House Finance Committee House Bill 59 Testimony Dr. Howard Fleeter Education Tax Policy institute March 21, 2013 Good morning, Chairman Amstutz, Ranking Member Sykes, committee members. Thank you for the opportunity to speak to you today about the provisions of HB 59 that relate to the K-12 school funding formula. My name is Howard Fleeter and I am a consultant for the Education Tax Policy Institute (ETPI). As my testimony is rather lengthy, I will provide a summary of the main points and then be available for any questions that the committee might have. 1. Overview The school funding formula proposed in HB 59 bears a strong resemblance to prior school funding models used in Ohio over the past 25 years. The proposed system begins with an initial component the purpose of which is to distribute state aid in a manner inversely proportional to school district wealth. This component is known as Core Opportunity Aid and in the past has been referred to as “foundation aid” or “basic aid”. The proposal next provides additional assistance to the poorest 80% of school districts, again in a manner inversely related to local property wealth. This component is referred to as Targeted Resources and is similar to the former Parity Aid program. There are also a series of additional funding components that provide additional funding to school districts in order to serve particular groups of students. These components include special education, funding for districts with high concentrations of economically disadvantaged pupils, education of English language learners, gifted and talented students, and funds to increases access to early childhood programs. Finally, in addition to the funding components listed above, the proposed formula also provides a hold harmless provision (typically referred to as the “guarantee” and a series of funding caps. The guarantee provision ensures that no district receives less funding in FY 14 or FY 15 than in prior years, while the “gain caps” place a limit on the amount of additional state aid that can be received by a given district in a given year. Guarantee provisions, in one form or another, have long been a part of Ohio school funding formulas and cap provisions are common when formulas transition from one methodology to another. In FY 14, 63 districts are capped, while 22 are capped in FY 15. This testimony will provide analysis of discussion of different features of the proposed funding system. 2. Guarantee As has been the case in past school funding formulas, a hold harmless provision or “guarantee” has been included in the Administration proposal to ensure that district 1

revenue loses relative to prior years are limited. In FY 14 398 school districts will receive supplemental state aid through the guarantee provision in order to ensure that no district receives less total state funding in FY 14 than in FY 13. In FY 15, 384 districts will be on the guarantee ensuring that they receive at least as much state aid in FY 15 as they did in FY 14. When the Governor previewed his funding proposal at a meeting of Ohio school superintendents one of the primary points of emphasis was that the primary objective to the proposed funding plan was to reduce disparities between wealthy and poor school district across the state. The equalization of 20 mills of property wealth per pupil up to the 96th percentile was stressed, as was the inclusion of the parity aid-like Targeted Resources funding component that provided additional equalization of funding up to the 80th percentile of property and income wealth. However, when district-by-district printouts of the school funding plan were released a week later, the results were surprising to many. The table below summarizes the number of districts on the guarantee in FY 14 and FY 15 by ODE district typology grouping. Table 1: Number of Districts on the Guarantee by Type of District # on % on # of Typology Grouping Guarantee Guarantee Districts FY 14 FY 14 1. Poor Rural