How Ohio got here

Ohio's history of concern and controversy surrounding its school funding practices is a long one. For two decades, educators, parents, students and communities have struggled to find a solution that provided enough resources, balanced out inequities among schools, did not place too large a burden on taxpayers and gave citizens enough control over local education decisions.

The DeRolph decisions

In 1991, the Ohio Coalition for Equity and Adequacy of School Funding, an alliance of more than 500 school districts, filed a lawsuit on behalf of Nathan DeRolph, a student in the Northern Local School District in Perry County. The lawsuit claimed that by relying so heavily on local property taxes to fund schools the state failed to provide a "thorough and efficient" educational system, as dictated by the Ohio Constitution.

In 1997, and in several other rulings since, the Ohio Supreme Court declared Ohio's school funding system inequitable and ruled it unconstitutional, directing the legislature to enact a "complete, systemic overhaul."

The legislative response

In the years after the Supreme Court ruling, the Ohio General Assembly enacted several pieces of legislation aimed at correcting problems identified by the court.

To address infrastructure... the Ohio School Facilities Commission was created in 1997, providing more than $2.3 billion, primarily in tobacco settlement money, to fund a statewide effort to rebuild schools rated as the worst in the nation. (GAO study, 1996)

To address adequacy... The consulting firm Augenblick and Meyers completed a "costing out" study in 1997 to determine what would be adequate funding to educate a student in Ohio. While this study produced an increase in funding, rising 37.5% from 1997 to 2002, the model used has been deemed flawed by some, who argue that it does not accurately capture the costs of adequately educating a student.   

To address equity... Parity aid, which provides additional funding to districts with low property values, was introduced in 2001 to help close the gap between rich and poor districts. Additionally, the legislature responded to the court decisions by favoring low wealth districts with equity aid.

To address funding... In 1999, House Bill 282 marked the first time the state created an education budget separate from its main operating budget, a move aimed at keeping education spending from being overlooked in the larger general fund budget.

Ballot initiatives

In addition to legislation, ballot initiatives proposing solutions were introduced.

Sales tax. In 1998, Ohio voters rejected 1 cent sales tax increase to raise $1.1 billion a year, half for schools and half for property-tax relief.

Getting It Right Campaign. After four failed attempts to revamp the school funding system through the courts, the Ohio Coalition for Equity and Adequacy of School Funding shifted its energies to placing a constitutional measure on the ballot. The group sought an amendment that would address the concerns of the DeRolph cases, a campaign called Getting It Right For Ohio's Future. The coalition has not been successful in obtaining the signatures needed to put it on the ballot.

Signs of progress

On some fronts, improvements were 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.

The state share of school funding 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.

Building Blocks

The school funding system in place as the 2009 budget process began is known as the Building Blocks approach. Under that approach, the state started 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.

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

Each local school district had to pay a portion of the foundation amount. Generally, the local share equaled the amount of money that the school district would raise with a 23 mill (2.3%) property tax, which varied 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.

Issues with the formula

Funding increases

Since the final Ohio Supreme Court ruling on school funding 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 level came 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.

"Phantom revenue"

Although property reappraisals by tax assessors historically resulted in districts' having increased property valuations, districts did 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 often was collected at a lower rate than the formula used to determine the local share. In other words, the state charged districts for the "growth" in property values when computing their local share even when they didn't collect "growth" in local tax revenue. This phenomenon, known as "phantom revenue," varied with growth in values among districts.

The foundation level

The method for determining the foundation amount became a source of controversy. The formula relied on a sample of districts who were able to meet state report card standards while spending a relatively low amount per pupil, which was viewed as an indication of efficient spending. Opponents contended these districts displayed mediocre results on broader performance measures and were selected on the basis of spending at the state-determined minimum level.

Timeline of Ohio School Funding

1976 House Bill 920 passes.

December 1991 DeRolph lawsuit filed.

July 1994 DeRolph ruling: Funding system unconstitutional.

August 1995 Court reverses DeRolph decision.

March 1997 Supreme Court rules funding system unconstitutional, orders compliance.

1997 Ohio School Facilities Commission created to rebuild schools.

February 1998 Legislature establishes new basic-aid formula.

March 1998 DeRolph deadline for compliance passes.

May 1998 Voters reject sales tax increase for schools/property tax.

February 1999 Lower court rules state has not complied with DeRolph order.

May 2000 Supreme Court rules funding system still unconstitutional.

May 2001 Legislature increases school funding and provides parity aid.

September 2001 Court rules school funding system still unconstitutional, orders state to alter methodology.

March 2002 Three months of court-ordered mediation between the DeRolph parties fails.

December 2002  Supreme Court affirms that funding system remains unconstitutional but ends its oversight.

May 2003 Supreme Court reiterates final DeRolph order; prohibits further litigation.

October 2003 U.S. Supreme Court declines to hear the case.

April 2005 Educate Ohio begins effort to gather signatures for proposed constitutional amendment.

November 2006 Consortium of education groups adopts language for amendment that would establish high quality education as fundamental right and implement new funding model 

January 2007 Campaign does not gain enough signatures to place proposed amendment on November 2007 ballot.

May 2008 Campaign suspends effort to place constitutional amendment on November 2008 ballot.

January 2009: Gov. Ted Strickland unveils his reform plan.