The Fair School Funding Plan
The Fair School Funding Plan represents years of work by legislators, local school leaders, and education finance experts to provide a predictable, student-centered formula based upon how much it costs to educate a child and how much a local community can afford to contribute toward these costs. The funding plan was intended to be fully implemented over six years, with several important components of the formula being updated over time.
The bipartisan funding plan was adopted in House Bill (HB) 110 from the 134th General Assembly (2021-2022). Ohio’s last budget bill (HB 33 – 135th General Assembly, 2023-2024) phased in years three and four of the plan.
Substitute House Bill 96, Pending in the Senate Finance Committee, State Operating Budget for Fiscal Years 2026 and 2027
The Senate version contains a shell of the Fair School Funding Plan, it does not provide the needed cost updates for the formula to properly function resulting in the state share declining. Under the Senate proposal, 146 districts would receive less money from the state next year than this year, and 180 districts would see state revenue decline between FY 2026 and FY 2027. Ohio needs to fund schools based on the actual costs of providing services to students and operational needs. The costs associated with buildings, materials, and supplies are increasing. State funding that falls below inflation will only make it more difficult for districts to pay these expenses.
Cash Balance Provision
Under the Senate proposal, funds more than 50%, instead of 30%, would be used to reduce property taxes. The Senate version does give school districts some flexibility in transferring general fund money for future capital projects to be spent within three years and not subject to the threshold.
School districts carry over funds for a variety of factors. These include, but are not limited to, desire to limit levy frequency, funds for programs that previously were funded through federal ESSR dollars, building maintenance and capital improvements, long term planning for purchases and anticipated increases in material and supply costs. The Senate’s carryover policy would impact approximately 293 school districts and will force school districts to return to the ballot more often and lead to voter confusion.
Property Tax Changes
The Senate Substitute bill makes a variety of tax changes impacting school districts with the proposed elimination of certain levy types beginning January 1, 2026 (i.e., replacement, emergency, substitute, combine school district and fixed-sum, and renewals with increase). The Senate also added provisions that allow a county budget commission to reduce millage on any voter-approved tax levy if the commission finds it “reasonably necessary and prudent” to avoid unneeded property tax collections and the requirement that school boards obtain a two-thirds vote of all members to put a tax levy on the ballot.
These provisions, along with the carryover balance policy, will make it challenging for districts to predict their revenue. Taken as a whole, these provisions undermine local control, create unnecessary hurdles, limit the options for school districts to raise local revenue, and do not provide school districts with adequate time to adjust.
Talking Points School Funding
- The Senate version contains a shell of the Fair School Funding Plan; it does not provide the needed cost updates for the formula to properly function resulting in the state share declining. Under the Senate proposal, 146 districts would receive less money from the state next year than this year, and 180 districts would see state revenue decline between FY 2026 and FY 2027.
- The Senate version shortchanges public schools by over $2.5 billion due to not updating the formulas components (base cost and implementing cost studies recommendations on special education and EL students).
- Full implementation and updates to the Fair School Funding Plan will ensure that all children receive the resources and support needed to succeed in our schools. Additionally, it provides for predictable and transparent funding for students.
- Without updating the base cost inputs, the funding formula does not keep up with the cost of educating students and shifts the burden of funding schools back to the local communities. This means our schools will be forced to continue over-relying on local tax levies, which are becoming harder to pass amid rising costs and property values.
- School districts need to budget for current prices. For example, your grocery or utility bills are not the same as they were three years ago, and neither are school expenses.
Talking Points on Cash Balances Proposal
- While an improvement from the House proposal, the 50% cap on district cash balances undermines local control and threatens fiscal stability of school districts.
- School districts carry over funds for a variety of factors. These include, but are not limited to, the desire to limit levy frequency, funds that will need to be used for programs that previously were funded through federal ESSR dollars, building maintenance and capital improvements, long term planning for purchases and to fund increased costs in supplies.
- This provision coupled with the lack of a school funding formula that provides sufficient state support will financially cripple school districts.
Talking Points on Property Tax Changes
- The Senate’s proposed property tax changes undermine local control, create unnecessary hurdles, limit the options for school districts to raise local revenue, and do not provide school districts with adequate time to adjust.
- While there is a need to address increased property taxes, these provisions, coupled with the lack of a school funding formula that provides sufficient state support, will severely hamper school districts.
- These changes have a real impact on our students, leading to larger class sizes, reduced staffing, and fewer course offerings.
