NOTE: On Monday, March 1, 2021, members of the House Finance Subcommittee on Primary and Secondary Education heard testimony on House Bill 1, which would create a new school funding system for Ohio. Chad L. Aldis, Fordham’s Vice President for Ohio Policy, gave interested party testimony before the subcommittee. These are his written remarks.
Thank you, Chair Richardson, Ranking Member Troy, and House Finance Subcommittee on Primary and Secondary Education members, for giving me the opportunity to provide interested party testimony today on House Bill 1.
My name is Chad Aldis, and I am the Vice President for Ohio Policy at the Thomas B. Fordham Institute. The Fordham Institute is an education-focused nonprofit that conducts research, analysis, and policy advocacy with offices in Columbus, Dayton, and Washington, D.C. Our Dayton office, through the affiliated Thomas B. Fordham Foundation, is also a charter school sponsor.
The Fordham Institute has long advocated for reforms that put Ohio students and parents at the center of school funding policy. We strongly support principles such as “funds following students” to the schools in which they actually attend, and “weighted student funding,” in which extra resources are devoted, for example, to low-income, special-education, and English language learning students.
The plan before you in HB 1 proposes some important improvements that would better align Ohio’s funding system with these core principles. We strongly support the following aspects of the plan:
- Funding all school districts via the funding formula, instead of through caps and guarantees. A good funding formula drives resources to the places that most need state support. Ensuring that the formula is actually being used to determine funding amounts is critical to a fair, well-functioning system. While this is a stated goal of the system being proposed in HB 1, it does appear to maintain guarantees through its use of targeted assistance dollars when district residents use a non-district education option and by providing temporary transitional aid to districts based on funding levels from three years prior.
- Increasing the funding for economically disadvantaged students. To its credit, Ohio has long recognized the additional costs of supporting low-income students, and the funding plan in HB 1 builds upon this system by increasing the categorical amounts for disadvantaged students. This is a really important change. We urge the House to go a step further and base the count of low-income students—currently exaggerated by the use of Community Eligibility Provisions to distribute more free lunches—on direct certification of students based on participation in other assistance programs. This shift would better target dollars to the neediest students and might even allow an increase in the $422 base amount for economically disadvantaged students.
- Funding schools of choice directly rather than through a “pass-through” method, whereby charter and voucher students are first counted in their home district and then funds designated for their education are deducted. Moving away from the current model would be a step in the right direction, but as I’ll discuss in more detail later the shift must be done with utmost care.
Of course, there is always room for improvement, especially with something as complicated as a school funding plan. Here are a couple of concerns that we have:
- Uncertainty about a funding source. Even with a proposed six-year phase-in, the $2 billion per year sticker price (more, according to some estimates) will be a heavy lift for future General Assemblies. Is it fair to kick that can down the road to future lawmakers? Will they be pressured to raise taxes to fully implement the plan? If so, which ones? Will funding need to be cut for other programs? Again, which ones? If legislators are unable to fully fund the significant outlays demanded under this proposal, will they be accused of failing to properly fund Ohio schools? Could the state be subject to another round of school funding lawsuits because this plan sets a specific cost for educating a student and then doesn’t meet it? The Ohio Constitution doesn’t appear to allow for “phase-ins” of a constitutional funding system.
- Interdistrict open enrollment. While the plan’s approach to funding students based on where they attend school is commendable, it should not create disincentives for districts to accept non-resident students. It appears that wealthier districts will be heavily disincentivized from participating in open enrollment and providing important opportunities to students from higher poverty districts. This could reduce the already limited options available to families in some areas. We suggest either retaining the current funding structure for open enrollment or developing an alternative calculation methodology as appears to have been done for some career and technical centers.
As for charter schools, we’ve written extensively on the large shortfalls, relative to their local district, that they face in terms of overall taxpayer funding. Despite educating children of similar backgrounds, brick-and-mortar charters in the Ohio Eight receive on average about $4,000 per-pupil less than their local district. The discrepancy is due to the fact that local funding, with limited exceptions, does not follow students to charter schools.
As a matter of fairness to charter students—most of whom come from low-income families or are students of color—the state should work towards funding equity for charters. While HB 1 improves upon the initial version of the plan that was in HB 305, the treatment of public charter schools remains concerning. On a positive note, recent estimates indicate that Ohio Eight charters would see an average funding increase of $1,389 per pupil under this plan. This is a step in the right direction. Unfortunately, the plan does not narrow funding gaps between Ohio’s urban charters and urban districts. Because the average funding for Ohio Eight districts increases $1,713 per pupil, the funding gap actually grows.
This inequity puts charters at a tremendous disadvantage relative to their nearby districts in competing for talented teachers and offering comparable academic and non-academic supports. Also worth noting is the relatively small increases that general-education charter high schools would see under the proposal, often below $1,000 per pupil. One of the state’s finest urban high schools—Dayton Early College Academy (DECA)—actually loses $82 per student under the plan.
Leveling the playing field between charters and districts is a heavy lift, but the following tweaks to the funding plan would improve equity for charters:
- Calculate charters’ base costs in exactly the same way as districts. To its credit, the updated plan generally moves charters into the same base-cost model as districts. But, without any obvious policy rationale, it doesn’t provide full base amounts in three of the cost components. It also appears to exempt charter schools from some minimums when determining the number of special teachers funded. If the plan has indeed captured the costs of educating a student, it should apply to charters just as it does to districts.
- Revisit the base cost model for operating high schools. The base cost model calls for fewer teachers per student in grades 9-12, hence lowering the assumed costs. Such an approach might be okay for entire districts, which can redistribute centralized resources to high schools, but it could hurt standalone high schools that often face higher costs. For instance, high schools may need to purchase expensive science equipment, pay higher salaries to attract teachers, fund extracurriculars and athletics, and offer college and career counseling. Though it could further increase the plan’s price tag, it may be worth reviewing the cost assumptions for standalone high schools.
- Incorporate the recently enacted supplemental funding program for quality charters. With the backing of Governor DeWine, this $30-million-per-year initiative—increased to $54 million per year in the Executive Budget—provides up to an additional $1,750 per economically disadvantaged student to charters that qualify based on academic performance. These dollars help narrow funding gaps, provide extra resources that enable charters to serve more students, and make Ohio a more attractive locale for excellent national charter networks. HB 1 should include—and add to permanent law—this valuable charter funding initiative.
Finally, we recommend several changes to HB 1 to ensure that charters are treated fairly over the long term. They are as follows:
- Ensure charters are not subject to a line-item appropriation. In any move to directly fund charters, a concept that we support, clear statutory language must be used to ensure charters are funded through the main, multi-billion-dollar K–12 education appropriation in the state budget. HB 1 is a big improvement from HB 305 in this regard, but more can still be done. This could be accomplished by creating a new section that parallels existing statutory language used to fund school districts and joint vocational districts. In short, charters should never be funded via a line item that exposes them to unilateral budget cuts or a targeted veto.
- Remove language that calls for a study of charter school costs. The developers of this funding model have asserted that it captures the costs of educating a typical student. That model applies to all Ohio districts, large and small, urban and rural. If that model works for districts, why wouldn’t it apply to charters?
- Ensure charter representation on a School Funding Oversight Commission. The latest version of House Bill 1 calls for a commission that would make recommendations about how to adjust the formula in the years to come. Despite a rather large commission, charters would not be represented. If such a commission is deemed necessary, charters should have a seat at the table.
As a final note, you’ve probably noticed that my testimony doesn’t describe the current school funding system as unconstitutional. There’s a good reason for that. In a paper that we published in December, we think the scope of the legislative changes since DeRolph have given Ohio a fundamentally different school funding system than the Court examined in that landmark case. Assumptions that the current system is unconstitutional are just that—assumptions. That being said, we share the bill authors’ belief that the current funding system can and should be improved.
In conclusion, we believe that House Bill 1 has important strengths that would significantly improve the state’s funding system. Yet uncertainties remain around financing the plan’s costs and its approach to funding public charter schools. Thank you for the opportunity to provide testimony.