According to the Annie E. Casey Foundation, 594,000 children live in poverty throughout the state of Ohio. Assuming a family of four, these Buckeye youngsters come from households with an annual income of less than $25,000—truly disadvantaged families. It’s no secret that children such as these are behind the proverbial eight-ball in life; as recent research demonstrates, it’s a longshot that kids who grow up poor will climb into the upper-middle class as adults—and Ohio’s low-income children face some of the longest odds nationally.
It has long been recognized that the best antidote to this vicious cycle of intergenerational poverty is an extraordinary education. Still, even today, tens of thousands of low-income Buckeye students are way off track in school—in an academic Siberia—and almost certainly not on the path to adult success. In fact, according to early results from last year’s PARCC tests, roughly 15 percent of students from poor urban areas are meeting career- and college-ready benchmarks, while the percentages reach 50 and 60 percent in the suburbs.
What can we do? One possible avenue for advancement is to create public finance policies that devote more dollars to the education of low-income students. In technical speak, this refers to the concept of “vertical equity”—pupils with unequal needs ought to receive different amounts of aid—and is related to the idea of weighted student funding. Pragmatically speaking, this suggests that a low-income student might receive, say, $15,000 per year in public aid for her education, while a child from a wealthy family would receive a lesser amount. The logic is fairly simple: A low-income family has virtually no disposable income to privately finance K–12 education, while an affluent family has more and is thus in less need of governmental aid.
This approach could create more equitable learning opportunities for low-income children. It holds the potential for allowing their schools to compete for top-notch teacher talent, creating deeper and richer educational experiences, complete with science labs and rigorous coursework, and providing extracurricular activities such as band or orchestra, sports, theatre and the like. In other words, a funding system that prioritized public spending on low-income children could allow them to access the educational goods and services that upper-middle class families more or less take for granted. If (and it is a huge “if”) schools serving low-income students spend these dollars effectively, one would expect outcomes for low-income kids to improve.
So does Ohio’s school funding system actually dedicate a greater amount of taxpayer funding to those with the greatest economic need? The answer is both yes and no—and the whole question is surprisingly complicated.
Let’s start by looking at the distribution of state revenue to each of Ohio’s 609 districts. Chart 1 illustrates that the state generally devotes larger amounts of funding to districts with higher percentages of low-income pupils. The correlation between the variables is fairly strong (r = 0.67; 1.0 indicates a one-to-one relationship, and 0.0 indicates no relationship). In isolation, then, state revenue is allocated in a fairly progressive manner and indeed largely meets the goal of delivering more public aid to districts that educate higher-need pupils.
Chart 1: Percent economically disadvantaged students versus state revenue per student, Ohio districts, 2013–14.
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Source (for charts 1–3): Ohio Department of Education, Cupp Reports (FY 2014) Notes: Each point on the chart represents a school district. Ohio’s “island districts” and College Corner Local, which spans across the Ohio-Indiana border, are excluded from these charts. Generally speaking, “economic disadvantage” refers to students eligible for free and reduced-priced lunch (185 percent of the federal poverty level, or roughly $45,000 for a family of four).
Bear in mind that state revenue accounts for less than half of a district’s overall revenue—about 43 percent on average. Districts also receive a significant portion of funding (42 percent) from local taxes—predominately property—while the remaining share comes from federal funding (8 percent) and non-tax sources (7 percent).[1] The second chart displays the link between districts’ local revenue and their fraction of disadvantaged students. As you can see, an inverse relationship emerges: Districts with higher numbers of disadvantaged students receive less local funding (r = - 0.47).
Chart 2: Percent economically disadvantaged students versus local revenue per student, Ohio districts, 2013–14.
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As has long been recognized, widely varying property values drive the negative relationship that we observe in Chart 2. For example, one mill levied on the taxable value of real estate (i.e., a 0.10 percent tax rate) yields somewhere between $200 and $500 per student in wealthy suburban districts; meanwhile, in the most property-poor districts, one mill raises less than $100 per student. For example, Dayton and Youngstown school districts raise $68 and $51 per pupil, respectively, on one mill. Rural districts also raise relatively little when levying property taxes: Those defined as rural by the state generate, on average, $120 per student on 1 mill.
In addition to varying tax bases, another factor behind the local revenue disparity is the property tax rates themselves. Wealthier districts tend to have somewhat higher tax rates, as voters in those districts have chosen to tax themselves at rates above and beyond the minimum effective property-tax rate required by the state.[2] This means that not only do a fair number of high wealth districts have a leg up in terms of tax base, but generate even more local revenue than usual through a higher tax rate.
The net effect is that local tax revenue—which is held exclusively by the taxing district, not reallocated to others depending on their need—washes out the positive relationship between state funding and student poverty displayed in Chart 1. When all sources of taxpayer revenue are combined (state, local, and federal), the correlation between the two variables, though still slightly positive, falls closer to zero (r = 0.20; Chart 3). This indicates that the way Ohio funds public education only very modestly drives more overall taxpayer aid to fund the education of needier children.
Chart 3: Percent economically disadvantaged students versus total revenue (state, local, federal sources) per student, Ohio districts, 2013–14.
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In an ideal world, one might wish that the overall funding system looked more like Chart 1. But it doesn’t. This, of course, brings us to a key tension point in school funding policy: Local control versus equitable funding. Arguably, one crucial dimension of local control is the authority that school districts—local government entities—have to independently levy taxes and then spend those dollars as they see fit.[3] Some have argued (not unreasonably) that local control, as it pertains to districts’ tax and spending authority, ensures that citizens have “skin in the game”—a stake in the well-being of their communities’ public schools. Any attempt to minimize (or even abandon) the use of the local property tax to fund public education would run counter to the deeply held principle of local control.
At the same time, without addressing local districts’ taxing authority in some way, Ohio may not get to an equitable/weighted funding approach that actually puts more overall taxpayer dollars into the backpacks of children with the greatest economic need. This raises a tough question for those who want to see greater equity in education but also hold dearly to the principle of local control. How do you reconcile that principle—at least the tax and spending bit of it—with equality in educational opportunity (if not closer parity in academic, and even adult, outcomes)? Can we stand for both at the same time, or is the tension intractable?
The comments are open.
[1] Though not detailed in the Cupp Report documentation, non-tax revenues are specified in the Uniform School Accounting System manual; such receipts may include earnings on investments, breakfast/lunch sales, extracurricular dues and fees, facility rentals, sale of an asset, and so forth.
[2] Because a district’s voters can by referendum approve property taxes above the minimum amount the state requires (the floor is set at an effective 2 percent, or twenty mills, on taxable real estate value), local tax rates vary across the state. See here for the tax rates. The correlation between districts’ real estate values and their tax rates is 0.39; the correlation between median income and tax rates is 0.26.
[3] Although not the subject of the present article, within-district inequity can also emerge, such as when high-wealth schools receive a disproportionate chunk of district appropriations relative low-wealth schools. Research from Texas suggests that this is an even greater problem than between-district inequity (discussed here).
