Mr. Strickland's Challenge

No one can fault governor-elect Ted Strickland's ambitions. After handily winning the governor's seat, Mr. Strickland has promised to reform the state's flawed education funding system--going so far as to stake the success of his administration on it (see here).

Over the coming months, Mr. Strickland will hear from a chorus of advisors, supporters, and stakeholders--from school boards and superintendents to teacher unions--all proposing solutions for fixing Ohio's school funding problems. There may be calls to increase the state's per-pupil contribution; to mount a popular referendum to alter House Bill 920, which prohibits district revenues via voted levies from increasing with inflation; or even to fund the system altogether differently (perhaps through a statewide sales tax).

These suggestions--and sundry others--deserve vigorous debate. Funding schools in Ohio is currently an exercise in diminishing returns, particularly at the local level. Phantom revenue (which mitigates the impact of voted levies over time--see here), and elimination of the Tangible Property Tax (whereby districts earned revenues from taxing local business inventories) have, in part, contributed to perennial district pleas for money in the form of levies and now local income taxes.

It's a safe bet that much of the advice Mr. Strickland receives can be distilled to a familiar refrain: more money. Yet any reform efforts will need to consider how money is spent as well as how much. Three issues, among others, beg for a more comprehensive and creative approach to education funding.

First, Ohio, like many states, is engaged in poorly targeted spending--by funding districts and institutions over children. Serious funding inequities exist across districts and even within districts--with some buildings receiving far more funding than others. None of these differences is actually based on the needs of children, but rather on the needs of adults. Such inequities aggravate the state's worrisome achievement gaps in core subject areas--and do little to ensure that the best teachers are reaching the neediest students. The state's ambitious $5 billion facilities construction project is another example of well-intentioned funding missing its target. In urban districts, many shiny new buildings stand sparsely populated (see here). Not to mention the 72,000-plus charter school students who benefit neither from local tax dollars nor state facility funds. Any equitable school funding system will fund Ohio's children, not just its institutions and adults (see here).

Second, there are substantial costs associated with the funding system that have little to do with instruction and learning. Most notable is the staggering $20-plus billion in combined unfunded liabilities (see here and here) that the state's teacher and school employee retirement systems are carrying--a debt the state (and its taxpayers) is constitutionally bound to pay. Couple this with an aging teacher workforce (36 percent of teachers are age 50 or older--see here) and spiking healthcare costs, and it's clear that such "legacy costs" may torpedo any effort, however noble, to reform education funding. Just as numerous private sector companies have done already, the state must reexamine generous commitments made to teachers in the form of guaranteed retirement benefits or risk painful cuts in services and personnel.

Finally, Ohio is hardly in a position to spend with abandon. The state is struggling to attract new businesses (consider Honda's choice of Indiana over Ohio for its new plant--see here), and retain its existing ones (GM, Delphi, et al.). And Ohioans are already some of the most highly taxed citizens in the nation. Indeed, taxpayer fatigue is evident in recent election results that show voters rejecting almost half of the 206 school levy issues on November ballots--and 75 percent of all new tax requests (see here). This is hardly surprising. Many Ohioans don't feel they're getting good returns on their investment. And shifting more of the funding burden from local communities to the state--while perhaps a sensible move--will not address fundamental issues of district and school efficiency.

Mr. Strickland's goal of reforming education funding in the Buckeye State is both laudable and essential to improving the prospects of both the state and its youngsters. Indeed, it is imperative if he is to realize many of his other education goals--including new pre-school and post-secondary initiatives (see here). Yet for any plan to succeed, he will need to think radically differently about the purposes and efficiency of school (or rather student) funding.

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July 11, 2006
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