Meeting Schedule, Agendas and Minutes
September 17, 2004 Minutes
In attendance were Task Force Vice Chairman Jim Hyre, Ted Adams, Barbara Byrd Bennett, Susan Bodary, John Brandt, Eric Burkland, Representative Charles Calvert, Fred Church, Paolo DeMaria, Matt Filipic, Russ Harris, Representative Bill Hartnett, Representative Jim Hoops, Senator Jeff Jacobson, David Locke, Dick Maxwell, Tom Mooney, Dan Navin, Senator C.J. Prentiss, Barbara Shaner, Richard Stoff, David Varda and Dennis Woods.
Presentation:
- Blue Ribbon Task Force Draft Recommendations (PDF*, 57 KB)
Mr. Hyre called the meeting to order at approximately 10:10 a.m.
Mr. Hyre informed the committee that Revenue and Taxation Committee Chairman Chuck Gossett had passed away earlier in the week from brain cancer. He noted that an envelope would be passed for those who wanted to make a donation for Mr. Gossett. The committee observed a moment of silence in memory of Mr. Gossett.
Mr. Hyre began by noting that members of this joint committee of the Revenue and Taxation and Funding for Success committees will now try to pull together the committees' recommendations. Everything is currently in draft form and will remain that way until the joint committee completes its work. Mr. Hyre added that Task Force staff cannot begin to simulate draft recommendations until the joint committee resolves the remaining issues. He urged the committee to focus not on what had happened previously in the two committees, but on the unresolved issues. Mr. Hyre then turned to Mr. Marshall, who reviewed the draft recommendations of the Funding for Success Committee.
Mr. Marshall expressed his hope that, by the conclusion of the committee meeting, the staff would have preliminary guidance that would allow them to begin running simulations. He added that these simulations would be a place to start; they would not represent final numbers. Mr. Marshall opined that staff will find problems once draft recommendations are simulated.
Mr. Marshall noted that the Funding for Success Committee adopted a different way of looking at school funding through its building block approach. There is such a variety of types of school districts that the committee needed to develop a more flexible approach to school funding that would allow targeting of funding to address districts' specific needs. Mr. Marshall summarized the balance of the draft recommendations of the Funding for Success Committee, entitled Governor's Blue Ribbon Task Force Draft Recommendations.
Mr. Stoff asked if the listing in the grid on pages four and five of the Draft Recommendations was an exhaustive listing or examples of programs. Mr. Marshall responded that this is the list with which the Funding for Success Committee seemed to be in agreement. Mr. Filipic added that the grid is an exhaustive list of the things on which the Funding for Success Committee focused. There are more items, but these are all of the ones that were addressed by the committee.
Senator Prentiss noted that she wants preschool and class-size reduction to be a higher priority than community engagement. She believes that community engagement has not worked so far in urban areas. Senator Prentiss opined that community engagement should be the last priority. The joint committee appeared to be in general agreement with Senator Prentiss.
Senator Prentiss stated that all of the building blocks should be included in the foundation formula. She suggested that it will be more difficult for the General Assembly to change them if they are part of the formula. Senator Prentiss then asked where the committee was relative to inflation indicators. Mr. Marshall replied that the issue of inflation indicators remained unresolved
Mr. Stoff would like to see something in the recommendations that deals with high school dropouts. He added that he would like to see a holistic approach that included funding from agencies other than the Department of Education. Health and nutrition are critical to students' academic success.
Representative Hartnett asserted that test scores are really driving education policy. When we think of public schools, it seems that we are looking for effective teaching institutions instead of effective learning institutions. It is not fair to the child or the institution to create labels when it may be that effective teaching and learning are occurring but you have not yet moved the children up to their grade level.
Mr. Woods stated that he wanted to keep the more generalized language that is currently in the draft report. The hope is that the Battelle for Kids data will give us what we need to make progress. If schools do the right things over time the generalized language will serve us better. Mr. DeMaria added that, if a school is making two years of progress in one year, but still not getting over the bar, they should be counted successful and not be made to comply with more prescriptive measures.
Representative Calvert asked how the Funding for Success Committee came to the conclusion that teachers in high-poverty school districts need additional training. Senator Prentiss replied that national data show that high-poverty schools are much more likely to have teachers that are not appropriately certified. Dr. Byrd-Bennett added that research shows that teachers in poverty areas are typically less well prepared than other teachers. There is a greater need for professional development for these individuals.
Representative Calvert also asked what would be done with additional funding for high-poverty districts when the districts eventually became successful. Would the additional funding be phased out or "institutionalized" as a permanent feature of the formula? There was further discussion of this issue but no consensus emerged
Mr. Burkland suggested that it would be helpful to describe the process that the Funding for Success Committee followed in arriving at its draft recommendations. This process involved asking what inputs are successful and focusing on funding them. We need to make recommendations that are specific about what is required to have successful outcomes. There needs to be a special emphasis on deployment. We could have better data to present to the General Assembly, but that will not be easy.
Representative Hoops asked Representative Hartnett what he would do locally if he were still a school superintendent. Representative Hartnett answered that he would let the state determine what to do at a macro level and he would spend all of his time at the micro level. He would want to know what it takes for an individual child to succeed. Representative Hartnett opined that the state needs to give school districts the ability to take care of things on the micro level. He added that colleges and universities need to get teachers to the right level.
Senator Prentiss agreed with the point raised earlier in the meeting that all items that impact children should be under one umbrella. How do we meet all the needs of all children? These disparate pieces need to be put together.
Mr. Mooney noted that there has been some really good general work done by the Funding for Success Committee. However, he opined that it is difficult to evaluate the draft recommendations until we know what the base cost is. Mr. Mooney stated that Ohio is under-investing in education. Base funding needs to be adequate. Mr. Mooney asserted that Ohio is behind every surrounding state except Kentucky in school funding. If Ohio is to pass a constitutional amendment we need something for everyone. Mr. Mooney also declared that professional development is under-emphasized in the draft recommendations.
Mr. Marshall noted that the Funding for Success Committee had extensive discussion regarding professional development. What was presented to the joint committee was only a thumbnail description. Both committees did much more than could be represented in brief outlines. Mr. Marshall then turned to Mr. Church and Mr. Sobul who summarized the draft recommendations of the Revenue and Taxation Committee.
Mr. Church briefly went through the draft recommendations of the Revenue and Taxation Committee, which are summarized in the Governor's Blue Ribbon Task Force Draft Recommendations.
Mr. Filipic asked whether the contemplated reduction in the charge-off on real property was because the property tax revenue would be growing at a slower rate than property values. Mr. Church replied that Mr. Filipic was essentially correct.
Mr. Navin asked Mr. Sobul to review for the joint committee why a constitutional amendment is necessary to implement the recommendations of the Revenue and Taxation Committee.
Mr. Sobul referred members of the joint committee to page 15 of the Draft Recommendations. He noted that there are three major pieces of the constitution that reference school funding. The principal reason a constitutional amendment is required is attributable to the draft recommendations' proposal to swap 22 inside mills for 22 existing mills. "Effective" millage cannot be repealed since it does not exist in law. To replace outside millage for inside millage you might need to replace, say, 10 outside mills for five inside mills because of tax reduction factors. This could happen because the 10 mills are now effectively five mills due to the tax reduction factors. That is the primary issue that requires a change of the constitution. There are other secondary reasons, but other changes could probably be made within the limits of the constitution. Mr. Church summarized by saying that the constitutional amendment was necessary because under the current constitutional requirements, repealing voted mills in exchange for inside mills would result in large revenue losses to the school districts from tangible property taxes and Class II real property taxes.
Representative Hoops asked whether the Revenue and Taxation Committee had discussed taxing residential and agricultural property separately. He noted that he had raised this issue before. Mr. Church acknowledged that Representative Hoops and Mr. Maxwell had raised this issue in an earlier meeting, but there has not really been any discussion on taxing these two types of property separately. Representative Hoops would like this topic to be added to the list of unresolved issues.
Mr. Maxwell observed that agricultural and residential property values will never move in tandem, which could cause problems if the committee does not take that into account if it proposes changes.
Senator Prentiss asked whether the Revenue and Taxation Committee's draft recommendations would meet the guidelines of the Ohio Supreme Court, which said that the way we fund our schools is overly reliant on property taxes. She asked that the Task Force's report specify how its recommendations address the rulings of the court.
Mr. Navin answered that the Revenue and Taxation Committee did not go to great pains to couch its recommendations in the context of the DeRolph decisions. The committee reviewed various recommendations, such as 100 percent state funding of base costs through a statewide property tax. The committee rejected the statewide property tax idea because it wanted to keep the state-local partnership. The recommendation currently before the joint committee is to propose 22 growing mills, with growth limited by some factor, and to make the number of growing mills and the charge-off the same to eliminate phantom revenue.
Mr. Harris agreed with Senator Prentiss. The bottom line is that this recommendation would increase the school funding system's reliance on property taxes. Mr. Harris asserted that Ohio is 46th nationally in the equitable distribution of funding for education. This draft recommendation would put Ohio in a worse position. Unless there is new state money in the mix, no equalization is possible. If we have greater reliance on property taxes, we will not have met the court's order and we will not be providing equal educational opportunities to all children in Ohio.
Ms. Shaner stated that the Revenue and Taxation Committee worked under the premise that over-reliance on property taxes meant that the education of a child should not depend on where the child lives. Whatever tax effort is determined to be reasonable, the same per-pupil amount should be available across all school districts in exchange for the same local tax effort. One of the reasons the committee wanted growth on the basic aid amount was because there was going to be a cap on how much local property taxes could grow. Ms. Shaner added that it is her belief that the committee did address what the court said and created a reasonable approach to improving the school funding system.
Mr. Varda expressed his comfort with the building blocks approach. He observed that it is simply a funding mechanism that provides more state assistance to those districts that need it the most.
Representative Calvert asserted that there is a common misperception relative to what the Ohio Supreme Court ruled about property taxes. Some people believe that the court's ruling would require a reduction in property taxes, which is incorrect. Representative Calvert paraphrased the Supreme Court's ruling in DeRolph III that a school funding system that relies in part on the property tax is unconstitutional only if it creates disparity so dramatic that children in the poorest school districts are deprived of basic educational opportunities. Mr. Calvert further asserted that it is unlikely that property taxes would go down. Property taxes are the most stable tax base and they are going to stay a part of the equation.
Mr. DeMaria suggested that school districts that want to have mills above the 22 mills that grow should be given that option. Mr. DeMaria offered that, if the growth in the property tax inside millage is tied to education spending, it may need to be linked to a broader measure of education spending, including such things as categorical program spending. Mr. DeMaria added that the allowed growth in property tax revenue may also need to take account of enrollment growth.
Mr. Filipic opined that the focus on state and local shares of funding is not fruitful. He observed that the Revenue and Taxation Committee could have proposed that the 22 growing mills be a statewide tax rather than a local tax, which would have made the state share of funding look much larger, but taxes would not have been redistributed. There would have been a big change in state and local shares with no real change in the system, showing that the shares by themselves have little meaning He reasserted his belief that the effect of the Revenue and Taxation Committee's recommendations is that school districts would not have to return to voters as often.
Mr. Harris declared his sense that school districts propose emergency levies not just as a strategy to get to the 20-mill floor but also because they need cash. Other kinds of levies do not provide the same immediate access to cash as emergency levies. He asked Mr. Church how the committee proposal to eliminate emergency levies would deal with this issue, since eliminating those could be problematic to districts. Mr. Church replied that the law could certainly be changed to allow the same ready access to cash from current operating levies, so this should not be a problem for districts.
Mr. Harris asserted that the Funding for Success Committee has not recommended a methodology for calculating the base cost, which is not reflected in the unresolved issues.
Mr. Hyre closed the morning session by urging committee members to think about how to address the unresolved issues. The committee can expand the list of unresolved issues, but we should try to keep them to a minimum. He cautioned members that the committee cannot resolve the DeRolph case in the committee. Mr. Burkland asked that the tangible personal property tax be added to the list of unresolved issues. Mr. Mooney asked why the base cost methodology is not on the list of unresolved issues.
After the lunch break Mr. Hyre began the discussion of the unresolved issues and noted his hope that the committee would be able to come to a conclusion on the remaining unresolved issues at its next meeting.
Mr. Marshall noted that both the Revenue and Taxation and Funding for Success committees have struggled with inflation factors and how to structure the inflation factor. These factors drive a lot of money so they are key factors. Mr. Marshall provided a brief overview of the list of unresolved issues.
Mr. DeMaria asked that any inflation indicators be compared to the historical inflation in base cost, at least for years where that comparison would be reasonable. Mr. Filipic stated that he would like to see one combined inflation indicator used to grow the foundation level, rather than several indicators being used for different components of cost (such as using the ECI for salaries and other indicators for purchases of materials). On the other hand, Senator Jacobson said that he would like to see different inflation indicators used for adjusting salaries and benefits so that the state could make better decisions about what benefits package to offer to school employees.
Mr. Navin observed that there was a strong recognition in the Revenue and Taxation Committee that there needed to be a credible cap on property tax growth that is tied to an index, or perhaps to the growth in the foundation amount, so that as there are increasing needs, any increase in property values would be tied to the higher costs. The committee reviewed different indices. There was sentiment within the committee to peg the increase to the increase in the foundation level, although that might not be a dollar-for-dollar increase.
Mr. Woods asked whether it would be necessary that the specific form of the cap be included in the constitutional language. Mr. Sobul answered that this would not be necessary. Since it is inside millage you can do whatever you want with it. Mr. Locke opined that there should be some sunset provision built into recommendations so that policymakers can make sure that they remain relevant in changing times. Mr. Hyre suggested that the committee should recommend a follow-up group that will monitor the implementation of the Task Force's recommendations.
Representative Calvert explained that the Revenue and Taxation Committee recommended a cap on property tax growth to get enough votes to pass the constitutional amendment. Senator Jacobson asserted that the committee needs to recognize that there will be consequences associated with the cap, whatever it is. If the legislature limits growth in state support for education to a small amount, we will have capped local revenues as well. Senator Jacobson added that, if the state decides to increase state aid by seven percent, do we want property taxes to go up seven percent? Should we have a cap that reflects inflation and perhaps more than that? He argued that the state should not allow more than inflationary growth automatically. He also stated that if it was the Task Force's desire to keep state and local shares of funding roughly where they are now there are other ways of doing that besides tying the property tax growth cap to the foundation level growth rate.
Mr. Church responded to an earlier question about whether anyone had actually proposed percentage caps by stating that the Revenue and Taxation Committee did discuss "hard" caps of three or four percent. Mr. Filipic opined that it is a bad idea to pair the foundation growth rate and the property tax growth rate. It appears that there are more things that can go wrong with tying them together than can go right. How do you decide what the right rate is on the spending side? Mr. Burkland said that just as Mr. Church had said earlier that the decision to cap the growth in inside mills was a decision made to balance the interests of taxpayers, he felt that the legislature needed to continually make judgments about balancing the needs of taxpayers, school districts and the state. Therefore, the property tax growth rate and the education spending growth rate should not be automatically linked but should be decided separately in order to achieve the desired balance.
Ms. Shaner observed that capping inside mills only impacts the pool of money that is available to the state. Doing this does not impact school districts. Her concern is that there not be a huge shift between the local and state contributions.
Mr. Hyre asked whether committee members had specific proposals to offer relative to inflation factors. Mr. DeMaria suggested that committee staff develop some options. One option could blend salaries and fringe benefits and another could keep them separate. Mr. DeMaria also suggested that the growth rate of personal income be considered instead of an inflation measure, since the ability to pay property taxes is ultimately a function of income.
In response to Senator Jacobson's concerns about the difference in inflation rates for wages and for benefits, Mr. Sobul related that, over the past decade, in five years salaries grew faster than fringe benefits and in the other five years fringe benefits grew faster. The differences appear to be cyclical. Over time the changes have been roughly equal. Senator Jacobson opined that keeping the inflation indicators for wages and benefits separate would offer policymakers the ability to tie these to specific benefit packages that the state might create. It might force decisions to be made at the state level.
Mr. Burkland agreed with Mr. Filipic's proposal that there be one inflation factor that would combine the salary and fringe benefit rates and leave it to school districts to determine the ratio. This would leave the decision about how to allocate the money between wages and benefits at the district level.
Mr. Varda suggested that there should be an oversight panel to monitor the state-local partnership to make sure that things do not get out of balance. Senator Prentiss believes that it is really important to come out with concrete recommendations that do not give the legislature much latitude, even though that body does have the final say. When the report is done Task Force members will have to convince the rest of the General Assembly to accept it.
Representative Calvert opined that, in order to get the legislative votes for a constitutional amendment, there needs to be a cap. Property taxes would be capped and if the state increases the amount of the foundation the state would need to fund it. Representative Calvert wants to keep the ratio of state to local revenue the same as it is currently.
Senator Jacobson noted that, when the legislature wanted to keep the state-local ratios the same in the last budget that was to address phantom revenue. If the proposed constitutional amendment is approved, phantom revenue is not the problem anymore. Once we have eliminated phantom revenue and addressed funding disparities the state-local shares are not nearly as important.
Representative Calvert stressed that there needs to be a hard cap on property tax increases. There has been a lot of shifting between the state and local shares of school funding over the years. If we have a hard cap on the local revenues then the onus is on the General Assembly to maintain balance.
Senator Prentiss wants the committee to make specific recommendations on inflation indicators, developed in accordance with the guiding principles of the Funding for Success Committee. She does not want to leave the inflation indicators to the General Assembly to decide without concrete direction from the Task Force.
Mr. Varda asked Representative Calvert to explain what he meant by "hard" cap. Representative Calvert replied that he meant that there needs to be a firm limit on local property tax increases. He did not mean that there needs to be a cap on the state or local shares. Mr. Varda would like to see the Task Force make a specific recommendation relative to a cap together with an explanation of why the Task Force made the recommendation. He added that he understands that the legislature is free to adopt whatever cap it chooses; he would prefer to give the legislature some guidance.
Senator Jacobson reiterated his suggestion that the committee should consider an alternative to a constitutional amendment that would allow local voters to approve some level of growth on property tax millage. With either the constitutional amendment or his proposed alternative the cap would be the same. The hard cap would be some percentage or inflation, whichever is lower, but it should be less than five percent. There should also be some measure of ability to pay. The cap should be easy to understand and not be required to go up faster than taxpayers' ability to pay.
Mr. Stoff agreed that there should be a hard cap and it should be tied to an index. It would then be up to the General Assembly to approve or disapprove the recommendation.
Mr. Maxwell stated that Representative Calvert's point is that we are looking at a cap on property taxes. More than 300 school districts have unrestricted growth on their property taxes because they are at the 20-mill floor and now we are talking about capping this growth.
Mr. Hyre requested that staff prepare for the next joint committee meeting alternatives that will enhance this conversation. The intention is not to solve the problem, but to bring more options to the table.
Mr. Hyre then called on Dr. Jane Wiechel, Associate Superintendent of the Department of Education's Center for Students, Families and Communities, who shared with the joint committee a draft proposal to expand the state's preschool program. This draft proposal is available on the Task Force's website.
Dr. Wiechel summarized the preschool proposal, which was prepared in response to a request from the Funding for Success Committee. She began her presentation by noting that research demonstrates that all children benefit from preschool, but it is particularly beneficial to low-income children. Dr. Wiechel added that the vision would be that all children would eventually have access to preschool, but parents who can afford it would pay some portion of the cost on a sliding scale. The per-child cost of the proposal is approximately $9,000, for a total annual cost of $100 million.
Senator Jacobson asked whether the $100 million included current state funding for preschool or would be in addition to the current state spending. Dr. Wiechel replied that the proposal anticipates retention of the current state investment, but would increase the quality of the current programs.
Mr. Stoff asked whether there is any analysis that would make the long-term connection between this proposed investment and what it might do to the poverty rate in Cleveland. Is there any way to make that connection? Dr. Wiechel said that a study has been done of this connection by Clive Belfield of Columbia University. Mr. Hyre asked Dr. Wiechel to forward the analysis to Mr. Marshall.
Mr. Woods observed that, to be effective, preschool needs high-quality academic content. How many of the preschool programs in Ohio have high academic quality? Dr. Wiechel replied that both public preschool and Head Start have academic content that is aligned to K-12 standards. Mr. Harris asked how many of the 49,000 children who receive preschool services are in public preschool. Dr. Wiechel replied that about 7,000 children are in public preschool. Mr. Harris asked if Dr. Wiechel had information on how other states fund preschool for children of middle-income parents. Is it a combination of state, federal and parental funding? Dr. Wiechel responded that it was. Mr. Harris added that the most serious problems occur where there are concentrations of poverty, but the long-run vision is for universal access for preschool, which should be a Task Force recommendation.
Mr. DeMaria said that the committee should be careful as preschool is added so that these children also have access to all-day kindergarten. Mr. Varda asserted that preschool is very important. We need to look at all the available resources to fund it. Everyone agrees that preschool is important and we need to bring it up a level. Funding for all-day kindergarten also needs to be a part of this. Until all-day kindergarten funding is included in the foundation formula, the state is not where it needs to be.
Dr. Wiechel noted that the $9,000 per-child cost estimate would provide preschool for six hours a day, five days a week and 50 weeks a year. She added that the Department of Education is conducting a cost study to determine what it really costs to provide preschool services for all children of poverty.
Mr. Hyre thanked Dr. Wiechel for her presentation. He asked that all joint committee members read the materials that have been provided to them before the next meeting. He added that the committee needs resolution to the unresolved issues to allow staff to run simulations. In a perfect world, all of us would like to do everything that has been discussed, but we cannot so we have to make some difficult choices.
Mr. Stoff asked whether the committee could consider holding a retreat so that more time could be devoted to discussing issues. Mr. Hyre said that idea could be discussed.
Senator Jacobson asked that his idea of considering an alternative to the 22 growing mills, imposed by the state, be added to the list of unresolved issues. He would like to have a back-up proposal that would allow each district's electors to vote on whether to have growing mills.
Senator Prentiss wants to discuss funding for programs to deal with the low graduation rates of African-Americans.
Mr. Hyre closed the meeting by again urging members to read their materials. He added that no new subjects will be added until the joint committee deals with all the ones it already has.
The meeting was adjourned at approximately 2:15 p.m.
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