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- [00:02]
A
You're listening to asbo international's school business insider. I'm your host, john brucato. Each week on School Business Insider, I sit down with school business officials and industry experts from around the world to share their stories and explore the topics that matter most to you. Find out what it means to be a school business official and get your insider pass on all things school business. Hello, everyone, and welcome back to School Business Insider. Today's episode tackles one of the most complex and consequential challenges facing school business officials. The intersection of property taxes, state funding formulas, and the growing expansion of school choice policies. Today, I am joined by Dr. Eric Rauch, executive Director of Financial affairs for Columbus City Schools, to discuss the evolving fiscal landscape in Ohio. We'll explore proposed property tax reforms, including a constitutional amendment, effort to repeal property taxes outright, ongoing struggles to fully fund the state school funding formula, and the broader implications of policies that shift more funding towards school choice while increasing operational pressures on public districts. This is a candid, policy grounded conversation about financial sustainability, political realities, and the daily challenge of keeping a large urban district running amid constant change. Eric, welcome back to the podcast, my friend. It's good to see you.
- [01:32]
B
Good to see you. Thanks for having me on. Yeah.
- [01:35]
A
So we have a lot to talk about and just when I was reading the intro, negating property taxes altogether is a whole thing I want to unpack with you because as a New York school district, we are heavily, heavily dependent on taxes. But before we get too much into that, just give us a high level overview of Ohio's fiscal landscape. What are really your current financial and political climate challenges for public school districts?
- [02:00]
B
Some of the challenges that we're certainly seeing in Ohio right now is what I'll say. It's really been a constant drumbeat against public ed. It feels like now, whether that's the intent, whether that's the intention of folks in the General assembly or not, it certainly feels like that sometimes there's a lot of bills just coming back at us, upending, I'd say 50 years of how we do things, how we really have looked at funding education, particularly in the property tax realm. Ohio is kind of unique, I think, among states in that we have what they call a rollback provision. So we don't ever really collect what we vote on. In, in Ohio, it actually where a lot of states get a little bit of growth as property tax values go in, we get very, very little growth.
- [02:51]
A
Interesting.
- [02:53]
B
Most of it, most of it by. By virtue of a constitutional amendment. If you think of it this way, Whatever your property taxes kind of generated five years ago, that's essentially what those levies are generating today. So we've got levies going back to the 70s that are generating very little at this point, even though the millage on paper may look high.
- [03:12]
A
So you, as a, as a taxing authority, as a school district, you're locked into that historic rate.
- [03:17]
B
Yeah, that's correct.
- [03:19]
A
Wow. And so is there. Well, you know, I guess we can go down many rabbit holes, but. So it's just so fascinating to me. Was that just a legislative priority one year and just locked everybody in or what. What are kind of the. The guardrails and the boundaries around that? Because it sounds like being locked into a funding mechanism from decades ago really isn't helping you out today.
- [03:40]
B
So 50 years ago, I think we saw something like we're seeing today. There were record property valuations going up. Folks were clamoring about how property taxes were high. And this was the solution that was generated at the time. It was initially a legislative fix, which is why in Ohio, if you hear Ohio folks talk, they talk about House Bill 920, because that was the legislation they put into place. And then a couple years later, they enshrined it in the Constitution, essentially. What, what it does is exactly what I said. It kind of locks in that local property taxation at whatever you kind of pass it at, and you don't see any growth on that. We have what they call inside mills in Ohio where we get a. It's usually about. Depends on the school district, but, you know, anywhere from probably about 3 to 4 or 5 mills, those were allowed to continue to grow because they're under kind of a different constitutional section. But if you do, I guess I should qualify this. If you do fixed rate levies, then you're kind of capped in the growth. So what the General assembly did a number of years later, I think in the early 80s, so this all happened like in the mid 70s. So then in about the early 80s, they went ahead and passed legislation that allowed school districts to have, I'll call them just fixed some levies. We unfortunately, in Ohio call them emergency levies, even though they may not really be for emergency purposes. Purposes, as some may think of what an emergency is. That misnomer or that nomenclature is what's caused a lot of confusion at the General assembly right now. But those are exempt from that calculation. So what you saw from a lot that a lot of districts have done over these last few decades is kind of move off of the fixed rate levy and Move to these fixed sum levies because they don't count towards that growth. And what's interesting, I'm going probably way too deep for folks.
- [05:24]
A
No, I love it. Who cares about who's listening? I'm really fascinated.
- [05:27]
B
All right, let's keep talking. I love this. You know, there's another provision that says that school districts have to generate 20. They have to basically generate 20 mil. They call it the 20 mil floor. We have to pay for 2% in order to get state revenue. We have to account for 2. We got to kick in 2%. Right? So 20 mils because of that provision. That is the workaround. Then using that on top of fixed rate or fix some levies, then you actually can get growth on your property taxes. So fast forward to now where we've seen this post coveted surge in property tax valuations in Ohio as well as other places in the country. And what you see are school districts that typically, you know, we're seeing perhaps some growth, you know, some modicum of growth, maybe the 6 or 7% range, we're suddenly jumping 20 some percent because they have to, they have to, to bump back up and get to the 20 mils. And if all these levies don't count towards that calculation, that math problem and the math problem, then that rate, that, that growth actually does come in. And so then property owners are going, wait, I'm getting hit with, you know, these, these 20% increases. And so they're then clamoring. And that is, I think, also where, as you mentioned earlier, we're getting to this citizens initiative to outright repeal property taxes. At this point, those folks are just that frustrated. What's interesting is a lot of school districts over the years have caught on to this kind of, you know, it's the vagaries of the system that that's been created. They've worked to take advantage of this. And so, so what's happened now is that about 3/4 of the districts in Ohio are on this, what they call the 20 mil floor, which then spread a lot of legislative activity here recently in part because taxpayers are clamoring about the large tax increases. The General assembly is trying to figure out some way to do something to head off this constitutional ballot initiative which has now led to different pieces of legislation that are caught and cause even more confusion going forward. You can stop me at any time. I'm just enjoying talking about this.
- [07:36]
A
I'm just curious. I mean, even for me, having been doing this over a decade as an outsider to Ohio and having a lot of Experience with local tax levies and formulas and things like this. This is complicated. So how do you even approach explaining the issue and maybe even some potential solutions you and your colleagues have come up with to not only the taxpayer, but legislators? Because I'm assuming that the taxpayers probably don't have a strong understanding of all of these nuances. They're just feeling it in their pockets every year when taxes are increasing. So they're banging the doors of the legislators saying, you have to do something. The legislators probably have a better working knowledge of it. But it's just so complex. What is your approach? To kind of thread the needle between explaining what the issue is and maybe reaching resolution that doesn't completely blow up public education?
- [08:31]
B
That's a great question. I think, first of all, the assumption that most members of the General assembly understand it better than the normal taxpayer perhaps is a little generous just because, I mean, it is so complex. And unfortunately, Ohio has term limits, so you get a lot of new legislators coming in, I'd say. So you have some folks who have a better understanding of it than others. What's made it challenging for us is that these are the same folks we have to go, you know, is their taxes going up? These are the same people we have to go and ask for levies from going forward. It makes it. It's a very kind of touchy situation.
- [09:07]
A
Sorry to interrupt. When you say, ask, do they have to formally vote on any proposed increase
- [09:12]
B
in Ohio in order for. In order to levy additional taxes, you have to go back to the taxpayers and they. They have to pass. They have to pass that by a majority vote. One of the lovely bills that have been introduced, I think this GA, I think last GA, was to increase that threshold to 60% of the electorate in order to pass a tax levy. Thankfully, that has not gone anywhere and doesn't seem to be gaining a lot of momentum. But you never know.
- [09:39]
A
It sounds very similar to New York because. And similarly, we have to go out to vote every year on our budget. But that usually implies some kind of tax increase. Not all the time, but we have what's called the tax levy limit formula, which I think hell has frozen over because I feel like I have a new appreciation for it when talking to you and the complexities of Ohio's different nuanced pieces of your levying power or lack thereof. So we have a whole calculation. I used to say it was complex, and now talking to you, it seems pretty straightforward. But essentially we run a few important numbers, including some growth numbers and valuations into this formula, and then that's kind of our ceiling. And so we can go to the voters for a simple majority. If we don't breach that ceiling, if we pierce this tax cap, then we have to seek that 60% super majority vote. So, you know, this is somewhat like ptsd. Everything that you're kind of up against, because we've had to go through that in New York and that was implemented in 2011, I think similarly, because you're seeing double digit tax percentage increases, then you know, taxpayers are just kind of fed up. So that was the solution. But yours is just so much more complex. There's different, it sounds like different streams and different emergency authorizations that may not be emergencies anymore.
- [11:03]
B
And what's interesting, even though we call it an emergency levy, it still has to go to the ballot. It still has to be voted on by the electors in that school district. I kind of am envious. At least you can get some growth. I'm glad I don't have to take a budget every year because that could be, you know, I don't have to do that at least.
- [11:19]
A
Yeah, pick your poison, I guess, right?
- [11:20]
B
I pick your poison. You have to do that. I don't have to do that, but anytime I need any new money at all, we've got to go back to the ballot.
- [11:27]
A
Yeah.
- [11:28]
B
And while the fixed, the fixed rate levies that you have, you can do them for a period of different years, you can also do them continuous. In Columbus city schools, we've chosen the continuous route. The levies stay on in perpetuity. Any of those fixed rate or emergency levies, they have to be for a period of time, usually about five or 10 years is what most people put them. But they are fixed, they sunset, which means that they roll off the rolls, which means in order to just even keep the money you're bringing in, you got to go back to the voters and hope that they give you the authorization again.
- [12:00]
A
And is that authorization, you say it's fixed. Is that a flat dollar amount for, let's say, five years? Or can you build in CPI increases or something like that? 15 million.
- [12:09]
B
$15 million a year for five. For five years. And so it will generate 15 million for those five years. And that will go into. It doesn't, it doesn't vary. It's just a fixed rate. It's just that kind of like what you would almost need for like a bond issuance.
- [12:23]
A
Yeah, yeah. But you're saying, though, so after that five years or whatever expires, the community or that can claw that back and then you're, you're 15 million in the hole.
- [12:32]
B
Correct. Wow. So if that levy fails, the money's gone, it evaporates. Wow. So it can be, it can be disconcerting for school business officials in Ohio now, usually what they'll call a, you know, usually to go ahead and either do it is you know, to put that back on. If you message that to the community, look, you've been paying for $15 million. We're asking for 15 million. Again, most of the time the community is usually supportive of that because it really isn't changing. It's not changing their day to day lives. And so those have been a little bit easier to pass. Unfortunately now the General assembly has made it more difficult. They've in fact essentially almost done away with those going forward. So you're not gonna be able to use that as a tool anymore. There are a couple they put some stipulations on when you can use them. You can only do it. I think for one, you only do a 15 year shot at point. Instead of kind of being able to keep going back again and again and again, they're moving everybody to these fixed rate levies again so that as you do a fixed rate levy, then those reduction factors come into play so you don't get to continue to generate additional money.
- [13:48]
A
So excuse my ignorance, but if you have that fixed rate levy and you're locked in for five years, but maybe your costs escalate faster than what you had anticipated. Are those other avenues, those other emergency mail rates and things like that, are those other opportunities to garner additional revenue if you need it?
- [14:05]
B
Now at this point going forward based on some changes made now, you can only get the emergency if essentially, you know, ode, our department of Education or the Auditor State here has kind of said you're getting close to fiscal distress. Other than that, you got to go back for another fixed, you got to go back for a different fixed rate levy. You can do an income tax. In Ohio, we are allowed to do income taxes, which I don't think a lot of other states allow. So that is an option that exists and actually plays fairly well in rural parts of Ohio because oftentimes farmers are property rich and income poor, as they sometimes say. So they do well in rural areas. But I think you're going to see more and more folks shift to the income tax just given the way they've made it more challenging for school districts to really go forward with property tax levies that A, makes sense and B, there's such a hostility towards property taxes. Right now the income tax levy may be an easier selling point. We had a school district here, locally, one of our suburban districts failed their property tax levy a couple times, but then was able to put an income tax levy on the ballot in that passed and they did so despite organized opposition, including one of their local members at the General Assembly. But they were able to pass that with a pretty decent sized percentage.
- [15:29]
A
And if you adopt one of the fixed rate levies, let's say again, it's for five years, you're three years in. Can you go out before that five year expiration if you need additional funds, I mean where the community.
- [15:41]
B
It's a new levy at that point you're putting a new levy out there is how that works. So for instance, all of ours are continuing. So they exist. I've got levies on our books going back to the 70s and 80s. What happens is it. It was voted on for say here's a great example. I'll use a very current example to kind of put in better perspective. We went out in 2023. So just three short years ago, less than three years ago, went to the November ballot for 7.7 mills part PI, part operating because it was a reappraisal year. And in Ohio we do full reappraisals every six years and do an update every three. Three. So every three years those, those, those property valuations will, will typically increase, you know, 2008 time frame notwithstanding, you'll. That's when those increases are effectuated. So because that was a, a reappraisal year and, and because we went for the, we went for the 7.7 mils, they applied the reduction factor before we collected a cent. And so we voted on 7.7 and we collect like 5.3 something 5.3 and change. Never collected the full 7.7. We'll do a triennial update this year and that 7.7 mil levy will probably generate, I'm going to guess at this point somewhere in the 4 mil range. 4 plus. Wow. That's how that reduction factor works. So it's on paper. It's one thing. What you actually bring in is another because that 7.7 was going to generate we'll say, you know, $100 million in 2023. So whatever it takes to generate that hundred million dollars in 2027 will be what the millage is and they just adjust it accordingly.
- [17:29]
A
So are you kind of introducing, I don't say artificially inflated mill rate, but you have a certain number that you need to meet in your revenue budget. So are you, if it was apples to apples, it would be a much more palatable number for the community. So are you having to kind of project out and levy at a higher mill rate than I guess truly what you would need because of that reduction
- [17:50]
B
factor that is a method by which to go at it? Yes, certainly to do that. What we typically when we did that, we knew what the millage was going to generate and at the time that was going to be sufficient to get us where we needed to go. That kind of leads into the fact that the state didn't necessarily follow through the way it needed to on its state, on it, on its state funding formula. So that in addition to that being a big reason there, you know, the millage wasn't sufficient to kind of go forward. And so even now as we're looking, if we start planning for another levy, we'll work with, we'll work with. But you know, usually our municipal advisor, we use Baker Tilly, we'll work with them and start to calculate, okay, what is, what's our current, you know, valuation, what's our property valuation now? Okay, what do we think it's going to be when we go to the, you know, you start to try to really run scenarios what we think we, what millage we may need to generate to get us over the hump and then we actually project that, you know, we, you know, we run models here about 10 years out. Typically you hope your levy lasts you four to five years. If you're doing pretty well. We're probably going to be on about the four year cycle, maybe get five out of it depending on how things are going. But it means you reduce money in the interim, you have to make reduction. So it's right, you know, the options here are probably similar to what they are in other states. And you know, my previous boss used to say, he likened it kind of what Woody Hayes said about before would pass. There's three outcomes and two of them aren't great. Same thing typically with what we're, same things what we're doing here. You know, you either cut, you raise taxes or you do a combination of the two. So that, that cutting in both scenarios or the, the outcome you really don't want to try to do. So yes, we have to then go back to the ballot more frequently. You know, we, we had, we have a researcher in Ohio and he, he estimated that if we were even just allowed to get inflationary growth on our property tax levy, if they had just allowed inflationary growth, you would not have seen this huge influx of levies that we do. There are hundreds of levies on the ballot every year in Ohio. Wow. And we're not the only taxing jurisdiction asking for money. There's a lot of others, probably as there are in other states. You've got children's services levies, you've got, you know, area agency on aging levies, there's zoo levies, there's park levies, there's ambulance and fire and police that are all also up oftentimes for property tax levies. And so which is why this property tax abolishment has got a lot of folks very, very nervous in Ohio right now.
- [20:42]
A
And I do want to get to that, but is there, I guess it's more of an anecdotal question, but when you are in your day to day, you're speaking with your colleagues across the state, is that the sentiment statewide? Are you seeing more opposition to these levies and maybe more affluent areas that have higher home valuations and maybe feeling the pinch a little bit more? Is it just kind of spread across the board?
- [21:06]
B
I think I'll often say it's hit or miss and part of it depends on the story that you can tell. Right. I think the story, if you can tell a compelling narrative, you can give a compelling narrative to your community, you have a higher opportunity potentially pass. Now, again, if it's, if it's that situation I mentioned earlier where I've been levying $15 million in levies and I'm asking for 15 million again, I'm already paying it. Yeah, I'll go ahead and do that. And if I, if I can convey what you're getting, here's the academic program you're getting and if we don't have this, this is what the cuts will be. I think that the extent you can really tell that compelling story with your, within your community, that helps a lot. That doesn't mean it always helps because sometimes you can have a great narrative and the folks in the community are like, I just can't afford anymore. I just can't, I can't put any more at it or I'm hurting in these other areas, I'll take that little bit of money, I get the property tax back to help me. Sometimes it's the mix of it. Right. If you've got a decent industrial commercial base, that helps a lot too, because you don't necessarily need to maybe ask for as much as if you're just primarily a bedroom community. Right. And so the story changes too, because Obviously, the companies aren't voting and the folks that are, you know, I've got a pretty high property commercial base here, but I also have a number of folks in the, in the community where the median, median home value and the median income is a lot lower than a lot of my, a lot of the surrounding suburban areas.
- [22:38]
A
Right. So let's talk a little bit about this potential repeal of property taxes altogether. So can you walk me through what this amendment is on the ballot and what would that really mean for school districts across Ohio?
- [22:53]
B
So thankfully or not thankfully, dependent on. I'll say thankfully right now it's not on the ballot. What makes us all nervous is that it's not, but it still could be. So we're kind of in this, that we're walking on eggshells. We're in this period of really, will they, won't they do it? They have the ability. Citizens can put a. Can put together a petition drive. They need, I think, 413,000 signatures, valid signatures. They need to have those from 44, from the 88 counties in Ohio. They've got to be validated. And they've got until sometime in early August, late July, early August to get those certified and to get the initiative put on the ballot. And it's a real simple amendment. It just says there shall be no levy, no taxes on property in Ohio. A lot of Ohio districts are paid primarily from property taxes. I mean, that's just the way the system's set up. I'd say probably all of them are primarily paid from property taxes. There are some that may be getting a little bit more state aid, but still a significant amount of money that they're generating is coming from property tax taxes. And so you're going to lose that overnight. That's going to go away if we can't levy property taxes. It's a real problem in that that major funding source and our school district alone is about 80%. We're not. That's not something you're going to make up overnight. Even if we're given the time to try to put something else in place. You know, the state has run different numbers. The Office of Budget Management in Ohio has estimated Ohio probably would have to put like about an 18% sales tax on in order to make up if property taxes went away.
- [24:32]
A
So you're saying 80% of your revenue could potentially be in jeopardy.
- [24:36]
B
80% could go away. It becomes, I mean, those are existential discussions at that point. Never mind the fact that I think that, you know, we've got a lot of taxing jurisdiction in Ohio. And last I heard, somewhere between, I think 10 and 20 billion dollars of secured debt are coming from property taxes. So if there's suddenly no means to pay that debt, I don't want to even know what that does into the, into the bond markets.
- [25:04]
A
Ohio becomes insolvent.
- [25:05]
B
And then a lot of these, you know, the state in state, I think, who's going to pick up all of the, all of the, all that debt? And Ohio is limited by its constitution, how much debt it can pick up. So there's gonna be a lot of parts and pieces that are gonna fall apart. Part of my fear is that if it collapses, we could very well drive the country into a recession. Cause all those bonds overnight, there's no means to pay for them at that point. I know that. I'm sure that my 403 and 457 plans are probably holding on to some of those in addition to probably some other portfolios that folks own at home. And it's like, what's that going to mean to the market suddenly when billions of dollars dry up overnight?
- [25:55]
A
So is this potential bailout measure, in your experience, and maybe you reading the tea leaves, is this more kind of just political chest pounding and just drumming up support, or is this a legitimate. This is, you know, legislators have signaled like, no, we, we're getting rid of taxes. This isn't just a political move.
- [26:14]
B
So the plus side is that I'll say that the political powers that be in the state and I'll say the general assembly, the statewide elected, like the governor, the chamber of commerce, union groups, a lot of these folks are like, this is not a good idea. Everybody don't just outright do this. The scary thing is that when you talk to people and you look at poll numbers, people love poll the way that sounds. They say, do you hate property taxes and your property. You see your property tax bill go up and you're like, yeah, I hate property taxes. Or, you know, did you know, you know, you may own your home outright, but you're still paying taxes on it every year. And then if you don't pay, then, then the government can go ahead and put a lien on your. You know, those are all things that, that resonate with people and people and it's a simple message. I don't like taxes. Just vote to get rid of them. If you're explaining, you're losing. And when we have to start explaining, it becomes a little more challenging. So the concern is less politically what the powers. I guess it's not Necessarily a legislative push. In fact, I think the legislature is really nervous because if all that dries up, constitutionally, they're on the hook to continue to pay for education with no local share in sight. So they're going to have to come up with money really quickly as well to then backfill. Now, the interesting thing is based on the funding formulas written today, while it's great to backfill some of that, it's still going to leave most school districts woefully short, and you're going to have cuts in some of the areas of Ohio, the school district's the largest employer. So this ripple effect is going to be very problematic. So it's this grassroots initiative and the fact that their message is very simple. And when polled or when people have done, you know, actually looked at the question, it does very, very well. It's like picking up 60, 70% of folks are saying, yeah, let's get rid of property taxes. Now if you start explaining what the outcome of that is, maybe that number will go down. But boy, that's a very, it's a very dangerous gamble.
- [28:19]
A
So how are you budgeting now and projecting? Are you phasing from the possible to the probable end of the spectrum? Is this something that you seriously need to consider or is it still a little too early to tell if this is if 80% of your revenue is going to evaporate in a couple of years?
- [28:35]
B
Well, it's, it's, it's really too early to tell. I mean, it's not even, it's talked about. It's being a lot of things get talked about, never make the ballot.
- [28:42]
A
Yeah.
- [28:42]
B
So as of right now, it is a great discussion topic and it's a threat that we've, we've recognized. We've told our school board. We say it's out there. It's possible. We're still projecting in working as we always would. There have been some legislation passes I mentioned earlier as they're trying to head this off. Most of those bills really impact some of those districts that do see some of that growth because they've got the fixed some, you know, fixed some levies versus fixed rates. So it doesn't really apply to us as much. So we're planning as we normally would. And you have to almost at this point. It is, it is a, it is a specter out there. But we can't stop doing what we're doing because to do that, how do you, how do you even start to plan for 80% of your revenue being gone? You know, you can't even, you have to have classrooms of probably 100 kids in order to make anything work and probably be the treasurer and maybe two people trying to pay, you know, whoever's left and pay the bills. And it becomes just almost impractical to plan like that. Even if it makes the ballot. We still have to plan. In Ohio, we have actually very rigorous financial forecasting legislation. We have to forecast current year plus three years out. Used to be current year plus four years out. For whatever reason, they decided to make that change as well. I don't know why we still continue to do what we call the five year forecast. And here in our district, even the treasurer goes out another five years. So we try to take a 10 year picture so you can start looking about what's levy going to mean, what's the impact of collective bargaining agreements, all of those things. You just got to keep planning, you keep plowing ahead. And if it does make the ballot, we'll still do what we need to do and make sure kids get educated and make sure bills get paid. And if it passes, that's another story for another day. You know, we'll have to figure out how long can we make those dollars last, how long can we stretch things out while we try to, at that point, get to a point where hopefully some decision makers can ensure we'll have some, some resources to keep things happening?
- [30:45]
A
Yeah, I mean, when you said this along as kind of some talking points for this episode, I was like, oh, this is pretty interesting. I had no idea it was this involved. And you had that much on the line. So much so that we've already gone through three quarters of our time on one subject.
- [31:02]
B
And for those listening, if you haven't
- [31:04]
A
been on the podcast, I'll send along maybe like six or seven different segments and topics. And we've only gotten through one of them. So I do want to try and touch on a couple other really important topics that are, that are happening in Ohio, one of them being the school funding formula challenge. So you've been working towards implementing a new funding formula, but, you know, full funding obviously still remains an issue. What's the current status? And maybe you can just give our listeners just a brief overview of what the challenges and what the initiatives have been.
- [31:35]
B
I mean, I've been a part of different school funding initiatives for several, many different iterations. And part of that is before I came to school business, I worked policy on the, on the, with the General assembly and with the governor's office. And so I've worked on A few different school funding plans over the years. This is the thing that I love most about the one we have in front of us right now is that it was not created by politicians, is not created by a blue ribbon panel of whoever the governor at the time was. Two members of the General assembly, one Republican, one Democrat, said we got to do something about school funding. And they convened superintendents and treasurers and said, figure this thing out. So really the people that created this school funding formula are those of us in the field.
- [32:21]
A
How often do you get to say that?
- [32:22]
B
It's very rare you get to say that, which is why I think. And they even said, put it together. Let's not worry about running a bunch of simulations. Put the model together, first and foremost, figure it out on the back end. Let's get the parts and pieces the way they need to be. So we did, you know, we had a lot of great folks, a lot of really smart people in this state that were able to come together and do what was best for the citizens. Even putting aside their, their individual school district, excuse me, putting aside their individual school district. Well, this would really help my students or my school district say no, no, we'll look at this in toto. What's best for the state of Ohio? What's going to work as a system, just systemic approach. What's going to work taking all the other little political and parochial interests out. What do we need to do? That approach itself was amazing. And then the fact that they were able to for four years, two biennial budget cycles, two state biennial budget cycles because Ohio budgets on a two year process for four years. We were moving the needle, we were moving that ball down the field. They took a six year phase in approach and we were getting really close. And then unfortunately at the end of the day we stopped. Now part of that are the political powers that be. Some of it is folks either don't understand or don't care for it, or have different ideations or priorities. Budgets are about priorities. We all know that. We're all school business officials. And so at the end of the day we stopped doing what we needed to do.
- [34:02]
A
So when you say you stopped, was the funding starting to flow as intended through the formula or are you talking that the development of the new formula had stopped?
- [34:12]
B
So the formula itself envisioned that phase in and envisioned. There's a great video on the Columbus City Schools website that does like a quick 2 to 3 minute overview, nice little animated video explains school funding in a nutshell. In short, what are the, what are all these Inputs that go in to calculate what it costs to educate a student. You know what are the add ons for certain student groups and then what's that state local share? Well, we did a good job of continuing to update all the state local share because that means the state's share goes down. What we did not do a good job of doing, where we stopped this last section is we just froze everything at 2220, at 2022 cost set. So whatever it costs to educate a student in 2022, that's what we're funding today in 2026. As I've said to others, I don't know about you, but my expenses have certainly gone up since 2022. Because we froze that piece of it and because the state's share was able to continue to go down, school districts are getting less money overall under the formula. The formula itself is not broken. The formula self works, works. They continued the six year phase in and for that I'm very thankful, I'm thankful that we, we made progress. We missed this one crucial piece and that's updating those cost sets. As we were moving towards full implementation of the funding formula, we've got a bunch of funding guarantees and we knew that as time went on, some of those guarantees may start to fall off. We know the General assembly certainly has a very different view on some others. And, and that's probably the way a formula should work. If the formula truly works, then at some point we have to move off of guarantees. And the reality was as we were continuing to increase those cost sets over time, the formula was working. We were seeing a lot of districts on the formula, not on these guarantees. That's not the case today. And so unfortunately where we're heading right now is back to a state local share. When the last litigation for school funding was filed back in the, in the 1990s, it's less than that percentage of the state local partnership. And it's unfortunate we're going that route. And it's unfortunate is that I fear that this formula that's really been very well thought out, tested and constructed with practitioners in the field is going to, is going to pay the price because folks will say well, it's not working. Well, it's only not working because you're not letting it work. It's, it's is as I said, it reminded me of the year that you know, my mom, my mom makes beautiful pies and she had a great day here where she forgot to put the pumpkin pie spot. She forgot to put the pumpkin pie Spice in the pumpkin pie. And it was still a beautiful pie and the crust was great, but it tastes like squash. It tasted like squash. The filling wasn't there. Now that doesn't mean we shouldn't use the recipe anymore because she forgot it at once one point. It means that we need to go back and do what needs to happen. We need to actually go back and follow the recipe to, to the hilt and then we'll be okay. My fear is that we're going to throw out the pie entirely and say, nope, it didn't work. And by the way, here's lemon meringue. Now that seems to be where some folks want to go. And so, and I hear lots of, I hear lots of challenges from, from, from some folks in the General assembly saying, well, we gave more money to education. I will concede more money went into education overall, but most of that money, more of that money is going to the private schools now through all these various voucher programs. So they're getting a much bigger piece of the pie than they used to, so to speak.
- [37:49]
A
So with the funding formula, is it a matter of just updating the data sets and where the formula is drawing from?
- [37:56]
B
By and large, update those data sets to current year numbers. And yes, the formula should work as it needs to. Are there still. We had some, some different, some of those what I'll call, you know, add ons or specific student populations. We haven't updated our special education weight since 2003. Okay. Long. So, so there was a study and said this is what you should look at and same thing for English learners, for career tech, for our disadvantaged people impact day. So there's always going to need to be more work done. And part of that is things change over time. You know, special education services and education looks different in 2026 than it did in 2003 and the cost set should reflect that. And so it's, you know, by and large increase the cost sets. That is most of your issue right there. Tweaking with the, these other aspects and trying to implement some what, some of what the best practices and research says we should be doing, which is again where we're trying to do. Again, practitioners and researchers saying this is what it should look like. Let's follow that path the way we need to follow it. That is where we need to go. We're so close. We're very close in Ohio. We're just not quite there yet.
- [39:10]
A
So we are coming up on time. But I don't wanna let you go before we talk about school choice. Because that has been a recurring theme on School of Business Insider. So tell me, in Ohio there's been a pretty strong push for more funding to school choice options. How was that impacting public schools? I mean, you kind of already alluded to and mentioned that there's money out there that has been, yes, increased to education in the broad sense, but seems to be diverted towards school choice. So give me an overview of what's happening with that and how you're being impacted directly.
- [39:43]
B
So certainly, you know, number of years ago, and I think part of it may have been part of the deal to keep the school funding model alive and moving, a lot more money went into school choice efforts. They had, they went from a voucher program, we call them scholarships in Ohio, but a voucher program that essentially was for students in either, either schools that were not doing well academically or were more income based. We extended it now and there's not another program in Ohio that does this, certainly not for pre K. But if you're up to 400% of the poverty rate, you go ahead and get a voucher amount for the full, you know, the full voucher amount which is, you know, 90 some thousand 100 some thousand dollars a year for a family of four. There are a lot of programs that would kill to have a 400% poverty rate threshold and then after that you get some money. Now what we found initially is that in the first few years in particular, particular a lot of the folks taking the vouchers, the student, the, the voucher amounts went up, but the student numbers didn't necessarily change that much for, for school districts which, which essentially meant people that were already in the private schools were now taking advantage of that. Sure. And, and, and so they did. And, and well, you can't, I mean,
- [40:57]
A
just objectively what, you can't blame them. Why?
- [41:00]
B
I don't blame them at all. I would do the exact same thing if you said, yeah, you know, you know, I know you're already, I know you're already know, you know, buying a, you know, buying this gym membership every year.
- [41:10]
A
But I'm going to go ahead and
- [41:11]
B
give you, you know, if you, if you go ahead and just sign this piece of paper, I'll pay for the gym membership for you or, or your taxes will pay. I go, sure, that's a good deal. Yeah, no problem. I don't pay for anymore. Great. And so, and so that's, that's kind of what's happened is that that is, that's now skyrocketed and the money Going towards those have gone up substantially. We also have community schools or, you know, most people know them as charter schools. Those also have expanded, although I'd say probably not as much as the voucher programs necessarily have. Those are still technically public schools, though. They, they are exempt from a number of state regulations and such. While, while there, they don't seem to be quite, they don't seem to be generating quite as much interest as perhaps the various voucher programs, scholarship programs that exist. So. But at the end of the day, a lot more money is going into those programs and then are going to the traditional districts just by virtue of the fact that that's where, that's where they've decided to push the money.
- [42:15]
A
And it's interesting with the, you know, to your point of, you know, there's a certain subset of the kids that are already in these private schools and now they're getting money for their enrollment. Is that money coming from the state that's being peeled away from you? Are you a pass through for that fund? Those funds? Do you have to budget for it? What's the mechanism behind that?
- [42:34]
B
Luckily, when we did the school funding formula mechanism, it used to be a deduction from us. And that could be a whole other podcast on how that was a train wreck. But we will go down that path today. Luckily now it is no longer a ddoc. The state pays for that entirely. But as we all know, there's only so much money that goes into the, that goes into the, into the budget pie. Right. There's only so much money to spread around. And when I have to put more money towards a voucher program, that's less money that's necessarily available to flow through the formula the way it's supposed to flow. So I don't update the cost sets, but I can put more money into a voucher program is kind of how that works. So even though, even though most of the students in the state of Ohio go to a traditional public school district, that's not where the majority of that percent increase was seen in this last biennial budget. Just wasn't.
- [43:25]
A
Yeah, well, I feel like I need to have you back on for a part two because there's so much more that I want to discuss with you. But we are up on time. But I want to thank you for all of your insights and I mean the complexities that you're dealing with in Ohio are substantial. And I wish you all the luck with your colleagues there and. But you definitely have to come back on. There's so much more. We have to talk about, but otherwise, thank you, Eric.
- [43:51]
B
Anytime. I'm happy to come back anytime and talk. All right.
- [43:55]
A
When we get offline, we'll schedule our next meeting. That sounds good. Thanks, Eric. Appreciate it.
- [44:00]
B
Thanks, John.
- [44:02]
A
Thank you for tuning in to School Business Insider. Make sure to check back each week for your favorite topics on school business.
- [44:11]
B
Sam.