ETPI Research Update: FY14-15 Funding Formula Overview & Adjusted Expenditure Per Pupil Dr. Howard Fleeter Education Tax Policy Institute OSBA Capital Conference November 13, 2013

FY10-FY15 School District Formula Aid & TPP Tax Replacement Payments ($ in Millions) * Foundation Aid figures include Federal Stimulus funds of $417.6 million in FY10 and $515.5 million in FY11. Source: All data are from the Ohio Legislative Service Commission.

The previous table shows: Formula funding (including JVSDs) did increase over $1 billion in the FY14-15 biennium compared to FY12-13 ($1,080 to be exact). However, Foundation and TPP Replacement funding in the FY12-13 biennium was a $1.438 billion decrease compared to FY10-11. As a result, when TPP Replacement is taken into account, Foundation and TPP funding in FY14-15 is $607.3 million less than in FY10-11.

Comparison of FY14 Governor, House, Senate and Conference Committee Funding Formulas ($ in Millions)

Comparison of FY15 Governor, House, Senate and Conference Committee Funding Formulas ($ in Millions)

Comparison of FY14 School Funding Proposals ($ in Millions) * Transportation & Career Tech Funding are outside the Cap and Guarantee under the Governor’s Proposal

Comparison of FY15 School Funding Proposals ($ in Millions) * Transportation & Career Tech Funding are outside the Cap and Guarantee under the Governor’s Proposal

Comparison of FY13 Foundation Aid and FY15 Foundation Aid by Typology Group ($ in Millions)

Change to the Local Share The chargeoff off as we know it (20 something mills * district property valuation) is gone. In its place is the “state share index” derived from a “wealth index” based on each district’s relative property valuation and also relative median income (if the income index is less than the valuation index). The relative wealth index is transformed into a state share index (SSI) ranging from 5% (wealthiest districts) to 90% (poorest district). The SSI effectively acts as a variable chargeoff, ranging from roughly 8 mills to 23 mills. 538 districts have “chargeoff equivalent millage” between 18 and 23 mills under the SSI in FY14. While a variable chargoff is not a bad idea, it appears at this point that the SSI needs to be tweaked so that it tracks in a more predictable manner. There are also questions as to the stability of the SSI from one year to the next.

GRF Tax Revenues FY05-FY15

Education Fiscal Data Project As part of ODE’s ongoing efforts to provide local districts with tools to analyze and understand spending patterns, ODE has prepared the District Fiscal Benchmark Report for the years FY10, FY11 and FY12. Allowing for easy comparisons of a wide variety of data elements across districts, the Fiscal Benchmark Report includes a measure called “Expenditure per Equivalent Pupil” (EEP) among the Expenditure data.

Expenditure Per Equivalent Pupil Using data from the ODE Expenditure Flow Model (EFM), the FY12 Benchmark report shows Expenditure Per Pupil ranging from a low of $7,245 in River Valley Local to a high of $21,776 in Orange City. There are many reasons why expenditures can vary widely from one district to another. The idea behind the EEP measure is to adjust expenditures for differences in student needs by weighting pupils who are economically disadvantaged, limited English proficient, and/or in need of special education services.

Expenditure Per Equivalent Pupil Weights ODE’s EEP measure uses the following weights to adjust the EFM expenditures: Special Education - the foundation formula weights for each of the 6 disability categories, ranging from 0.2906 to 4.7205 LEP - Limited English Proficient students are assigned a weight of .2906, the lowest special education weight Economically Disadvantaged - a base weight of 0.1 is multiplied the district’s ratio of economically disadvantaged students (as measured by % of students eligible for free or reduced price lunch) to the state average. The maximum weight is 0.24 in Cleveland.

ODE Expenditure per Equivalent Pupil By multiplying the weights from the previous slide times the number of students in each category, ODE produces a weighted ADM count (note that category 3-6 special ed. students who are also economically disadvantaged receive only the special ed. weight). This weighted ADM count is then used to produce a weighted expenditure per pupil, which is the EEP. The ODE EEP ranges from a low of $6,037 (Williamsburg Local) to a high of $18,226 (Orange City).

ODE Expenditure per Equivalent Pupil The point of the EEP is to take each district's actual EFM expenditure per pupil and adjust it for the student needs in the district. By making this adjustment, the Equivalent Expenditure per Pupil figure reflects the amount that each district has to spend on the typical student. While the ODE methodology is generally sound, the weight used for economically disadvantaged students appears to be too low. National research shows that the poverty weight is typically at least 0.3 and higher for districts with high concentrations of low-income students.

ETPI Adjusted Expenditure per Equivalent Pupil ETPI recomputed the ODE Expenditure per Equivalent Pupil calculations using a base weight of 0.3 for poverty rather than ODE’s 0.1. The maximum weight is now 0.72 in Cleveland and the average weight is 0.3 The ETPI EEP ranges from a low of $5,409 (Hardin Northern Local) to a high of $18,107 (Orange City).

Some Example Districts

Adjusted Expenditure Per Equivalent Pupil by 2013 Typology Group

Why is EEP Useful? The purpose of this analysis is to show a true “apples to apples” comparison of spending across Ohio school districts by adjusting for the mix of pupils. Adjusted Expenditure Per Equivalent Pupil (EEP) shows the $ spent in each district on the education of the typical Ohio student.