On Strickland's School Funding "Fix"

Up until now, I've defended Gov. Ted Strickland on school funding. Yes he promised to fix the system and no he didn't offer a fix in the first budget cycle. But it made sense for him to get on top of things and wait until after the midterms before rolling out a major initiative like that. So yesterday was it. The big fix. Here we go. And . . . not so much.

Strickland's promise, at least as proposed in his state of the state speech, is twofold. First, he promises to generally increase the state share in some manner, so the state is paying an average of 59% of K12 costs. Second, he offers a couple of phantom revenue fixes.

We won't know the particulars of the state funding until the budget is released next week, but conspicuously absent from the SoS speech was any promised reform that would make the funding changes systemic. While bumping up state funding is a good idea, it depends on Ds remaining in power. After the Supreme Court relinquished jurisdiction over the DeRolph case, the General Assembly began whittling away the gains in state funding. It's hard to get too excited about a "reform" that can as easily be undone.

More disturbing is the phantom revenue fix. For a review of what phantom revenue is, check this previous post. Strickland's proposal for a state fix is to tinker with the local share charge-off. Here's the excerpt from the speech:

In the current system, when the state calculates how much tax revenue a school district has, the state uses phony numbers. You may have heard this called ‘phantom revenue.’ For example, in many school districts, rising property values do not produce additional property tax revenue. But the state formula for school aid assumes districts do get additional tax revenue. That’s not logical, and it results in many districts being punished because the formula says they have an abundance of phantom dollars that don’t actually exist.

Under my plan, the state will no longer ask school districts to pay their bills with phantom dollars.

Instead, my plan lowers what our local taxpayers are expected to contribute to local schools from 23 mills to 20 mills. The state will assume responsibility for providing the difference between what those 20 mills raise and the cost of the full range of educational resources our students need according to our evidence-based approach.

OK, a couple of thing here. First off the 20 mill/23 mill business refers to a problem, but not the one Strickland describes. Here's what he's addressing. For a school district to receive state aid, it must have a twenty mill levy in place. Also twenty mills is the floor past which H.B. 920 will not reduce the millage further. So if a school district is down to twenty mills, those mills grow if property values grow. As a result many rural districts with low value tax bases live at twenty mills and do what they can do.

Meanwhile, the local share charge off (the amount the state deducts from its allocation as an estimate of what a district can provide) is the taxable property value times 23 mills. So by appearances the formula starts by assuming that local districts will provide 20 mills, but then takes back three mills by the time we get to the local share chargeoff. Whether the payout actually assumes 20 mills is open to debate, but the fact that the two different figures appear in the formula certainly don't bolster it's perceived credibility.

So Strickland is now reducing the local share chargeoff to 20 mills. That's certain better for districts stuck at twenty mills. The problem is that any time you tinker with the local share you run a high risk of windfalling the wealthiest districts. Everyone gets their tax base times three mills. Since Hudson's tax base is far higher than, say, Federal Hocking district in Athens county, Hudson will get far more state money than Fed Hock.

After all this time, I expected something better than a fix that disproportionately benefits the districts that need it the least. And this is before we even get into the yet- unanswered questions about where the money will come from.

As to the last bit of the phantom revenue fix -- allowing taxpayers to pass levies that grow with property values -- I need a bit of research time.