The cost of “updating inputs,” plus other notes on the state budget

Debate on the biennial state budget is in full swing, as Governor DeWine has unveiled his proposals and House lawmakers are now holding committee hearings. Through the amendment process, the chamber is expected to put forward its plan in April and send the legislation over to the Senate. The Fordham team has already taken a close look at several of the big topics in the governor’s plan for K–12 education (charter schools, literacy and numeracy, student attendance, career planning, and guarantees). This piece covers three additional issues worthy of attention.

Cost of updating the funding formula inputs

It sounds incredibly arcane, but one of the biggest discussions right now revolves around updating the “inputs” of the school funding formula. As a quick refresh—and see here for a longer explanation—Ohio’s current formula (the Cupp-Patterson model) uses a series of inputs to determine base per-pupil funding from the state. These inputs include average teacher salaries and benefits, building expenses, and a whole lot more. Ohio currently uses input data from FY22 (e.g., salaries from that year) in the formula, and public-school advocates have been pushing hard for an update to FY24. Because of rapid inflation, the use of more current data would push up state education spending significantly.

While it seems like an “easy” update (at least technically), it’s hard politically, because it comes with a very steep price tag. This a possible reason why the governor (who has stressed fiscal discipline) didn’t propose it, and is likely behind Speaker Huffman’s comments about the formula being “unsustainable.” Indeed, according to estimates that I’ve seen, the update would cost the state roughly $850 million over the next two years—an 11 percent increase in state education spending by FY27 compared to FY25. This added cost goes above and beyond the governor’s proposed $250 million (2.5 percent) bump over the biennium. That’s a lot of money to spend, especially at a time when the state budget is tightening and the national economic outlook is becoming cloudier.

We at Fordham have long raised concerns about the costs of Cupp-Patterson’s inputs-driven model, and now this General Assembly has some tough questions to wrestle with. Will they find enough room in the budget to drop hundreds of millions more into the formula? Or will they take a pass on the update, presumably kicking the can to future lawmakers to make (bigger) “catch-up” payments down the road? Might they get fed up with the formula’s expense and simply put a fork in it? Or will they seek a compromise that reins in its costs but preserves the underlying structure? No one knows exactly how it’ll all play out. But it’ll be fascinating to see how the debate over the $850 million “update” unfolds.

Funding high-quality industry credentials

Under Governor DeWine’s leadership, Ohio has invested millions in supporting high schoolers’ attainment of industry-recognized credentials (IRCs). The headliner in this area has been the Innovative Workforce Incentive Program (IWIP), which provides reimbursements to schools when students earn an industry credential in selective, high-priority career fields (e.g., manufacturing, IT, and healthcare). These credentials can give students an edge as they pursue in-demand careers that require technical skills. In past budgets, schools were eligible to receive up to $1,250 per IWIP credential. However, due to increasing attainment of these credentials and a limited budget appropriation, the reimbursement rate had to be scaled back in FY24 to just $550 per credential.

The governor’s budget does increase IWIP funding from $10.5 to $16.0 million. That’s a step forward, but it’s still not quite enough. In fact, his budget proposes to reduce the maximum reimbursement to $750 per credential to fit the new appropriation. While that creates more realistic funding expectations, the governor should have prioritized this important initiative and allocated a higher overall appropriation to accommodate both the increasing participation in IWIP programs and support the originally intended reimbursement of $1,250. With any luck, House and Senate lawmakers will see the importance of incentivizing IWIP credentials and enlarge the allocation.

Finally, on the topic of industry credentials, kudos to the governor for discontinuing funding that covers credentialing testing fees ($5.5 million, this year). The problem Ohio is running into is that students are accumulating more and more credentials, but many of them have little value in the workplaces (including hundreds that are not on the IWIP list). Yet under current policy, the state covers testing fees for these low-level credentials. That should stop, and the governor was right to pull the plug. Note that testing fees for high-value IWIP credentials would still be covered through that reimbursement program.

Money for academic distress commissions?

One of the more eyebrow-raising allotments in the governor’s budget is $2 million over the biennium to support academic distress commissions (ADC) in East Cleveland and Youngstown. While this is less than the prior budget’s allocation for ADCs ($3.5 million), it’s still a surprise to see funds set aside. Over the past several years, lawmakers have gutted this policy, which had originally sought to transform Ohio’s lowest-performing school districts. The initial policy called for a chief executive officer who had “complete operational, managerial, and instructional control of the district,” while the commission itself—the majority of whom are state appointees—appointed the CEO and oversaw an improvement plan. After hearing constant complaining about state overreach from district officials, lawmakers relented in 2021 and walked back the ADCs. The chief executives are now gone, the commissions have been made toothless, and governing authority has been handed back to the local school boards. All districts have to do is create an improvement plan, and meet a majority of goals in that plan to be released from any commission oversight.[1]

Given the dramatic rollback of state accountability and intervention through ADCs, it’s puzzling that the state would spend money to support the now-feeble effort. And don’t shed a tear over these districts losing funding, either. East Cleveland receives—by far—the most state funding per pupil in Ohio: a whopping $25,260 per student in 2024, a large chunk of which comes through guarantees (largely money for students the district no longer serves). Youngstown received the eleventh most state funding at $14,541 per pupil, a portion of which also came through guarantees. If ADCs were a serious turnaround effort, setting aside state funds in support would be wise. But the policy is now but a shell, and these dollars would surely be better spent elsewhere.

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In the days ahead, state lawmakers will be making important decisions about how to spend taxpayer dollars while also working to craft a fiscally responsible budget. In the area of K–12 education, they should think hard about which programs and initiatives are best positioned to deliver a quality education for Ohio students. Investing in high-quality credentials, effective literacy programs, and high-quality schools of choice should breeze through, but initiatives that are unlikely to improve student outcomes should receive more scrutiny. The stakes are high, and lawmakers need to continue using school funding levers to drive higher achievement throughout Ohio.