Navigating a Crisis: Lessons from 2009

I know I tend to talk a bit about my time as the Chair of the Primary and Secondary Education Subcommittee on the House Finance & Appropriations Committee. I try not to use that word salad too much, but being in charge of the $24 billion biennial education budget while making sweeping changes to the state's school funding system was one of the honors of my life.

I haven't talked much about how the Great Recession interfered with that effort and how we were able to deal with hundreds of millions of dollars of lost revenue each month.

As it appears we're about to face a similar and potentially deeper state budgeting crisis next year, I thought I'd offer some insight about ways for the state and federal governments to make sure we're still able to provide the essential services our country needs (specifically education) while navigating a financial and humanitarian crisis.

So, here it goes.

Maintenance of Effort

In the 2009 Stimulus bill, the federal government provided Ohio what they called State Fiscal Stabilization funds. This money was meant to prop up state budgets while state revenues (primarily income and sales taxes) cratered. The idea was to ensure that the state could essentially maintain the same level of services through the crisis, and even more in some areas (like unemployment, food stamps, Medicaid, etc.) that are more heavily used during recessions.

Ohio used about $933 million over the two-year budget (Ohio by law has to do biennial budgeting) -- about $417.6 million in the first year and $515.5 the second -- for K-12 education.

However, we were only able to draw down that additional funding because we were able to show something called "Maintenance of Effort." The feds required states to maintain a certain level of state funding relative to previous years' spending before allowing states to draw down the federal dollars. I get it. You didn't want states just gobbling up money without any effort.

However, the maintenance of effort with the 2009 stimulus was quite rigorous. And there were times when we didn't think we'd be able to make it. In fact, as Chair of the House committee dealing with the education portion of the budget, I forced the legislative and executive budgeting offices (we rarely if ever agreed on anything) to meet for many late nights (along with me and my staff) so we could have agreement by everyone in the room that we had met those standards. So instead of working on programs that could help kids, we spent countless hours doing an accounting exercise.

My advice to the feds this time is to ease up on maintenance of effort this cycle. I'm not saying have no maintenance of effort, but let's make it reasonable given these circumstances so state policy makers can focus on policy and not on academic exercises.

Target federal spending to meet the crisis

If there is one thing I'm hearing today from school leaders, teachers and parents, it's how this crisis has revealed the technology equity gap between districts and even neighborhoods of districts. There are many students throughout Ohio that don't have computers or internet access at home. Not every district can afford to give out laptops and hotspots to every kid, especially in areas with lots of families who don't have internet or laptops. Some districts are mailing out worksheets for families to mail back the responses.

Federal Title IV, Part A funding is meant to address these technology concerns. If the feds would significantly boost funding to this program, it would allow many families to access the technology needed to do universal remote learning. And in the context of trillions of dollars of federal spending, this should cost a relative pittance.

Be Bold

During the 2009 recession, as we were watching literally hundreds of millions of dollars of revenue just disappear monthly, Gov. Ted Strickland and the House still undertook what remains today as the most ambitious effort to fix our unconstitutional school funding system -- the Evidence Based Model. A version of this Evidence Based Model of school funding is still in place in Wyoming, which has the most highly regarded, equitable and adequate funding system in the country.

While the recession kept us from realizing the model's true potential for our kids, it did allow the state for the first (and only) time to commit additional state resources to education beyond the biennium. It promised a little more than $3 billion additional state revenue over 10 years, greatly reducing our state's need for property taxes to fund education -- the primary issue for the Ohio Supreme Court and why it ruled four times that the way we fund schools is inequitable and inadequate.

The current legislature has the Cupp Patterson funding plan before it as we speak. I would urge leaders to not ditch the plan. Instead, use this crisis to make the changes everyone knows we need to our school funding system. Commit to fully funding the plan, even if it's many years in the future (you can always do it quicker if our recovery happens qufaster than expected).

But you will get a pass from folks if you don't immediately infuse billions into education because we just won't have it. But committing to that additional funding, even over a decade, will show schools, families and kids that the state is indeed committed to their futures. And at the very least, we will have a formula that is rational and can more efficiently and effectively distribute revenue to districts that need it the most during this coming downturn. If we're going to have to deal with funding cuts, at least have a formula in place that will better ease the pain on kids in districts that are most reliant on state funding (typically the poor ones).

A good formula can protect districts from cuts as well as it can benefit districts with funding increases. The makings of the best formula since EBM are in front of the legislature now. Don't abandon the good work. Use it to help ease the pain of the coming downturn.

Revenue

Look, I more than most understand the political power of the anti-tax message in Ohio. In 2009, we delayed the implementation of the last year of the 2005 income tax cut by two years and I got hammered for "raising taxes" the rest of my political career.

Unfortuantely, there is no relatively simple revenue fix available to lawmakers now. They've cut taxes to the bone. About the only large pot of money out there is the $1 billion or so "LLC loophole." But will the legislature have the political courage to examine revenue increases during this downturn? Lots of people forget that after the last recession, property tax levies jumped and income tax rates increased too. The legislature wasn't willing to do that dirty work, so it was up to local communities to raise the needed revenue.

But I don't know how much more locals can do on revenue, what with school property taxes alone going up by about $2 billion between 2010 and 2018 and the average tax rate jumping by 10 percent.

Municipal Income Tax collections are also up by $1.4 billion -- a more than 1/3 increase -- between 2010 and 2017.

There is going to be a serious revenue shortfall coming up next year. The Rainy Day Fund likely will be depeleted soon. So then what? State legislators and the governor have to be sober and serious when dealing with this issue. We are going to need more first responders and educators now given the nature of this crisis. How do we provide these services with less revenue?

One option that will have to be discussed is more revenue.

Keep the kids in mind

One of the things I kept returning to in 2009 while we were worrying about lost revenue, maintenance of effort and creating a new school funding and accountability system was this: What will help kids the most? What I eventually landed on was pretty simple: Follow the evidence and fund those services we know will help kids, especially as their families fall on hard economic times. Smaller classes (which help offset many at-home issues), community liaisons, multiple ways to graduate more college and work-ready students and create a formula that most efficiently drives dollars to the neediest kids at the neediest times are all efforts that meet the need.

One of the issues with the Cupp Patterson plan is it is kind of a peanut-butter approach -- spread a lot of money over many districts, lessening the benefits for the most needy kids. But it's not that far from being fixed. A tweak here and there and we could have a formula that actually protects the most vulnerable kids and families from the coming recession. So let's do that.

Conclusion

These are just a few of my memories and recommendations for those who will likely face the most daunting task in our lifetimes -- developing and funding policies that help kids and families during what will surely be an unprecendented economic and public health crisis.

We've seen the state show great leadership on the public health side of this crisis. I pray it shows equal competence and leadership during the coming financial crisis. Because if they do, our kids and families will succeed and dig us out of this hole more quickly. If the state shrugs its shoulders, lacks courage and eschews bold solutions to an unprecedented crisis, then we will struggle for a generation.

No pressure. 

 

State Budget Shortfall Looms. Time to Prepare.

These are crazy times. And they're only going to get crazier.

However, one thing that I've not really seen reported or discussed is what will certainly become a huge state budget shortfall, probably first manifesting itself in April's revenue receipts put out by the state.

Having gone through the last one of these as a State Rep., I think I can help offer some suggestions about the last budget crisis we felt during the Great Recession.

1) Assume the worst. I can't tell you how many times I thought we had figured out a state school funding plan, only to find out a week later we had $250 million fewer in the state's coffers. Assume the worst for what will soon become a createring of tax revenues. And build from there.

2) Invest wisely. This crisis will be different from previous ones in that most folks who do work will have to do so remotely, and students will have to be schooled from home. Both of these realities require internet access and computers. More than ever we need universal broadband internet access across the state. Use this as an opportunity to deliver what's been needed for two decades now.

3) Set priorities. We need investments in areas of the economy that can help grow it. Building things, educating people, ensuring public safety should all be priorities that are set. Now is not the time for pet projects. It IS the time for lots and lots of pork to keep people working and the economy working.

I do not envy the state legisltors who will have to deal with this. My heart also aches for Reps. Cupp and Patterson who worked so hard on their new school funding plan, which holds real hope for Ohio's kids. But instead of a solid economy to make the change, they're going to face a similar economy to the one I faced in 2009 when we did the Evidence Based Model -- a similarly hopeful change that ran into the harsh economic reality of a major recession and forced a 10-year phase in period.

I hope for our kids' sake that we will keep trying big things on education. But I fear we will lose sight of the forest over the next few weeks and months. It will be our job to keep people focused and right during this really difficult time.

Stay safe. Stay well. 

No Han Solo: What’s missing in Ohio’s newest school funding attempt

When the long-awaited school funding simulations were released Friday by state Reps. John Patterson, D-Ashtabula, and Robert Cupp, R-Lima, for their Fair education funding plan, people didn’t really know how to respond. Yes, it called for an annual spending increase of $718 million statewide for schools.

That’s good.

But did Ohio’s suburban districts need to swallow up more than 1/3 of that increase while the state’s biggest urban districts only got 5 percent of the increase? And flat funding Northern Local in Perry County – the district that originally sued the state over its failure to properly fund education? How is that “fair”, as the plan’s authors claimed?

Something didn’t seem right. The formula Cupp and Patterson talked about made sense. Figure out what students need. Then fund it. The elements they picked (teachers, mental health, etc.) all made sense.

So why were wealthy, suburban districts getting more than 1/3 of the increase?

One explanation is that Ohio has held down increases in suburban districts through so-called “gain caps” for years.  This allowed the state to continue investing in districts that couldn’t raise local revenue – not enough state investment there, by the way, but this Robin-Hooding has happened for decades.

So if you’re eliminating gain caps – one of the hallmarks of the Cupp Patterson plan – you’re going to see large increases in districts that have been capped for years. In many ways, you are essentially making up for 30-40 years of Robin Hooding.

But the issue is more complicated than that.

Ten years ago, I was in the exact same position as Cup and Patterson. I was the chair (they are co-chairs) of the Primary and Secondary Education Subcommittee of the House Finance and Appropriations Committee when then-Gov. Ted Strickland introduced the Evidence Based Model of school funding – the state’s first real attempt to cost out education and pay for it since the Ohio Supreme Court ordered the state to do so in 1997.

In much the same way as Cupp-Patterson, the original EBM initially poured millions into wealthy, suburban districts while doing much less, relatively speaking, in poorer districts.

Yet by the time the formula left the House and eventually became law for a couple years, the plan did the best job of distributing revenue to the most needy districts the state had ever seen. And it won the prestigious Frank Newman Award from the bipartisan Education Commission of the States.

What happened?

We found Han Solo.

Let me explain.

I have always contended that the reason the Star Wars prequels failed to garner the widespread love of the original three was because the second prequel didn’t have Han Solo (or a character like him) – a wisecracking, street smart character who didn’t quite buy all this Jedi/Force/Destiny stuff. He was grounded in the real world. He was the guy audience members who weren’t buying the magical part of the movies could relate to.

You didn’t need to believe in the Force to believe in Han Solo. Because Han Solo was us.

Back to school funding.

The EBM’s Han Solo was the Education Challenge Factor – an index that calculated a school district’s extra-curricular challenges (and I don’t mean football teams). It took into account a district’s relative poverty and its parents’ educational attainment level – what we’ve known for years is the single most important determinant of a student’s success. Those were merged into a number that we applied to many of the formula elements.

 Why did we decide to apply the ECF to the formula elements? Because it’s hard to find, for example, teachers who want to teach in districts where the parents don’t value education that much and will more likely impede than support  learning. Likewise, it’s easier to find those teachers in wealthier districts with more supportive parents. We applied it to many of the other formula elements, but that's the reason why. It's generally harder to overcome poverty and other barriers in districts with more of it.

The ECF did a lot of the heavy lifting for the EBM – leveling out a lot of the original inequities in the formula.

The Cupp Patterson formula doesn’t have a similar mechanism to account for the more difficult challenges districts that are poor and whose students don’t have much support from parents face in finding talent and overcoming those barriers, especially in districts that are the most challenged.

So, for example, the Cupp Patterson plan assumes it will be just as easy to find the mental health professionals the formula envisions in Olentangy, Cleveland and New Boston. And those professionals will be equally successful in all those places.

That’s probably not an accurate assessment.

What effect would the ECF have on the Cupp Patterson plan? I’m not going to use dollar figures here because I don’t know which elements of the formula the authors would want to apply it to. And I’m using ECF figures from 10 years ago. I don’t want to suggest that Cupp and Patterson have to figure out how to find even more money than they currently have. 

However, what I can do is show how the distributions work under the current Cupp Patterson plan and how it would work if you applied the 10-year-old ECF to all of a district’s funding (which is not how it would work, but this is just an exercise). Here’s the result:

What you’ll see is that instead of only receiving 5 percent of the formula’s benefit, the state’s Big 8 Urban districts (Akron, Canton, Cincinnati, Cleveland, Columbus, Dayton, Toledo and Youngstown) would see about ¼ of the benefit with an ECF. Likewise, poor, rural and small town districts would see about 1/3 of the benefit.

Meanwhile, the state’s wealthiest suburban districts would see a small bump, or even a slight cut, depending on the category.

I want to be extremely clear: I am not saying this is how the distribution should look.

What I am saying is that this is a lot closer to what a fair distribution resembles. And since this is being dubbed the “Fair” education funding plan, it would appear that an ECF-like mechanism could significantly improve its fairness.

As this formula works its way through the legislature, it is important to realize that the funding simulations released Friday will change. That’s a given. And there are major challenges to find the additional revenue the plan calls for.

The only way to ensure that the most benefit goes to the most in need of those resources is to do what the Cupp Patterson plan states as a goal – develop a fair education funding formula.

The current plan does the best job since EBM of calculating the elements of student need. 

What the plan is missing is Han Solo -- something to bring everyone around to it. But there’s still time to release him from the carbonite.

You just have to march into Jabba’s Palace and do it.