Stuart Blog 2: School funding: Textbook failure

Wednesday, October 20, 2004

School funding: Textbook failure

School funding: Textbook failure

School funding: Textbook failure
Court edicts, genuine efforts have not solved Ohio's problem
Sunday, October 17, 2004
Scott Stephens
Plain Dealer Reporter
Blame it on Harmon Stidger.

The Canton lawmaker, a farmer and physician, was chairman of the Ohio legislature's education committee in 1850 when he submitted a proposal to the state's second Constitution calling for a "thorough and efficient system of common schools."

More than 150 years later, Ohio still is trying to figure out what Stidger meant.
Eleven years of litigation produced four Ohio Supreme Court rulings, all calling for a complete overhaul of the way the state pays for public education.

Those rulings produced extra money for districts especially for the construction of schools. But state lawmakers and two governors largely ignored the real thrust of the rulings: Ohio's system relies too heavily on local property taxes, inviting huge funding disparities and making the quality of a child's education largely an accident of birth.

"Ohio is, perhaps, the most shameful example in the nation," said Jonathan Kozol, a teacher and social activist whose writings have chronicled the effect of funding inequities on children. "The entire system is archaic, undemocratic and ultimately unfixable."

That has not stopped the state from trying. Members of a 35-person task force appointed a year ago by Gov. Bob Taft a bipartisan mix that includes educators, business leaders, elected officials and union leaders generally agree they have made some progress.

The task force is expected to push a plan that would allow modest revenue growth for local school districts, meaning they would not have to constantly seek tax increases from voters.

The plan would also take aim at "phantom revenue" the shortfall between the rising property values the state uses to calculate how much money it gives a district and the actual revenue the districts collect.

The plan might include redistribution of the business tax on tangible personal property such as equipment, inventory, machinery and fixtures. It would also offer expanded tax relief for low-income elderly residents.

The group's most important consensus was philosophical rather than financial: the acknowledgment that poor children need more money than affluent children to reach the same academic benchmarks. That's significant in a state that suffers from one of the most pronounced gaps in achievement between white students and black and Latino children, many of them attending the state's poorest districts.

But the task force, which could issue its final recommendations as early as next month, has missed at least two deadlines and remains sharply divided on the fundamental question of adequacy that is, what constitutes a good education, and how much should it cost?

In fact, the failure of the task force to commission a study on that question could result in some members issuing a minority report in protest.

"We never did an adequacy study, so we're just kind of flying blind," said Sen. C.J. Prentiss, a Cleveland Democrat who sits on the task force.

Even if plan is approved, change probably far off

Political and economic realities also threaten reform efforts. The task force's proposal to tinker with the state funding formula, for example, would require both legislative approval and a voter-approved constitutional amendment.

"Even if everyone approves of what we're doing, it's going to take a while to phase it in," said Paul Marshall, the task force's executive director, adding the process could take six to eight years. "And not everyone thinks this is a good idea."

Already, several Republican legislators have vowed to fight any "Robin Hood" approach that would force wealthy districts to share revenue with poor districts.

"Taking from Peter to pay Paul is not a sensible school funding measure," said Rep. Jim Trakas, Republican of Independence.

But given the chances of finding new money, that might be a likely route. Taft's goal to include the task force's recommendations in his two-year budget proposal early next year is clouded by the prospect of a projected $4 billion budget shortfall.

Already, state funding cuts and voter rejection of property tax issues have resulted in the layoff of at least 2,000 teachers statewide and deep cuts in everything from transportation to extracurricular activities. At the same time, $344 million in base funding is expected to be deducted from public school coffers this school year and sent to charter schools one-third of them managed by for-profit companies.

Soaring costs for special education, health care, fuel, textbooks and compliance with the federal No Child Left Behind law have pushed strained school district budgets to the breaking point.

Once viewed as a potential savior, lottery profits for education continue to drop like a stone, falling from a peak of $714 million in 1996 to about $600 million this year or less than $1 million per school district. Analysts blame the drop on competition from other states.

And there is little hope legislators will extend the temporary, two-year, 1-cent sales tax increase, which is to expire in July.

"We aren't really very close to school funding reform at all in Ohio," lamented Jan Resseger, an education activist with the United Church of Christ. "It says something about us and it says something about our children."

Resseger is part of a growing grass-roots movement trying to push elected officials into action. Last spring, the Ohio Fair Schools Campaign drew more than 1,200 people to seven school-funding hearings across the state. The campaign is now trying to collect 100,000 signatures on a petition calling on the governor and legislature to reform school funding.

Likewise, the Ohio Education Association sponsored 33 public meetings around the state to discuss school funding.

Modern funding saga began with 1976 lawsuit

While Ohio has been struggling with school funding for most of its history, the modern chapter of the story began in 1976. That was the year the Cincinnati Board of Education filed a lawsuit asking the Ohio Supreme Court to recognize education as a fundamental right and to declare the state's funding system unconstitutional.

The effort failed, but the interest it sparked eventually led to the formation in 1991 of the Ohio Coalition for Equity and Adequacy of School Funding, an alliance of 275 school districts, many of them poor and rural. In December of that year, the coalition filed DeRolph vs. State of Ohio, a lawsuit named for schoolboy Nathan DeRolph.

DeRolph, now married and with a child of his own, attended school in Perry County, a Central Ohio county with five small school districts scattered along miles of rolling farmland and abandoned strip mines. To many, the county embodied the state's school-funding crisis.

In the Perry County village of Thornville, Somerset Elementary School was condemned in 1993 because bricks were falling from the sides of the building and the walls were bulging outward.

In 1998, Thornville Elementary School's third-floor hallway ceiling started to collapse under the weight of bat feces that had collected on the attic floor.

The schools in Thornville were part of the Northern Local School District, which ranked near the bottom of the state in most economic measures, including income, value of taxable property and per-pupil spending.

By any legal measure, the DeRolph lawsuit was a stunning success. In 1994, Perry County Common Pleas Judge Linton Lewis Jr. ruled in the coalition's favor and ordered the state to eliminate funding disparities. Appeals went up to the Ohio Supreme Court, which in 1997 agreed with Lewis and ordered a "complete system overhaul."

The court would rule three more times that, while some progress had been made, the funding system was still unconstitutional. But in its final ruling, the state high court dropped its jurisdiction over the case, leaving the victorious plaintiffs no way to enforce the order. The U.S. Supreme Court declined to hear an appeal from the coalition.

"This is just unthinkable in a nation of laws," said William Phillis, the coalition's executive director. "They shut the courthouse doors on us."

Despite court rulings, disparities still exist

After more than a decade of litigation, reliance on local property taxes actually has increased, and disparities continue.

Schools in the affluent Cleveland suburb of Beachwood, for example, spent $17,735 per pupil in 2003, the highest in the state. The Pleasant schools in Marion County, a rural district 50 miles from the Statehouse steps, spent $5,856 per pupil that year, the least in Ohio.

Both districts get nearly the same base funding from the state, but Beachwood's rich tax base allows it to spend more than three times as much per pupil.

Still, even the wealthiest districts are forced to beg voters to raise taxes just to keep pace with inflation. Since this year's senior class entered kindergarten, Ohio's school and vocational districts have gone to voters with 5,471 tax requests, an average of eight each. In August, voters approved just 26 percent of the 103 school issues on their ballots.

More than one-third of the state's 613 school districts forecast deficits within three years.

The culprit, to many, is House Bill 920, a tax-relief law passed by the legislature in 1976 two years before California's infamous Proposition 13 property tax revolt.

In some states, such as New York and Pennsylvania, elected officials set the tax rates that generate money for schools. In Ohio, that's the job of voters, who must approve tax hikes to pay for their schools.

Homeowners and businesses pay annual property taxes based on the assessed value of their property. Property taxes generally increase every three years when new values are set. Before 1976, revenue to schools increased if real estate in a community appreciated.

House Bill 920 froze that revenue at the amount generated the first year a new tax was collected. So, if property values went up, the tax rate was rolled back to keep revenue constant.

It is a formula that hurts districts such as Sheffield-Sheffield Lake, a Lorain County school system of 2,000 students that is struggling to avoid fiscal calamity. Unless the community passes an emergency tax increase next month, the district will face a deficit of $1.5 million and a state takeover of its finances by next summer.

The district's revenue has failed to keep pace with the soaring costs of health care, fuel and books and supplies, Superintendent Will Folger said, and voters have continually defeated tax requests. It has been a decade since voters approved new revenue for the district, he said.

"A large part of our population worked in steel mills, on the docks or in the car industry, and this area has been hard hit," Folger said. "We're asking people to give up more of their money for the good of the schools. For a lot of people, that's a difficult decision."

Likewise, the funding formula penalizes the Berea School District, which includes the industrialized and retail-rich communities of Brook Park and Middleburg Heights.

The state guarantees every school district a base per-pupil amount, which is $5,169 this school year. That money comes from a mix of local property taxes and state general fund dollars. Districts with rich tax bases pay a larger share of that base amount; for districts with poor tax bases, the state picks up a larger share.

Berea, for example, gets about $950 about 18 percent of its base allocation from the state. Akron, by contrast, gets more than $3,100 about 61 percent of its $5,169 base.

In theory, that's a split that industrialized districts such as Berea should be able to afford. But tax abatement and other deals to attract and keep business can quickly dilute a rich tax base.

"I think the biggest issue is what businesses are paying in taxes," said Berea schools Treasurer Randy Scherf. "I think they need to pay their fair share to do business in Ohio."

Suburban districts with more-affluent residents have grumbled for years that they get a lot less back from state coffers than they put in. Residents in Orange, for example, paid nearly $62 million in state income tax for the 2001 tax year but received only $5.3 million back in state education money. East Cleveland residents paid in about $5.7 million, but got back $35.5 million.

"I live in a suburban school district, and we basically self-fund ourselves," said Rep. Larry Wolpert, Republican of Hilliard.

Wolpert, Independence Republican Rep. Trakas and two other GOP lawmakers are pushing their own reform package in the House. One bill would allow a simple majority of school districts in a county to seek a countywide tax issue and distribute the money proportionally. Another would allow communities to voluntarily lift H.B. 920. A third would eliminate phantom revenue, and a fourth would give fast-growing suburbs quicker access to state building money.

The lawmakers are not the only ones working on their own initiatives. Former State Rep. Bryan Flannery is asking voters to sign petitions to put his school finance plan on the state ballot in 2005. He would reduce reliance on local property taxes and make up the difference from a blend of sales, income and corporate taxes. His plan would also establish a committee that would decide an amount of money needed to fund an adequate education, and the state would be required to stick to that amount.

Not everyone has given up on the DeRolph ruling. School funding is an issue in three Ohio Supreme Court races, and at least two challengers pledge to reopen the case.

Phillis, the executive director of the school district coalition, said, "Conditions may have degenerated enough in Ohio where people will choose a new court."

© 2004 The Plain Dealer.

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