- [Narrator] Production and distribution of City Club forums on Idea Stream public media are made possible by PNC and the United Black Fund of Greater Cleveland Incorporated.

(upbeat music) - Hello and welcome to The City Club of Cleveland, where we are devoted to conversations of consequence that help democracy thrive.

It's Wednesday, June 7th, and I'm Meghann Marnecheck, executive Director of the Cleveland Transformation Alliance and member of The City Club Education Committee.

I'm pleased to introduce Howard Fleeter, owner of the research and consulting firm, Howard Fleeter and Associates, an expert on our state's budget process.

In Ohio, public education constitutes the largest share of the state spending, as the legislature reviews Governor Mike DeWine proposed two year budget ahead of the June 30th deadline, education funding will once again be up for debate.

In the previous budget, Ohio's lawmakers in included the Fair Schools funding plan, which takes into account a school district's expenses when calculating the state's cost per student.

Still, there's a lot at stake with this budget.

Ohio's public school system serves approximately 1.7 million students.

What is approved later this month will determine how much or how little goes to K to 12 schools in the state for the next two years.

As our education system grapples with the aftermath of the pandemic, increased political turmoil, and teacher and substitute shortages, we will hear today if what is proposed in the biennial budget is enough to get our scholars back on track.

Howard Fleeter has an extensive background in education, funding and policy.

He has worked with a variety of statewide organizations, including Columbus City Schools, Educational Service Center of Central Ohio, Ohio Alliance for Arts Education, and the Ohio Department of Education.

Dr. Fleeter is also a research consultant for the Ohio Education Policy Institute, which provides nonpartisan data and analysis on state issues regarding education and tax policy.

If you have a question for our speaker, you can text it to 330-541-5794.

You can also tweet your question to at The City Club, and City Club staff will work to include it in the second half of our program.

Members and Friends of The City Club of Cleveland, please join me in welcoming Dr. Howard Fleeter.

(audience applauding) - Thank you, Meghann.

Thank you to The City Club for inviting me to do this.

I'm truly honored to be here.

I am a native Cleveland.

I grew up in Cleveland Heights and graduated from Cleveland Heights High School.

So for me to drive up (audience cheering) (audience applauding) Cleveland Heights represent, for me to drive up 71 and come here and talk about school funding in my hometown is, I'm really honored to do that.

Thank you for putting this on.

I've spent most of my professional career working on education issues and honestly, I think making sure that every kid in this state gets an adequate education, as far as I'm concerned, is the single most important thing that our state leaders need to be doing now and all the time.

(audience applauding) So I brought a prop with me.

So I got started on this back in 1991.

I was an assistant professor in the School of Public Policy and Management at Ohio State.

One of my former students is right down there as a matter of fact, and I did my dissertation in California on school finance in California.

Governor Voinovich had just been elected.

He formed something called, the Governor's Education Management Council, and he did a study on governance, and he did wanted to do a study on school funding.

And he had a third study that I can't remember what it was, right?

The governance study raised a lot of issues that the legislature's kicking on right now, and we're still kicking around this school funding study as well.

But, you know, this project landed in my lap.

I went to grad school to work on being an economist work on issues that affected the real world.

Every single faculty member in my department told me I should run the other direction from this project, that a new professor ought to be sitting in his office writing journal articles, and I ignored all their advice, thought I could do this project in three months.

A year and a half later, I wrote this report, 75 single spaced pages with 75 pages of tables.

And it was without question the best decision I ever made in my life, to do this project.

It got me outta my office, it got me working with policymakers, and it got me doing exactly what I went to graduate school to do.

That's the good news.

The title of this report was, "Equity adequacy and Reliability in Ohio Education Finance."

And I can think back to the first presentation I made back in November of 1992, and I'm pretty sure if I could find those notes, which are somewhere in my office, and if I updated the numbers, the issues and the solutions are largely the same now as they were back then.

The only thing that's different, and this is important, and I'll talk about this in a little bit, we now have community schools and vouchers, which didn't exist back then, okay?

But the issues as far as what it takes to fund, you know, the traditional K12 school districts, of which we have 609 in Ohio, those issues are the same now as they were then.

We know the problems, we know the solutions.

What we need is the political will to actually implement them.

And right now where we stand looks like the Ohio House of Representatives has more of that political will right now, than the Ohio Senate does.

And I'll talk about that in a little bit as well.

And I know there's a lot of people, that's all they want me to talk about right now.

(audience laughing) So I've only got a half hour.

Most of the people who work with me think that there's no way I can do all this in a half hour, but I'm out to prove them wrong.

So what I wanna do is just run through what the basic issues are, talk about the solutions, give a little bit of history for where we are, because I think you need to understand the history to know what the decisions that the legislature has in front of them right now are.

And I'll talk a little bit about vouchers and where we stand with that.

And then I've been instructed that you people show up here in order to ask questions, and I need to make sure you're allowed to ask questions, so.

Ohio funds, you know, public schools the same way, basically every other state does.

With the exception of Hawaii, it's a state and local partnership.

Hawaii is entirely state funded, but all the rest of the states have local school districts, which are funded with property taxes.

And then the state adds aid.

And they do that according to their own priorities and their own formulas, okay?

We use property taxes.

I think historically, you know, that's how we used, you know, before there were income taxes, we would tax land.

So historically we do it.

It also makes sense from an economic standpoint that for small units of government, like school districts, property taxes are stable, property values tend to go up, they don't tend to go down.

And that's important for small units of government, 'cause they can't withstand revenue swings that you get from income taxes and sales taxes.

So the property tax makes sense as the basis for local funding.

What's the problem with using property taxes?

Well, we have 609 school districts in Ohio, and they're not all created equal, okay?

We've got wealthy places.

We've got poor places, okay?

As does every other state.

So one of the purposes of the state aid formula, is to equalize the disparities between poor districts and wealthier districts, okay?

Then there was a, you know, I'm gonna talk about how many people have heard of the DeRolph decision in this room?

Okay.

My little report played a cameo role in that.

And so I got subpoenaed in order to have that be submitted as evidence.

But you know, the DeRolph decision was one of what a lot of people think of as the second wave of school funding lawsuits.

The initial wave of school funding lawsuits were based primarily just on equity, that you have wealthy places and poor places, that the poor places lack the tax base in order to fund their schools properly.

You know, this was true in Ohio, back at the time the DeRolph lawsuit was filed, there were school districts that had such little local wealth, that they would've needed a 45 mil levy in order to just get up to the state average level of expenditures.

The average millage at that time was about 28 mils.

So 45 mils is very significant, clearly not possible for a district that poor, right?

So there's significant disparities.

The important thing about the DeRolph decision is that, there's a second function of state aid, which is just as important, and that's adequacy, okay?

And so adequacy, I've got a little definition of this, which I like to read so I don't forget it, that it brought way too much stuff up to the podium for one guy in half an hour.

So, and of course, the one thing I want I can't find.

(audience laughing) So adequacy, I've been thinking about this for 30 years, I can say it without looking at my notes.

So adequacy is essentially making sure that each student gets the resources that they need, okay?

And that starts functionally, you know, the way that Ohio and other states do this, is it starts with what we call the base cost, which you can think of as the, you know, what's the per pupil amount that the typical student in the typical place needs?

And then we know that we've got students that aren't typical.

They have additional needs, they're students with disabilities.

Career tech is more expensive.

English language learners are more expensive.

Gifted students cost more to educate.

And importantly, economically disadvantaged students face challenges that less disadvantaged students don't face, and they require more resources, right?

So each of those, you know, all those different types of students need to receive adequate funding from the formula.

In addition, districts are different from each other, right?

You know, they're different geographically, in their size, in their population density.

One of the most important ways that manifests itself is in transportation.

Transportation costs are very different in a suburban district that's densely populated than in a rural district.

We have five school districts in Ohio that are entire counties, okay?

And so not gonna consolidate a school district beyond the county level, I don't think, right?

But think about how long you need to be on a bus and a place like that, and how much more expensive it is.

So the formula needs to take into account all those things, okay?

So you need the base cost, and then you need, you know, the additional cost, we tend in Ohio to call those the categoricals, that's the extra money that each district needs based on their own mix of students and characteristics, okay?

So that's the adequacy issue.

And the decision was one of the first ones where both of those things were flagged by the court as being things that the state had to respond to, okay?

So, you know, in my report, you know, and I, you know, this is kind of basic stuff for those of us who look at school finance, you can look at the school districts.

Ohio is different from other states in a couple ways.

One, we are a very, very diverse state, okay?

If you just think about us compared to, you know, Michigan, or Illinois, or Wisconsin, or Minnesota, how many major cities do each of those places have?

One.

Okay, how many do we have?

Okay, to answer this question, you risk consulting people, right?

We've got at least three in, Cleveland, Columbus, and Cincinnati.

You don't wanna leave out Akron, Dayton, and Toledo, okay?

Then Youngstown and Canton are like, hey, what about us?

(audience laughing) Then you've also got Lima and Mansfield.

We've got a lot of, you know, good sized cities.

We have, you know, we've got suburbs, we've got some very wealthy suburbs.

We've got our rural areas in Ohio are not the same, okay?

Southeast Ohio is very different than northwest Ohio, right?

So, you know, at one point there was a documentary back in the 90s about school funding and about, you know, all the different problems that states face.

We already have an example of every single one of those challenges, right?

So, I mean, our degree of difficulty is, I think, a little bit harder.

The other thing that makes our degree of difficulty harder, is our property tax works in a different way than any other state.

So it surprises people, I can actually find these notes.

I can do this.

That it surprises people, I mean, maybe not the people in Cleveland Heights, or Shaker Heights, or Lakewood, or East Cleveland, but it surprises a lot of people to find out that we vote more on levies in Ohio than any other place in this country.

And it's not even close, okay?

So we have, we could play a little game of guess how many school levies we've had since 1984, but in the interest of time, I'll just tell you the answer is 15,680.

That's since 1984.

That's an average of 402 a year, and it's 257 operating levies and 145, what I call capital levies, which are bond issues and permanent improvement levies.

Over the last 10 years, those numbers have fallen.

I think if you talk to most school people, and I've already talked to a couple on my way in, they will tell you it is harder and harder and harder to pass a school levy in Ohio.

And the word we use for this is levy fatigue, right?

And so I see you folks nodding at me that it's a well known thing that, you know, there's a reason we have to vote so much.

The way our property tax works, is because of a law passed in 1976, called House Bill 920, which four years later was put into our constitution.

We get very little growth from when property values are reappraised.

So in a couple months when Columbus goes through reappraisal, and we've already been told by our auditor that we're gonna have 30 to 40% increase in our home values, I'm gonna spend a couple hours talking all my neighbors off the ledge and saying, no, you know, just 'cause your house went up this much, doesn't mean your taxes go up this much, because House Bill 920 rolls back the tax rates.

There's no other state whose property tax works the same way that ours does.

And what that means, and it's particularly for inner ring suburbs, right?

Districts that don't have a room to grow, the only way that you can really get additional growth from property taxes is to keep building.

So if you're hemmed in like Cleveland Heights, and Shaker, and Lakewood, and a lot of suburbs in Columbus, right?

You don't have any room to grow.

Your only option for getting additional money is to go to your voters and ask them to approve a levy.

And that is a very unusual thing that makes us different than any other states.

And you know, what that does, is it puts pressure on our school people to make the case for levies.

It puts pressure on our voters to do the calculus for themselves and decide if it's worth to vote yes on those levies.

And it puts more pressure on our state aid formula to keep up, because our property tax does not have the automatic mechanism to bring new money in year after year, that is true in other states.

So, I mean, that's the problem that, you know, we share the problems that every state has in figuring out what's adequate.

You know, how do we determine equity to offset those disparities across wealthy and poor places?

But we've also got a problem that our property tax, you know, works in a very particular way.

So that's the challenge that we face.

Those were the, you know, issues that were put before the Supreme Court and the DeRolph case.

And on March 24th, 1997, I remember sitting in my office in Haggerty Hall at Ohio State, you know, with my 287 computer, which only means something to people of a certain age, right?

Waiting for the pages to reload, so I could read that and, you know, and then, you know, realizing within the first couple pages that the, you know, the court ruled that our system was unconstitutional.

And, you know, I'd done this report for the governor and, you know, when I was given this assignment, you know, the task I was given, and this will tell you how naive I was at 30 years old, right?

To even agree to this was, you know, they wanted not just one, but several solutions to fix the school funding formula in Ohio in order to make the lawsuit go away, okay?

Well, the fact that there's a DeRolph decision means, A, I failed in that, okay?

But, you know, I did come up with, you know, several different solutions and the governor and the legislator actually implemented a number of them.

They put in something in place called the equity fund, which was $50 million.

We now call it targeted assistance and it's over a billion dollars.

That's money that goes to help lower wealth school districts, okay?

We changed the formula in a way that made it more equitable.

They bumped up the per pupil amount by $500 from one year to the next, okay?

And so when the DeRolph decision came out, Governor Voinovich really took that personally, he was offended, right?

But the state rolled up its sleeves, okay?

And said, what do we need to do to comply?

And the DeRolph decision flagged three things, okay?

It flagged facilities issues, right?

Which were deplorable.

And there's a video about that called, "Children in America's Schools."

And I remember, I can't remember the school district, but I remember there was a teacher, you know, walking around the building and pointing out like, the falling tiles and whatever.

And the line that she said was, educating a child in this building is like growing a flower in a garbage can, right?

I thought like that stayed with me my entire life, right?

And so we have since put in over $10 billion of state money for facilities and we have made a very, very large dent.

And there was a study at the time that said it was gonna cost 2 billion to fix the buildings in this state.

People thought that's ludicrous.

And it was ludicrous, because it was 80% too low, right?

But people thought it was too high at the time.

So concrete example of the DeRolph decision was fixing the buildings.

The other two things was it flagged the adequacy language.

And it actually cited what some of the a paragraph that I wrote in my report that said that, you actually have to have all the numbers in the formula be cost based, okay?

You can't just have the legislature choosing them.

And a lot of people when I talk about this, say, well, don't we elect the legislature in order to, you know, make budget decisions like this?

And the answer is yes, but not for education.

Education is the only, you know, local public service that's explicitly mentioned in the constitution.

And that's true in Ohio and in other states.

And so there's a higher standard that our legislature has to meet.

And so, you know, I called, you know, when I first looked at the formula, the base pupil amount in 1990 was $2,517 per pupil.

And I thought that's a very particular number.

They must have done some kind of a cost study, right?

That said, that's how much it cost to educate the typical kid.

Okay, again, you know, that's naive me, right?

Right Outta grad school.

No, that was the number that you got by working backwards through the formula based on what the property values were, okay?

And how many kids we had.

And down in the basement of the Ohio Department of Education and literally down in the basement, two guys working at their computer, right?

And they figured out, okay, in order to spend the amount of money that the legislature chose to allocate, the most we can make that per pupil amount is $2,517.

And the DeRolph decision said, that is not acceptable.

You need to have a cost based way, cost study for all those numbers, for the base cost, and then for the extra money you need for transportation, kids with disabilities, economically disadvantaged kids, gifted kids, career tech, English learners, all those things need to be based on a current cost of what it takes to educate those kids and get them to and from school.

And that was the task that the DeRolph flight lawsuit laid out in terms of adequacy.

In terms of equity, they said Ohio's system is suffers from an overreliance on the local property tax.

That would've been nice if they would've been a bit more specific, because you can interpret that several different ways.

You can just say, our property taxes are too high, and honestly we're about in the middle nationally, okay?

And if they are high, it's not because of school taxes, it's because we have a lot of taxes at the local level for other things.

Many states don't have a local tax for, you know, developmental disabilities or, you know, adult alcohol drug addiction and mental health services, or children's services, or elderly services, or any of the things that, you know, we have levies on the ballot in Columbus for and across this state, but it's not really that our property taxes are too high.

Some people thought it was, you know, we have too many levies, we do have too many levies, but that's because of House Bill 920, it's not because there's a problem with the funding formula.

The last reason for that, and when you closely read all the DeRolph decisions, and there are four of them.

Example after example, after example shows that what the court meant by overreliance on local property taxes, was the disparities between wealthy and less wealthy school districts.

And so that's the task that the legislature, you know, was left with after the DeRolph decision.

And, you know, commission was convened.

They brought in a national expert from Colorado named John Organ Black.

He came up with a methodology to determine the base cost.

We made some other changes to the formula.

We spent 13 years from 1999 through 2011, trying different versions of the formula to comply with the DeRolph decision and make sure that what we were doing was equitable and adequate.

You know, and then the last, you know, the last, you know, objective in my report, was it needs to be reliable.

Like once you fix it, it needs to stay fixed, right?

And so it needs to work over time.

So, you know, we were making a good faith effort.

There's different ways you can get at this.

You know, you can work backwards from what are the, you know, successful school districts we have, and look at how much they spend.

That's the way we started.

You can look at what are the inputs that you need in order to provide a quality education.

And you can figure out what they cost.

Both of those things to an economist are two different ways of getting you to the same objective.

I think the inputs approach, you know, we change our outcome measures too much for that to be stable enough for the funding formula, the inputs approach is very intuitive.

That's what the fair school funding plan, you know, is based on now.

You know, people, and there are people who are not supportive of public schools, by and large, they will say things like, there's no scientific way to do this, okay?

That's not true, okay?

There is a scientific way to do this, right?

You can have somebody like me, or a statistician, or another economist, we've got the data.

You can crunch numbers, and you can do a statistical analysis of the spending and the outcomes across 609 school districts.

And you can get a fairly, you know, accurate sense, you know, for most things of, you know, what it would it cost to do that based on how districts are doing.

The problem with that, and I learned this much to my dismay, right outta graduate school, 'cause that's what I was trained to do, is to policymakers, that's a black box, right?

They need to understand, right?

You know, yes, the Constitution says you need to fix this problem, but they need to understand why they're directing dollars the way they are, right?

And I learned fairly quickly in my career that you need, in order for any methodology we use to come up with the parameters for our school funding formula, that it has to be transparent and understandable.

And there's a value beyond them being just transparent and understandable, is that you can have very productive discussions about what are the necessary things that we need to be funding?

How much do they cost?

What's the best way to go about it?

Those things change over time, okay?

That is the discussion that you need to have.

The formula is, you know, it's an evolving thing, right?

And so, you know, for 13 years we had those discussions and then we had a recession.

Ted Strickland lost the election.

John Kasich came in as governor.

He faced a multi-billion dollar budget problem.

He tossed out Ted Strickland's input based model, held the formula harmless for a couple years.

And then since then, we spent 10 years where we were back to doing the same thing that we were doing before the DeRolph decision that we were just picking numbers.

And this time, instead of 2,517, we were picking round numbers, you know, it was 50, you know, it was 5,800, then it went up to 5,900, then it went up to 6,000 and 6,010, and then 6,020, you know, when I can't sleep at night, I just run through all the different foundation formula amounts, you know, and then eventually I go to sleep, right?

I know 'em off the top of my head, which is sad for me.

(audience laughing) So, but you know, it was, you know, so we, you know, from 1990 to 2019, we went from $2,517 to per pupil to $6,020 per pupil.

But neither one of those numbers meant anything.

They weren't based on a cost of what it took to educate a kid back then or now.

And so in comes the fair school funding plan where we now have an input methodology, okay?

And, you know, what do we do about the equity issue?

You know, the equity issue is basically two things.

Boy, I'm running out of time.

So if the problem with equity is that you've got disparities between wealthy places and poor places, what you need to do is divide a formula that gives more money to poor places and less money to wealthy places.

That's what every state does.

So the concept is easy.

The details, you know, that's where the devil is, right?

And so for years we used property values and we used like a millage rate that we would apply.

And then we realized, okay, we could equalize up to that millage rate, but the wealthy districts can go beyond that with their own levies, right?

That less wealthy districts have difficulty passing.

And even if they do, they don't have the tax base to generate much money.

So we realized, you know, Ohio and other states we put into tier two, that's where the equity fund was.

We then bumped it up after the DeRolph decision and called it parody aid.

So it started out at about 500 million.

It was 500 million was parody aid.

Then we turned it into something we call targeted assistance.

And it's a way to provide extra money for districts beyond just the adequacy level, so that they can pursue the local goals that they have, the same way that wealthier districts can.

That's when you really get true equity.

That's when you get local control.

I hear a lot of discussion about local control, but if you don't have the resources to exercise it, it's just talk, right?

So, you know, you need two things, you know, you need that state and local share calculation to be right.

And you need that second tier of funding to also allow these districts to go beyond, because districts are different.

They have different objectives, okay?

And to really be able to pursue them, that's what you need to do.

And so what we've learned over time is that, having it just be based, having that local share just based on property taxes, that's clearly important.

That's where we get most of the funding from at the local level, okay?

But you know, you also need to include income, because the ability to tap into your tax base, whatever it is, is limited by the income of your voters.

You know, one of the reasons, you know, for disparities is certainly home prices in a wealthy area versus a poor area.

But a lot of it has to do with where, you know, business and commercial industrial and public utility property is located.

Those things add to your tax base, but they don't vote, okay?

So if you have, there are a lot of communities that have power plants and they tend to be located, you know, along the river or, you know, along other bodies of water because that's what they need.

And so they're in low income places and they look like that they're wealthy, but their voters don't have the ability to tap into that tax base the same way that wealthier people do.

So the formula that we have in the school funding for fair school funding plan also incorporates income.

And so this year is the second year of that formula.

Last year was the first year.

It's supposed to be a six year phase in, this years one and two.

And you know, the way the budget played out last year was, you know, we got one and two with no promise of what would happen afterwards.

So now I'm finally with five minutes left, getting to what everybody wants to know, which is what's going on in the budget today.

And so, you know, the governor basically punted the budget to the legislature, added a couple hundred million dollars each year.

A lot of it was for school resource officers, which is certainly something that we need.

But the governor knew that the house and the Senate were gonna fight this out.

And so the governor lays the blueprint, what the legislature did.

So 20 sec, six minutes in, I'm finally gonna look at my notes.

So the house added 652 million to school funding to the public, to the 609 public school districts in their budget for this year.

And then another 217 million next year.

And the amount is larger this year because when the adequacy calculation was made, we are using data from 2018.

And that was sort of a mistake that happened in the last budget.

The data should have been from 2020 for last year, and from 2021 for this year, because of the timing of the school year and the timing of when you get the data, you know, you're gonna be two years behind getting the data, but it should be the most current it can be.

And so we were, you know, we were using 2000 data, 18 data in 2023, so we're three years behind this year.

The house increased that for next year to 2022, which is the proper year.

It's gonna be using the most current data.

And so that's why there's a bigger jump from in the first year of this budget under their plan than in the second year.

And so that's absolutely something that needed to be done.

And there was an issue, you know, again, when I talk about reliability, you need to have all the data in the formula be current and accurate.

And what we were doing this year was we updated the property value data that determined the state and local share, but we didn't update the data on the adequacy side.

And what that did was actually the cost of fully funding the formula this year, was actually 373 million less than it would've been last year if we didn't have a phase in.

And the reason is because property values went up, okay?

Which meant that the local share went up, but that the state share, you know, all the parameters in the formula remained the same this year as last year.

And so the state share went down, the local share went up, and the state saved themselves money by updating the data on one side of the formula and not the other.

So the house plan has largely corrected that, we were waiting with bated breath, you know, until yesterday afternoon at three o'clock to see what the Senate would do.

And the Senate did actually keep the 2022 salary data, which is the right thing for them to do.

But they made a change to that state and local share calculation, which they eliminated one of the income measures which is used, and I've not seen the legislative language yet, I have to look at the details of it.

But the Senate has reduced funding in the formula for public school districts by 542 million this year and next year compared to the house, okay?

542 million, it's a 246 million decrease in FY24 and a 296 million decrease in FY25.

That's the Senate plan compared to the house, okay?

So that's a 542 million decrease in funding for public schools that served more than 80% of the kids.

And they did it, I think by changing the way that state local share is calculated and lowering the local share.

And again, it's only, it's not even been 24 hours yet.

So I don't know for sure, but that's the only thing that I can see in the budget that could be responsible for it.

So at the same time, and I said I'd talk about vouchers and I've got one minute to do this.

They've increased funding for vouchers by 181.5 million this year, and by another 191 million next year.

So for those of you scoring at home, and I see people taking notes, the total increase in voucher funding under the Senate plan compared to the house is a $372 million increase for private schools, which serve less than 10% of the kids in this state.

And a $542 million decrease for the public schools that serve over 80% of them.

And so I think that that is, and again, it's only been 24 hours and there's a lot of details, but that seems to be a pretty clear indication of the difference in the priorities between the Ohio Senate and the Ohio House on June 7th, 2023.

So the other thing that I will say, we have another document at you, actually, I can't find it, so I'll just tell you about it.

On Monday, the Ohio Education Policy Institute released a report I did on school vouchers in Ohio.

And I've tabulated the data vouchers started in 1997 in Cleveland.

It was one of the first three voucher programs in the country along with Milwaukee.

And a third one, which I cannot for the life of me remember, and I can't Google to figure it out, right?

But we were one of the first three in Cleveland, there was a, you know, a lawsuit that went all the way to the US Supreme Court.

And it ended up saying that it was in fact allowed to do that even though most of the public dollars were going to religious based schools.

So vouchers, you know, that program was validated as legal.

Since then, we've added four voucher programs.

We've added one for students with autism.

We've added the Jon Peterson Special Needs Program with, for students with disabilities.

And we've added an EdChoice program, which is basically a statewide expansion of the Cleveland program.

And the takeaway from my report is that, over the last several years with changes made to the EdChoice program, the fundamental nature of vouchers in Ohio has changed in a very significant way.

You know, when you started, you could look at the Cleveland program and you could say, okay, this is something which is providing an educational opportunity to what tend to be lower income parents whose children are attending are underperforming schools.

And you can look at that and you can say, that's enhancing equity.

School choice wasn't invented in the 1990s with community schools and vouchers.

School choice goes back to the first time somebody moved to another school district, or paid their own money to go to a private school.

That's traditional school choice.

But in order to do either one of those things, you need to have a certain level of income.

So I, it's, you know, my first choice is fix underperforming schools.

My second choice would be, you know, while you're doing that, okay, at least give kids that are stuck there an option to go somewhere else.

I can live with that, okay?

And, but lately that is not what we've been doing because of changes to the definition of underperforming schools because of changes to the requirement that you not only had to live in the area of the underperforming school, but you actually had to go to it.

Those changes have been made by the legislature.

And in the last four years, we have gone from 7% of students getting EdChoice vouchers, having not attended, have having attended a private school the year before, to 55% of the new students getting vouchers this year were already in private schools.

So something which was originally designed to expand choice and offer opportunities to kids and families that don't have the ability to do it themselves has been changed to something where we're now using state money to pay for people that are already attending private schools.

And you know, the end game of that is what people call the backpack bill.

It's a universal voucher program.

And the Senate did put in their version of a universal EdChoice Program into the budget, and that's responsible for that increase in vouchers.

So, you know, it's, again, I think that, you know, what we know now that we didn't know yesterday is we know very clearly what the priorities of the Ohio Senate are.

I will stop there and take questions.

I could talk forever, but I know you won't let me, so thank you.

(audience applauding) - All right.

We are about to begin the audience Q and A. I know we're getting a lot through text messages as well, and I encourage everyone to please take their spot at one of these microphones.

If you have a question, make sure you tell the staff member if you have a question and wait for the cue.

For our livestream audience, I'm Cynthia Connolly, director of programming here at The City Club.

We are joined by Dr. Howard Fleeter, owner of the research and consulting firm, Howard Fleeter and Associates, discussing the K-12 education funding status in our state budget.

We welcome questions from everyone, City Club members, guests, students, and those joining via our live stream at cityclub.org.

If you'd like to tweet a question for our speaker, please tweet it @thecityclub.

You can also text your question to 330-541-5794.

That's 330-541-5794.

And our City Club staff will try to work it into the program.

May we have our first question, please?

- We're gonna begin with one of those text questions that came in.

Is there a precedent for pooling property taxes across the state, not just per district?

Do we need to follow a model of another state?

In essence, what do you see are the steps to leveling the education of our children across the state of Ohio?

(indistinct) - It is very funny to get that as my first question because in my report that I waved at you with its yellowing cover and it's font that looks like it's from the 1950s, I proposed pulling of non-residential property taxes.

And I had several different ways to do this and I published two journal articles about how to do this.

If any states wanted to take us up on that, there was actually legislation introduced by Cooper Snyder, if anybody remembers him from back in the day to do this, that was a very controversial idea, right?

To me it was the way to say, you know, if non-residential property is one of the big drivers of inequity, okay?

And consolidating school districts is very difficult, okay?

And unless you can close a significant number of buildings, honestly, it doesn't save very much money and it causes a lot of, you know, trauma at the local level when that happens.

But you can pull the revenues and you can do it in a way where no residential taxpayer, you know, not a penny of residential taxpayer money goes to another district.

And you can do it in a way where you're just pulling the growth and you're leaving everything that's in place at any given time there.

I propose those as part of, you know, that would reduce the over-reliance on local property taxes if you did one of those.

And somewhere in my files, I have the article from the Columbus dispatch that reviewed that, and I recommended modifying House Bill 920 to allow some growth at the local level and pulling tax revenues.

And they called one of those ideas the stupidest idea they ever heard and won the most dangerous.

And for the life of me, I can't remember which was which, about 10 years later, they recant it and changed their mind.

So, but that's an option.

It is politically, it's very difficult to do that, right?

And, you know, one of the taxes that was the most inequitable, we ended up eliminating, which has ended up, you know, it reduced the inequities, but it caused problems for the districts that relied on that money.

And so, you know, again, if we don't do something like that, you're just putting more pressure on the state aid formula to offset those disparities year after year after year.

And so my preference would be absolutely to do something like that, but I just don't, I think that's a bridge too far for Ohio right now to do that.

I wish it wasn't.

- Hi, Dr. Fleeter, thank you so much.

I'm gonna take you out of the K12 space and put you into the higher ed space.

- Okay.

- If you can.

- Sure.

- There's also a bill, Senate bill 83 that's expected to be folded into the budget.

This is a massive sweeping higher ed bill that's banning DEI academic relationships with China and policies based around gender, race, and sexuality.

Can you talk about the financial impact of this bill being folded into the state budget as well, especially as it pertains to creating a pipeline from K12 into our higher ed spaces?

- Boy, that's a good question, that bill is very concerning in a lot of ways, right?

And I have a lot of friends who are, you know, who are professors who are very concerned about what that's gonna do to the educational climate on campuses.

And, you know, there's a concern that it's actually gonna stifle discussion more than enhanced discussion, which is I think what the people doing it or want to happen.

And most people are affected by it or think it won't happen.

And I think that there's a legitimate concern about, you know, I mean, you know, will you be able to attract faculty to come and teach at Ohio, you know, public universities and, you know, will students, you know, want to go to college under those circumstances, right?

And so I, you know, I think it's too soon to understand like, what the impact will be.

But I think that there is a concern that kind of a bill is sending the wrong message, not the right message, or maybe it's sending the wrong message to more people than it's sending the right message to some people, right?

And so, but that's, you know, and I got asked a question once, several years ago when I was talking about, you know, school funding and I was still professor at OSU and they said, you know, how does the university feel about me going around telling, you know, people that the legislature needs to put more money into K-12 education?

Doesn't that take away from that?

And I said, you know, higher ed is the customer, you know, of K-12 education.

You know, the more money we put into K-12 education, the better off higher ed institutions are.

And this is almost the opposite of that, right?

I mean that the higher ed institutions, if they change in ways like that, you could, you know, there's a chance that you could cause fewer people to wanna attend those universities.

But again, I don't know that anybody can quantify that impact yet though.

- [Audience Member] The ICU they just released a pretty comprehensive report about some their best guess financial impact.

(indistinct) - Do you remember their number?

I'll see if I can find, I mean it'd be, I do know, I mean there's a lot of concern about that at higher ed.

- Published a paper in December about how in the current biennium, the legislature began the phase in of disadvantaged pupil impact aid at a much slower rate than the phase end of the rest of the school funding plan.

The LSC yesterday in what Joe Engels sent out, says the Senate would speed up the DPI phase in from 33.33% in FY23 to 50%, in FY24 and 66.67% in 2025.

Will that bring the phase in, assuming it passes of DPIA to where it should be, or will it still be far behind?

- Okay, so, alright.

Thankfully a question where I can answer with some positive news.

(audience laughing) So, like three days after we released that report that looked at funding for economically disadvantaged students and that was a really interesting study, because that issue is the one part of the formula that has not had a comprehensive cost study in the 30 plus years I've been working on this and it really needs one.

And so I worked with Greg Browning, who was Governor Veynovich's budget director, and I got to know him while working on that project and he and I looked at urban district, a suburban district, and a rural district.

The suburban district we looked at was Shaker Heights.

And they were very helpful in with us in that study.

And you know, what we wanted to do was we wanted to quantify what are the services that lower income kids need that higher income kids don't need?

What is it that need to take that?

And you know, it was very interesting because we found there were a lot more similarities across a large urban district, a rural district, and a relatively wealthy suburban district.

Then I would've guessed, right?

The things that they're doing, the types of interventions they're taking.

And so, you know, our hope was, you know, that, you know, we'll actually get that cost study and for the last three budgets, the house has put the economically disadvantaged cost study in and the Senate has taken it out.

On my way here, I got a text message that somebody said, it looks like the Senate took the cost study out again.

And it's like smacking my head, right?

And you know, to do that study is $500,000.

It's an $80 billion budget, right?

It's it's literally rounding your, right?

I mean, and they, I think they don't want to know the answer to that, but the good news is that they did at least fix the issue of the phase in.

They did that a couple days after our report came out in the lame duck session kind of outta nowhere to all of us.

They accelerated the phase in, so that for this year they did raise the phase in for the disadvantaged aid to 33% and then the 50% for next year, and the 66.7% for 2025.

Those are the same percentages as all the rest of the components.

And so we don't have the study, but the fair School funding plan committee was smart enough to think ahead on that.

And so they put in kind of a placeholder target.

And so that funding right now is a little over $400 million and when it's fully funded, it's gonna be over $600 million.

So whether there's a study or not, as long as they stick to the formula, there will be more money going in each year to help those kids.

(audience applauding) And as I've worked on all this over the years, closing the achievement gap has become the single most important issue that I think we face in this state educationally.

- I've been looking at and trying to track HB 807 and how do you, have you been following that?

And can you say a little bit about how, if at all, it's going to impact property tax levies for schools and other agencies that receive levy funding?

And then the other part that I have is, I was told in the house budget it ends replacement levies and I don't know if that is also in the Senate budget.

And so maybe you've been tracking these things better than I have been.

- Okay, so I'll answer the second one first.

So I don't know if the replacement levy repeal is in the Senate budget or not yet, okay.

And I did look at the data and they're somewhere around in the, since I think I went back to 2011, so the last 12 years there are only been about 40 replacement levies.

And so to explain what a replacement levy is, the way our property tax works in Ohio, let's say you pass a five mill levy and then when your property values go up and that levy amount could be reduced to four mills.

And then when your property gets reappraised again three years later, it could go down to three mills, right?

And so a replacement levy would be, that would take the same levy that was already voted in place and raise it back up to its initially voted millage, right?

And so it's a way, it's not a new levy, okay?

But it's a way that you can get additional money, because you're raising the millage rate, you know, up and then that millage rate, that original millage rate now is multiplied by higher values.

So you get more money than you did the, you know, when the levy was originally passed.

And I honestly, I think they're a little deceptive to voters.

I don't think our property tax is so complicated.

I don't think people understand it.

I literally was not exaggerating saying, I'm gonna spend two hours talking to my neighbors when our appraisals come in.

No, nobody understands how the property tax in Ohio works, and there's 11 million people here and if there's a thousand of them that can explain it, I'd send out ribbons, right?

So it's very complicated and it's not reasonable for a regular person to understand it.

And so you, you would have a replacement levy and they'd say it's not a new levy, but yet your taxes would go up.

And I think, you know, what districts have learned is you can pass a renewal levy with an increase and that is more straightforward to voters if it's a continuing levy.

I mean, what a lot of districts are doing is, it is harder to pass new levies, and it's harder to pass continuing levies.

And they've pretty much given up on the renewal levies.

Like half of the 40 renewal levies were for permanent improvement levies, which are only one or two mills.

Several others were for joint vocational school districts, which are countywide, and those were only one or two mills.

There were maybe 15 regular school districts that tried a renewal levy.

And it's something that's not being used anymore.

If they wanna take it off the board, if they want to take it off the table, I don't think the world's gonna end.

But we needed them.

No other state has a replacement levy, because no other state has a property tax that works like ours.

House Bill 1807 is something that's gonna change the way values get reappraised.

And my assessment of this is that, this is a technical change that auditors are asking the tax department to make, because we've seen a run up in property values over the last three years, which we'd not seen probably since around the mid seventies when House Bill nine 20 was implemented in the first place.

And that came about the same time as Proposition 13 in California, the same time as Proposition two and a half in Massachusetts.

There was nationwide inflation and home values and something needed to be done and different states did different things.

And so they want reductions in the market value.

So there's one county, instead of going up 42%, they think their values will go up 24% of these changes are made.

And for districts that are above 20 mills, it's not gonna make any difference.

Whatever your percentage is, they'll just roll the taxes back.

But for districts that are at what we call the 20 mil floor, and over half our school districts are there right now, then those districts that a 40% increase in value will be a 40% increase in taxes for their residents.

And so I think that they're just trying to mitigate this, and I think it's gonna end up in the budget, and if they wanna fix it for the tax year, 2023, they have to put it in the budget.

So I think it's a temporary measure and I think that they may be looking at that whole 20 mil mill floor issue at some future point in time.

But you know, there are gonna be some school districts that will get less money as a result of that.

And honestly, I was on a call with them last week and I said, I think for a lot of school districts, you're in a better position right now to take the hit and get less money from your taxpayers than a lot of taxpayers are to make those large increases in their property tax bills right now, so.

- Good afternoon.

Thank you.

I'm Meryl Johnson.

I'm on the State Board of Education.

Thank you for mentioning the movie, "Children in America Schools."

I remember a line from that movie where a teacher said, our textbook says one day we'll go to the moon, well, we've been to the moon.

And that was a very important line from that movie.

And that movie is available on YouTube for people that wanna see it.

- [Howard] It's from 1995 and we went to the moon in 1969.

- Yeah, it's a great history of what's going on.

And then also General accounting office in 1996 said that, Ohio was number one in the amount of tax dollars going to private and religious schools and number 50 in the conditions of its buildings.

So that leads to my question, and you may not be prepared to answer it, but do you know where we stand now in those two stats?

The conditions of our buildings and the amount of tax dollars going to private religious schools?

- I don't know the rankings, right?

I know that traditionally Ohio has been the top two for sending money to private schools.

We send money to private schools for auxiliary services and for administrative services.

And a lot of people also don't know this, that public school districts are responsible for busing community school and private school kids.

And so we do, I think New York, the last time I looked, New York was the only state that was higher in terms of the dollars per pupil that we sent to private schools in Ohio.

And you'd be interesting 'cause I'm wondering whether or not you count vouchers as part of private money going to schools or not would change that.

But we spend a lot of money on vouchers now.

I mean, right now, you know, my report showed the total amount of money we've spent on vouchers since its inception was 4.3 billion.

And 75% of that spending has been in the last eight years.

And this year we're up to $600 million in voucher spending, and under the Senate proposal, the estimate is it would be over a billion dollars.

So, you know, for the things that we've traditionally counted for state money going to private schools, we've always ranked high.

And now we've got a significant amount of money going to vouchers as well.

I'd be interested to see how we rank with other states.

I don't know off the top of my head though.

- Hey, I'm Anthony Green from MC2 Stem High School.

My question is, what do you think is the average cost to teach a student, and does that fluctuate based on the amount of technology that that district has?

- Yes, to the second question.

So the, you know, again, according to the model that we have in place right now, so what we've defined as the base cost, right?

That the cost for this year is about $7,200 per student on average across districts.

So the fair school funding model, the old cost from 2019 was 6,020.

So the cost that we're using now is about 20% higher for that, right?

And that is the base cost is a narrowly defined thing.

It's just for the typical kid, for the typical needs, again, any, you know, there's a lot of extra services and things that are funded differently and are funded beyond that.

You know, the average expenditure is over $10,000 per pupil in this state, but technology, I mean, there's one of the people from the Fair School funding Plan is sitting over there, Mike Hanlin.

And so Mike, you may be a better answer this question than me, that they did spend, there is a funding component in that funding formula that is specifically geared to technology and trying to make sure that, you know, there's a huge technology gap, especially between rural areas and urban areas, right?

I mean, there are school buildings that where, you know, they have to go outside to get reliable wifi, right?

I mean, I'm not making this up, right?

I mean, and so there's a big technology gap and they did spend a, there was a subcommittee that looked at that and that funding for that to try to equalize those differences is now included in the funding plan.

I can't remember the dollar amounts off the top of my head.

Do you remember, Mike?

- [Mike] They say it's a $150 per student, (indistinct) - Right.

Okay.

- Yeah.

And the ESSER money from the pandemic, right?

The lot of that money went, you know, when you're doing remote schooling, you can't do that, you know, without kids having the devices and without the connectivity that you need for that.

And so, honestly, from the standpoint of technology, you know, and I don't want this to be misinterpreted from the standpoint of technology, the COVID pandemic was a very good thing for that, because it forced us to confront it.

Everything else about the pandemic was horrible, right?

But from that point, we realized that you can't, you just can't.

There were too many places that were too far behind.

And that hopefully that gap has been narrowed.

(audience applauding) Am I outta time?

- [Cynthia Connolly] Yes, we're outta time.

- I'm happy to stick around if people have more questions.

I will talk about school funding if anybody's ever willing to listen.

(audience laughing) So thank you very much.

I really appreciate it.

- Thank you.

Thank you.

(audience applauding) You can leave your notes.

Thank you.

I love the notes here.

This is very much so in the vein of, a lot of the policy wonks that I know and work with.

- That's my brain.

- Yes, I love it.

Thank you Howard once again for joining us at The City Club today.

Today's forum is part of The City Club's education innovation series and partnership with Nordson and The City Club is grateful for your continued support.

We would also like to welcome guests at the tables hosted by Honesty for Ohio Education, MC Squared Stem High School in Nordson.

Thank you all for being here today.

Up next at The City Club on Friday, June 9th, we will host Chasten Buttigieg author, teacher, and yes, the husband of Secretary of Transportation, Pete Buttigieg.

He will join WKYC reporter Emma Henderson for a discussion about his young adult adaptation of his memoir, "I have something to tell you."

And then on Friday, June 16th, we'll host our inaugural Siddiq Forum on the Islamic World, featuring author Reza Aslan.

He will discuss his new book, "An American Martyr in Persia."

You can learn more about these and other forums at cityclub.org.

And that brings us to the end of today's forum.

Thank you once again to Dr. Howard Fleeter and thank you members and friends of The City Club.

Our forum is now adjourned.

(audience applauding) (bell dings) (upbeat music) - [Narrator] For information on upcoming speakers, or for podcasts of The City Club, go to cityclub.org.