Casino Money for Schools = Lottery Redux

A few days ago, some legislators suggested that Ohio's schools need not fret about the $1.8 billion that was eliminated from education with their votes in last year's budget bill. Casinos will come to the rescue!

Here's how freshman State Rep. Mike Duffey, R-Worthington, put it:

... Duffey said ... that districts should start conservatively counting casino money in their five-year forecasts.

“I would certainly advise them to add it to what they’re getting right now,” he said. “I wouldn’t anticipate ... any reduction in state funding to offset what they’re going to get in casino money. It’s going to be supplemental, not just offset money.”

This is exactly what politicians told school districts about the state's lottery profits -- it would fix school funding. Instead, Columbus politicians took the lottery money and simply replaced General Revenue Funds with it. So no additional money went to schools; it just changed the makeup of the revenue source.

It is true that the Constitutional language that allowed Ohio's first casinos to open in Cleveland, Columbus and Toledo calls for the funds to not supplant money that would have already been spent.

Tax collection, and distributions to public school districts and local governments, under sections 6(C)(2) and (3), are intended to supplement, not supplant, any funding obligations of the state. Accordingly, all such distributions shall be disregarded for purposes of determining whether funding obligations imposed by other sections of this Constitution are met.

Go ahead and try to prove that the education cuts next budget of $200 million, $180 million, $150 million, or whatever the amount, happened because there's $160 million in gambling money that's coming in (the estimated amount from the state's new casinos that would be earmarked for schools).

We'll be told the state cut money to schools because revenues are down, the economy's bad, we need another tax cut, or something else. The excuses are tried and true.

Unless the cut to education money is essentially the same amount as the gambling money, and other areas of the budget increase by about that same figure, it's going to be awfully difficult to prove the state is supplanting general revenue money with the gambling money.

And let's say it is provable. Is anyone confident that the Ohio Supreme Court would be excited about taking on the legislature again on a school funding issue and rule that the legislature violated the Constitution? DeRolph fatigue (Ohio's school funding case that found Ohio's system unconstitutional four times between 1997 and 2002) would certainly play a factor.

This is why astute South-Western Treasurer Hugh Garside told the Dispatch this:

“It won’t be new money,” he said. “We would receive the same amount of money, but it would be funded from a different source.”

And let's say by some chance it is not used to supplant general revenue. Is it really enough to make up for the crushing funding cuts from last budget? Absolutely not. By way of scale, the lottery produces about $660 million a year for education. The new Casino money is not even one-quarter of that and represents about 1% of all state, local and federal money spent on education in Ohio each year.

The Dispatch story only looked at additional revenue for Franklin County districts, so let's examine them. Franklin County districts were cut about $83 million in the last budget. Casino revenue will generate $16.6 million for Franklin County, according to the Dispatch story. There remains a yawning gulf of $66.4 million. So property taxpayers still have to come up with about $65 more per $100,000 home to make up for the cut, and that doesn't include non-formulary cuts from the previous budget.

In South-Western schools, casino money would eventually generate $2 million a year, according to the Dispatch article. Sounds great, right? Sure, until you notice that the budget last year cut them over $10 million just in the formulaic distribution, which helps explain Treasurer Garside's reluctance to support the idea of a Casino rescue.

Oh, and one more thing: Last school year, the state's Charter Schools received $721 million in state money originally intended for school districts. Through the second April payment this school year, Charters are set to receive $771 million. If they continue to grow at that rate, it won't be long (3-4 years) before all the additional gambling money (as well as all the lottery money) is effectively eaten up by Charter School payments.

In addition, the districts that will benefit the least from the casino money are the ones that have historically been shortchanged by the state and were the subject of the DeRolph litigation -- rural Appalachian districts. They are also the most dependent on state money because they raise as little as $25,000 on a mill of property tax. However, they won't see much of the casino money because it is distributed proportionately to districts based on a county's school population. The money won't be distributed evenly among all Ohio's students, such as giving districts an extra $100 per pupil or something. From Section 15.06(B) of the Ohio Constitution:

Thirty-four percent of the tax on gross casino revenue shall be distributed among all eighty-eight counties in proportion to such counties' respective public school district student populations at the time of such distribution. Each such distribution received by a county shall be distributed among all public school districts located (in whole or in part) within such county in proportion to each school district's respective student population who are residents of such county at the time of such distribution to the school districts.

Therefore, counties with sparse student populations will receive proportionately lower shares of the gambling revenue. Franklin County, which is the county the Dispatch discussed, is the state's second largest county, but, depending on how you count student population, is the state's largest or second largest (according to the latest Cupp Report, on average daily membership it's second while it's first in enrollment) and will, therefore, receive the largest or second-largest share of gambling revenue (about 10-11%). Yet even in Franklin County, where the casino money will have just about the greatest impact of any of the state's 88 counties, the amount casinos will contribute to schools is relatively minor, especially compared with the massive cuts Duffey and others thrust upon districts in the last budget.

So, once again, schools, parents and children are being sold a bill of goods that there's some pot of gold over the rainbow. Ohioans have caught this leprechaun before.

He was carrying Iron Pyrite.