Skip navigation.

Please Note: You are viewing the non-styled version of The Governor's Blue Ribbon Task Force on Financing Student Success' website. Either your browser does not support Cascading Style Sheets (CSS) or it is disabled. We suggest upgrading your browser to the latest version of your favorite Internet browser.

State of Ohio | Governor's Blue Ribbon Task Force on Financing Student Success

Committees

Funding for Success Committee

February 26, 2004 Minutes

The meeting of the Funding for Success Committee began at 10:15 a.m. In attendance were Chairman Matthew Filipic, Vice Chairman Richard Maxwell, Eric Burkland, Paolo DeMaria, Russ Harris, Representative Jim Hoops, Senator Jeff Jacobson, Senator C.J. Prentiss, Scott Williams, and Susan Tavakolian (for Susan Zelman). Also in attendance were Task Force Vice Chairman James Hyre, John Brandt, Dan Navin and Barbara Shaner.

Presentations:

Fiscal Stress of School Districts

Chairman Filipic reviewed for the committee the agenda for the day's meeting. He then welcomed Scott Bennington, Assistant Director of the Finance and Management Services Division of the Ohio Department of Education (ODE). Mr. Bennington summarized for the committee information relative to school districts' five-year forecasts.

Mr. Bennington began the presentation by explaining that the main objective of his office is to restore the fiscal integrity of school districts placed in fiscal watch or emergency. Senator Prentiss asked whether it was more common for school districts to be in financial difficulty because of mismanagement or because of lack of resources. Mr. Bennington responded that this is a difficult question to answer but that both have been the cause of financial difficulty. Mr. Bennington added that some districts have made mistakes with their finances because of inaccurate data or assumptions in their budgeting process. These districts many times have aspects of their operations that can be improved, but not necessarily as a result of mismanagement.

Mr. Bennington noted schools districts have been required to prepare five-year forecasts since 1999. He then summarized the five key features of fiscal accountability:

Mr. Filipic questioned borrowing on a 5-year forecast he analyzed. Mr. Bennington explained that districts can enter into short-term cash flow borrowing when the district's voters pass a levy. Such borrowing is called a tax-anticipation note.

Mr. Filipic asked whether the requirements of the forecasts inevitably lead to the projection of deficits in the out years since it is difficult for school districts to anticipate increases in state aid or the passage of new levies. Mr. Bennington noted that, on average, school districts need to go on the ballot for additional operating revenues every three or four years. Forecasts are a way of planning for this inevitable need for additional local resources.

Senator Prentiss asked what capacity the Department of Education has to respond to the fiscal needs identified in the five-year forecasts. Mr. Bennington said that Ohio law requires the Ohio Department of Education (ODE) to identify districts with the potential to incur a deficit during the first three years of the forecast period. ODE's practice is to contact school districts that project current-year deficits. The ODE consultant who contacts the district assesses the financial situation and offers assistance. Districts that cannot demonstrate the willingness or ability to avoid a current-year deficit will be recommended for placement in fiscal caution. Districts with potential deficits in future years are sent letters requesting the submission of a written proposal that addresses the future year deficit(s). School districts may be placed in either fiscal watch or fiscal emergency by the Auditor of State if this is deemed necessary.

Mr. Harris asked whether ODE still conducts staffing analyses relative to meeting minimum standards for staffing. Mr. Bennington responded that ODE still does these analyses. Mr. Harris asked why ODE does not go beyond these staffing analyses and look at programs. Mr. Bennington noted that staff comprises more than 80% of total spending, so the staffing analysis does get at program costs.

Mr. Filipic asked if a school district can fund minimum standards if they are relying solely on Foundation level funding (no millage beyond 20). Mr. Bennington stated that he thought they could, but emphasized that minimum standards are just that — minimums.

Mr. Harris noted that the current funding system in place is to meet minimum standards but the state has expectations of performance that goes well beyond the minimum.

Senator Jacobson noted that 26 school districts are ranked as either excellent or effective and spending at Gap Aid levels. Mr. Harris observed that almost all of these school districts are rural and very homogenous and thus easier to educate.

Mr. Bennington walked the committee through an example of a district's five-year forecast. He noted that line 6.01 is especially important because it shows the difference between annual revenues and annual spending. Negative numbers show that districts are spending more than they are receiving within a given year. Line 7.02 is also important because it shows the ending cash balance. Line 10.01 shows the ending fund balances, which is different from the ending cash balance in that it includes encumbrances (obligations incurred but for which actual expenditures have not been made). There was a general discussion of when, how, and under what circumstances ODE intervenes with school districts that project deficits.

Mr. Burkland asked why the exemplar school district was projecting such large increases in spending. It was shared that this particular district is experiencing large enrollment increases. Mr. Filipic noted that school districts are not required to provide enrollment projections as part of the 5-year forecast submission. This seems to be a flaw in the report, since one would expect very different expenditure patterns in districts experiencing significant enrollment growth as compared to districts experiencing sustained decline. The absence of enrollment data limits the usefulness of the reports.

Representative Hoops asked about the implications of requiring the submission of five-year forecasts while also requiring districts to sign H.B. 412 certificates that certify that funds are available to meet contract obligations. He asked whether collective bargaining contracts can be reopened when forecasts are not projected accurately. Mr. Bennington replied that what is happening is that school districts are entering into shorter-term negotiated contracts.

Mr. DeMaria pointed out that the exemplar five-year forecast is a great example of the structural deficits created under current law. When school districts ask voters to approve levies, they must plan over a three- to four-year period. Since local revenue does not grow with inflation, they have to plan for large cash balances in the first few years and then project the balances declining over the time period. Such large cash balances in the first years raise questions in the minds of voters. Districts, however, are forced to think this way because of the way the funding system is structured.

Mr. Filipic then asked Mr. Bennington to discuss some of the reasons for the increases in the number of school districts projecting deficits. Mr. Bennington gave some examples of reasons for more fiscal stress, including the decline in the economy. Mr. Filipic noted that if the decline in the economy is behind the increase in deficits, then the problem should go away as the economy improves. Mr. DeMaria noted that levy passage rates are related to the state of the economy. Fewer successful levies results in more fiscal stress.

Senator Jacobson noted that the state's lower inflation assumption (2.2% instead of the former 2.8%) may have led to part of the difficulty. Since increases were higher in the past, school districts may have assumed higher increases in state aid that have not been realized.

Mr. Maxwell added that a few years ago school districts had cash balances on which to depend but that those cash balances are now gone. The current smaller cash balances are partially attributable to smaller increases in state aid. Mr. Maxwell went on to say that he feels there is diminished capacity at ODE to assist school districts. He noted some of the warning signs of impending fiscal difficulties, such as personnel costs exceeding 85% of total budgets, fringe benefit costs exceeding 30%, and declining cash balances, for example. Mr. Bennington said that ODE does not have the capacity to analyze districts at this level. ODE must limit its analysis to the end-of-year cash balance.

Mr. Burkland commented that fiscal management is critical in a district and feels that the committee should perhaps make some recommendations on ways to improve how school districts account for spending.

Mr. Harris passed out a chart that showed November levy passage rates from 2000 to 2003. This document shows that the passage rate has decreased from 74.1% in 2000 to 44.5% in 2003.

Senator Jacobson opined that there is always uncertainty with projecting revenue and wondered whether a system can be developed that reduces uncertainty. He suggested that an input-based system might result in more reliable projections of revenue.

Mr. Maxwell noted how declines in student populations affect revenues. He opined that relatively small declines in student populations can result in relatively large declines in state revenues that can be very difficult to accommodate, especially in the short run. For example, since over 80% of a district's expenditures are tied up in personnel, required reductions have to be made here. This means the district has to bargain with the individuals that will be laid off. Another challenge with declining enrollment is that students do not leave from one class (which could then be eliminated), they leave from all over the district which makes reductions difficult.

Mr. Burkland asked ODE to provide a proposal regarding its capacity to assist school districts that are experiencing fiscal exigency. What additional resources does the Department of Education need to provide the necessary assistance to these school districts?

Mr. Maxwell opined that there seems to be more acrimony among voters towards school levies than in prior years. There seems to be increased resistance to new levies.

Senator Jacobson feels that part of this acrimony is attributable to the school funding lawsuit. He feels that voters assume that the state will take care of funding instead of local levies.

Mr. Filipic summarized his intentions for the discussion on fiscal stress. He explained that since he has not been persuaded of a convincing statistical relationship between overall funding and achievement, he thought that showing the fiscal stress being caused by the current system may be an alternative basis for justifying additional funding. He indicated that he knew things were going on in schools that were helping kids learn and which cost money, but has concern for the lack of understanding of the process. He said he is not willing to recommend an increase in funding simply as a gesture in the absence of convincing data, since increases in funding for one part of the budget are likely to come at the expense of other important functions.

Funding Implications of the Recommendations of the Governor's Commission for Teaching Success

The next presentation was from Marilyn Troyer, Associate Superintendent of the Center for the Teaching Profession at the Department of Education. Dr. Troyer outlined briefly each recommendation made by the Governor's Commission for Teaching Success and identified current funding for each and whether funding is needed.

Recommendation #1: Standards for what teachers and principals should know and be able to do. Funding is provided in the current budget for creation of the Education Standards Board. Additional funding will be needed for dissemination and training.

Recommendation #2: Framework for local evaluation systems to assess the performance of teachers and principals. Funding is provided in the current budget for providing guidance to school districts and for a proactive review of academic watch and emergency districts. Additional funding is needed for dissemination and training.

Recommendation #3: Statewide interactive database for tracking Ohio's education workforce. The Ohio Department of Education is currently developing a web-based recruitment center and is conducting research on attrition. Dr. Troyer did not indicate any additional funding necessary to support this recommendation.

Recommendation #4: Make more effective use of Ohio's colleges and universities. Articulation agreements between two-and four-year institutions are currently being negotiated. No funds are available for rewarding campuses for preparing the most-needed teachers.

Recommendation #5: Grow-your-own recruitment strategies for hard-to-staff schools. Dr. Troyer indicated that some of the elements of Diversity Grants provided now by the state support this recommendation. For the most part, however, there is no money available for the grants outlined under this recommendation.

Recommendation #6: Improve teacher retention by enhancing teaching and learning environments. Dr. Troyer described several ways to implement this recommendation, including reconfiguring school leadership teams, restructuring school days and moving to smaller schools or smaller units within schools. She explained that the specific grant program suggested under this recommendation is not created. There is also no specific funding supporting this recommendation. Some current initiatives, however, enable implementation of some aspects of this recommendation.

Recommendation #7: Raise the minimum salary for beginning teachers and implement new compensation systems. The General Assembly directed the Legislative Office of Education Oversight to study teacher salaries. The current budget also has a little under $200,000 for grants to a small number of school districts to develop plans for new compensation models.

Recommendation #8: High quality clinical and field experiences, including partnerships between colleges and P-12 schools. Dr. Troyer explained that this recommendation includes the creation of professional development schools, funding for clinically based preparation programs, college faculty to spend more time in the schools, and more collaboration between arts and sciences and education faculty. There are no funds appropriated for this recommendation, but the Board of Regents has allocated some funding for collaboration with arts and sciences colleges.

Recommendation #9: Strengthen teacher education program's accountability for the performance of their graduates. Dr. Troyer said that results of testing are currently being published. The Ohio Partnership for Accountability is in the process of acquiring grant funds for research in this area.

Recommendation #10: High-quality, standards-based alternative routes for teachers and principals. There is approximately $1 million appropriated each year for this purpose through Diversity Grants in the current budget.

Recommendation #11: High-quality induction experiences for new teachers and principals. There is $10 million currently available each year for entry year programs. Everything proposed under this recommendation can be accomplished with existing funds

Recommendation #12: Statewide standards for professional development. State funds are currently available for the development of these standards.

Recommendation #13: Professional development aligned to content standards and focused on the use of data. The state currently funds five additional days for professional development for 9th and 10th grade teachers in Academic Emergency school districts.

Mr. Filipic asked whether there is research that demonstrates what kind of professional development is most successful. Dr. Troyer noted that there is. It tends to be more expensive than less high-quality professional development. Dr. Troyer mentioned a current rural professional development pilot that appears to be very successful. Mr. Burkland asked if this program could be expanded. Ms. Troyer cautioned that it is challenging to scale up smaller pilot programs because the specific individuals who provide the leadership make the program successful and this is hard to replicate everywhere.

Mr. Filipic asked if the cost of this additional professional development is just the tip of the iceberg. Does Dr. Troyer know what the additional cost in teachers' salaries is as a result of teachers obtaining additional graduate credit and degrees? Dr. Troyer replied that there is certainly a cost, but was unsure what the cost might be.

Senator Jacobson asked if Dr. Troyer could provide a cost of a day of professional development. Dr. Troyer replied that the cost could be computed by assuming an additional contract day. In the summer, teachers could be provided a stipend to compensate them for their time. There is an additional cost for the materials and individual providing the professional development. Senator Jacobson would like for the Department of Education to provide some cost estimates for different ways of providing professional development.

Recommendation # 14: National Board Certification. The state currently funds 400 more teachers per year for National Board certification. The state pays the application fee and $1,000 annually as a stipend for new people that obtain National Board Certification.

Recommendation 15: Develop a plan for a regional service delivery system. The goal is to align and restructure regional service delivery agencies to support and assist school districts in raising student performance. Dr. Troyer indicated that this new system is being developed at this moment.

Mr. Filipic asked if Dr. Troyer had a specific recommendation that the committee should consider. She responded that the most important investment is in high-quality professional development.

Mr. Maxwell observed that ODE in the past had recommended that half of professional development funding go directly to school districts to use as they see fit and half to be allocated by the state in the form of grants. He asked if other states have adopted this model. Dr. Troyer said that some have. The Department of Education requested this approach in its last budget and still supports it.

Proposal for Creating a New School Funding Model

Paul Marshall, the Executive Director of the Task Force, explained the work that Task Force staff has been doing in considering how to proceed with a new funding formula. He explained that this proposal is only a draft for the committee to consider and is based on past discussions of the committee. Mr. Marshall explained that this proposed model will not produce an exact number of how much to fund schools but will provide a framework from which the committee can build.

Mr. Marshall explained that the proposal is a two-step approach. First, districts were identified that receive Gap Aid as well as identified as excellent or effective. Such districts are achieving high academically with minimal levels of funding. These districts, therefore, would provide a baseline funding level. Second, the goal would be to identify what additional services are necessary for schools with high concentrations of poverty. To analyze these needs, staff would look at the Schools of Promise. Such buildings have at least 50% of their students as low income and have achieved high success academically.

Mr. Marshall indicated that obtaining good data is going to be problematic. There are better data at the school district level than at the building level, but building level data is required if we are to analyze Schools of Promise. In order to get better data, staff will need to contact these individual schools to find out how dollars are being spent.

Mr. Filipic commented that the logic of focusing on models of success is to show what additional funding is necessary to add to a base model. He said that, since there is no generally accepted production function for teaching, this could lead the committee in the right direction.

Senator Jacobson said he wants to know what state dollars provide. The current formula does not allow for policy decisions to be made in an informed fashion. He indicated that this approach could be a good starting point for providing information that the committee could use to make informed decisions. His hope is that the information gathered on the Schools of Promise will show what they do rather than finding out specific information such as what the correct student-teacher ratio is.

Mr. Hyre suggested that the magnet schools and other outlier schools be removed from the sample. Mr. Marshall agreed.

Mr. Harris asked how many Schools of Promise will be analyzed. Mr. Marshall responded that this is only a starting place and that staff may have to go beyond actual Schools of Promise so that there are enough buildings to get a good representation.

Mr. Harris went on to express his concern that the 25 Gap Aid districts do not in any way represent most schools in Ohio. Senator Jacobson said that the approach would show what the base model will purchase. The committee can then debate what needs to be added as enhancements.

Mr. DeMaria shared that the analysis of the Schools of Promise seems to be a separate analysis. This will show the committee how to get to the additional things that are needed to address issues like high poverty and other problems. This is not a subset of the first group (the Gap Aid schools). Mr. Marshall said there could be some overlap.

Mr. Maxwell cautioned that to try and build inputs from Schools of Promise will be difficult because school building data are difficult to obtain. He expressed concern that the committee would be making decisions on bad data. Senator Jacobson said his understanding is that the data would not be used in a rigorous way. The information would be used for discussion on how important the various parts of the model are.

Mr. Maxell said that finding out the legitimate adjustments to the base would be very difficult. He added that funding adjustments to address poverty are probably the toughest to determine.

Mr. Filipic admitted that there are lots of problems with this approach but felt the committee would at least be looking at schools that are succeeding - as opposed to some sort of mathematical analysis that might indicate what would have to be spent if everyone does a bad job.

Mr. Harris requested a list of the Gap Aid districts identified for the model. He also said there are 300 effective and excellent school districts that should be analyzed. Senator Jacobson said that the problem with looking at 300 districts is that it does not take every dollar that such districts spend to achieve the success they are realizing.

Mr. Burkland said he liked the direction that staff is taking with one caveat. At some point, it is going to be hard to dig out the differences between the schools since so much of what a school does is regulated.

Mr. DeMaria suggested that staff also look at Gap Aid districts in Continuous Improvement that have a high performance index. He is concerned that not including such districts could exclude districts with successful practices.

Mr. Filipic said it is important to have a good understanding of the kinds of districts that are being analyzed so that the approach is not bipolar - where only those districts at the extreme ends of the spectrum are being analyzed. This could result in districts in the middle that are sufficiently different than those districts at either end. Senator Jacobson responded that the vast number of middle districts are not Gap Aid districts and, thus, have more money to deal with their specific characteristics.

Mr. Filipic concluded that there is some general interest in moving forward with this model and that a progress report should be provided at the next meeting.

Mr. Filipic also said that this approach should not be the only one being considered. The committee may come to a point where this approach is not desirable. He went on to say that he has been receiving inquiries from a number of people who want to speak to the committee on possible plans. He asked for the committee's thoughts on how to handle such requests.

Mr. DeMaria suggested that each person desiring to speak reduce their proposal to one to two pages for the committee to review. The committee could then discuss whether the desire is to hear more on each proposal. Mr. Filipic added that members of the committee should feel they can take time before the committee to share any proposals they may have.

The next meeting of the Funding for Success Committee will be held on March 8, 2004 on the 23rd floor of the Rhodes Tower. Mr. Filipic adjourned the meeting at approximately 3:00 p.m.


* To view PDF files, download Adobe's free Acrobat Reader.


THE FINAL REPORT
Governor Taft reading with a student.