Meeting Schedule, Agendas and Minutes
September 30, 2004 Minutes
In attendance were Task Force Chairman William W. Wilkins, Vice Chairman Jim Hyre, Ted Adams, Susan Bodary, John Brandt, Eric Burkland, Representative Chuck Calvert, Fred Church, Walt Davis, Paolo DeMaria, Matt Filipic, Russ Harris, Representative William Hartnett, Representative Jim Hoops, Senator Jeff Jacobson, David Locke, Jim Mahoney, Dick Maxwell, Tom Mooney, Dan Navin, Senator C. J. Prentiss, Barbara Shaner, David Varda, Scott Williams and Tom Zaino.
Presentations:
- Property Tax Growth Restriction Proposals (PDF*, 19 KB)
- Options to Pay for Supplemental (Categorical) Costs (PDF*, 11 KB)
- Estimated Impact of Growth Caps on the Charge-Off/Inside Millage Rate (PDF*, 11 KB)
- Preschool Funding Proposal (PDF*, 55 KB)
Mr. Hyre called the meeting to order at approximately 10:10 a.m.
Mr. Hyre began the meeting by observing that the issues on the day's agenda have been discussed previously. The purpose of this meeting is to attain some level of consensus. The Task Force has made considerable progress, but there is more work to be done.
Mr. Hyre then turned to Mr. Marshall, who described briefly the materials before the Task Force. Mr. Marshall stated that the Task Force will meet three more times: October 14, October 28 and once in November, tentatively November 18. He added that, whatever the Task Force cannot resolve at this meeting will have to be resolved on October 14, which will be the Task Force's last working session. The meeting on October 28 will be an opportunity to fine-tune the recommendations, which will be discussed at the last meeting of the Task Force in November.
Inflation Factors
Mr. Church reviewed for members the per-pupil foundation funding levels from 1995 to 2005. The chart used by Mr. Church included various inflation indicators and showed how they have changed over the past decade. Through fiscal year 2002 there were very large increases to the foundation levels as the state was phasing into the long range targets that it had established earlier. Mr. Church added that it has only been in the past few years that inflation has been the guiding measure for the increases in the foundation levels. Over the past three years, however, the foundation has grown somewhat faster than some of the inflators, but less than others.
Senator Jacobson again advocated applying inflators to salaries and benefits separately. He stated that, where possible, the Task Force should keep each identifiable piece separate so that future policymakers can have policy discussions about the components separately. If the Task Force can be more precise, it should be. This approach will give local school districts more ability to know which parts of the budget can grow and which should remain flat. If the districts deviate from those increases, they will know that a trade-off has to be made. The inflation factors being considered are good for many parts of the proposed foundation. If the Task Force can find others, such as an energy cost inflator that might reflect regional differences in Ohio, we can use that as we get additional information.
Mr. Mooney responded that this might be a technically sound approach, but it might be overly complex and not as durable as another approach. Mr. Mooney would prefer a standards-based system that provides more operational autonomy at the school-building level. Too much rigidity with the building blocks would take away power from the people on the front lines who are doing the job of teaching children. Mr. Mooney suggested that no inflation index will be perfect, so select a reasonable index that will be predictable and easier for the state and school districts to work with.
Mr. Filipic expressed his support for Senator Jacobson's idea for different reasons. He opined that people normally tend to use the Consumer Price Index (CPI) because it is the one that people understand. But there is a difference between using CPI and the Employment Cost Index (ECI). The ECI is a measure of what is happening with compensation in the economy, but this has little to do with inflation. There were real gains in income in the late 1990s due to productivity increases, but inflation was not moving nearly as fast. If you just use the CPI, then teachers would not get to share in the salary increases that the rest of the economy might be realizing when the economy is moving in that direction. Mr. Filipic does not believe that this would mean that there would be any real limitations on school districts with using various indexes: it only would determine their funding levels. They would still be able to spend the money as they deemed appropriate.
Mr. Burkland suggested that this number should reflect the costs of salary benchmarks for positions that compete in the same market for teacher-like positions.
Mr. Maxwell asked whether a blended rate is the net result. Would we calculate inflation for all the components, with their respective inflators, and then end up with a single number?
Senator Jacobson noted that there is a problem with general inflators: we know what the number is now and we know what we can buy with it. In ten years, you do not necessarily know what you can buy with the number that you have in ten years. Senator Jacobson would prefer to know how the building blocks have changed over time. To do this you really need to look at each part separately instead of blending them all together, which would mean that you would lose the granularity of the data.
Mr. Maxwell asked whether data are available for all the smaller portions of the per-pupil foundation amount. Senator Jacobson responded that such data were not obtainable. He offered that the Task Force could determine how much of the per-pupil foundation amount is "other" with a regional adjustment determined by policymakers. As the state collects more data, policymakers will become better able to pick inflators for various "other" parts of the per-pupil foundation amount.
Mr. Maxwell observed that the Task Force is already looking at inflators that make up 85% of a school district's budget. Supplies and insurance costs are the two things left that make up the bulk of the remaining 15%. Mr. Maxwell is reluctant to endorse an approach that is too complicated. The 2.2% inflation assumption that is in current law has little meaning. School districts can receive less state aid this year than last, yet we say their funding has increased 2.2%. There has been a lot of shifting of burden to the local taxpayer as we have been increasing the foundation level at a rate lower than the increase in property tax values.
Mr. Hyre asked whether any Task Force members are unhappy with using the Employment Cost Indices for wages and benefits. He also asked which inflationary factors members want to recommend for the non-compensation items?
Mr. Church suggested that there are several routes the Task Force could go. We could combine everything that is not compensation or we could break out energy costs and other things, each with their own inflators.
Mr. Hyre opined that the Task Force should give a direction to the General Assembly, who then can themselves make this a more refined process. Leave it to the legislature to make this a more sophisticated system.
Mr. Navin stated that it appears that, to the extent that we have data, we are going to recommend that the per-pupil foundation amount include a salary inflationary factor for the portion that is for salaries, another for benefits and another for the other costs.
Mr. DeMaria opposes using the Consumer Price Index (CPI) as an inflation measure because it does not represent what schools buy. Representative Calvert would prefer to use the CPI for non-compensation items instead of the Gross Domestic Product deflator.
Mr. Hyre requested that staff develop a proposal to incorporate the ideas offered by Task Force members. The proposal will be presented at the October 14th meeting of the Task Force.
Cap on Growing Millage
Senator Jacobson noted that because the growth on 22 mills is capped, in a few years the effective rate of the millage will be going down to 20 mills. This means that the state has to come up with more money. There is no floor, so millage could continue to fall. There will be less equalization going on with this. If the millage goes lower, rich districts do not have to pay as much as they would have.
Mr. Zaino responded that the legislature would always be able to reset the rate to 22 mills. The 4% cap would not be a reduction in revenue; it would just limit the increase to 4%. Mr. Brandt reminded members that the other part of the revenue proposal is the 40-mill charge-off on tangible personal property, which takes dollars away from rich districts.
Mr. Filipic observed that this touches on a fundamental question. The heart of the problem is the enormous instability of the number that we use to fund our schools. To address this, we need a constitutional amendment. This leads me to say that the issue at hand is to make this as understandable as possible. While this only provides a marginal benefit, people understand a CPI limit on growth. This would mean that additional money over time would come from additional millage or from the state.
Mr. Mooney asked what happened to the idea of linking the property tax growth to the growth in the per-pupil foundation amount. He would like to see more growth in the foundation, but he does not want a shift towards local property taxes as a more significant revenue source.
Mr. Church responded that his recollection was that this idea was discussed, but rejected, at the last meeting. The consensus seemed to be that per-pupil foundation levels should be a different conversation from the growth in property taxes.
Mr. Adams added that the Revenue and Taxation Committee did not look at what inflationary factors would be involved for the per-pupil foundation amount; this committee looked just at property tax measures. Mr. Zaino agreed with Mr. Adams. We are recommending moving from a situation where we allow growth in some districts and do not allow growth in others, to allowing growth in all.
Senator Jacobson noted that, over time, the 22 inside mills will decline, leaving additional inside mills available. Who could authorize accessing this additional millage? Mr. Sobul replied that the General Assembly could enact legislation that would prevent just anyone from taking that inside millage. As part of this legislation, the legislature could designate the mills for education only.
Senator Jacobson asked whether separate legislation would be needed to get this to work. Mr. Sobul answered that this was what staff envisioned, but this could be accomplished as part of the constitutional amendment.
Mr. Mooney wants something durable that is not subject to the whims of the General Assembly from budget to budget. Representative Calvert agreed with Mr. Mooney. If the millage is rolled back, the General Assembly could restore it, but Representative Calvert does not think it would take separate legislation.
Mr. Maxwell observed that more than 300 school districts (those at the 20-mill floor) currently get growth that is higher than the CPI and would lose from this plan. Representative Calvert added that the recommendation is for these districts to go from 20 growing mills to 22 growing mills. Mr. Maxwell responded that it will take less than a decade for these 20-mill floor school districts to lose from restricting growth on 22 mills rather than not restricting growth on 20 mills.
Mr. Hyre asked for a proposal on what the property tax cap should be. Mr. DeMaria suggested that the cap be the lesser of four percent or the growth in the CPI. Representative Calvert stated that the problem with putting four percent in the constitution is that it would be nearly impossible to change. He would prefer to have a limit that could be changed more easily. Mr. Navin agreed, noting that there is nothing magical about four percent. Mr. Zaino added that taxpayers in the 20-mill floor districts would have some protection under the provisions of the draft recommendation, which should be a good selling point.
Senator Jacobson asked whether the limit involves just the 22 growing mills. Would mills beyond 22 still be subject to the H. B. 920 tax reduction factors?It was stated that, yes, mills beyond 22 would still be subject to the H. B. 920 tax reduction factors. Senator Jacobson asked whether the charge-off had to match the level of growing mills. The answer is yes, in order to eliminate phantom revenue.
Representative Hoops stated that we do not know what the future holds, so he would like to see some leeway in setting a growth limit in lieu of a hard cap. Mr. DeMaria asked whether this means that the General Assembly would have the latitude to set the cap. Mr. Mooney opined that giving the legislature this flexibility might mean that the cap could be set at one percent. Having a hard cap might be our best bet to sell this amendment.
Mr. Marshall responded that, as long as the charge-off and the number of growing mills are kept equal there is a disincentive for the General Assembly to put in a low cap because doing so would increase the cost to the state. The lower the charge-off the greater the state's funding obligation.
Mr. Zaino opined that the Task Force is wasting its time if it does not recommend putting a cap in the constitution. The cap provides protection for taxpayers. It gives them a reason to vote for the constitutional amendment. Mr. Navin remarked that the issue is what the cap is. Should it be a hard cap of four percent, should it be tied to the CPI, or should it be some function of personal income? Mr. Zaino suggested that reference to the CPI should not be in the constitution, since the name of this indicator could be changed. The Task Force should recommend a hard cap, but suggest that the General Assembly should have the authority to adopt a limit that would be below the hard cap.
Mr. Mooney objected to this idea, noting that the General Assembly could set the limit at half of the CPI or some similar low number. Mr. Zaino replied that we have no choice but to trust the General Assembly to approve a good level for schools. He repeated that the constitutional amendment cannot be approved without a cap.
Mr. Navin interjected that simplicity cuts both ways. If there is a hard cap in the constitution, people might assume that their own taxes will not increase by more than four percent, while they could under this proposal. That would be just as bad as some of the other outcomes.
Mr. Brandt stated that the Task Force needs to recommend a hard cap. If we set a four percent cap and the General Assembly uses some other index that might be lower, the state has to come up with more money.
Mr. Hyre asked if there were other suggestions besides recommending a hard cap of four percent. Mr. Adams offered that, instead of picking a number, perhaps staff could present some options for consideration at the next meeting. Mr. Sobul said that staff would be able to draft some options.
Mr. Davis asked whether the Task Force should consider recommending either a three-year or a five-year moving average based on the CPI. Mr. Filipic suggested that the cap ideas might be shared with the focus groups, since the Task Force is interested in how voters might react to different ideas. Mr. Marshall replied that a question relative to caps could be included in the polling questionnaires.
Reallocation of Funds
Mr. Hyre directed attention to the unresolved question of the reallocation of existing state resources. Ms. Weir remarked that there would be a shifting of some $94 million if the cost-of-doing-business factor (CODBF) were eliminated, although guarantees or transition aid would reduce that amount.
Mr. Adams asked why this is an unresolved issue. Ms. Weir answered that the Funding for Success Committee discussed using existing state resources to fund some new initiatives. The CODBF was a possible target because it benefits many rich school districts. The districts that would realize the largest CODBF reduction (or be held harmless) would also get the most gain from 22 growing mills.
Ms. Shaner added that another reallocation is caused by increasing the tangible personal property charge-off from 23 to 40 mills. Are these the same school districts that would be affected by the CODBF elimination?
Senator Jacobson observed that districts cannot get hit twice. If the first hit puts districts on a hold harmless the second hit does not affect them. Once you put districts on the hold harmless, making the charge-off higher does not do anything. It should be a different discussion.
Ms. Shaner would prefer to have few districts on a hold harmless. She added that whatever the Task Force decides to do with the categorical programs is also going to have a big impact. Ms. Shaner noted that there are other positives to going to a 40-mill charge-off on tangible personal property.
Mr. Maxwell stated that all of these recommendations tie together. That is why we cannot discuss any of them in isolation. Mr. Maxwell asked if poverty-based assistance is a building block. Ms. Weir affirmed that it is. It would replace the current Disadvantaged Pupil Impact Aid line item.
Senator Jacobson suggested that the per-pupil foundation amount would be higher if the non-poverty-based building blocks were incorporated into it. Ms. Weir agreed that the building blocks funding that is proposed for all school districts could be added to the base cost if that is the desire of the Task Force.
Mr. Hyre interjected that the bigger point is what are we going to do if there are any additional CODBF dollars left?Senator Jacobson stated that there should be no CODBF money left because it should all be reallocated to school districts.
Mr. Mahoney suggested that the Task Force should be looking at the end product: are all of these changes making the system better?They might be better than the old parts, but we need to make sure that all of these things combined work better.
Categorical Programs
Mr. Church led the discussion of alternative ways to fund the costs of categorical programs (special education, career-technical education and pupil transportation). He noted that the 22-growing-mills proposal leaves the Task Force with a problem: school districts also have to have some millage to pay for costs of categorical programs. With the recommended change from a 23-mill to a 40-mill charge-off for tangible personal property, in some cases there is no money left over for categorical program costs that used to be paid for by this additional tangible revenue.
Options for dealing with the costs of categorical programs:
- The state could pay for 100% of the cost of categorical programs, removing any local share. This approach would cost the state approximately $580 million in FY 2006.
- Another option would be to create a modified gap aid program for those districts that do not have millage available to address the cost. This could be funded using money that became available because of the elimination of the CODBF.
- A third option would involve adding language to the constitutional amendment to add more inside mills for this particular item. This could be at the state or local level.
- A fourth possibility would be to retain the additional penny sales tax (or portion thereof) to pay for the local school districts' share of the categorical program costs. Keeping the full penny would also allow for other types of tax relief.
Mr. Church closed his presentation by stating that this was not an exhaustive list of ways to address the problem with categorical program costs.
Mr. Mooney expressed reservations relative to the third alternative, since it seems to be contrary to the proposed constitutional amendment. Are we not reallocating the CODBF funds for the new poverty-based assistance program?Senator Jacobson agreed that the CODBF money was already spent.
Mr. Mooney opined that the state should pay 100% of the cost of these categorical programs, which means that the state needs to raise more money. Senator Jacobson disagreed that the state should pay all of the cost. He added that the chances of the state finding the money to pay 100% of these costs for school districts that have local money to pay for them are not very high.
Mr. Brandt observed that state funding of all costs of categorical programs would help make whole those school districts that would be negatively impacted by increasing the tangible property charge-off to 40 mills.
Senator Jacobson replied that it is not necessary to increase the charge-off on tangible personal property to 40 mills. It only needs to increase enough to fund the reduction of the charge-off on real property from 23 to 22 mills. It is also not necessary for the state to pay all categorical program costs.
Mr. Adams interjected that the Revenue and Taxation Committee did not say that the state would pay for all costs of categorical programs. That committee was simply trying to address all these items. How these cost items fit into the formula is what we are trying to do.
Mr. Brandt agreed that the Revenue and Taxation Committee did not recommend that the state pay all categorical program costs, but there was a lot of discussion about it. There are many districts that will not have enough local revenue left to cover these costs after the charge-off on tangible personal property changes to 40 mills.
Senator Jacobson remarked that the more the state provides money to all school districts, the less the state has to address the goals the Task Force has established to target state dollars where there is the greatest need. Mr. Brandt replied that this is true only to the extent that education funding is a zero-sum game. He does not agree that this is legitimate or part of the charge that the Task Force was given.
Senator Jacobson disagreed that it is a zero-sum game. He does not understand why the state should reward wealthy districts with 100% state financing of categorical programs. They have locally available money to pay for this, and the state could use that money elsewhere. Funding all costs of categorical programs for wealthy districts would increase disparity in the state. Mr. Brandt responded that increasing the tangible personal property charge-off to 40 mills and removing the CODBF are fundamental shifts as well. Senator Jacobson retorted that any fundamental shifts should improve equality and fairness, not reduce them.
Ms. Shaner noted that the net savings to the state of reducing the real property charge-off to 22 mills and increasing the tangible property charge-off to 40 mills is about $300 million annually. It seems reasonable to put that money towards paying for the costs of categorical programs. We could have something graduated where the rich districts still pay some portion of the costs.
Mr. Mooney opined that the most significant problems facing school districts are special education funding and the H. B. 920 tax reduction factors. The state has to do something about the growth in special education costs, so what is wrong with having the state pick up all of the excess costs?
Mr. Adams disagreed with Mr. Mooney's suggestion. Senator Jacobson stated that the current system provides state funding for the costs of categorical programs (special education, career-technical education and pupil transportation) to the extent that these modeled costs exceed 3. 3 mills for a given school district. If the district does not have 3. 3 mills, the state pays for it. There is a local share now.
Ms. Shaner replied that there are currently 160 school districts that do not have even 22 mills, including emergency levies and school district income tax revenues.
Mr. Maxwell expressed his approval of the current treatment of categorical program costs. The assumed 3. 3 mills local contribution was tied to property values. The weights are tied to the foundation level which is growing at 2. 2% annually. If the Task Force includes an inflationary piece like we are doing to the charge-off that would be good. In addition, Mr. Maxwell believes that the tangible personal property tax is going away. The Task Force needs to look at what the school districts can get now by assuring them of a minimal amount for categorical programs. In the long term, these districts will be better served getting those amounts from weights rather than from personal tangible taxes, which are not viable in the long run.
After a lunch break, Mr. Hyre asked whether anyone had a direction that they think this conversation should take for the categorical program costs.
Mr. DeMaria heard support from the Task Force for keeping some form of gap aid. The state aid would go down in some measure as a school district decided to raise more local revenue. We should think about how to allow for some growth in the 3. 3 mills that we are using for categorical programs. That could be done by recalibrating the floor so that school districts do not go below the level necessary to pay all costs of these programs.
Senator Jacobson agreed that it is worth trying to formulate some principle about gap aid separate from this discussion. To the extent that there is gap aid in the system in the future, if a school district wants to wean itself from gap aid, rather than losing state aid immediately, it would be phased out over some period of time. Senator Jacobson would support adding this to the Task Force's report as a principle without adding something that happens to be a quirk of someone's history.
Mr. Maxwell answered that this approach is preferable to what we have now. Now we have districts on gap aid that might not have any tangible property base. Some of these districts have made an effort in the past to raise local revenues, but have been driven to the floor because of the disincentive that state aid is lost when local revenue is raised.
Representative Calvert stated that he had proposed the third option for dealing with categorical program costs, but he has reconsidered his position. He does not know that we need three growing mills for this purpose. Whatever three mills raises, the local school districts pay and the remainder is picked up by the state. The state would always pick up the excess cost.
Mr. DeMaria observed that the Task Force is committed to eliminating phantom revenue. He suggested that the Task Force consider allowing districts to convert any mills above 22 to be part of the 22 growing mills, as the 22 growing mills are reduced due to the cap on property tax increases.
Mr. Hyre asked that Mr. DeMaria, Ms. Shaner, Mr. Maxwell, Representative Calvert and Senator Jacobson come to the Task Force at the next meeting with a solution. He directed them to work with Mr. Marshall and Mr. Church. Mr. DeMaria is in charge.
Property Tax Relief
Mr. Sobul provided an overview of four options related to additional property tax relief. He noted that this is not an exhaustive list, but illustrations of what the Task Force could do. They basically fall into expanded eligibility or expanded exemptions.
Senator Jacobson asked where the state was supposed to get the revenue to fund the additional costs of higher property tax relief. Mr. Hyre replied that more property tax relief for low-income senior citizens and individuals with disabilities was thought of as a trade-off to help with the passage of the constitutional amendment. Senator Jacobson opined that additional property tax relief is a problem if the General Assembly has to find a lot of money to pay for it. Mr. Hyre noted that what Mr. Sobul is presenting are just options. Nobody is advocating for any of the options.
Mr. Zaino observed that one of the problems with levies is that the elderly have a problem paying for any new property taxes. This was thought of as a way to help get their support in future elections. This might not be as necessary since we are talking about having more growing millage, which might mean fewer levies going on the ballot.
Mr. Mooney has not seen any proof that having 22 growing mills means that voters will not have to approve levies anymore.
Mr. Mahoney remarked that the purpose for the additional relief is to encourage those voters who are 65 years old or older to support school levies. Mr. Maxwell asked why the property tax relief would not be extended to other low-income taxpayers. Why limit this to just those above 65 years of age? The 12. 5% rollback is across the board, why is this not treated the same?
Representative Calvert replied that these are just proposals, and they do not seem to provide enough tax relief to actually sway votes. Enacting them would also require the state to replace the lost local revenue.
Mr. Navin clarified that the purpose of proposing additional property tax relief was to mitigate the impact of moving from the 20-mill floor to 22 growing mills, particularly for those who can least afford it. That was the context within which this issue was raised. Committee members did not identify any revenue source since that was not our goal.
Mr. Filipic agreed with Mr. Zaino that the growing mills should mean that there is less need to return to the ballot. That does not mean that this proposal would ease the stress on school districts. However, there should be stability in the system so that districts go to the ballot for more money, not because of some strange arithmetic reduction in state funds due to assumed local growth that is not realized. Do we need a package to get our amendment passed?
Senator Prentiss stated that the Task Force is not discussing finding new revenue to pay for the educational aspects of our plan and yet the discussion is being held on items that do not have anything to do with education. Ms. Shaner added that the purpose for the proposals was just to get people to vote yes on the plan who otherwise might tend to vote no.
Representative Hoops asked whether anyone looked at the fact that the baby-boomers are going to be turning 65 in the near future, and to see what this proposal would cost in a few years when the bulk of the baby-boomers start to retire and fall into this age group. Senator Jacobson agreed that this is an issue.
Mr. Hyre referred to a recent article he read that claimed that Ohio is losing residents in the middle ages and gaining elderly residents. This tax relief is something that we would all like to do, but we have enough on our plate without worrying about paying for another change. He recommended that this item wait until the end of the Task Force's work to see if members would prefer to trade something else to fund property tax relief.
Mr. Mooney opined that the 10% property tax rollback does not accomplish anything that he is aware of, but it is a growing part of the education budget. We cannot afford to spend more money on property tax relief since we are already spending $1. 1 billion on it now. We could recommend changing the current rollback system and could afford many things that are targeted for certain policy objectives. Mr. Varda replied that eliminating the property tax rollback is just a tax increase.
Senator Jacobson suggested that expanding property tax relief might make it more difficult to pass more levies in the future, because a higher share of the levy will fall upon a smaller segment of the population.
Representative Hoops asked whether the Revenue and Taxation Committee studied having 65-year-olds exempt from property taxes, and taking those taxes retroactively when they sell their property. Mr. Navin answered that the committee did consider this idea briefly. The concern with this approach is that it would be very difficult to administer and the idea might be opposed by county auditors.
Preschool
Mr. Marshall asked whether committee members had any questions for Dr. Jane Wiechel relative to the Department of Education's preschool proposal.
Senator Prentiss asked how many children the proposal would fund and how many would not receive services. Dr. Wiechel replied that the Department of Education's proposal is a long term program. Over time the proposal would help children in families earning up to 300% of poverty. She added that not all of the costs would belong to the state. Federal dollars as well as dollars from the families affected could be used to support these services. If $100 million were available for preschool the state could fund 100% of the children who are at or below 100% of poverty and could add an additional 10,000 children, which would take us up to 185% of poverty. That level of funding would not allow us to serve all of the 100,000 three- and four-year-olds at 185% of poverty.
Senator Prentiss stated that the Department of Education's proposal only addressed 11,000 of these children. How do we get to serve all of these children?
Dr. Wiechel replied that it would cost another $400 million annually to serve all children (assuming a 66% participation rate) from families that are at or below 185% of poverty. This funding level would provide services 50 weeks a year, 30 hours a week, five days a week. The length of the program, the credentials of the teachers and the low class sizes all contribute to the relatively high costs.
Senator Prentiss asked whether the Task Force could put in a goal statement saying that we want to serve all three- and four-year-olds, up to 185% of poverty. We should invest early and stop investing in the drop-out prevention programs and prisons.
Dr. Wiechel added that the Department's proposal includes $1,800 per teacher for professional development, including release time. The cost estimate also includes $1,600 for facility costs, although that is an assumption that might not be accurate. The proposal assumes that not all children would be in existing school buildings, but, generally, where they are currently.
Ms. Shaner asked whether there might be a point where you do not need as much intervention in K-12 education if investments are made in early childhood education. Would an investment in preschool offset future costs? Are there any data on what the cost savings would be and how long it would take to get it?
Dr. Wiechel responded that a recent Ohio study looks at the cost benefits of such a program. The savings occur over time, but the study estimates that there is a $9 benefit for every dollar invested in preschool. Investing more in preschool also may limit the need for special education services. Behavior management should be improved. Shorter-term benefits include the likely reduction of retention.
Senator Jacobson asked whether the estimated cost savings are related to school only or also include social costs over a lifetime. Dr. Wiechel answered that both are affected. Senator Jacobson asked whether investing more in preschool would allow a reduction in state support for the school foundation program. If the state is to make this investment, there needs to be something on the other end where we can assume they need less. We need to be able to assure the General Assembly that there is a tangible benefit to this investment.
Mr. Mahoney agreed with Senator Jacobson in principle, but cautioned that it will take time to realize any benefits. Dr. Wiechel cautioned that there needs to be a critical mass of children participating to realize the benefits outlined in the study she referenced. Providing preschool services to a small number of children will not result in the impact estimated in the paper.
Mr. Filipic opined that the concept merits close examination. Can we target the investment to maximize the benefits? Should we allocate more funds to the schools with the greatest needs?Maybe a better logic is to target this money to schools with the least-prepared entering kindergarten students.
Senator Jacobson suggested that, as we invest more money in preschool, for every dollar we put in up front, we should have some future savings that will not be needed for intervention. We start the system of investing in preschool and factor in some future savings because children will be more prepared for school in the future.
Senator Prentiss offered that the state could do a pilot study. She stated that we need Ohio data on what makes sense. We could follow children who participate in the pilot so that we would have hard data.
Mr. Varda asked whether federal dollars were available to fund some portion of the $500 million annual cost. He also asked whether this cost estimate assumed that only two-thirds of eligible children would participate. Dr. Wiechel replied that the estimate does assume a 66% participation rate. She added that it is possible that there might be other revenue streams available to pay for part of this cost. Mr. Varda asked whether the cost estimate included preschool special education children. Dr. Wiechel answered that it did.
Mr. Filipic asked what the per-child cost is currently for preschool. Dr. Wiechel responded that the current cost is $5,800 per child because they are part-day part-year programs. Mr. Filipic asked whether Dr. Wiechel had hard data that shows that going from part-day part-year programs to all-day year-around programs provides tangible benefits. She stated that she does have these hard data.
Mr. Hyre concluded the meeting by noting that the Task Force will have to prioritize recommendations since the state does not have enough money to pay for everything that has been proposed. He adjourned the meeting shortly after 2:00 p.m.
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