Districts seek millions in ‘lost’ revenue

Districts say state unfairly favors charters; charters have own gripe


THE FUNDING ARGUMENT, IN A NUTSHELL

The state contribution to educate each student is listed as $5,900.

But the state has a formula that adjusts that number downward for traditional public schools — down a lot in property-rich communities, down just a little in poorer ones.

Say District A actually gets $2,000 per child in state funding, with local tax levies making up the difference. When a child leaves to attend a charter school, the state takes the full $5,900 from District A and sends it to the charter to pay to educate that student (because charters don’t have levies to make up the difference).

Some districts say, “You took your $2,000 back, but you also took $3,900 of our residents’ taxes.” The charter advocates say, “No, they took the $5,900 from your overall state funding amount” (meaning the state per-pupil amount dips below $2,000, but local funding stays intact).

Regardless, neither side is happy. The charters are unhappy because without local levies, they generally get less total money per student than school districts. The districts are unhappy because the $5,900 deduction for each charter student can leave them with hundreds of dollars less state money per pupil than the state formula intends.

— Jeremy P. Kelley

“I’m fighting on every little dollar. It’s not like we can spare a dollar to go to anybody else.”

Northmont Superintendent Sarah Zatik

Three dozen Ohio school districts — including Northmont, Xenia, Fairborn, Troy and Northridge — have sent invoices to the state education department asking for the return of millions of “lost” dollars that they say improperly went to fund charter schools.

The invoices are largely symbolic — no one expects the money to be returned — but illustrate the nasty political battle that has erupted over the state’s formula for allocating money for charter schools.

The public districts and the charters couldn’t be much further apart on this issue. The districts say the process discriminates against them financially, while charter advocates point to the millions of dollars districts get from local tax levies, which charters can’t put on the ballot.

ExploreCharter schools, funded mainly by state and federal money, say they end up with thousands of dollars less per student than similar district schools.

“The system is inequitable,” said Aaron Churchill, Ohio research director for the Fordham Institute, which sponsors charter schools.

At issue for school districts is the dollar amount the state subtracts from them when a student enrolls in a charter school. That amount — $5,900 per student — is more than what districts get in base, per-pupil state funding. When applied to hundreds of students over multiple years, the difference can amount to millions of dollars.

Fairborn, for example, says it is owed $25 million from the state because of unfair payments to charters over multiple years. Xenia put the number at $9.3 million.

Some districts also argue that the state rewards charters that perform badly.

Northmont's school board passed a resolution last month saying the district "lost a total of $430,955 local funding to charter schools" just last year, criticizing charters for "low academic performance … fraud and corruption."

Churchill calls the district arguments a non-issue because they can seek money from voters through tax levies. Charters, he said, “receive no local tax revenue. Zilch. Goose eggs. Bubkis.”

State Sen. Peggy Lehner said legislators understand the frustration from both sides. But if the system changes at all, she said, it won’t be until the next state budget, in summer 2017.

“The informal discussion that’s going on has been around not a tweak but a fundamental change in how we fund charters,” said Lehner, chair of the Senate Education Committee. “The state would pay each charter $5,900 per student directly from state dollars. It would not go through the public school at all.

“To do that could be a significant cost increase to the state, therefore, it’s not going to happen in the middle of a budget cycle.”

Districts’ complaints

Base-level state funding varies by school district, as communities with stronger tax bases get less. For example, Dayton starts with about $4,400 per student from the state, Northmont starts with $3,150, and Kettering $1,260.

But every time a student goes to a charter, the state deducts its full $5,900 per-pupil amount from the home district’s bottom line and sends it to the charter.

That means more state money is going out for each charter student than is coming in for remaining district students. According to estimates from left-leaning Innovation Ohio, a frequent charter critic, the annual deficit is close to $1 million in Huber Heights, Kettering and Miamisburg, and more than $7 million in Dayton.

“The publicity is making people more aware that the charter issue is not just affecting the urban districts,” Lehner said. “People say, ‘How is it costing Centerville schools $400,000? There’s no charter in Centerville.’ Well, that’s the kids in online schools. And that’s surprising some folks.”

Several local school boards, including Fairborn, passed resolutions complaining about this system.

“Local taxpayers must subsidize the difference,” Fairborn’s resolution reads. “And/or such costs are borne by Fairborn City School students through reductions in educational services and higher fees.”

Stephen Dyer, education policy fellow for Innovation Ohio, concedes that the money being diverted to charters is state money rather than local tax dollars. But he said school districts then have to use local taxpayer money to fill in the state funding gap, possibly leading to more levy requests.

“Every way you calculate it, the amount of funding the state says that districts are going to get ends up being a lot less,” Dyer said. “So you’re increasing the burden on local property tax payers, and the last time I checked … that was unconstitutional.”

Northmont Superintendent Sarah Zatik said she’s against the current system in general, but she said losing $430,000 per year is especially bad now, arguing that the district is struggling financially.

“I’m fighting on every little dollar,” she said, adding that the majority of school expenses are personnel and benefits. “It’s not like we can spare a dollar to go to anybody else.”

Charters’ response

Churchill, from Fordham, argues that many districts are being disingenuous by focusing only on the state funding side of the equation. He points out that school districts can levy local taxes, while charters cannot, and says the focus should be on the total amount of public funding provided for a student’s education.

“You have a low-income student in Dayton attending a charter school, and they may get about $8,500 in total funding — $5,900 from the state, plus a little bit of federal,” Churchill said. “Then you have a low-income student in Dayton attending a traditional district, and they’re getting about $14,000 total funding.

“It’s a similar student, and they have similar needs. They both deserve a great education but they’re funded differently.”

Asked whether charter and district funding should be the same, Churchill acknowledged that since charters are relieved of some regulations, funding can be different.

“But certainly 60 cents on the dollar is pretty low,” he said.

The highly regarded Dayton Early College Academy charter school spends just over $10,000 per student annually according to state data — close to what Northmont spends, but less than what Dayton Public Schools spends on students from the same geographic area.

David Taylor, chief academic officer at DECA, took a similar tone to Northmont’s Zatik about funding, talking about squeezing every dollar out of textbooks, teachers and front-office staff.

“We’re compared to districts that are spending 12, 13, 14 thousand a year per student,” Taylor said. “We try to offer them a roughly equivalent education so we have to be really creative in how we do things — find a way to cut corners in ways that won’t hurt our students.”

Darlene Chambers, president of the Ohio Alliance for Public Charter Schools, has said her group is open to the legislature’s idea of directly funding charters, but slightly worried that “the stroke of a pen,” such as a line-item veto, could someday turn that upside-down.

But she criticized the move by some school districts to bill the state, when the legislature set up this very system.

“For traditional school districts to bill the state for an education they did not provide for a public charter school student that did not attend a school in that district defies all logic,” Chambers said.

Ohio Department of Education spokeswoman Kim Norris said ODE had no comment on the funding dispute, calling it an issue for the legislature.

Next steps

Churchill, Lehner and Dyer all agreed there’s no simple tweak that would make charters, districts and state budgeters happy. It would take millions more annually for the state to send $5,900 per student straight to each charter while also giving each school district its current state share with no deduction.

“It would have to come from someplace,” Lehner said. “Both sides have legitimate arguments, that’s the bottom line. … Everyone was kind of hoping we wouldn’t have a new funding formula in this next budget cycle, but if we start reconfiguring how we pay charters, we’re going to have a new funding formula.”

Churchill said reconfiguring the state formula, including caps on some districts’ funding and guaranteed minimums for others, “is a fairly complicated procedure, but I think it needs to be looked into.”

The schools certainly aren’t satisfied with their current funding. According to Fordham’s new survey of Ohio’s highest-scoring charter schools, 83 percent of principals said lack of funding is a serious problem for their schools. On the other side, four school districts have put levies on the March ballot asking voters to increase their taxes to pay school costs.

But in a state where the median household income of $49,308 still has not rebounded to pre-recession levels, schools will have to convince voters that the increased taxes are worth it. And school lobbyists will try to convince legislators of the same thing.

“The foundation of the whole problem is that the state wouldn’t put its money where its mouth was and set up a separate charter school fund that could offset the difference that districts got from their local revenue,” Dyer said.

But he added that a recently passed charter school reform bill, plus current discussion of the funding issue by the legislature, has him more optimistic.

“I’m really excited that we’re going to get some more equitable funding in both sectors,” Dyer said.

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