Ohio’s state budget yields a mixed bag on education funding

Update (7/1/25): Of the items discussed here, Governor DeWine vetoed the nonchartered private school ESA and several property tax proposals.

Author’s note (6/30/25): As of the posting of this piece, Governor DeWine had not yet weighed in with any vetoes. Any relevant vetoes will be noted in an update at the top of this piece.

Last week, Ohio lawmakers put finishing touches on the biennial state budget for FY26 and FY27. As usual, education issues were front and center. This iteration, lawmakers focused much of their attention on fiscal-related matters, most notably the school funding formula (which distributes state aid to districts and charter schools), as well as local property taxes, which provide billions more for school districts.

In the end, lawmakers crafted a rather fiscally conservative budget, including a sizeable income tax cut and reforms that help address concerns about rising local property taxes. Increases in state spending overall, and in K–12 education specifically, were relatively modest. This piece offers takeaways, largely focusing on funding issues (future posts will dive into other education policy areas).

1. Public school funding ticks upward, but with some significant belt tightening

The last state budget featured hefty increases in public school funding, both for traditional districts and charter schools, as well as additional funding to support private-school choice. While this budget didn’t ratchet back funding—contrary to the left-leaning media narrative—growth in state funding for K–12 education slowed this time around. Overall public school funding is projected to increase by 4 percent over the biennium (compared to just over 10 percent in the previous budget). Despite substantial enrollment declines in recent years, traditional districts receive more state aid, as their funding goes up 2.4 percent from FY25 to FY27. The faster-growing charter and JVSD (career-tech) sectors receive larger increases of 10.1 and 14.0 percent, respectively (in real dollars, not on a per-pupil basis).

Table 1: State foundation funding for public schools, FY25 (current) to FY27 (projected)

2. Lawmakers put the school funding formula on a more sustainable track

In 2021, Ohio lawmakers enacted the politically popular but very expensive Cupp-Patterson school funding formula. With state coffers overflowing during the first years of implementation, lawmakers were able to sign-off on its exorbitant expense. But with the Covid era of fiscal largesse ending, lawmakers began to question the model’s sustainability. After much back and forth, the budget bill generally keeps in place the formula and fully phases it in yet also takes important steps to improve its functioning and sustainability. Here’s how:

• Reasserts legislative control over formula costs: The General Assembly has the power of the purse, i.e., the ability to maintain control over appropriations, a large one of which is school funding. The Cupp-Patterson plan erodes that authority through a structure that prescribes formula amounts based on “inputs” that are outside the realm of legislative control (e.g., teacher salaries dependent on local decision making). Despite strong lobbying efforts from school groups to “update the inputs”—a move with a hefty price tag—the legislature decided to hold the inputs constant, opting instead to provide small per-pupil supplement of $27 and $40 per pupil to all public schools statewide in FY26 and FY27, respectively. This decision constrains formula costs and signals a more assertive legislative role moving forward in determining the rate of funding growth.

• Begins an overhaul of disadvantaged pupil impact aid (DPIA): The legislature wisely approved a Senate proposal to phase in an improved method of identifying low-income students (direct certification) to allocate supplemental funds supporting their education. Incorporating these more accurate data will improve DPIA allocations. However, the work is still unfinished. Future lawmakers will need to fully phase in direct-certification numbers and increase the DPIA base per-pupil amount to ensure the element works as intended and low-income students receive the resources they need for success.

• Takes baby steps toward sunsetting “guarantees”: Guarantees are subsidies that shield districts from funding reductions that would otherwise occur if the formula were strictly followed. In practice, the persistent use of guarantees means that Ohio funds a number of “phantom students” or “empty desks,” as guarantees prop up districts that lose enrollment (they also send excess aid to districts that are growing wealthier). After much debate, the legislature did two smallish things in this area: (1) repealed a relatively modest ($53 million/year) guarantee-like component known as supplemental targeted assistance and (2) held steady the system’s main guarantees’ “base” years, which are currently FY20 and FY21. As discussed here, maintaining a longer “lookback” helps phase out guarantees faster than updating the baseline to a more recent year, as some had proposed in the budget process. While not nearly as aggressive as they should have been, lawmakers did push the issue to the forefront of the debate and took some measures to unwind guarantees.

3. The push for equitable charter funding loses steam

After a promising start in the governor’s budget, the final bill landed with a surprising thud for charter schools. While state funding for charters will rise modestly in the next biennium, in both absolute dollars and per-pupil, it will be due to the increases in their general formula aid (table 1), not via greater investment in key supplemental elements that are crucial to closing the charter funding gap. As of FY24, high-performing charters receive about 10 percent less total funding per-pupil than their local districts; other charters receive about 30 percent less.

The following describes where the legislature came out on three charter-specific components:

• High-quality charter funding: Maintains current per-pupil funding amounts ($3,000 per economically disadvantaged pupil, $2,250 per non-disadvantaged). The budget bill, in general, upholds a high performance bar to qualify but slightly modifies the criteria in ways that will allow some more schools to become eligible. The per-pupil amounts are subject to reductions to fit the line-item appropriation, should more schools qualify for the program than expected.

• Charter facilities allowance: This program will be flat-funded at $1,000 per pupil. It was incredibly disappointing to see the legislature scale back the governor’s proposed increase to $1,500 per pupil, a boost that would have helped charters cover more of their building expenses.

• Charter equity supplement: In another disappointment, lawmakers cut funding for this program. Instead of $650 per pupil equity supplement as of FY25, charters will receive just $500 and $400 per pupil in FY26 and FY27.

Taken together, the dialing back of these elements means that the average charter funding gap won’t budge very much. Regrettably, charter students, by virtue of their choice in school, will continue to get the short end of the funding stick.

4. A mix of steps forward, steps backward on other funding-related issues

Here’s how the legislature landed on funding several other notable programs and initiatives:

• Private school scholarships: Legislators flat-funded the EdChoice and Cleveland scholarship amounts, which are tied to the average base-per-pupil funding for public schools. Since the base doesn’t go up, those scholarship amounts remain unchanged. The legislature, however, did increase the Autism and Jon Peterson special-needs scholarships by roughly 5 percent.

• Nonchartered, nonpublic school ESA: At the cost of an estimated $35 million per year, lawmakers created an educational savings account (ESA) program for parents with children attending “nonchartered” private schools, which cannot accept EdChoice scholarships because they choose not to be “chartered” by the state. The ESAs will be worth 75 percent of the EdChoice amount, and homeschoolers are ineligible for an ESA (though their parents can receive a state tax credit). There are many details in the budget bill about how the ESA is supposed to work—it does include, for instance, a testing and reporting requirement—and it will be interesting to track program implementation in the years ahead.

• Literacy coaches: The governor proposed a $12 million per year earmark for coaches that support schools implementing the Science of Reading. To their credit, lawmakers signed off on the request, and the state will continue to support literacy coaches who work in the state’s lowest-performing schools.

• Industry recognized credentials: The governor proposed $16 million per year for the Innovative Workforce Incentive Program (IWIP), which provides schools reimbursements when students earn a high-priority, in-demand industry credential. The legislature wisely approved that funding amount. Also in the area of credentials, the legislature followed the governor’s lead by repealing a $5.5 million per year test-fee reimbursement program that applied to any credential, many of which are of minimal value to students and employers.

• Career awareness and exploration funds: Currently, $16 million per year is allocated to support career exploration opportunities across grades K–12 such as job shadowing, career counseling, or a job exploration course. The governor proposed to maintain that funding level, but the legislature scaled back that amount to just $5 million per year. That reduction will unfortunately make strong career-connecting learning less common in Ohio.

• Property taxes: In response to citizen concerns about recent tax hikes, the legislature responded with a package of reforms aimed at taming property taxes. In general, while these reforms may not give most Ohioans immediate property tax relief,[1] they should create a more transparent and even playing field between districts seeking revenue and citizens being asked to vote on tax measures. Proposals, discussed in this piece, regarding emergency and replacement levies were approved in the final budget.

If anything, this budget was a stark reminder that the days of money raining from Washington and Columbus are over. While the state continues to invest heavily in K–12 education, the school system must return to more normal budgeting routines. Can school leaders adjust in ways that keep student achievement afloat—and even boost it—by stretching their school dollar? That’s the multi-billion-dollar question that matters most for Ohio students.