The Fiscal Year (FY) 16-17 school funding formula passed House Bill (HB) 64 in June bears a close resemblance to the FY14-15 funding formula. The main changes in the FY16-17 funding formula as compared to the current system are summarized below. A more detailed explanation of the exact formulas to be used for each component is contained in a PowerPoint presentation that can be at found at the OEPI website www.OEPIohio.org.
1) Increases in Funding Formula Parameters – The proposed FY16-17 funding formula retained the basic structure of the current funding formula, including Core Opportunity Aid and the categorical components including Targeted Assistance, Special Education, Career Technical Education, Economically Disadvantaged Aid, K-3 Literacy Aid, Transportation, Gifted Funding and LEP Funding. However, several changes were made to the parameters of the funding components:
- i) The core opportunity aid base amount was increased from $5,800 per pupil in FY15 to $5,900 per pupil in FY16 and $6,000 per pupil in FY17.
- ii) Special education weighted amounts were increased 2% annually from FY15 levels.
iii) Career technical education weighted amounts were increased four percent annually from FY15 levels. Additionally, in FY17 career tech funding is exempt from both the guarantee and gain cap, ensuring that all districts receive the full amount of career tech funding prescribed by the formula.
- iv) K-3 literacy funding amounts were increased five percent annually from FY15 levels.
- v) The transportation funding formula is now fully funded. This was accomplished by increasing funding, eliminating the prior requirement that ODE prorate transportation payments, and reducing the minimum state share of transportation funding from 60% in FY15 to 50% in FY16 and FY17. In addition, the transportation supplement funding formula was modified to focus on low-density school districts and is exempt from the gain cap.
- vi) Formulas for the other funding components, including Targeted Assistance, Economically Disadvantaged Aid, and Gifted funding are unchanged from FY15.
2) Retention of Transitional Aid Guarantee and Gain Cap – Despite the Administration’s initial proposal to phase-down the Guarantee, the FY16-17 funding formula assures that all districts will receive at least as much formula aid in both FY16 and FY17 as they did in FY15.
The gain cap (which limits the percentage increase in funding from one year to the next) will be 7.5% in both FY16 and FY17. The FY15 gain cap was 10.5%.
3) State Share Index – Despite changes proposed by both the Administration and the House of Representatives, the FY16-17 funding formula largely preserved the FY14-15 mechanism for determining the state and local share of funding for each school district. This mechanism – known as the State Share index or “SSI” – is a relatively complicated formula that ranks each school district according to their property wealth per pupil and income level and results in state share percentages which vary from five percent in the wealthiest districts to 90% in the poorest districts.
The FY14-15 SSI formula suffered from a flaw whereby 95% of the districts receiving a benefit from the income factor were higher income districts. While both the governor and House FY16-17 funding proposals would have corrected this flaw and included the income factor in a more rational manner, the FY16-17 SSI formula made only a minor change which excluded districts whose median income is more than 150% of the statewide median from benefiting from the income adjustment.
3) Capacity Aid – The FY16-17 funding formula includes a new funding component (first introduced by the House) that is based on the ability of districts to raise revenue from one mill of local property taxation. Districts are ranked from low to high in terms of their local revenue generating capacity, and then provided aid on a per pupil basis at a decreasing percentage. Aid is provided to all districts below the statewide median revenue raising capacity (roughly $220,000 in FY17). The district immediately above the median only receives a small amount of supplemental aid. This component — which has been termed “Capacity Aid” — is outside the gain cap, which means that all funding provided under this component will reach the intended districts in FY16 and FY17.
The rationale for the inclusion of this funding component was that some districts in Ohio raise as little as $40,000 or $50,000 from one mill of taxation. This amount of money is barely enough to hire a teacher and such a small increase in resources hardly justifies the time and expense of a levy campaign.
4) Graduation Rate and 3rd Grade Reading Proficiency Bonuses – The FY16-17 funding formula included two new performance incentives introduced in the Senate version of the budget. The graduation rate bonus provides roughly $20 million per year in funding to districts through a formula providing five percent of the per pupil amount for each student who graduated. The 3rd grade reading bonus provide roughly $17 million per year in funding to districts through a formula providing 7.5% of the per pupil amount for each 3rd grader who is proficient in reading. These two funding components are outside the gain cap.
5) 20% Minimum Per-Pupil Aid (Vetoed) – The FY16-17 funding formula approved by Conference Committee included a new funding component (first introduced by the House) that would have ensured that no district received less state aid per pupil than 20% of the Core Opportunity Aid per pupil amount. This proposal was to be phased-in this at 15% in FY16 and 25% in FY17, however it was vetoed by the Governor.
- TPP Replacement Payment Phase-out – The FY16-17 budget also includes a resumption of the phase-out of TPP replacement payments to schools initially begun in the FY12-13 budget. This phase-down was initially proposed in the Administration budget and was retained by the House and Senate. More detail on the FY16-17 phase-down of the TPP reimbursements can be found in a related article in this Newsletter.
7) TPP Supplement (FY17 Vetoed) – The FY16-17 funding formula passed by Conference Committee included a “TPP supplement” to ensure that no school would receive a net reduction of FY16 and FY17 formula aid + TPP replacement payments compared to FY15 levels as a result of the phase-down of the TPP payments.
However, the Governor vetoed the FY17 TPP supplement while leaving the supplement intact in FY16. In FY17 109 school districts were to receive $84.2 million in additional funding under the TPP supplement. Because the HB 64 bill language approved by Conference Committee did not specify any provisions for the TPP supplement beyond FY17, the impact of the Governor’s veto is that the TPP replacement payment reductions will be felt one year earlier than intended.