AN OVERVIEW OF HOW OHIO FUNDS ITS SCHOOLS School Funding Legislative Service Commission April 2015.

AN OVERVIEW OF HOW OHIO FUNDS ITS SCHOOLS

School Funding

Legislative Service CommissionApril 2015

Importance of K-12 Education for State Budget

State-Source GRF State and Federal GRF0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

40.0%28.6%

31.7% 51.2% General GovernmentCorrectionsHigher EducationHuman ServicesK-12 Education

FY 2014: $20.65 billion FY 2014: $28.90 billion

GRF Accounts For More Than Half of ODE Budget

70.4%

17.0%

7.5%

4.5%0.5%

ODE Expenditures by Fund Group FY 2014

GRFFederalLotteryRevenue DistributionInternal Service and Dedicated Purpose

Total: $11.23 billion

Most of ODE Budget Goes to Outside Entities

98.0%

0.2%

0.5%

1.0%0.3%

ODE All Fund Expenditures by Account Category

FY 2014

Subsidies

Other

Personal Services

Purchased Personal Services

Supplies, Maintenance, Equipment

Total: $11.23 billion

School Foundation Aid Makes up Majority of Subsidy Payments

59.5%

10.4%

4.6%

16.6%

8.9%

Subsidy Payments, FY 2014

School Foundation AidProperty Tax RollbacksProperty Tax Re-placement PaymentsFederal ProgramsOther

Total: $11.00 billion

Lottery Profits Comprise a Small Share of K-12 Education Funding

88.2%

11.8%

Foundation Aid, FY 2014

GRFLottery Profits

Total: $6.56 billion

Formula Changes in Recent Years

Foundation Aid FormulasBuilding-Blocks Model

Prior to FY 2010Evidence-Based Model (EBM)

FY 2010-FY 2011Bridge Formula

FY 2012-FY 2013Achievement Everywhere

FY 2014-FY2015

Capacity Varies Across Districts

1 2 3 4 $-

$50,000

$100,000

$150,000

$200,000

$250,000

$83,587

$120,244 $148,897

$218,044

Valuation Per Pupil by Wealth Quartile

District Quartiles from Lowest to Highest Wealth

Impact of Varying Valuations

Same tax effort results in very different levels of revenue 38 mill (3.8%) tax effort results in

$3,192 revenue per pupil in district with valuation of $84,000 per pupil

$8,284 revenue per pupil in district with valuation of $218,000 per pupil

Addressing Differences in District Capacity

Current law and Executive proposal – index

House proposal – charge-off

Wealth Index - Current

Valuation index – District 3-year average valuation per pupil divided by State 3-year average valuation per pupil

Income index – District median income divided by Median district median income

If income index < valuation index, then wealth index = 2/3 valuation index + 1/3 income index, else wealth index = valuation index

Income index lowers index for high valuation/relatively low income districts, but does not increase any district’s index

0.30 0.50 0.70 0.90 1.10 1.30 1.50 1.70 1.90 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

State Share Index Current

Wealth Index

Sta

te S

hare

In

dex

Capacity Measure - Executive

Instead of addressing low income relative to valuation, addresses low and high incomes relative to state Income index < ½ standard deviation below mean,

subtract difference (mean income index – district income index) from valuation index

Income index > ½ standard deviation above mean, add difference (district income index – mean income index) to valuation index (phased in at 20% in FY16 and 40% in FY17)

Income index within ½ standard deviation of mean, no adjustment to valuation index

-

0.2

0

0.4

0

0.6

0

0.8

0

1.0

0

1.2

0

1.4

0

1.6

0

1.8

0

2.0

0 0.0%

10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

State Share Percentage - Executive

Capacity Measure

Sta

te S

hare

Perc

en

tag

e

Charge-off - House

Charge-off = charge-off rate x district valuation

Valuation is a 6-year average for the 236 districts that have agricultural property that is more than 20% of total real property, which tends to lower these districts’ valuations

Valuation is a 3-year average for all other districts

Charge-off - House

Charge-off rate varies based on the income index of the district.

In general, a district’s rate is equal to a base rate of 20 mills times its income index

Index values above the statewide median are adjusted so that highest rate is 26 mills

For FY16 and FY17, rates above 20 mills are phased-in at 50% and 60%, respectively, so that the highest rate is 23 mills in FY16 and 24 mills in FY17

Lowest projected rate is approximately 10.5 mills

Total Opportunity Grant

Total opportunity grant = formula amount x formula average daily membership (ADM)

Current & H.B. 64 Formula Amounts

FY15 $5,800

FY16 $5,900

FY17 $6,000

Opportunity Grant

Current and Executive: Opportunity grant = total opportunity grant x state share

index (percentage) State share index (percentage) between 5% and 90%;

average 49.5% in FY15 and 52.3% in FY16 and 51.7% in FY17

House: Opportunity grant = total opportunity grant – charge-off State share percentage = opportunity grant/total

opportunity grant Minimum state share percentage of 5% Highest state share percentage projected to be from 90% to

91%; average 53.8% in FY16 and 53.7% in FY17

Opportunity Grant

Largest funding component

Current & H.B. 64 Estimated Allocation ($ millions)

Executive House

FY15 $4,808.8 $4,808.8

FY16 $5,173.0 $5,321.0

FY17 $5,195.4 $5,402.8

Targeted Assistance

Additional aid to 490 (80%) lowest wealth (capacity) districts

Wealth per pupil = 50% valuation per pupil + 50% FAGI per pupil

Wealth index (capacity measure) = State wealth per pupil / District wealth per pupil

Threshold wealth per pupil = 490th district’sAssistance = (Threshold wealth per pupil –

District wealth per pupil) x wealth index x .006 x ADM

Recent Valuation Changes

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

6.2%

-2.8%

-7.4%

-14.0%

-6.5%

12.1%

3.6%1.1%

-2.2%

2.3%

% Change in Real Property Value

TY08 to TY12 TY12 to TY14

Rural Small Town Suburban Urban Statewide

Supplemental Targeted Assistance

Districts with real property value that is 10% or more agricultural property receive an additional 40% of base targeted assistance payment

Districts with less than 10% receive from 0% to 40% of base targeted assistance payment

$-

$100

$200

$300

$223 $82

$4 $5 $55

Supplemental Targeted Assistance Per Pupil, FY15

Rural Small Town Suburban Urban Statewide

Targeted Assistance

Second largest component

Current & H.B. 64 Allocations ($ millions)

Base Supplement Total

FY15 $654.9 $92.2 $747.0

Executive

FY16 $705.7 $97.2 $802.9

FY17 $750.9 $102.1

$853.0

House

FY16 $696.5 $98.7 $795.2

FY17 $727.7 $101.8

$829.5

Capacity Aid - House

New component that targets funding to smaller districts with relatively low total property valuation.

Funding is based on the amount a district can raise with one mill

Provided to districts that raise less than the median amount

Calculated on a sliding scale – districts further from the median receive a higher amount – ranging from 0 to 2.5

This scale (capacity ratio) is multiplied by per pupil amounts of $1,036 in FY16 and $1,049 in FY17 and then by formula ADM

Capacity Aid - House

H.B. 64 Estimated Allocation ($ millions)

FY16 $260.7

FY17 $260.8

Districts Are Different Sizes

Total ADM Average – 2,800 Maximum – 68,800 (7 above 20,000) Minimum – 60 (14 below 400)

Geographic Size Average – 68 square miles Maximum – 546 (9 above 300) Minimum – 1 (8 provide no transportation)

Transportation

Compute statewide cost per rider and cost per mile from previous fiscal year.

Base is greater of district’s current year riders x statewide cost per rider or district’s current year miles x statewide cost per mile.

Lower density, rural districts tend to benefit from calculation based on miles.

Greater of 60% or state share index is applied to base.

In FY15, the base is prorated to stay within the appropriation and a supplement is given so that low wealth/low density districts get full base.

H.B. 64 Transportation

Reduce minimum state share from 60% to 50%

Remove proration and supplement4th largest component (6%)

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $457.2 $457.2

FY16 $470.2 $486.9

FY17 $478.4 $496.2

Students Have Different Needs

Special EducationEconomically DisadvantagedCareer-Technical EducationGifted EducationLimited English ProficientK-3 Literacy

Districts Face Different Challenges

Disabled as % of Total Average – 14.8% Maximum – 26.7% (40 at or above 20%) Minimum – 0% (57 at or below 10%)

Economically Disadvantaged Average – 43.0% Maximum – >95% (23 above 95%) Minimum – 0% (6 below 5%)

Limited English Proficient Average – 3.1% Maximum – 41.8% (36 at or above 5%) Minimum – 0% (372 at 0%)

Additional Categorical Funding

Generally, districts are allocated an additional per pupil amount for students in each category and the state share index (percentage) is applied.

Formula for economically disadvantaged students takes concentration of these students into account, but not state share index.

A certain amount of K3 literacy funding is provided to every district without state share index applied.

Gifted funding allocated based on inputs.

Special Education

Special education additional funding = category amount x category ADM x state share index (percentage); summed over six categories.

Current & H.B. 64 Category Amounts

FY15 FY16 FY17

Cat. 1 $1,517 $1,547 $1,578Cat. 2 $3,849 $3,926 $4,005Cat. 3 $9,248 $9,433 $9,622Cat. 4 $12,342 $12,589 $12,841Cat. 5 $16,715 $17,049 $17,390Cat. 6 $24,641 $25,134 $25,637

Special Education

Third largest funding component

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $714.2 $714.2

FY16 $773.6 $796.6

FY17 $781.4 $812.3

Career Technical Education

Career-technical education additional funding = category amount x category ADM x state share index (percentage); summed over five categories.

Also includes an amount per pupil regardless of category that is transferred to lead district of CTPD. Current & H.B. 64 Category Amounts

FY15 FY16 FY17

Cat. 1 $4,800 $4,992 $5,192Cat. 2 $4,550 $4,732 $4,921Cat. 3 $1,660 $1,726 $1,795Cat. 4 $1,410 $1,466 $1,525Cat. 5 $1,210 $1,258 $1,308Lead district $227 $236 $245

Career Technical Education

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $42.8 $42.8

FY16 $47.4 $49.5

FY17 $49.2 $51.5

Limited English Proficient

LEP additional funding = category amount x category ADM x state share index (percentage); summed over three categories.

H.B. 64 does not change category amounts.

Current & H.B. 64 Category Amounts

Cat. 1 $1,515Cat. 2 $1,136Cat. 3 $ 758

Limited English Proficient

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $24.0 $24.0

FY16 $26.1 $27.0

FY17 $25.8 $27.0

K-3 Literacy

K-3 literacy additional funding = K-3 ADM x (Base per pupil amount + Additional per pupil amount x State share index (percentage)).

Current & H.B. 64 Amounts

FY15 FY16 FY17

Base (Not equalized)

$115 $121 $127

Additional (Equalized)

$175 $184 $193

K-3 Literacy

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $102.9 $102.9

FY16 $111.1 $112.7

FY17 $116.0 $118.2

Economically Disadvantaged

Funding is targeted to districts with high concentrations of economically disadvantaged students through an index.

Index is the district’s percentage of students who are economically disadvantaged divided by the statewide percentage, with the result squared.

Economically disadvantaged funding = Economically disadvantaged ADM x per pupil amount x index

H.B. 64 does not change per pupil amount ($272).

Economically Disadvantaged

Since this funding calculation does not use the state share index (percentage) & ADM used in the simulation is constant, estimated allocation is the same for all three years.

$383.0 million

Gifted

Fund $5.05 per pupil for identificationFund a gifted coordinator for every 3,300

students, with minimum of .5 and maximum of 8

Fund gifted specialist for every 1,100 students, with minimum of .3

Funded amount for both coordinators and specialists is $37,370

H.B. 64 does not change amountsEstimated funding is $80.6 million each year

Temporary Transitional Aid

In FY15, current law guarantees each district is allocated at least FY13 state aid

Executive guarantees state aid does not fall in either FY16 or FY17 by more than 1% of total state and local resources in the prior fiscal year

House guarantees each district is allocated at least FY15 state aid

Temporary Transitional Aid

Fiscal Year

Executive House

Number of

Districts

Estimated Allocations ($ millions)

Number of

Districts

Estimated Allocations ($ millions)

FY15 198 $195.2 198 $195.2

FY16 226 $153.4 118 $122.9

FY17 184 $138.5 122 $127.0

Funding Limitations

In FY15, current law limits increases in state aid to 10.5% of prior fiscal year

Executive limits increases in state aid to 10.0% of prior fiscal year

House limits increases in state aid to 7.5% of prior fiscal year

Funding Limitations

Fiscal Year

Executive House

Number of

Districts

Estimated Amount under

Cap ($ millions)

Number of

Districts

Estimated Amount

under Cap ($ millions)

FY15 232 $581.6 232 $581.6

FY16 214 $609.0 427 $999.7

FY17 131 $366.8 346 $752.9

Secondary Per Pupil Guarantee - House

Calculated after both temporary transitional aid and the cap

Guarantees each district’s state aid per pupil is at least 20% of the formula amount: $1,180 in FY16 $1,200 in FY17

In FY16 and FY17, this aid is phased in at 50%Applies to about 28 higher wealth districts each

fiscal yearEstimated cost is $21.2 million in FY16 and

$20.4 million in FY17

Total Foundation Funding

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $7,010.7 $7,010.7

FY16 $7,412.2 $7,457.7

FY17 $7,734.5 $7,856.6

Lower Wealth Districts Receive More State Aid Per Pupil

1 2 3 4$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Average State Aid Per PupilExec - FY16 House - FY16

District Quartiles from Lowest to Highest Wealth

State Aid Helps to Counteract Effects of Varying District Wealth

1 2 3 4$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$3,166 $4,573

$5,945

$8,774

$7,226 $4,897 $3,660

$2,025

Estimated Local Operating Levies and State Aid Per Pupil under House Proposal

FY 2016Local Levies State Aid

District Quartile from Lowest to Highest Wealth

Joint Vocational School Districts

Opportunity grant = (formula ADM x formula amount) – 0.5 mills of district valuation

Receives special education, career-technical education, LEP, and economically disadvantaged additional funding

Subject to guarantee and cap

Total JVSD Funding

Current & H.B. 64 Estimated Allocations ($ millions)

Executive House

FY15 $271.1 $271.1

FY16 $271.9 $276.1

FY17 $272.2 $279.3

Funding Choice Programs

Generally, allocate funding to districts based on students who live in the district.

If the student is educated elsewhere, transfer funding allocated for that student to educating district or school.

School Choice Program Spending Growing Each Year

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $-

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$214.6 $301.9

$439.7 $489.7

$551.1 $644.2

$723.5 $768.5

$823.1 $893.9

$978.6 $1,076.0

School Choice Program Spending

Mil

lion

s of

$

Tangible Personal Property Tax Reimbursements

Fixed rate operating levy reimbursements are phased out by 1% to 2% of a district’s total state and local resources

The phase-out percentage is determined by the district’s capacity measure used in the calculation of the state share percentage in the Executive budget

Fixed-sum operating levy reimbursements are phased out over six years (TY16 – TY21) for all districts

Fixed rate nonoperating levy reimbursements are phased out by FY17

Tangible Personal Property Tax Reimbursements

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

$0

$200

$400

$600

$800

$1,000

$1,200

$99.0$106.9

$108.7$116.5

$193.1

$520.3

$706.3

$881.8

$1,121.2 $1,129.1

$759.9

$510.1$509.7$509.7

$360.9

$249.8

$ in

millions

TPP Supplement - House

Supplemental payments to guarantee districts do not receive less funding in each fiscal year than their combined funding from state foundation aid and fixed rate operating direct reimbursements

Funded by transfers from the Medicaid Reserve Fund and FY15 GRF ending balance

Fiscal Year Number of Districts

Estimated Allocations ($

millions)

FY16 88 $36.0

FY17 91 $66.0

Property Tax Rollbacks

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$705.7$736.6

$782.2$828.4

$796.2

$742.5$858.1

$939.5

$1,057.1$1,048.1

$1,074.8

$1,110.4

$1,142.3

$1,159.8$1,181.8

$1,201.3$ in

millions

Instruction Comprises Over Half of Operating Expenditures

In-struc-tional; 58.1%

Building Oper-ations; 18.8%

Admin, 12.1%

Pupil Support; 5.6%

Staff Support; 3.6%

School District Operating Expenditures, FY 2014

Education is Labor Intensive

Salaries; 55%

Fringe Benefits; 21%

Purchased Services; 18%

Supplies, Materials, and Textbooks; 3% Other; 2%

Capital Outlay and Debt Service; 1%

School District General Fund Expenditures by Category FY 2013

Ohio’s Average Teacher Salary Little Higher than National Average

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $42,000

$46,000

$50,000

$54,000

$58,000 $56,307

$56,103

Ohio United States

Ohio’s Per Pupil Operating Expenditures Continue to Exceed

National Average

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000 $11,204

$10,608

Ohio United States

Per Pupil Spending Varies Across Different Types of Districts

District Types – Description Spending Per Pupil

Rural High poverty, small population $9,247

Rural Average poverty, very small population $9,259

Small Town Low poverty, small population $8,864

Small Town High poverty, average population $9,322

Suburban Low poverty, average population $10,145

Suburban Very low poverty, large population $11,210

Urban High poverty, average population $11,130

Urban Very high poverty, very large population $13,792

State Average $10,446

SFC Funding Offered to 73% of Districts & JVSDs

All Buildings Complete; 39.0%

Funded, Not

Com-plete; 15.0%Funding Offered,

But Not Taken; 19.0%

Funding Not Yet Offered; 27.0%

District and JVSD Status for Completing Master Facility Plans, July 2014

Additional Resources

LSC website School Funding Complete Resource Redbook and Greenbook for ODE and SFC Ohio Facts Historical Revenues and Expenditures Tables

ODE website District Payment Reports iLRC