State Budget - Ohio Public School District

Transcription

1 New Dollars, Guarantees for Public Schools in House Budget; Status Quo for Higher Education Terry Thomas, Public Policy Consultant State Budgeting Matters Volume 11, Number 4 May, 2015

2 New Dollars, Guarantees for Public Schools in House Budget; Status Quo for Higher Education By Terry M. Thomas, Public Policy Consultant May, 2015 Please note that the author s opinions are not necessarily those of The Center for Community Solutions. Highlights: Despite significant additional funding provided for primary and secondary education by the Ohio House of Representatives, the Cleveland Metropolitan School District is the only major urban district in the state that will receive greater support under the House budget than was the case with Governor John Kasich s proposal. No public school district will receive less state aid during the forthcoming biennium in the House budget than during the current fiscal year, including Tangible Personal Property (TPP) and utility tax replacement funding. Districts in Greater Cleveland were major beneficiaries of the protection provided by a $102 million School District TPP Supplement. Concerns about Common Core led to significant funding cuts in student assessment by the House and a prohibition regarding use of the testing tools produced by the Partnership for Assessment of Readiness for College and Careers (PARCC). Failure to perform required testing potentially jeopardizes $750 million in No Child Left Behind Act federal funding. Higher education funding increased marginally in the House. Notably, Ohio College Opportunity Grants, the state s need-based financial aid program, was increased by $5 million annually and the split of funding between public and private institutions was specified. However, support for the program still falls far short of historic funding levels. Greater flexibility was provided to public institutions of higher education with regard to tuition caps. The Executive Budget capped tuition for all public institutions at 2 percent in FY 2016, while holding tuition flat in FY The House permitted public universities to raise their tuition by the greater of 2 percent, or $200, over the course of the biennium. It allowed community colleges and university regional campuses to increase tuition over the biennium by the maximum of either 2 percent or $100. Department of Education House of Representatives action on the FY 2016-FY 2017 budget for primary and secondary education took several twists and turns during the legislative process, but one overarching Page 2

3 principle remained constant. The House was resolute that none of Ohio s 610 public school districts should receive less funding in the new budget than they did during the current fiscal year. The definition of what constituted a loss in funding to school districts did change during the process, however. The initial substitute bill that came before the House Finance and Appropriations Committee provided a guarantee that no school district would receive fewer funds through the Foundation Formula during the coming biennium than was the case in FY This guarantee was extended in the committee proceedings, and subsequently sustained by the full House, to include all districts that had a decrease in funding as a consequence of the phasedown of Tangible Personal Property and utility industry tax reimbursements. This principle was achieved through several vehicles. The original House substitute bill added $202.6 million to the Foundation Formula over the biennium, while simultaneously making several important formula changes. In the Executive Budget, rural districts fared particularly poorly due to recent increases in agricultural real property values. These increases in agricultural property value occurred at the same time that real estate values were declining statewide for most other types of property. As a consequence, nearly three quarters of all new money in the executive s funding proposal went to urban districts with rural districts receiving virtually no benefit. 1 By using a six-year average rather than three years to compute real property tax values in predominately agricultural districts, the House was able to largely buffer rural school districts from the impact of their growing real estate values. In addition, restoring the 20-mill charge-off, an expected local contribution, helps to direct resources to lower wealth, mostly rural, districts. The House also limited the cap on funding growth through the Foundation Formula to 7.5 percent per year rather than 10 percent per year as was the case in the Executive Budget, thereby allowing $1.75 billion over the biennium to flow to other districts. A counter argument would be that imposing a lower cap, or perhaps any cap, on formula growth is an indication that the state is employing a funding methodology that it is either unable or unwilling to fund. 2 This 7.5 percent annual cap, however, does not apply to school districts that currently receive less than the state provides to private schools, which is approximately $1,200 per pupil annually. This could be considered a second funding principle underlying the House budget. There are 28 such school districts in the state. These districts are largely affluent, including the district with the largest gain as a result of this provision. Instead of receiving a 21 percent increase over the biennium in the Executive Request, state support for the Olentangy School District in Delaware County is boosted a robust 75.9 percent in the House version of the budget. The increase in part reflects strong enrollment growth in recent years. Page 3

4 Impacts on Urban Districts The House Finance and Appropriations Committee subsequently added in the omnibus amendment a $102 million School District TPP Supplement--$36 million in FY 2016 and $66 million in FY to ensure that districts would not receive a reduction in their total state support from the combination of the Foundation Formula and tax replacement funding. This funding only impacted those school districts that needed to be made whole as a result of declining TPP and utility tax reimbursements. The funding came from several sources outside the Ohio Department of Education, including the Medicaid Reserve Fund and the new Student Debt Reduction Program in the higher education budget. Notwithstanding this action, reimbursements for these two taxes are expected to decrease from $510 million in FY 2015 to $360.9 million in FY 2016 and $249.8 million in FY Of the 89 public school districts that were positively impacted by this provision, over one third of them (32) were in Greater Cleveland. These districts will now be flat-funded over the FY 2016-FY 2017 biennium rather than suffer losses due to the tax reimbursement phasedown, some of which would have been significant. Of the 10 districts that would have received double-digit losses in FY 2016, fully seven of them were in Greater Cleveland. This included six of the seven districts that would have received the largest percentage reductions, although the Grandview Heights School District in Franklin County would have taken the largest single cut of 14.2 percent in FY In purely dollar terms, the Lakota School District in Butler County was spared the greatest dollar loss, $2.6 million in FY Every large urban school district benefits under the House funding plan relative to current funding levels, some significantly so. The Toledo City School District will see the largest increase of 7.5 percent in FY However, because of policy shifts in the House that favored rural districts, among the major urban districts, only the Cleveland Metropolitan School District (CMSD) will receive more funding in the House version of the budget than under the governor s proposed budget. Including tax reimbursements, the CMSD will receive $437.2 million in FY 2016 in the House budget versus $428.8 million in the current year, an increase of 2 percent. Under the governor s plan, the CMSD would have received $431.9 million, an increase of only 0.7 percent. 4 Tax replacement funding has been a fairly significant piece of state aid to CMSD in recent years. This funding is declining sharply, however, from $13.9 million in the current year to $7 million in FY 2016 and $115,990 in FY Ironically, despite the importance of tax replacement dollars to the CMSD and Cleveland districts in general, the CMSD will not receive any funding from the $102 million added in House Committee, since the district does not need these funds to be on the positive side of the state funding ledger. With every school district in the state either gaining funds in the coming biennium or at least maintaining their current level of support, there is widespread approval for the House education budget in the education community. Nevertheless, while the artificial guarantees provided in the budget offer welcome protection to many school districts, they prevent other Page 4

5 districts from receiving funding they should merit according to the formula due to either their increased enrollments or declining property tax wealth and average household income. 5 If the goal is to buffer school districts from large losses that are fiscally unmanageable, it can be done through different vehicles than offering a full guarantee of current year funding. A simple, straightforward suggestion might be to provide a guarantee at a lower level of FY 2015 expenditures, such as 95 percent, which would allow some additional resources to flow to areas of need without causing an untenable level of stress to districts on the district on the guarantee. Moreover, raiding such a potentially critical item as the Medicaid Reserve Fund to provide every school district a full measure of protection would seem unwarranted. Table 1 examines the main sources of funding for traditional public school districts. It indicates that school district funding will grow in the aggregate by 4.0 percent in FY 2016 over FY 2015 levels, and by an additional 3.8 percent in FY 2017 over FY This is notably less than the funding increases from the Foundation Formula alone of 6.1 percent in FY 2016 and 5.4 percent in FY This is due to significant decreases for tax reimbursements, despite the addition of the $102 million in House Committee, and the relatively negligible increases provided for Pupil Transportation. Table 1. Primary State Source Traditional Public School District Funding FY 2015 Estimate FY 2016 Executive FY 2016 House FY 2017 Executive FY 2017 House General Revenue Fund $6,151.5 $6,502.6 $6,459.2 $6,815.3 $6,861.3 Foundation Funding Lottery Foundation Funding Total Foundation Funding $7,009.2 $7,380.3 $7,436.9 $7,693.0 $7,839.0 Pupil Transportation $ TPP and Utility Tax Replacement School District TPP Supplement Total $8,040.2 $8,269.0 $8,361.6 $8,471.1 $8,683.1 Amounts in thousands of dollars Note: Foundation Funding includes some earmarks that may not be available to public school districts generally. Source: Ohio Legislative Service Commission, H.B. 64 Budget in Detail Foundation Funding comprises the bulk of General Revenue Fund (GRF) and all funds spending for the Ohio Department of Education. Thus, total GRF spending authorized by the House for the department of $7.6 million in FY 2016 and $8.0 million in FY 2017 is similarly increased, by 5 percent and 5.7 percent, respectively. Page 5

6 A number of important reductions were made to GRF items in the Ohio Department of Education budget, however. These reductions were not all necessarily made to free up additional funding for the Foundation Formula, but they nevertheless had that effect to some degree. Significant cuts were made to various items related to student assessment, accountability, and information technology. Especially notable was the $33.6 annual reduction made to the item for Student Assessment. In addition to these GRF items, a $50 million annual cut was made to the Straight A Fund with the remaining funding for this program moved out of the Lottery Fund into a separate dedicated source. This freed up fully $100 million in Lottery resources each fiscal year for the Foundation Formula. Changing Paradigms of Student Assessment Since the 1990s, educational policy in Ohio and indeed across the nation began to follow a new paradigm. State policymakers sought to improve the educational system through standardsbased reform with progress measured via student testing and other metrics. 6 How times have changed! In response to frustration expressed by parents and educators alike over the ever increasing volume of student testing, the Executive Budget contained a provision to reduce student testing time by 18 percent, so that it would comprise no more than 2 percent of the academic year. The House not only cut the Student Assessment budget by nearly half, they also specifically prohibited the purchase of any assessments developed by the Partnership for Assessment of Readiness for College and Careers (PARCC), tests in which Ohio has already invested $45 million. 7 They also prohibited the use of federal Race to the Top funds for student achievement assessments. This was a direct assault on the Common Core State Standards Initiative, commonly known as Common Core. Although an outgrowth of the National Governors Association, Common Core has been embraced by the Obama Administration, and has increasingly come to be associated with it. As such, it is an anathema to many conservative legislators. No replacement is suggested by the House for the PARCC tests, and even if a different testing mechanism is found, the funds to pay for them have been eliminated. Since states are required to assess students in English or language arts and mathematics in grades three through eight and once in high school, Ohio could potentially lose up to $750 million in federal funding for being out of compliance with the No Child Left Behind Act. In addition to student assessments, the House deleted some other important items in the Executive Budget as well. These included provisions regarding new requirements for the evaluation of teachers and first-ever standards for school counselors. Community Schools (Charters) and Other Provisions The House removed virtually all community school sponsorship reforms contained in the Executive Budget, and instead chose to address this subject in separate legislation, H.B. 2. Nevertheless, it did take some notable actions regarding community schools including lowering Page 6

7 the standard for their participation in preschool programs. The Executive Budget permitted only a limited number of community schools rated as exemplary to participate in the program. The House broadened this considerably to allow all community schools that receive a grade of C or better to operate preschool programs. The House also allowed community schools, as well as STEM schools and consortia of community schools led by one or more educational service centers, to participate in the Executive-established Competency-Based Education Pilot Program. It also provided $25 per ADM (average daily membership) for e- school facility costs and $1 million per year for this purpose, in addition to the $200 per ADM provided for facility-based community schools. In regard to non-public chartered schools, most were exempted from end-of-course exams that are required assessments for high school graduation. Finally, the House requested that the department develop a plan regarding an expansion of its authority to authorize community schools and recommendations for a ratings rubric for community school sponsor evaluations. The House continues the program that was established in the 2014 Mid-Biennium Review for individuals age 22 and older seeking a high school diploma. Although the Alternative Education Programs line item was not increased, $2.5 million was earmarked each fiscal year from its $7.8 million appropriation to make payments to participating school districts, community colleges, and university regional campuses that enroll students toward this goal. The House established an Education Program Support item funded at $4.75 million in FY 2016 and $2.5 million in FY 2017 to provide resources to five diverse items: the Ohio-West Virginia Youth Leadership Association; Supporting Partnerships to Assure Ready Kids (SPARK); We Can Code IT in Cleveland; Teach for America; and Jobs for Ohio s Graduates. The House also established a STEM Initiatives item funded at $150,000 in FY 2016 to provide middle school students in Geauga and Lake counties affiliated with the Alliance for Working Together early access to programming, engineering design, and problem-solving skills. The funding will be distributed to the Lake County Educational Service Center. Through earmarks, the House increased funding to both joint vocational school districts and educational service centers. The House either created task forces or otherwise requested the department to study several complex issues in greater depth. These included school transportation, community schools for the gifted, tax reimbursements, and, notably, the re-establishment of an umbrella Joint Education Oversight Committee. Finally, it is noteworthy that the House deleted a controversial amendment that appeared in the substitute bill presented to the House Finance and Appropriations Committee that would have banned unionized community school employees from receiving state pension benefits. Page 7

8 Department of Higher Education The House made comparatively few changes to the budget for the newly renamed Ohio Department of Higher Education, currently the Ohio Board of Regents. The House did add a modest $28.9 million in GRF support to the $2.5 billion higher education budget in FY 2016 and an additional $28.7 million in FY The budget increase in FY 2016 over FY 2015 now totals 3.2 percent versus the 2.5 percent increase contained in the Executive Budget. The additional 2.4 percent increase in FY 2017 is comparable to the 2.5 percent increase provided in the Executive Request. For the first time in memory, no change was made to either the funding or the structure of the State Share of Instruction (SSI), which provides the preponderance of state support to Ohio s 37 public universities and colleges. The account is funded at $1.86 billion in FY 2016 and $1.89 billion in FY 2017, a 2 percent increase each fiscal year. This is barely over one-fifth greater than the support provided this item during the first year of the Taft Administration, FY 1999, when SSI was funded at $1.54 billion. During this time, the consumer price index advanced by 41 percent. The budget establishes the breakout of funding between public universities and community colleges. At this writing, the Ohio Board of Regents had not yet made campus allocations available. The FY 2016-FY 2017 higher education budget continues the recent trend toward rewarding course and degree completion and other measures of student success. Historically, Ohio incentivized enrollment growth and cost containment in its higher education funding model. Importantly, the funding formula contains no stop-loss or guarantee, which stands it in stark contrast to the House s approach to primary and secondary education funding. However, the continued utilization of multiple-year course and degree completion data and other success point data does provide a bit of a buffer. The House also tweaked, but did not substantially change, the tuition caps contained in the Executive Budget. The Executive allowed a 2 percent increase in FY 2016 for all public campuses but held tuition flat in FY The House, instead, provided universities the option for their main campuses to increase tuition by up to the greater of 2 percent over the course of the biennium or a flat $200. Under the proposal, university regional campus and community colleges could increase tuition by no more than either 2 percent or $100 over the biennium. The House proposal provides institutional flexibility as well as sends a message that higher-cost institutions should not be unduly rewarded by allowing them to raise their tuition by a significantly greater amount than schools with lower tuition rates. For example, a simple 2 percent increase for the public university with the highest in-state annual tuition, Miami University, would amount to $280 while a similar increase for the university with the lowest tuition, Central State University, would amount to only $125. Under the House proposal, the effective biennial cap would indeed be 2 percent, or $280, for Miami University, but for Central Page 8

9 State, the effective cap would be $200, a 3.2 percent increase. Since community college tuition is less than one half that of most public universities, the option provided by the House of a flat $100 increase would allow for a slightly greater percentage increase for these institutions than would be possible with only the flat 2 percent proposed in the Executive Budget. The state s need-based financial aid program, Ohio College Opportunity Grants, which supports students at both public and private institutions, has never materially recovered from the massive 57 percent cut it sustained during the Great Recession in FY The program does receive a significant $5 million per year boost in the House budget on top of the nearly $1 million per year in new funding provided in the Executive Budget. While a welcome and needed boost in support, the new funding levels of $96.2 million in FY 2016 and $97.2 million in FY 2017 still fall far short of the $222 million provided to the program in FY The House specifies the allocation between public institutions and private nonprofit and for-profit institutions, and that funding should be distributed on a need basis in the event the appropriation is not adequate to fund all students. The specified amounts appear to change the ratio of funding between private and public institution students from 2:1 in the Executive Budget to 2.5:1 in the House-passed version of the budget. 8 Table 2. Major Higher Education Program Funding FY 2015 Estimate FY 2016 Executive FY 2016 House FY 2017 Executive FY 2017 House State Share of Instruction $1,821.3 $1,857.8 $1,857.8 $1,894.9 $1,894.9 Ohio College Opportunity Grants Other General Revenue Fund Total General Revenue $2,379.9 $2,428.3 $2,457.2 $2,487.9 $2,516.6 Fund Amounts in thousands of dollars Source: Ohio Legislative Service Commission, H.B. 64 Budget in Detail The House maintained funding levels provided in the Executive Budget for all other student financial aid programs, but cut support for a new Student Debt Reduction Program by three quarters from $30 million per year to $7.5 million annually, even as it expanded the program to also include students attending private institutions. It moved $7.5 million per year instead to a new program, Workforce Grants, to incentivize students to attain certificates or degrees that would fit an Ohio in-demand job and the balance, $15 million annually, to the Ohio Department of Education to help ensure that no school district was funded at a lesser level than during the current fiscal year. The House also maintained a couple of other important policy changes contained in the Executive Budget. A potentially landmark item would allow community colleges to offer bachelor s degrees when there is a documented local need for advanced training and no public Page 9

10 university is able to meet the need. Other items maintained by the House are the establishment of a $20 million Higher Education Innovation Fund in FY 2017 patterned after the Local Government Innovation Fund, a $2 million item to expand campus training and oversight to prevent sexual assaults, and the previously mentioned name change, which also changed the agency executive s title from Chancellor to Director. New items added by the House included the following: Institutions would be prohibited from charging an overload fee for taking more than a given number of credit hours except under certain circumstances. While this change would reduce revenues for institutions, it would appear to be consistent with the goal of timely student graduation. Institutions participating in the College Credit Plus program would be required to offer associate degree pathways. The department is directed to establish policies to grant credit for successful completion of the International Baccalaureate Diploma Program. A provision requiring institutions to develop competency-based education programs is made permissive, and the time for submission of plans for this purpose is delayed to July 1, $10 million per year is provided for the Defense/Aerospace Workforce Development Initiative to strengthen the Ohio aviation, aerospace, and defense industries. A Higher Education Program Support item is created and funded at $5.4 million in FY 2016 and $4.6 million in FY 2017 to support five separate initiatives: the Global Engineering and Management program at Wright State University; the Ohio University Leadership Project; the OSU Agricultural Technical Institute to provide distance education course for College Credit Plus students; the National Center of Educational Research on Corrosion and Materials Performance at the University of Akron; and the Customized Employee Recruitment Workforce Program at Sinclair Community College. $750,000 in FY 2017 is appropriated to Southern State Community College for the Southern Gateway Innovation Center in Circleville. Significant additions are made to items of importance to Ohio s large agriculture industry. The Ohio Agricultural Research and Development Center in Wooster receives a funding boost of $1.73 million per year, and support for the Cooperative Extensive Service is increased by $1.15 million annually. Page 10

11 $9.25 million in annual funding for the Co-Op Internship Program is returned to GRF support. Of this amount, $1 million annually is earmarked for a STEM Public-Private Partnership Pilot Program. This new program will provide high school students the opportunity to receive education in a targeted industry while earning high school and college credit. The Ohio State University Board of Trustees is compelled to adopt a resolution concerning whether student members should have voting rights. The House deleted an item that would have required the department to develop statewide standards for entry into teacher preparation programs at institutions of higher education. A controversial amendment that would have barred many public university professors from collective bargaining for participating in such routine practices as recommending colleagues for promotion or selecting textbooks for classes was deleted by the House Finance and Appropriations Committee prior to final House action on the budget. Despite these several changes, overall there was little departure by the House from the original recommendations made for higher education by Governor John Kasich. In fact, even the Executive Budget included comparatively few changes from current practice. Rarely, it seems, has higher education been so low on the radar of Ohio public policymakers, as has been the case in recent times. This is not inherently a bad thing for higher education, but it is likely not terribly helpful either. However, this is expected to change given public statements by Senate President Keith Faber that higher education funding should be increased even as student tuition is lowered across the board by as much as 5 percent. Summary The more things change, the more they remain the same. Governor Kasich s bold proposals for primary and secondary education were largely stripped from the FY 2016-FY 2017 budget by the House. With over half of all public school districts losing funds under the governor s proposal, largely due to the impact of an accelerated phasedown of Tangible Personal Property and utility tax reimbursements, perhaps change was likely inevitable. Governors can have broad policy perspectives, but term-limited state legislators are necessarily more in tune with the concerns of their individual districts. While the House made fewer changes to the higher education budget, this was expected since the Executive Budget for colleges and universities did not really represent a major departure from current policy. Page 11

12 1 Jim Siegel, House GOP Rewrites Tax Cuts, Funding for Schools, The Columbus Dispatch, April 15, Keen Criticizes Guarantees, Caps in House K-12 Formula Changes, The Hannah Report, April 30, Rich Exner, Greater Cleveland School districts Dominate List that Would Lose Money Under Ohio House Proposal, Northeast Ohio Media Group, April 16, State Aid Proposed for Your District, Akron Beacon Journal Analysis of Executive and House Funding Proposals, Including Fixed Rate Operating Direct Reimbursements, or TPP Subsidy, April 17, Editorial, House Budget Ignores Vision, The Columbus Dispatch, April 16, Financing Ohio s Future: Human Services in Changing Times, Fourth Edition, The Center for Community Solutions, Cleveland, Ohio, May, Catherine Candisky and Jim Siegel, House Plan Risks Loss of $750 M, The Columbus Dispatch, April 16, Jim Siegel, Public Universities Critical of Grant Shares, The Columbus Dispatch, April 29, 2015 State Budgeting Matters is published by The Center for Community Solutions. Copyright 2015 by The Center for Community Solutions. All rights reserved. Comments and questions about this edition may be sent to jhoneck@communitysolutions.com Euclid Ave., Ste. 310, Cleveland, OH E. Town St., Ste. 520, Columbus, OH P: // F: // Page 12