an overview of how ohio funds its schools school funding legislative service commission april 2015
TRANSCRIPT
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AN OVERVIEW OF HOW OHIO FUNDS ITS SCHOOLS
School Funding
Legislative Service CommissionApril 2015
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Importance of K-12 Education for State Budget
State-Source GRF State and Federal GRF0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
40.0%28.6%
31.7% 51.2% General GovernmentCorrectionsHigher EducationHuman ServicesK-12 Education
FY 2014: $20.65 billion FY 2014: $28.90 billion
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GRF Accounts For More Than Half of ODE Budget
70.4%
17.0%
7.5%
4.5%0.5%
ODE Expenditures by Fund Group FY 2014
GRFFederalLotteryRevenue DistributionInternal Service and Dedicated Purpose
Total: $11.23 billion
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Most of ODE Budget Goes to Outside Entities
98.0%
0.2%
0.5%
1.0%0.3%
ODE All Fund Expenditures by Account Category
FY 2014
Subsidies
Other
Personal Services
Purchased Personal Services
Supplies, Maintenance, Equipment
Total: $11.23 billion
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School Foundation Aid Makes up Majority of Subsidy Payments
59.5%
10.4%
4.6%
16.6%
8.9%
Subsidy Payments, FY 2014
School Foundation AidProperty Tax RollbacksProperty Tax Re-placement PaymentsFederal ProgramsOther
Total: $11.00 billion
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Lottery Profits Comprise a Small Share of K-12 Education Funding
88.2%
11.8%
Foundation Aid, FY 2014
GRFLottery Profits
Total: $6.56 billion
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Formula Changes in Recent Years
Foundation Aid FormulasBuilding-Blocks Model
Prior to FY 2010Evidence-Based Model (EBM)
FY 2010-FY 2011Bridge Formula
FY 2012-FY 2013Achievement Everywhere
FY 2014-FY2015
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Capacity Varies Across Districts
1 2 3 4 $-
$50,000
$100,000
$150,000
$200,000
$250,000
$83,587
$120,244 $148,897
$218,044
Valuation Per Pupil by Wealth Quartile
District Quartiles from Lowest to Highest Wealth
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Impact of Varying Valuations
Same tax effort results in very different levels of revenue 38 mill (3.8%) tax effort results in
$3,192 revenue per pupil in district with valuation of $84,000 per pupil
$8,284 revenue per pupil in district with valuation of $218,000 per pupil
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Addressing Differences in District Capacity
Current law and Executive proposal – index
House proposal – charge-off
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Wealth Index - Current
Valuation index – District 3-year average valuation per pupil divided by State 3-year average valuation per pupil
Income index – District median income divided by Median district median income
If income index < valuation index, then wealth index = 2/3 valuation index + 1/3 income index, else wealth index = valuation index
Income index lowers index for high valuation/relatively low income districts, but does not increase any district’s index
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0.30 0.50 0.70 0.90 1.10 1.30 1.50 1.70 1.90 0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
State Share Index Current
Wealth Index
Sta
te S
hare
In
dex
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Capacity Measure - Executive
Instead of addressing low income relative to valuation, addresses low and high incomes relative to state Income index < ½ standard deviation below mean,
subtract difference (mean income index – district income index) from valuation index
Income index > ½ standard deviation above mean, add difference (district income index – mean income index) to valuation index (phased in at 20% in FY16 and 40% in FY17)
Income index within ½ standard deviation of mean, no adjustment to valuation index
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-
0.2
0
0.4
0
0.6
0
0.8
0
1.0
0
1.2
0
1.4
0
1.6
0
1.8
0
2.0
0 0.0%
10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%
100.0%
State Share Percentage - Executive
Capacity Measure
Sta
te S
hare
Perc
en
tag
e
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Charge-off - House
Charge-off = charge-off rate x district valuation
Valuation is a 6-year average for the 236 districts that have agricultural property that is more than 20% of total real property, which tends to lower these districts’ valuations
Valuation is a 3-year average for all other districts
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Charge-off - House
Charge-off rate varies based on the income index of the district.
In general, a district’s rate is equal to a base rate of 20 mills times its income index
Index values above the statewide median are adjusted so that highest rate is 26 mills
For FY16 and FY17, rates above 20 mills are phased-in at 50% and 60%, respectively, so that the highest rate is 23 mills in FY16 and 24 mills in FY17
Lowest projected rate is approximately 10.5 mills
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Total Opportunity Grant
Total opportunity grant = formula amount x formula average daily membership (ADM)
Current & H.B. 64 Formula Amounts
FY15 $5,800
FY16 $5,900
FY17 $6,000
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Opportunity Grant
Current and Executive: Opportunity grant = total opportunity grant x state share
index (percentage) State share index (percentage) between 5% and 90%;
average 49.5% in FY15 and 52.3% in FY16 and 51.7% in FY17
House: Opportunity grant = total opportunity grant – charge-off State share percentage = opportunity grant/total
opportunity grant Minimum state share percentage of 5% Highest state share percentage projected to be from 90% to
91%; average 53.8% in FY16 and 53.7% in FY17
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Opportunity Grant
Largest funding component
Current & H.B. 64 Estimated Allocation ($ millions)
Executive House
FY15 $4,808.8 $4,808.8
FY16 $5,173.0 $5,321.0
FY17 $5,195.4 $5,402.8
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Targeted Assistance
Additional aid to 490 (80%) lowest wealth (capacity) districts
Wealth per pupil = 50% valuation per pupil + 50% FAGI per pupil
Wealth index (capacity measure) = State wealth per pupil / District wealth per pupil
Threshold wealth per pupil = 490th district’sAssistance = (Threshold wealth per pupil –
District wealth per pupil) x wealth index x .006 x ADM
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Recent Valuation Changes
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
6.2%
-2.8%
-7.4%
-14.0%
-6.5%
12.1%
3.6%1.1%
-2.2%
2.3%
% Change in Real Property Value
TY08 to TY12 TY12 to TY14
Rural Small Town Suburban Urban Statewide
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Supplemental Targeted Assistance
Districts with real property value that is 10% or more agricultural property receive an additional 40% of base targeted assistance payment
Districts with less than 10% receive from 0% to 40% of base targeted assistance payment
$-
$100
$200
$300
$223 $82
$4 $5 $55
Supplemental Targeted Assistance Per Pupil, FY15
Rural Small Town Suburban Urban Statewide
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Targeted Assistance
Second largest component
Current & H.B. 64 Allocations ($ millions)
Base Supplement Total
FY15 $654.9 $92.2 $747.0
Executive
FY16 $705.7 $97.2 $802.9
FY17 $750.9 $102.1
$853.0
House
FY16 $696.5 $98.7 $795.2
FY17 $727.7 $101.8
$829.5
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Capacity Aid - House
New component that targets funding to smaller districts with relatively low total property valuation.
Funding is based on the amount a district can raise with one mill
Provided to districts that raise less than the median amount
Calculated on a sliding scale – districts further from the median receive a higher amount – ranging from 0 to 2.5
This scale (capacity ratio) is multiplied by per pupil amounts of $1,036 in FY16 and $1,049 in FY17 and then by formula ADM
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Capacity Aid - House
H.B. 64 Estimated Allocation ($ millions)
FY16 $260.7
FY17 $260.8
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Districts Are Different Sizes
Total ADM Average – 2,800 Maximum – 68,800 (7 above 20,000) Minimum – 60 (14 below 400)
Geographic Size Average – 68 square miles Maximum – 546 (9 above 300) Minimum – 1 (8 provide no transportation)
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Transportation
Compute statewide cost per rider and cost per mile from previous fiscal year.
Base is greater of district’s current year riders x statewide cost per rider or district’s current year miles x statewide cost per mile.
Lower density, rural districts tend to benefit from calculation based on miles.
Greater of 60% or state share index is applied to base.
In FY15, the base is prorated to stay within the appropriation and a supplement is given so that low wealth/low density districts get full base.
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H.B. 64 Transportation
Reduce minimum state share from 60% to 50%
Remove proration and supplement4th largest component (6%)
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $457.2 $457.2
FY16 $470.2 $486.9
FY17 $478.4 $496.2
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Students Have Different Needs
Special EducationEconomically DisadvantagedCareer-Technical EducationGifted EducationLimited English ProficientK-3 Literacy
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Districts Face Different Challenges
Disabled as % of Total Average – 14.8% Maximum – 26.7% (40 at or above 20%) Minimum – 0% (57 at or below 10%)
Economically Disadvantaged Average – 43.0% Maximum – >95% (23 above 95%) Minimum – 0% (6 below 5%)
Limited English Proficient Average – 3.1% Maximum – 41.8% (36 at or above 5%) Minimum – 0% (372 at 0%)
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Additional Categorical Funding
Generally, districts are allocated an additional per pupil amount for students in each category and the state share index (percentage) is applied.
Formula for economically disadvantaged students takes concentration of these students into account, but not state share index.
A certain amount of K3 literacy funding is provided to every district without state share index applied.
Gifted funding allocated based on inputs.
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Special Education
Special education additional funding = category amount x category ADM x state share index (percentage); summed over six categories.
Current & H.B. 64 Category Amounts
FY15 FY16 FY17
Cat. 1 $1,517 $1,547 $1,578Cat. 2 $3,849 $3,926 $4,005Cat. 3 $9,248 $9,433 $9,622Cat. 4 $12,342 $12,589 $12,841Cat. 5 $16,715 $17,049 $17,390Cat. 6 $24,641 $25,134 $25,637
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Special Education
Third largest funding component
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $714.2 $714.2
FY16 $773.6 $796.6
FY17 $781.4 $812.3
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Career Technical Education
Career-technical education additional funding = category amount x category ADM x state share index (percentage); summed over five categories.
Also includes an amount per pupil regardless of category that is transferred to lead district of CTPD. Current & H.B. 64 Category Amounts
FY15 FY16 FY17
Cat. 1 $4,800 $4,992 $5,192Cat. 2 $4,550 $4,732 $4,921Cat. 3 $1,660 $1,726 $1,795Cat. 4 $1,410 $1,466 $1,525Cat. 5 $1,210 $1,258 $1,308Lead district $227 $236 $245
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Career Technical Education
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $42.8 $42.8
FY16 $47.4 $49.5
FY17 $49.2 $51.5
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Limited English Proficient
LEP additional funding = category amount x category ADM x state share index (percentage); summed over three categories.
H.B. 64 does not change category amounts.
Current & H.B. 64 Category Amounts
Cat. 1 $1,515Cat. 2 $1,136Cat. 3 $ 758
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Limited English Proficient
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $24.0 $24.0
FY16 $26.1 $27.0
FY17 $25.8 $27.0
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K-3 Literacy
K-3 literacy additional funding = K-3 ADM x (Base per pupil amount + Additional per pupil amount x State share index (percentage)).
Current & H.B. 64 Amounts
FY15 FY16 FY17
Base (Not equalized)
$115 $121 $127
Additional (Equalized)
$175 $184 $193
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K-3 Literacy
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $102.9 $102.9
FY16 $111.1 $112.7
FY17 $116.0 $118.2
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Economically Disadvantaged
Funding is targeted to districts with high concentrations of economically disadvantaged students through an index.
Index is the district’s percentage of students who are economically disadvantaged divided by the statewide percentage, with the result squared.
Economically disadvantaged funding = Economically disadvantaged ADM x per pupil amount x index
H.B. 64 does not change per pupil amount ($272).
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Economically Disadvantaged
Since this funding calculation does not use the state share index (percentage) & ADM used in the simulation is constant, estimated allocation is the same for all three years.
$383.0 million
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Gifted
Fund $5.05 per pupil for identificationFund a gifted coordinator for every 3,300
students, with minimum of .5 and maximum of 8
Fund gifted specialist for every 1,100 students, with minimum of .3
Funded amount for both coordinators and specialists is $37,370
H.B. 64 does not change amountsEstimated funding is $80.6 million each year
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Temporary Transitional Aid
In FY15, current law guarantees each district is allocated at least FY13 state aid
Executive guarantees state aid does not fall in either FY16 or FY17 by more than 1% of total state and local resources in the prior fiscal year
House guarantees each district is allocated at least FY15 state aid
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Temporary Transitional Aid
Fiscal Year
Executive House
Number of
Districts
Estimated Allocations ($ millions)
Number of
Districts
Estimated Allocations ($ millions)
FY15 198 $195.2 198 $195.2
FY16 226 $153.4 118 $122.9
FY17 184 $138.5 122 $127.0
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Funding Limitations
In FY15, current law limits increases in state aid to 10.5% of prior fiscal year
Executive limits increases in state aid to 10.0% of prior fiscal year
House limits increases in state aid to 7.5% of prior fiscal year
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Funding Limitations
Fiscal Year
Executive House
Number of
Districts
Estimated Amount under
Cap ($ millions)
Number of
Districts
Estimated Amount
under Cap ($ millions)
FY15 232 $581.6 232 $581.6
FY16 214 $609.0 427 $999.7
FY17 131 $366.8 346 $752.9
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Secondary Per Pupil Guarantee - House
Calculated after both temporary transitional aid and the cap
Guarantees each district’s state aid per pupil is at least 20% of the formula amount: $1,180 in FY16 $1,200 in FY17
In FY16 and FY17, this aid is phased in at 50%Applies to about 28 higher wealth districts each
fiscal yearEstimated cost is $21.2 million in FY16 and
$20.4 million in FY17
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Total Foundation Funding
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $7,010.7 $7,010.7
FY16 $7,412.2 $7,457.7
FY17 $7,734.5 $7,856.6
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Lower Wealth Districts Receive More State Aid Per Pupil
1 2 3 4$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Average State Aid Per PupilExec - FY16 House - FY16
District Quartiles from Lowest to Highest Wealth
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State Aid Helps to Counteract Effects of Varying District Wealth
1 2 3 4$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$3,166 $4,573
$5,945
$8,774
$7,226 $4,897 $3,660
$2,025
Estimated Local Operating Levies and State Aid Per Pupil under House Proposal
FY 2016Local Levies State Aid
District Quartile from Lowest to Highest Wealth
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Joint Vocational School Districts
Opportunity grant = (formula ADM x formula amount) – 0.5 mills of district valuation
Receives special education, career-technical education, LEP, and economically disadvantaged additional funding
Subject to guarantee and cap
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Total JVSD Funding
Current & H.B. 64 Estimated Allocations ($ millions)
Executive House
FY15 $271.1 $271.1
FY16 $271.9 $276.1
FY17 $272.2 $279.3
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Funding Choice Programs
Generally, allocate funding to districts based on students who live in the district.
If the student is educated elsewhere, transfer funding allocated for that student to educating district or school.
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School Choice Program Spending Growing Each Year
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $-
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$214.6 $301.9
$439.7 $489.7
$551.1 $644.2
$723.5 $768.5
$823.1 $893.9
$978.6 $1,076.0
School Choice Program Spending
Mil
lion
s of
$
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Tangible Personal Property Tax Reimbursements
Fixed rate operating levy reimbursements are phased out by 1% to 2% of a district’s total state and local resources
The phase-out percentage is determined by the district’s capacity measure used in the calculation of the state share percentage in the Executive budget
Fixed-sum operating levy reimbursements are phased out over six years (TY16 – TY21) for all districts
Fixed rate nonoperating levy reimbursements are phased out by FY17
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Tangible Personal Property Tax Reimbursements
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
$0
$200
$400
$600
$800
$1,000
$1,200
$99.0$106.9
$108.7$116.5
$193.1
$520.3
$706.3
$881.8
$1,121.2 $1,129.1
$759.9
$510.1$509.7$509.7
$360.9
$249.8
$ in
millions
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TPP Supplement - House
Supplemental payments to guarantee districts do not receive less funding in each fiscal year than their combined funding from state foundation aid and fixed rate operating direct reimbursements
Funded by transfers from the Medicaid Reserve Fund and FY15 GRF ending balance
Fiscal Year Number of Districts
Estimated Allocations ($
millions)
FY16 88 $36.0
FY17 91 $66.0
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Property Tax Rollbacks
FY 2002
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$705.7$736.6
$782.2$828.4
$796.2
$742.5$858.1
$939.5
$1,057.1$1,048.1
$1,074.8
$1,110.4
$1,142.3
$1,159.8$1,181.8
$1,201.3$ in
millions
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Instruction Comprises Over Half of Operating Expenditures
In-struc-tional; 58.1%
Building Oper-ations; 18.8%
Admin, 12.1%
Pupil Support; 5.6%
Staff Support; 3.6%
School District Operating Expenditures, FY 2014
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Education is Labor Intensive
Salaries; 55%
Fringe Benefits; 21%
Purchased Services; 18%
Supplies, Materials, and Textbooks; 3% Other; 2%
Capital Outlay and Debt Service; 1%
School District General Fund Expenditures by Category FY 2013
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Ohio’s Average Teacher Salary Little Higher than National Average
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $42,000
$46,000
$50,000
$54,000
$58,000 $56,307
$56,103
Ohio United States
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Ohio’s Per Pupil Operating Expenditures Continue to Exceed
National Average
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
$12,000 $11,204
$10,608
Ohio United States
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Per Pupil Spending Varies Across Different Types of Districts
District Types – Description Spending Per Pupil
Rural High poverty, small population $9,247
Rural Average poverty, very small population $9,259
Small Town Low poverty, small population $8,864
Small Town High poverty, average population $9,322
Suburban Low poverty, average population $10,145
Suburban Very low poverty, large population $11,210
Urban High poverty, average population $11,130
Urban Very high poverty, very large population $13,792
State Average $10,446
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SFC Funding Offered to 73% of Districts & JVSDs
All Buildings Complete; 39.0%
Funded, Not
Com-plete; 15.0%Funding Offered,
But Not Taken; 19.0%
Funding Not Yet Offered; 27.0%
District and JVSD Status for Completing Master Facility Plans, July 2014
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Additional Resources
LSC website School Funding Complete Resource Redbook and Greenbook for ODE and SFC Ohio Facts Historical Revenues and Expenditures Tables
ODE website District Payment Reports iLRC