Budget & Finance

Ohio Program That Bails Out Fiscally Ailing Schools Raises Concerns

By Karla Scoon Reid — April 07, 2004 2 min read
  • Save to favorites
  • Print

Ohio’s latest school funding tussle finds the state bailing out bankrupt school districts, a practice that critics contend defies a court ruling that was among the decisions declaring the state’s education finance system unconstitutional.

Some observers characterize the cash advances as yet another symptom of the Buckeye State’s flawed method of paying for its schools. Over the past five years, 18 districts have received a total of about $59 million in loans.

At least one lawmaker, however, calls the advances a necessity.

“So what are we going to do?” said Sen. Robert A. Gardner, a Republican and the chairman of the Senate education committee. “Are we going to close the schools down in April?”

That’s exactly what William L. Phillis, the executive director of the Ohio Coalition for Equity and Adequacy of School Funding, said may need to occur to spur the legislature to make substantial changes to the way Ohio funds its schools.

He said the state supreme court’s 1997 ruling that the school aid system was unconstitutional also ordered the elimination of a practice that forced districts to borrow money from the state and pay interest to meet ordinary expenses. (“Justices Reject Ohio System of School Finance,” April 2, 1997.)

Mr. Phillis, whose Columbus-based coalition filed the funding lawsuit in 1991, contends that the “school district solvency assistance fund” is essentially the same loan arrangement with a new name. He predicts that more districts will rely on state bailouts: According to a state report, half of Ohio’s 612 school districts are projecting budget deficits by 2006.

Interest-Free Advances

Tim Keen, the state’s assistant budget director, argues that the solvency-assistance fund, which was established in 1997, is not a loan program. School systems are not charged interest, and instead receive cash advances on future state funding, he said.

Districts seek advances for many reasons—management problems or shifting tax bases, for example—most of which are not related to the school aid formula, he said.

Mr. Keen added that the state had heightened its financial-monitoring processes to identify financially troubled districts before they go bankrupt.

And though school systems’ budget projections appear gloomy, he said the financial forecasts are a planning tool to help districts identify upcoming problems. He said that in the end, it’s likely only a handful of districts will face budget deficits in 2006.

But statewide, districts are projecting larger deficits than in previous years, and more districts are reporting potential shortfalls, said Barbara Shaner, the director of legislative services for the Ohio Association of School Business Officials.

Districts will respond to bleak financial forecasts by reducing spending and passing school levies, Ms. Shaner said. Yet, she noted that in March, 52.6 percent of the proposed 228 local school funding measures were rejected by voters—the highest failure rate in the past decade.

“We’re having the situation where districts have progressively gotten into fiscal emergency because of the way the funding system works,” Ms. Shaner said. “If you’ve got to borrow against the future—whether you pay interest or not—it can’t make it easy for you to get back on your feet again.”

Sen. Gardner, though, stressed that the state has increased K-12 funding by up to 2.5 percent annually over the past few years. The elementary and secondary education budget is $7.9 billion for fiscal 2004.

Related Tags:

Events

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
College & Workforce Readiness Webinar
From Exposure to Experience: Designing Accessible Work-Based Learning
Learn how schools can create meaningful experiences that help every student build skills, connections, and a clearer path to their future.
Content provided by Project Lead The Way
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
School & District Management Webinar
A Tale of Two School Districts: Forecasting Enrollment
Forecasting enrollment is hard. Here’s how two different districts are navigating times of change with data that considers the whole picture.
Content provided by Zonda Education
Reading & Literacy K-12 Essentials Forum Strategies to Create a Culture of Reading in Schools
Join this free virtual event to learn how teachers and school district leaders ensure students are reading enough.

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Budget & Finance Trump's School Choice Program Could Push Public Schools to Charge New Fees
Districts that charge new fees will likely confront tricky logistical, legal, and philosophical questions.
9 min read
A tutor helps students at Benjamin O. Davis Middle School in Compton, Calif., on Feb. 6, 2025.
A tutor works with students at Benjamin O. Davis Middle School in Compton, Calif., on Feb. 6, 2025. The federal tax-credit scholarship program that launches next year can cover select expenses for public school students, including for tutoring. But to receive revenue from the program, public schools could have to set up systems to charge fees that the federally bankrolled scholarships can then cover.
Eric Thayer/AP
Budget & Finance As Student Meal Debt Soars, School Districts Launch Their Own Fundraisers
Meal cost increases, changes in federal food assistance eligibility may lead to more unpaid balances, experts say.
4 min read
Collage of various articles of clothing with clipped clothing descriptions and prices. Partial face of a kindergarten male eating a piece of fruit with other food items clipped such as pizza, bananas, and an apple. Subtle typography in the background shows menu items with prices.
Collage by Gina Tomko/Education Week + Getty
Budget & Finance Voter Support Dips as Schools Seek to Borrow More Money
Voters will decide on 373 school district bond issues this November. What's behind the requests?
5 min read
Collage of school construction, blueprints and money images. School funding, bonds and construction.
Collage by Vanessa Solis/Education Week + Getty
Budget & Finance See the School Supplies Teachers Buy for Students
Teachers share what they purchase the most for students amid rising school supply prices.
1 min read
Back-to-school supplies are displayed for shoppers at a Target store as retailers prepare for the annual back-to-school shopping season, on July 29, 2026 in Baltimore.
School supplies are displayed for shoppers at a Target store for the annual back-to-school shopping season, on July 29, 2026 in Baltimore. Paying for school supplies has become more challenging amid rising prices.
Robyn Stevens Brody/Sipa USA via AP