Local school districts will lose between $100,000 and $2.1 million each in state funding in the next two months as the state government cuts its spending in the face of major tax revenue losses.
The pandemic eroded state tax collections by $867 million below estimates in April, Office of Budget and Management Director Kimberly Murnieks said.
Murnieks released details Wednesday showing how Gov. Mike DeWine’s $300 million cut in K-12 state foundation aid would trickle down locally and what other cuts mean for Medicaid.
FIRST STORY: DeWine to make $775 million budget cut
Murnieks said the cuts were structured to protect lower-property wealth school districts somewhat, by cutting their funding less on a per-pupil basis.
The state’s highest-wealth districts will lose on average $254 per pupil, while the lowest-wealth districts will lose an average of $118 per pupil. Murnieks said that formula was used because state school funding in general is intended to help districts that have less capacity to raise money via local levies.
Dayton Public Schools, for example, relies on more than $175 million in state aid for 65-70 percent of its annual general fund budget, while Centerville gets only about $13 million, or 10-15% of its annual revenue via state foundation aid.
In the cuts announced Wednesday, Centerville will lose $2.12 million in state aid, while Dayton will lose $2.01 million.
Most school districts’ funding losses will equal between 1% and 2% of a year’s total expenses, according to OBM data. Some will lose less than 1%, including Trotwood, Mad River, Northridge, Springfield, Middletown and Monroe. But several local districts will lose 2 to 2.5% — Bellbrook, Beavercreek, Tipp City, Miami East, Greenon, Lebanon, Waynesville and Springboro.
“This is in line with how the school foundation program is set up in the first place,” Murnieks said. “Taking into account the ability of school districts to fund their programs based on property wealth.”
For many schools, the cuts, while unfortunate, do not create an emergency. Fairborn schools Treasurer Kevin Philo called the cuts disappointing, but said his district is “in a strong financial position,” adding, “we feel confident that we will still continue to deliver a strong education to our Fairborn community.”
But in Bellbrook schools, the district’s cash balance was already low enough that the state required a performance audit, then voters rejected another levy attempt this spring. OBM listed the district’s estimated cash balance at $3.095 million, or roughly 10% of a year’s expenses. Now the state is cutting another $659,087 from Bellbrook’s expected revenue.
Murnieks said one piece of the equation — a crucial piece for schools like Dayton — has not been resolved yet.
When a student attends a charter school or a private school on a voucher, the student’s local school district is required to deduct their funding amount and pass it on to the charter or private school. Murnieks said the state has not yet decided whether school districts still will have to pass along the full amount, given their cut in state funding.
In Dayton’s case, almost 10,000 students who live in the DPS geography attend charter or voucher schools, making that budget pass-through deduction a multimillion-dollar amount.
“I actually don’t yet have the answer to that from the Ohio Department of Education — exactly how that pass-though will work,” Murnieks said.
ODE officials said Wednesday morning they were “still working through information to get answers.”
Murnieks also said DeWine’s $55 million planned cut in “other education budget line items” is not finalized, with more information due in the coming weeks.
She did give two examples — that the state would save $5 million from not administering state tests and producing a report card this year, and that $5.7 million allocated to the EdChoice voucher expansion program would be saved because not all available private-school vouchers were used this year.
These $355 million in K-12 budget cuts are only for the next two months, to the end of the school fiscal year. Murnieks said state revenue will also be down in the 2020-21 year, but OBM does not have a firm projection yet, as analysts disagree on what the recovery curve will look like.
Many Ohioans have argued the state should be using some of its $2.69 billion rainy day fund rather than making cuts now, but DeWine and Murnieks both said the state plans to save those funds for possible use in 2020-21 and beyond.
The budget director also addressed $210 million in cuts to Medicaid, which covers health care for the poor, saying an additional 6% in federal pandemic-related funding will not lead to any loss of coverage for those enrolled, including as a result of losing their jobs due to the pandemic.
Murnieks said the state’s cut to Medicaid would come from “an adjustment to the rates that we pay to managed care organizations,” adding that the state is working with those groups as well as the federal Centers for Medicare and Medicaid Services on rate changes.
“We are not reducing medicaid eligibility in any way,” she said. “We know that Medicaid services are absolutely essential during a pandemic, and we expect enrollment to continue to grow significantly in the upcoming months.”
The forced closure of nonessential businesses due to the pandemic led to the loss of nearly 1.1 million jobs across Ohio, drastically undercutting income and sales tax collections.
Income tax collections plunged $636 million or 50% below estimates in April in part to the filing deadline being moved to mid-July. The sales tax take dropped $237 million or 24% below estimates. All told, state total collections were $867 million less than projected for the month.
Tax collections reflected a $1 billion swing in only two months. At the end of February, the state had pocketed $249 million more than expected for the fiscal year as the economy hummed along.
Tax revenue then plummeted in concert with the virus-ripped economy, with April ending $777 million below the fiscal year estimates on which the state budget was built.
If the state, over the entire budget year beginning July 1, cuts the equivalent of what is being chopped in the current fiscal year, reductions would total more than $4.7 billion, or about 20% of state-only dollars devoted to the general revenue fund.
The Associated Press contributed to this story.
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