By SANDY THEIS and STEPHEN OHLEMACHER
PLAIN DEALER REPORTERS

COLUMBUS - The first signs appeared yesterday that Ohio’s 11-year-old school funding lawsuit could be coming to an end.

And leadership from Ohio’s House speaker, on the job for just 10 weeks, is the reason why.

Speaker Larry Householder, a product of the poor, rural schools that first launched the court case, is backing a plan to increase state money for public schools by $3.2 billion over the next two years - far more than plans put forth by Gov. Bob Taft and the Ohio Senate.

Among its highlights:

A dramatic change in the formula for calculating how much state money individual districts would receive.

No new taxes. Instead, it would be funded, in part, by allowing Ohio’s seven, state-regulated horse racing tracks to each install up to 1,500 video "lottery" terminals - slot machine-like devices that would transform the tracks into de facto casinos. The terminals, now illegal in Ohio, would pour an estimated $900 million into the state over the two-year budget, the speaker predicts.

A state-ordered boost in the minimum per-student spending in each school district of more than $1,200 per year.

Little or no extra state money for Ohio’s more prosperous school districts, mainly in the suburbs, but windfalls for big urban districts and poor rural ones.

Special-education spending hikes of $260 million over the next two years. Students with the severest and most costly disabilities would get the most state money.

The terminals are controversial. The plan is expensive.

Even supporters concede they have not figured out how to pay for all of it.

But it got a ringing endorsement yesterday from leaders of the coalition of schools whose lawsuit prompted the Ohio Supreme Court to strike down the state’s public-school funding system. It is the first time any reform proposal got that blessing.

"I believe that the plan provides the basis for concluding the school-funding litigation," said Bill Phillis, who heads the Ohio Coalition for Equity & Adequacy. That group, which represents more than 500 of the state’s 612 school districts, filed the suit.

Householder, a Perry County Republican, learned of Phillis’ endorsement yesterday when a top aide slipped him a note. Householder beamed and said, "I think this is going to work."

The plan appears to face its easiest time in the House, where it will be added to the state’s two-year education budget. Householder expects the House Finance Committee to vote on it by April 1, and predicted it would be approved by the 99-member House.

"Quite frankly, we’re past the time when this should have been resolved," Householder said in an interview yesterday. "It’s time to do this."

The plan does not include the governor’s proposal to have Ohio join a multistate lottery, which would have generated an estimated $70 million over two years.

In addition to money from the video lottery terminals, the reform package would be paid for by tapping $250 million to $300 million in federal welfare money, known as Temporary Assistance for Needy Families. The rest would come from unspecified budget cuts.

House leaders said they are confident they will come up with the money, but others said there is still work to be done.

"We have no idea on God’s green earth how we are going to pay for this," said state Rep. Dale Miller, a Cleveland Democrat.

Miller was among a bipartisan group of lawmakers that worked on the plan. He supports much of it but opposes a provision to eliminate a special stipend in the current funding formula for districts with a higher-than-average cost of living.

Cuyahoga County districts are among the main beneficiaries of the stipend.

"Under their plan, the city of Cleveland gets an increase of [12.5] percent," Miller said. "But if you look at other poor school districts, they get 30 to 35 percent. There are just huge disparities."

Still, Cleveland, the state’s largest district, would get $44.5 million more state aid in the coming school year than current law calls for.

Among other large urban districts, Akron would get an additional $22 million and Columbus would get an additional $50.4 million, a 25 percent increase.

To help make the school funding system more equitable, House leaders are looking at a plan to redistribute some business property taxes statewide, though they are still working through several constitutional issues.

Pooling property taxes faces strong opposition from some suburban officials who collect a lot of money in business taxes. And the lottery terminals face strong resistance.

The horse tracks, not the Ohio Lottery Commission, would run them under state regulation. Anti-gambling organizations are staunchly opposed, and Taft fears the machines would drain revenues from the traditional Ohio Lottery, which also helps fund schools.

But a chance to end the 11-year-old lawsuit could be a strong incentive for many lawmakers.

The House plan comes as state officials are scrambling to meet a court-imposed June 15 deadline to come up with a constitutional funding formula. Legal experts already have said that Taft’s plan, and the rival Senate proposal, fall short of the court’s order for a complete overhaul of the funding formula.

Taft, leading a trade mission to South America, could not be reached for comment.

Senate President Richard Finan, a suburban Cincinnati Republican, would not comment on the House plan or Phillis’ endorsement of it.

"I quit worrying about Bill Phillis years ago," said Finan, who backs the Senate’s less expensive plan.

This year, Ohio requires each district to spend at least $4,294 per student in state and local money.

The governor’s plan would set that amount at $4,490 in the coming school year. Taft’s whole plan would cost an additional $800 million over the next two years.

The Senate’s plan would set the amount at $4,566. Its entire plan would cost an additional $1.3 billion over two years.

By contrast, the House plan calls for spending $5,409 per student in the coming school year and $5,560 in the year after. The amount would be adjusted for inflation each future year, and completely recalculated every two years.

Householder said that he and colleagues developed the spending amount without regard to how it would affect the budget. Instead, he said, the group looked at what 45 of Ohio’s top-performing districts spent and based funding levels on that.

The House proposal, which is still being fine-tuned, is the result of months of private meetings that included top House Democrats, Republicans and staff members from both parties.

Some who took part in the meetings fanned out across Ohio yesterday, trying to sell the total package - and to justify its more controversial components - to a largely conservative House whose members tend to favor less government spending, not more.

The plan also would require school districts to develop plans for improving academics, including reducing student-teacher ratios and buying new textbooks on a regular basis.

The local districts would develop the plans, but the state auditor’s office, which already audits all school districts, would have the authority to require schools to follow them.

House leaders are also discussing the idea of distributing statewide commercial property taxes on all new business machinery and equipment, rather than continuing the practice of allowing the money to remain in the school districts where they are generated.

The so-called "pooling" plan is similar to one that Taft’s aides developed in the fall. Taft, however, backed away from the suggestion because of too much opposition. The House plan, however, has important differences.

Dubbed by its supporters as "pooling lite," Householder’s version calls for statewide distribution only of taxes on machinery and equipment that businesses buy after the plan would become law. Under it, no district would lose money it already has. But districts that contain factories and other entities that generate such taxes would lose out on some future growth.

State Rep. James P. Trakas, an Independence Republican, said he likes most of the school-funding plan. But he will not support any pooling of property taxes because the wealthy schools in his district could eventually lose money.

"Will anyone ever vote for a tax levy again if they know that the money they are voting for is going to another district?" Trakas asked.

Trakas gave Householder credit for developing a bipartisan plan and working to sell it.

The new speaker’s methods are in sharp contrast to Taft’s approach.

Like Taft, Householder created a process to come up with a new funding formula. Unlike Taft, he embraced the recommendations that resulted from it.

With the June 15 court deadline approaching, Taft has cobbled together a new plan largely dependent on Department of Education recommendations that his budget chief had previously dismissed as too costly.

E-mail: stheis@plaind.com
Phone: 216-999-4213

E-mail: sohlemacher@plaind.com
Phone: 216-999-4213