Jan Resseger follows the latest budget shenanigans from the Ohio legislature. Reposted with permission.
On Tuesday afternoon, the Ohio Senate Finance Committee released its version of the next two-year state budget. It is a response to an Ohio House budget proposal released in mid-April. The two chambers must agree on and pass a final budget by the end of the month.
This week’s Ohio Senate budget proposal cuts taxes for the wealthy, fails to invest adequately in the state’s new public school funding formula, claims to protect home owners and farmers from rising local property taxes by threatening to return school district carryover balances to taxpayers, lets costs keep rising for the state’s voucher programs, cuts Medicaid, and eliminates a long-standing guarantee for public libraries of an automatic budgetary percentage each year.
The Ohio Senate budget proposal is strong on individualism supported by tax cuts, school choice, and a new Browns stadium, but in almost every way the Ohio Senate’s plan undercuts the needs of the public—public schools, public libraries, and publicly subsidized healthcare for those lacking employer-provided insurance. Senate President, Rob McColley promises what tax cut proponents always claim: “States that have a flat income tax or no income tax are seeing much more economic growth than the state of Ohio….”
For serving the needs of Ohio’s more than 1.6 million children and adolescents enrolled in public schools as well as for providing the “thorough and efficient system of common schools” promised in Article 6, Section 2 of the Ohio Constitution, the Senate’s budget proposal—like the House’s proposal released in April and the Governor’s proposal released in January—is wholly insufficient.
Senate Budget Undermines Phase-In of the Fair School Funding Plan by Failing to Update Data on School District Costs
The Fair School Funding Plan is a new state school funding formula designed by a bipartisan committee of experts to distribute the state’s school investment according to a reliable formula promising that all of the state’s 609 school districts can equitably and adequately educate the state’s young people. Wealthy and poor, urban and rural and suburban school districts all have different local capacities to raise local school funding through property taxes. The new Fair School Funding Plan formula is designed to calculate each school district’s local funding capacity by measuring the school district’s property valuation as well as the average income of the district’s residents (to measure their capacity to pass local school levies). The new formula is also designed to factor in what each school district must spend—its costs—and then to calculate what the state must invest in each school district to compensate for vast disparities in local school district capacity.
The legislature began the three-budget phase-in of the new school funding formula in the state budget in 2021, with the second phase in the budget passed in 2023. This year, the legislature was scheduled to complete the phase-in with funding in the FY 26-FY 27 state budget. The leaders in the Senate Finance Committee claimed yesterday that their budget proposal continues the phase in of the Fair School Funding Plan.
However… The Ohio Senate Finance Committee, like the Governor in his January budget proposal, insists on using old, outdated numbers from 2022 to measure each school district’s costs. School district costs have, of course, risen, and the new formula, therefore, fails to calculate the actual amount of state dollars each school district needs. While the new formula was designed to address years of inadequate state funding, the Plain Dealer‘s Laura Hancock reports that in the Senate’s proposal introduced on Tuesday, only 63 percent of school districts would see a funding increase in FY 26 and only 62 percent would see an increase in FY 27. Nearly 40 percent of the state’s school districts are falling farther behind.
It is difficult to discern from information released so far, just how much the state is diverting to the state’s five voucher programs, and particularly to the enormous, uncapped, EdChoice Expansion vouchers that ate up a billion dollars during the 2024-2025 school year. The cost is expected to grow as more students begin to use the vouchers.
Senate Finance Committee Keeps House Plan to Limit School District Carryover Balances
To make it even harder for school districts to fund an excellent education and to manage their budgets at a time when the legislature is under-funding the Fair School Funding Plan, legislators have also proposed to limit school districts’ right to maintain the carryover balances that make long range planning possible.
Ohio has a tax freeze law (House Bill 920), which limits school districts’ access to revenue when property appreciates. School districts must mount repeated levy campaigns to accommodate inflation. By law, all Ohio taxes must be voted on. School districts regularly plan for the future by asking voters for more local property tax millage than is needed in any one year and then operate from a carryover balance to stretch the length of time between levies.
Now the legislature is messing with this necessity. In their version of the budget passed in April, members of the Ohio House restricted school district carryovers to 30 percent of any district’s operating costs before the school district is required to return the extra money to the voters. This week, the Ohio Senate proposes to make the plan a little less stringent: Districts could maintain carryover balances up to 50 percent of their operating costs before they would have to give back the revenue voters approved in previous elections.
In recent testimony he presented to the Ohio Senate Education Committee, school finance expert, Howard Fleeter outlines why he believes the legislature’s proposal to limit school district carryover balances is unworkable: “A major reason that districts build up cash balances is the ‘levy cycle.’ Because House Bill 920 rolls back millage rates of all voted levies, school districts that are not at the 20 mill floor must rely on the continual passage of new levies in order to generate additional local revenue merely to keep up with inflation. Because expenditures escalate from year to year, the typical ‘levy cycle’ involves passing a levy for an amount which creates more than current expenditures initially but less than projected future expenditures… Eventually annual expenditures will surpass the district’s amount of annual revenue, and the district will begin spending down their cash balances… (and place) a new levy before voters…. However, under the… (legislature’s) cash balance cap provision, school districts that have recently passed operating levies will likely see much of these revenues mandatorily returned to voters… The alternative is for the districts to place levies on the ballot nearly every year trying to stay as close to the cap as possible.”
The Ohio Senate’s proposal to allow school districts to hold on to 50 percent carryover balances (instead of the House’s 30 percent carryover limit) might delay the need to pass new levies a little longer, but data posted by the Ohio Senate Finance Committee (School District Cash Balances 2014 through 2024) show that a 50 percent carryover will still curtail long range planning by myriad Ohio school districts.
Senate Finance Committee Would Provide Financial Rewards for School Districts with the Highest Test Scores
Laura Hancock reports that the Senate’s version of the budget would eliminate the years-old hold-harmless Guarantee for districts whose formula funding drops in any one year and also add the provision of extra state aid, (outside the Fair School Funding Plan) for school districts with fast-growing enrollment, as well as high-performing districts. This is a reward for school districts with high aggregate standardized test scores. This provision would inevitably boost state revenue in fast growing outer ring exurbs, many of which serve the state’s wealthiest families. And, as Stanford University’s Sean Reardon has demonstrated, students’ test scores primarily correlate with family income. Such a plan would undermine the work of the bipartisan planners of the Fair School Funding Plan to invest additional state revenue according to the needs documented in years of academic research—to support school districts where family poverty is concentrated and to support school districts serving students with disabilities.
Senate Finance Committee Further Cuts Ohio Income Taxes
The Ohio Senate’s budget proposal would also further reduce state revenue by cutting taxes, diminishing the state’s capacity, for example, fully to fund the Fair School Funding Plan. The Plain Dealer’s Anna Staver explains: “The Senate’s budget includes a $1.4 billion income tax cut, which comes from eliminating Ohio’s top tax bracket of 3.5% and replacing our tiered system with a flat 2.75% tax rate for anyone making over $26,000… According to an analysis from Policy Matters Ohio… more than 98% of the tax benefit would go to the top 20% of earners—those making at least $139,900 a year.” She quotes Policy Matters Ohio’s Bailey Williams: “A flat tax is a handout to the most well-off among us, and it will devastate Ohio’s ability to provide services that benefit everyone.”
Senate Adds Funding to the Budget for a New Cleveland Browns Stadium
Finally, the Ohio’s Senate’s budget proposal demonstrates that Ohio’s legislators don’t forget their friends. Anna Staver covers the Ohio Senate’s new budgetary gimmick to set aside $600 million to help major Republican donors, Jimmy and Dee Haslam, build a new domed Cleveland Browns stadium in suburban Cleveland.