school district directly incurs a net loss in state funding. You can see that after only 50 students leave Columbus, the district is having to pay out more money than it originally received in state funding for those exact same students.
As of the Ohio Department of Education’s latest funding report, ECOT had 1,219 students enrolled out of the Columbus City Schools. Using only the base funding amount, the Columbus City School District was outright losing over $4 million per year to this single charter school in state tax dollars. This is money taken directly out of the district’s total budget:
What this means is that even if every single student from ECOT returned to the Columbus City School District, while the state was paying ECOT over $8 million in state tax dollars, Columbus would receive less than half that amount for the exact same students.
As of January, the Ohio Department of Education reported that Columbus lost 19,256 students overall to charter schools. Here’s how that directly impacts the public school district’s budget:
That’s a net loss of state funding of nearly $68 million annually taken straight out of the Columbus City Schools’ budget, and that doesn’t even include students using private school vouchers that act the same way (i.e., not subject to the SSI or the Funding Cap). Vouchers result in a net loss of nearly $19 million in base funding annually – also deducted straight out of the district budget.
Look at it another way:
- The state of Ohio paid Columbus roughly $48 million for 19,256 students.
- The state then billed Columbus for roughly $116 million when those same 19,256 students enrolled in charter schools.
- Columbus receives $48 million from the state.
- Charter schools receive $116 million from Columbus.
- The exact same students.
Before I sum this up and get a little more detailed and show how the additionally funded categories and vouchers have an even greater impact on the public school district’s budget, I have a little bonus fact that I stumbled upon while digging through the numbers.
The State Share Index actually exists for all public school districts as a whole. Remember – the state budget “starts out” by setting the per pupil funding amount at $6,010 before the SSI reduces the actual payout.
And the SSI for Ohio’s entire state school funding system? – 50.1%
The base funding amount would total over $10 billion, but the law knocks that down to just over $5 billion statewide in base funding, while still fully funding charters and vouchers – directly from each district’s initial, already-reduced funding amount.
This means that while the state has technically set a base per pupil amount of $6,010, the myriad of formulas result in public school districts statewide receiving only half of the funds in state tax dollars, leaving local districts left to make up the difference with local levies.
Finally, here’s a look at the entire breakdown of per pupil funding for ECOT compared to Columbus City for those 1,219 students (according to the Ohio Department of Education; please note that the Special Education Funding is subject to the SSI, but not the Funding Cap):
The Columbus City School District was receiving just shy of $4 million dollars from the state, but then being forced to hand over nearly $9 million to ECOT. An annual loss of nearly $5 million dollars. And again, even if those students all enroll in CCS, the district is still getting short-changed.
This is just the story of one public school district – the largest in the state of Ohio. Every district across the state has a similar story to tell about the net loss of state funding due to the SSI, the Funding Cap, charter schools, and vouchers.
If you’re wondering why YOUR district is having to make budget cuts while the Statehouse is touting an increased investment in schools, now you know – they’re just moving it around, shifting it down to locals, or shifting it out of the districts.
I promised earlier that I would put some information here about the Funding Cap for those information nerds like me. Here’s a detailed explanation from deep within the ODE website (click on the link and search “Funding Cap” to see the various calcluations):
Provisions of Section 265.220 of Am. Sub. H. B. 49 provide for limiting the foundation funding that is generated through the foundation formula to a limitation base above which the district cannot be paid. The legislation provides that some of the funding components of the foundation formula in FY18 be subject to the limitation while other components are kept outside of the cap. For the calculation of the funding cap reduction, we distinguish Eligible power plant school districts from other districts to establish a different approach to calculating their funding limitation. Eligible power plant school districts are those that have an electric power plant and also simultaneously satisfy the following 3 conditions in terms of the value of their properties:
1) Public utility tangible property value in TY15 must be at least equal to 10% of total valuation in TY15
2) Public utility tangible property value in TY16 is less than 90% of the public utility tangible property value in TY15
3) Total power plant value in TY16 is less than 90% of total power plant value in TY15
The following funding components are subject to the cap although special education funding (C) and all the transportation funding components (I through L) are exempted unless the overall cap limitation cannot be achieved without reducing them. Very seldom will there be a need to reduce these funding amounts and almost always they escape the effect of the cap…. [click the embedded link above to navigate to the page where the components are laid out]