Overview of Am. Sub. HB49 Biennial Budget

Overview of Am. Sub. HB49 Biennial Budget

September 13, 2017

The Ohio General Assembly approved the two-year state operating budget, Am. Sub. HB 49 (R. Smith), on June 27, 2017 and Governor Kasich signed it into law on June 30, 2017.

Governor Kasich, exercising his line-item veto authority, struck-down 47 provisions, including 13 education-related provisions, before signing the bill into law on June 30, 2017. Details about the education-related vetoes are included in the appendix. (Read the governor’s “Veto Message.”)

On July 6, 2017 the Ohio House convened and voted to override 11 of the provisions vetoed by the governor by securing at least 60 votes - three-fifths of House members. Most of the provisions related to Medicaid, and none of the overrides related to education.

The Senate, meeting on August 22, 2017, voted to override 6 of the provisions that the House had also voted to override. These provisions will now be enacted as part of the law.

One of the most significant vetoes made by the governor was a provision in the budget to freeze enrollment in Medicaid expansion, which could have led to 500,000 individuals losing health insurance.

While the House and Senate voted to override several provisions related to Medicaid, they did not, at this time, override the Medicaid expansion provision. However, House and Senate leaders have left open the possibility of revisiting some of the other vetoes made by the governor as this legislative session continues. The General Assembly can take action to override the governor’s vetoes until the end of this legislative session, which is December 31, 2018.


A Look at the Budget Numbers

The state’s biennial budget includes over $132 billion in overall spending, including $65 billion for the General Revenue Fund.

According to Stephen Dyer, fellow at Innovation Ohio, when compared to the budget passed during the 2009 recession, this budget is short $896 million, when adjusted for inflation. “In addition, 409 school districts will have less in the last year of this budget than they had in the last year of the Recession budget.” (Stephen Dyer)

As overall state revenue declined in FY17, lawmakers struggled throughout the budget process to ensure that the proposed budget for FY18-19 would be balanced. By May 2017 the Ohio House had adjusted the governor’s original budget and tax plan to cover a $1 billion projected shortfall in state tax revenue for FY18-19 by reducing most agency and department spending by an average of 3-6 percent; eliminating programs, such as the Straight A Fund; reducing Medicaid by $200 million; eliminating earmarks; and re-purposing $85 million in unspent funds.

Lawmakers also resisted Governor Kasich’s attempt to further cut state taxes, which had occurred in the past two budget cycles. According to a report by Policy Matters Ohio, these tax cuts “...have sapped the state of billions of dollars a year of vitally needed revenue and weighted the tax system in favor of the wealthier as the expense of low-and middle-income Ohioans.”

While there were some positive tax changes in the budget bill as passed, some tax breaks for special interests were also included, but were later vetoed by the governor.

Several changes in the Current Agricultural Use Tax (CAUV), will reduce the value of agricultural property for farmers, but will mean that some school districts could lose tax revenue, and taxes could increase for residential taxpayers.

The budget also eliminates the bottom two brackets ($0-$5,000 and $5,000 to $10,000) of the income tax, and specifies that taxpayers with an Ohio adjusted gross income, minus exemptions or a taxable business income of $10,500 or less, will owe no tax.

And, to help families save for college, the maximum annual income tax deduction for contributions to a federally tax-advantaged college savings account is increased to $4,000 from $2,000 for each beneficiary.

While the law assures over $2 billion in the rainy day fund, according to Policy Matters Ohio, the state still needs “...a balanced tax system that delivers the revenue we need and taxes those who can afford to pay.”


Ohio Arts Council: The approved biennial budget provides the Ohio Arts Council (OAC) with General Revenue Fund (GRF) appropriations of $14.653 million in FY18 and in FY19. This amount is a little less than the level of spending in FY17 of $14.935 million. Appropriations for the OAC All Funds account are unchanged at $16.453 million in both fiscal years.


Ohio Department of Education: GRF appropriations for the Ohio Department of Education (ODE) total $7.987 billion in FY18 and $8.117 billion in FY19. This amount is more than the level of ODE spending in FY17 of $7.873 billion.

Appropriations for the ODE’s All Funds account total $11.167 billion in FY18 and $11.319 billion in FY19. This amount is more than FY17 spending of $10.956 billion. The All Funds account includes$4.3 billion from the federal government; $2.78 billion in redistributed funds; and $2.22 billion in lottery profits.

Estimated total funding for school districts increases from $8.003 billion in FY17 to $8.075 billion in FY18 and to $8.165 billion in FY19. The change in total state funding among school districts between FY17 and FY18 is $76.8 million (0.9 percent), and $86 million (1.1 percent) between FY18 and FY19.

One of the major expenses for school districts is the cost of transportation. State funding for transportation was cut from $592.3 million in FY17 to $546 million in FY18 (-7.69 percent) and reduced again to $527 million in FY19 (-3.59 percent). The budget also modifies the pupil transportation formula by decreasing the minimum state share applied to a district’s calculated transportation cost from 50 percent in FY17 to 37.5 percent in FY18 and 25 percent in FY19.


Policy Changes for K-12 Education

The following are some of the major policy changes in education policy included in law:

School Funding
-Maintains the structure of the existing school funding formula and the nine aid categories used in the existing formula: the core opportunity grant, targeted assistance, K-3 literacy funding, economically disadvantaged aid, limited English proficiency funding, gifted funding, transportation aid, special education aid, and career-technical education funding.

-Specifies a formula amount of $6,010 in FY18 and $6,020 in FY19. The House had increased the formula amount to $6,020 in both years. Generally maintains FY17 amounts for the categorical payments.

-Modifies state funding for school districts based on student enrollment between FY14 and FY16. School districts with enrollment declines of less that 5 percent are ensured to receive FY17 funding levels. Guaranteed funding will be reduced by 1 percent per percent of enrollment lost, for schools districts that have lost more than 5 percent of students between FY14 and FY16, with a maximum loss of 5 percent.

-Guarantees that districts will receive over the biennium at least 100 percent of the
funding for career-technical education and associated services they received in FY17.

-Establishes the gain cap at a scaled amount between 3 percent and 5.5 percent in FY18 and between 3 percent and 6 percent in FY19, based on the district’s enrollment change from FY14-FY16.

-Modifies the cap for school districts that have lost taxable value due to changes in public utility personal property valuation. Provides a “cap offset” payment in FY18 for these 18 school districts.

-Eliminates the TPP tax supplement.

-Includes a provision to address the loss in property values that certain school districts are experiencing as a result of closed or devalued power plants. Requires the ODE to recommend annually to the General Assembly a structure to compensate districts that experience at least a 50 percent decrease in public utility personal property from one year to the next.

-Allocates approximately $293.1 million in FY18 and $293.9 million in FY19 for Joint

-Requires the ODE to conduct a study of appropriate funding levels and methods for teaching gifted students, and to report its findings by May 1, 2018.

-Appropriates up to $450,000 each year for the Teach for America program.


Charter Schools
-Permits the ODE to know the identities of students associated with student data verification
codes (“SSID” numbers) for making per-pupil payments to community/charter schools. This provision is intended to assist ODE in preventing duplicate payments (and district deductions) that occur when a single student has more than one SSID entered into the EMIS – School Options Enrollment System.


Non Public Schools and Vouchers
-Increases the maximum amount that may be awarded under the Cleveland Scholarship
Program to students in grades K-8 from $4,250 to $4,650, and to students in grades 9-12
from $5,700 to $6,000.

-Requires the ODE to conduct a second application period if there are funds remaining to
award income-based EdChoice vouchers after the first application period.

-Eliminates the deadline for students to apply for the Jon Peterson special needs scholarship. Students can now apply at any time.

-Adds STEM schools to the list of entities that a public board of education must first offer an unused school facility for sale or lease. STEM schools will now have the same rights to such property that start-up community schools and college-preparatory boarding schools currently have.


Alternative Graduation Requirements
-Includes language providing for alternative graduation requirements for the class of 2018 to address a potential decrease in the number of students graduating in the Class of 2018. School officials have been worried that up to one third of the students in the Class of 2018 might not graduate, because they have not been able to earn enough graduation points based on their scores on end of course exams.

Section 773.67 (temporary law) creates additional ways for students attending regular education programs and students attending career-technical education programs to earn a diploma.

Students in traditional education programs must take all applicable end of course exams; retake at least once, exams in which the student has earned less than a score of 3; complete the graduation course requirements; and meet two of the following conditions:

  • Achieve an attendance rate during senior year of at least 93 percent
  • Earn a 2.5 GPA for senior-year courses (minimum 4 full year courses or equivalent)
  • Complete a capstone senior project as defined by the district
  • Complete 120 hours of work experience (including, but not limited to internship, work study, co-op and/or apprenticeship) or community service during the senior year, as defined by the district
  • Earn 3 or more credits in a College Credit Plus course at any time during the student’s high school experience.
  • Successfully complete an International Baccalaureate, or Advanced Placement course and earn a score on the respective exam that would earn college credit (4 on IB exam, 3 on AP exam) at any time during the student’s high school experience.
  • Earn a minimum Level 3 score on each of the reading for information, applied mathematics and locating information components of the WorkKeys exam (9 points total).
  • Earn a State Board of Education-approved, industry- recognized credential or group of credentials equal to or greater than 3 points.
  • Meets the conditions required to receive an OhioMeansJobs readiness seal.

Students in career tech programs can earn a diploma if they take all of the end-of-course exams; complete the district’s or school’s required units of instruction; complete a career-technical training program approved by ODE that includes at least four career-technical courses; and meet one of the following conditions:

  • Attain a cumulative score of at least proficient on career-technical education exams, or test modules, that are required for a career-technical education program
  • Obtain an industry recognized credential, or a group of credentials equal to at least 12 points
  • Demonstrate successful workplace participation, as evidenced by documented completion of 250 hours of workplace experience, and by evidence of regular, written, positive evaluations from the workplace employer or supervisor and representative of the district or school. (Specifies that the third condition must be based on a written agreement signed by the student, a representative of the district or school, and an employer or supervisor).

 

Assessments
-Eliminates statewide fourth and sixth grade social studies end-of-year assessments, but requires each school district to teach and assess social studies in at least the fourth and sixth grades. In addition, school districts no longer have to provide prevention/intervention services to students who score below the proficient level in social studies.
-Allows districts to administer certain portions of the kindergarten diagnostic assessment up to two weeks prior to the first day of school.
-Requires that at least 40 percent of the questions from each elementary state assessment andhigh school end-of-course exam become public records beginning in the 2017-2018 school year.
-Permits school districts to integrate academic content in a subject area for which the state board has adopted standards into a course in a different subject area including a career-technical education course in accordance with guidance that will be issued by ODE. Students may receive credit for both subject areas upon successful completion of the course. If an end-of-course examination is required for the subject area delivered through integrated instruction, the school may administer the related subject area exam upon completion of the integrated course. The ODE is required to issue by July 1, 2018 guidance regarding the appropriate teacher licensure for the course.
-Requires the ODE by December 31, 2017 to develop a framework for school districts to use in granting units of high school credit to students who demonstrate subject area competencies through work-based learning experiences, internships, or cooperative education experiences. Districts must comply with the framework and adopt changes to any of their policies regarding demonstration of subject area competencies by the start of the 2018–2019 school year.
-Requires the superintendent of public instruction to work with the governor’s office and business officials to establish a committee that will develop a list of industry-recognized credentials and licenses that may be used to qualify for a high school diploma. The credentials must align with the in-demand jobs list published by the Ohio Department of Job and Family Services. The credentials will be used on state report cards.
-Establishes an OhioMeansJobs readiness seal for students to earn on their diplomas.

 

Students
-Permits students to self-apply sunscreen, and permits school districts to require parent authorization.
-Prohibits students from using or possessing any substance that contains betel nut on school premises.
-Allows student enrolled in career-technical education programs to participate in pre-apprenticeship training programs that develops skills and knowledge needed to complete a registered apprenticeship programs. The ODE will develop this program.
-Specifies that a student participating in a school athletic activity submit the signed form indicating review of sudden cardiac arrest guidelines prior to participating in an athletic activity once every year rather than once every year for every athletic activity.
-Permits F-1 visa holders at certain schools to participate in interscholastic athletics.

 

Teachers/Educators
-Retains the Ohio Teacher Residency Program. This program was eliminated in HB49 as passed, but that provision was vetoed by the governor. This is a four-year entry level program to prepare educators for their professional educator license. Some lawmakers are considering overriding the veto, unless the ODE makes changes in the summative assessment part of the program.
-Requires the ODE to request fingerprints from licensed educators and applicants for licensure who are not enrolled in the Retained Applicant Fingerprint Database (RAPBACK) in order to enroll them. (RAPBACK is a criminal record monitoring service overseen by the Attorney General’s Office.
-Retains the current law regarding career-technical educator licenses. Several changes had been proposed as HB49 was being considered.
-Permits a superintendent to allow a school district to hire and pay a “substitute educational aide,” who does not currently hold an aide permit, but who is filling-in during an emergency or employee leave of absence. Currently an educational aide/paraprofessional must hold an aide permit from ODE. Someone in this new position of “substitute educational aide” can serve for up to 60 days, if they meet certain requirements, and must have already submitted an application for a permit with the ODE.

 

College Credit Plus (CCP) program.
-Student Eligibility: Limits CCP participation to students who demonstrate college readiness either by scoring remediation free on a college entrance exam, or by scoring within one standards error or measurement of the remediation free threshold and either obtain a recommendation from a school administrator, or have a GPA of 3.0 The college must pay for one assessment, but additional assessments are the responsibility of the students. Also requires that the student meet the college’s standards for admission and course placement to participate in CCP.

-Course Eligibility: Requires the Ohio Department of Higher Education (ODHE) in consultation with the ODE to develop rules specifying the courses eligible for CCP funding.

-Continuing Student Participation: Requires the ODHE in consultation with the ODE to develop requirements for students who underperform in CCP to meet in order to continue participation. These include the conditions that the students must meet to continue participation, the timeframe for notifying an underperforming participant, the mechanisms to assist underperforming participants, the role of school guidance counselors and college academic advisors in assisting underperforming participants, and consequences of ineligibility.

-Changes the annual deadline to notify high school Moves to February 1 (from March 1 as under current law) the annual deadline by which a high school must provide information about CCP to all students in grades 6-11.

-Moves the deadline for distributing to students information about the CCP program March 1 to February 1 for all students in grades 6-11.

-Modifies the appeal process for students when a principal refuses to provide written consent for participation. The final appeal will now be heard by the district superintendent rather than the state board of education, and the decision will be final.


-Modifies the appeals process for granting credit for CCP courses, and moves it to the ODE.
-Allows districts to negotiate CCP payments below the default floor. The Chancellor of Higher Education can approve or deny the agreement.

-Requires the Superintendent of Public Instruction and the Chancellor of Higher Education to study the outcomes of the CPP program annually and submit each report by December 31.

 

Early Childhood Education
-Creates an Early Childhood Education pilot program in no more than two counties in Appalachia.
-Prioritizes funding for early childhood education funds to providers receiving funds in the previous fiscal year. Any balance of funding will be given to new eligible providers.
-Permits the ODE to establish a pilot program in one or two geographical areas of the state that employs one or more parent choice models to deliver early childhood education services to eligible children.
-Extends eligibility to three-year olds if early childhood education funds remain after awards are made for eligible four-year olds. Requires the ODE to approve the spending.


Other Provisions

Straight A Fund: Eliminates this fund, which has provided grant support for a number of projects across the state.

 

Victims of Violent Behavior: Requires victims of students who are disciplined for violent behavior to be identified in EMIS reports starting on July 1, 2018. Victims are broadly classified as teacher, student, non-teacher.

 

Intervention Teams: Removes the requirement that absence intervention team assignments be made within ten days.

 

Ohio School Facilities Commission: Abolishes the Ohio School Facilities Commission (SFC) and transfers its responsibilities to the Ohio Facilities Construction Commission (FCC). No effect on service delivery. Currently, FCC and SFC work as one organization. However, it may reduce administrative costs by, for example, eliminating the required quarterly meetings for SFC.

 

Annexation Agreement: Requires boards of education that are party to an annexation agreement to approve a transfer of non-residential territory, unless the territory of one of those boards overlaps with a new community authority created prior to January 1, 1993. This provision is effective until October 1, 2021.

 

Ohio Constitutional Modernization Commission: Ended the Ohio Constitutional Modernization Commission, in July 2017. The commission was charged with analyzing and making recommendations to the Ohio General Assembly to amend the Ohio Constitution, but struggled to find consensus on a number of topics.

 

Business Advisory Councils: Requires the superintendent of public instruction, in consultation with the Governor’s Executive Workforce board, to develop standards for the operation of business advisory councils established by a board of education. These standards require the council to meet at least quarterly with the board, and determine on which matters it will advise the board. Current law requires that each school district board of education and ESC governing board appoint a business advisory council to advise and provide recommendations to the board regarding industry employment and skills needs.

 

STEAM School: Establishes in law a STEAM community or nonpublic school, which stands for science, technology, engineering, arts, and mathematics. STEAM schools must meet certain requirements, including involvement of arts organizations.

 

EMIS Advisory Group: Establishes an advisory group of school districts and other stakeholders to make recommendations for changes to EMIS to format standards and data definitions. Districts not using uniform data definitions and data format standards will have all EMIS funding withheld until the district comes into compliance.

 

Career-technical education enhancements: Creates a new program called “Agricultural Fifth-Quarter Project,” and allocates $600,000 each fiscal year for work-based learning through supervised agricultural experience anytime outside of the school day. ODE will develop eligibility criteria and will fund as many programs as possible.


APPENDIX

Vetoed Provisions

The governor vetoed the following education-related provisions:

Reimbursement Payments for Fixed-Rate TPP Tax Losses: This provision would have extended reimbursement payments to school districts for tangible personal property (TPP) and utility property tax revenue losses by slowing down the previously-enacted phase-out schedule of the reimbursements.

Laws were approved to change the tax code and eliminate revenue earned from public utility tangible personal property in 1999 and 2000, and general tangible personal property (TPP) in 2005. The TPP tax provided school districts about $1 billion per biennium. But lawmakers also approved reimbursements of the revenue lost for school districts to compensate districts. The original schedule for reimbursed payments to school districts for the tax revenue lost was to be phased-out by FY19. However, this schedule has been extended several times.

According to the governor’s veto message, most of the reimbursement payments go to school districts that have the capacity to raise local revenue to cover the lost tax revenue, and therefore diverts limited state funds from lower-wealth school districts. “Continually extending the reimbursement payments as this provision would do, and making only small reductions in their amounts, merely postpones the inevitable transition that districts must make.”

However, the governor did recognize a small number of school districts in which the reimbursements are truly needed, and agreed that the legislature should examine ways to help these districts.

 

Exemption from State Test and Graduation Requirements for Selected Schools: This provision would have exempted from state assessment and graduation requirements all students at chartered nonpublic schools in which at least 75 percent of students are children with disabilities who receive special education and related services. According to the governor’s veto message, “This provision could create lower expectations for all students at these schools, including children with disabilities receiving special education and related services, and potentially diminish their ability to succeed after high school.”

 

Progress Weighting for Community School Sponsor Evaluations: This provision would have required the ODE to increase from 20 percent to 60 percent the weight given to the “Progress” category score when computing a total score for the “Academic Performance” component of the ODE’s charter school sponsor evaluation.

The governor opposed this provision, because it would create a lower standard for charter schools compared to local public schools. According to the veto message, “Given the use of a 1 00-point scale, this change would unavoidably lead to a reduction in the weight given to all other factors in the accountability measure, including student achievement and graduation rates, which are important measures of a school’s performance. Additionally, by prohibiting the Department from considering the Compliance or Quality Practices components from its sponsor evaluations, this provision would essentially exempt community schools from complying with standards that the General Assembly has decided are important for schools to follow. Managing school accountability systems in a uniform way drives strong standards for all Ohio schools and improves educational opportunities for all of Ohio’s students and lowering those standards-even in a seemingly narrow way as this provision-undermines this progress.”

 

Educational Service Center Community School Sponsor Requirements: This provision would have permitted Educational Service Centers (ESC) rated “Effective” to sponsor a charter school anywhere in the state. Currently, most ESCs can only sponsor schools in their own and contiguous counties, unless they obtain permission from the ODE. According to the veto message, allowing effective ESCs to sponsor charter schools throughout the state would undermine the ODE’s efforts to create a high performing charter school system in the state, by removing its ability to reward high performing ESC sponsors.

 

Community School Sponsor Authority Revocation Exception: This provision would have allowed a charter school sponsor, that lost its sponsorship authority in 2015-2016 due to receiving zeros for the quality practices and the compliance components of the sponsorship evaluation, to renew its sponsorship for the 2017-2018 school year under certain conditions. The sponsor would have needed to receive a three or four rating for the academic component of the sponsorship evaluation. Currently the state rates charter school sponsors in three categories -- academics, quality sponsoring practices, statutory compliance and regulatory compliance. This provision was included in the budget, because it addressed a situation in which some sponsors met the performance measure, but failed to meet all the rules and laws for operating a charter school.

 

Elimination of Ohio Resident Educator Program: This provision would have eliminated the four-year program for new teachers to prepare them for a professional educator license issued by the State Board of Education. According to Governor Kasich’s veto message, this program is necessary, because it provides teachers with a path to become a professional teacher, and includes mentoring support, instructional guidance and detailed, objective feedback on classroom performance.

 

Paper and Online Tests: This provision would have allowed Ohio’s public and private schools to choose between administering state achievement assessments in either paper or online formats. The governor opposed this provision, because it is not necessary and would undermine efforts to encourage schools and students to utilize more technology. According to the governor’s veto message, approximately 98 percent of tests are already administered online, and districts and schools can request a waiver from the ODE to administer paper assessments if necessary.

 

College Credit Plus Minimum Grade Requirement: This provision would have required College Credit Plus students to receive a C or higher to receive college credit. According to the governor’s veto message, this provision would have established a different standard for earning credit depending on the learning situation, which would have created inequities, and would not serve the public interest.

 

School Facilities Assistance Segmenting: This provision would have allowed 29 school districts to reduce the amount of matching funds that they are required to produce in order to receive state funds. The governor opposed this provision, because it would have changed the protocol for determining the state/local funding share percentages, and increased the state share of construction projects supported by the Classroom Facilities Assistance Program (CFAP). As a result, the state would have fewer dollars to support the program, and would therefore serve fewer school districts.

 

Joint Vocational School District Projects: This provision would have redirected funding from the K-12 Classroom Facilities Assistance Program (CFAP) to the JVS Vocational Facilities Assistance Program (VFAP) by providing for one additional JVS project each year in the biennium, and capping the local share of costs for existing projects at 50 percent. According to the governor, this provision “...represents a fundamental departure from principles of fairness and equity that have guided Ohio’s school building program since 1997 by ignoring a NS district’s wealth, capping its share of costs at 50 percent, and moving it ahead of K-12 districts in the state that have been waiting for assistance. Further, by requiring the state to pay more for projects in high-wealth JVS districts, this provision would increase state costs by as much as $36 million over the biennium and reduce resources available to other, often lower-wealth, districts.”

 

Undergraduate Tuition Guarantee Program: This provision would have allowed any of Ohio’s public universities that choose to initiate a tuition guarantee program to increase tuition by 8 percent for the first cohort, as compared to the 6 percent currently allowed. The governor opposed this provision, because it would have undermined efforts to increase student access to higher education by making higher education more affordable.

 

Community Colleges Tuition Increase: This provision would have allowed an increase of up to $10 per credit hour for undergraduate instructional and general fees for community, state community, and technical colleges, while also exempting non-instructional program fees from the legislation’s two year freeze on undergraduate instructional, general, and all other fees for state universities or colleges. The governor’s veto prohibits credit hour and fee increases for the 2017-2018 academic year. According to the governor’s veto message, this provision would have increased annual education costs for students, and would undermine efforts to control the cost of higher education.

 

Joint Education Oversight Committee Authority Over Ohio Department of Education Audit Standards: This provision would have given the Joint Education Oversight Committee (JEOC) the authority to review the Ohio Department of Education’s (ODE) manual for conducting enrollment reviews, and exempt schools and districts from meeting standards set by the manual, if the committee determined that schools or districts could not comply with the manual. Currently the Electronic Classroom of Tomorrow (E-COT) and the ODE are litigating this issue in the state courts. The governor vetoed this provision saying that this provision extended the authority of the JEOC’s jurisdiction by giving a committee a “functional veto over the Department’s administration of full-time-equivalent student population audits and reviews.”