Ohio’s budget bill makes major changes to K–12 education policy

On July 1, Governor DeWine signed House Bill 110, the state’s operating budget for fiscal years 2022–23. The massive legislation, which encompasses virtually every area of state government, contains hundreds of provisions affecting Ohio schools. The big takeaway? As we noted in our press statement, the legislature made important progress in tackling thorny issues in the school funding formula, while also working to significantly expand educational opportunities for Ohio families and students. This post offers an overview of the most notable K–12 education provisions; in future blogs, we’ll take a deep dive into some of these policies.

Overall spending on K–12 education

With the economy in full recovery mode and state tax revenues exceeding expectations, the budget—predictably—raises overall spending levels. As the table below indicates, the state will spend $10.23 billion on K–12 education in FY 2022 versus $9.84 billion in FY 2021, a 4 percent hike. Spending rises again in FY 2023, going to $10.43 billion, good for an increase of 6 percent compared to FY 2021 outlays. Provided inflation rates don’t spike, these spending increases represent a solid investment of new state dollars on primary and secondary education. Keep in mind that this is above and beyond the enormous expenditure of federal funds reaching Ohio’s schools via the American Rescue Plan.

Table 1: State expenditures on K–12 education

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School funding formula

One of the most highly anticipated issues in this year’s budget is where legislators would land on the school funding formula. After much debate, they agreed to implement the Cupp-Patterson model for the next biennium, which:

• Creates a base cost model that relies primarily on statewide employee compensation data and fixed staff-to-student ratios. Those calculations in turn determine district, charter, and STEM schools’ base per-pupil amounts, which drive the bulk of their state funding. Relative to the current base amount of $6,020 per pupil, the average base under the new formula—if fully implemented—rises to about $7,200 per student. The higher base amount explains the new formula’s overall price tag of roughly $2 billion in additional state spending.

• Phases in the increase. Due to concerns about costs—including the model’s potential to inflate spending over the long term—legislators only partially fund the increase called for under the new formula and explicitly restrict its use to FYs 2022–23. Future lawmakers will therefore decide whether to continue the phase-in, modify the formula, or go a different direction.

• Includes an equalizing mechanism that adjusts each district’s base amount to account for its property wealth and resident income, akin to the current funding formula. This is done to ensure that higher-poverty districts receive more state aid than those that can raise more through local taxes.

• Retains various “categorical” funding streams that provide districts with extra aid based on pupil characteristics, like being an English language learner or a student with a disability. The new formula does eliminate a few smaller components, such as performance bonuses and K–3 literacy funding, likely in an effort to shift some money to pay for an increased base.

• Directly funds public charter and STEM schools, private-school scholarships, and interdistrict open enrollment students, rather than through deductions from districts’ state funding. This positive move should alleviate political tensions and eliminate distortions in the formula when choice students were included in their home districts’ student counts.

• Increases the funding base for economically disadvantaged students from $272 to $422 per pupil. The bill also expands the allowable uses of these dollars to include the activities covered under Governor DeWine’s Student Wellness and Success fund, which HB 110 eliminates.

Educational choice

Shifting gears, the state budget greatly bolsters Ohio’s choice options. Among the key provisions on the charter school side, HB 110:

• Raises funding for the quality charter school program from $30 to $54 million per year. The increase will better ensure that qualifying charters receive the full $1,750 per economically disadvantaged pupil under program guidelines.

• Doubles the charter and STEM school facility allowance from $250 to $500 per pupil. This boost will allow these schools to cover more of their facility expenses, without dipping into instructional budgets.

• Eliminates geographic restrictions on startup charter schools. Since their inception, charters have been prohibited from locating in most Ohio districts. HB 110 finally removes this outdated barrier to entry.

• Creates a clearer definition of an “unused facility” to prevent districts from withholding underutilized facilities from charters for lease or purchase under right of first refusal laws.

Turning to private-school scholarship programs, HB 110 makes a number of upgrades:

• Raises the EdChoice and Cleveland scholarship amounts from $4,650 to $5,500 in grades K–8 and $6,000 to $7,500 in 9–12. The amounts for Ohio’s special needs scholarships also rise.

• Eliminates constraints on the number of available EdChoice scholarships by repealing the cap on performance-based scholarships and shifting income-based scholarships to direct funding.  

• Expands eligibility for EdChoice to foster care students, siblings of current scholarship students, and any incoming ninth graders. These expansions build on recent work to broaden eligibility to ensure that more Ohio parents have private school options.

HB 110 also provides tax relief for Ohioans who support private-school students, along with parents who choose other educational options for their kids. The legislation:

• Creates a tax-credit scholarship program. Under this new policy, Ohioans can receive a non-refundable tax credit of up to $750 for contributions to a non-profit that awards scholarships to K–12 students.

• Offers a non-refundable tax credit of $250 for homeschooling parents.

• Depending on income, offers a non-refundable tax credit of up to $500 or $1,000 to families who choose non-chartered, non-tax-supported schools. This tax credit will help to offset tuition costs at these private schools, which do not participate in Ohio’s scholarship programs.

Last but not least, the legislature created a brand-new education savings account (ESA) program that provides $500 per year to pay for afterschool programs or enrichment activities of parents’ choice. The program will be open to families with incomes below 300 percent of the poverty line, regardless of where their children attend school.

Post-secondary readiness and accountability

Finally, the state budget bill contains policies that address post-secondary readiness and accountability. These changes are more of mixed bag—though, note that separately enacted legislation on school report cards made significant improvements in that area.

• In a disappointing move, HB 110 removes a requirement that students achieve passing scores on science, U.S. history, and American government state exams to earn credit towards meeting the “seals” part of Ohio’s graduation standards. Instead, the bill now allows students to replace their exam scores with course grades.

• Creates an off-ramp for the three districts currently being overseen by academic distress commissions (ADCs), Ohio’s intervention system for low-performing school districts. HB 110 requires ADC districts to create an improvement plan, removes the chief executive officer appointee under the current ADC law, and reverts managerial control to the local school board. Should ADC districts meet the majority of the targets in their improvement plans after three years, the oversight commissions are entirely dissolved.

• Allows for changes to eligibility rules for College Credit Plus, the state’s dual-enrollment program. Under current law, students must either (1) achieve a remediation free score or (2) achieve a score within one standard error of it, plus meet GPA or recommendation requirements, to participate. HB 110 eliminates the second criteria and instead authorizes the chancellor of higher education to create new alternative eligibility rules. It’s not yet known what those will be, but it’ll be keeping watch on this issue in the coming months.

• Ending on a positive note, supports the attainment of industry-recognized credentials. In his proposal, Governor DeWine budgeted $20.5 million per year to reimburse schools when students earn industry credentials. To their credit, legislators approved those funds in the final spending plan.

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As you can tell, K–12 education was a focal point in this year’s state budget debates. In many areas—particularly in the realm of educational choice—lawmakers took great strides forward. In other areas, they left open questions about what’ll happen next, most notably in the area of the school funding formula. Regrettably, we must express our chagrin for easing up on graduation standards. Nevertheless, much has been accomplished on behalf of Ohio’s parents and students—and there’s more work ahead. Onward!