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To: Speaker William Batchelder Senate President Tom Niehaus Members of the HB 153 Conference Committee Damon Asbury, Ohio School Boards Association Tom Ash, Buckeye Association of School Administrators Barbara Shaner, Ohio Association of School Business Officials June 15,2011 Amended Substitute House Bill 153 129th General Assembly From:

Date: Re: Cc:

In addition to significant funding reductions for school districts with the passage of Amended Substitute House Bill (Am. Sub. HB 153), the current version of the bill also contains a broad range of policy issues that affect education. We believe some are positive changes. Others may not be beneficial to schools, or they may result in unintended consequences. Our organizations have testified numerous times in both House and Senate hearings throughout the budget process . We have documented our concerns about the proposed reductions to education funding and the bill's treatment of Tangible Personal Property (TPP) Tax replacement payments. We continue to urge you to review the information we have shared with you in prior communications on these issues. Today we are writing to share just a few changes we would like to see in Am. Sub. HB 153 during the Conference Committee process, primarily related to education public policy. The following is a list of changes we are requesting. The list is followed by a brief summary of each issue and attached is supporting information where indicated. Equitable Distribution of Any New Revenues Electricity Pre-purchase Arrangement Teacher Evaluations, Merit Pay and Reductions in Force Special Education Vouchers Expansion of Choice & Unintended Consequences Home Schooled Students and Extra-curricular Activities Discussion of Ohio Smart Schools Benchmark study

Equitable Distribution of Any New Revenues We are hopeful that updated revenue projections for the next biennium will allow you to restore additional funds to education. We appreciate the funding additions made by both the House and the Senate in their respective versions of the budget, and we hope you will continue to consider education as a priority. We urge you, as new funds become available, that they be distributed in an equitable manner. Attachment A provides rationale for this approach and also data that shows the distribution of funding reductions by district typology -- as a percent of total resources. The range of reductions is relatively narrow among district types.

The provision in the bill that prohibits community schools to purchase goods or services from their sponsor may have unintended consequences for our members. We have a proposal that would allow us to achieve even more savings by pre-purchasing the electricity by utilizing tax-exempt bonds. The provision would appear to prohibit this option. We specifically want to highlight two provisions in the bill that will have an adverse affect on traditional public schools. our organizations. and reduction in force provisions to the bill. a description of the bond/debt process and a supporting Q&A document. we oppose the expansion of the EdChoice voucher program and the charter school program contained in the bill. We urge you to re-instate teacher evaluation. However. Attachment B includes an explanation of the request. have turned old school buildings into office buildings or other uses benefiting the district. While we support measures to ensure accountability for those . merit pay. Electricity Pre-purchase Arrangement In the spirit of shared services and improved efficiencies. It is our understanding that those buildings could be subject to this provision. we need a technical legislative change -. To do that. If the district cannot receive market value for the use of the building. some districts. We also believe Race to the Top (RttT) requirements for districts receiving those funds will require similar policy changes. and therefore serving no purpose for the taxpayers. Special Education Vouchers Our organizations strongly oppose the Special Education voucher program as contained in the current version of the bill. this is unacceptable. it appears that there would be no assurance that the lessee would be responsible for upkeep and repairs to the building. Merit Pay_. Attachment C is a document outlining rationale related to RttT. along with the Ohio Schools Council (OSC).However. new money has tended to benefit higher wealth districts disproportionately. sponsor a pooled purchasing program for school districts. We are concerned for the lack of accountability over the providers and the negative impact the provision could have on students -. Teacher Evaluations_. particularly those that have participated in OSFC projects. 1. We urge you to remove the Special Education voucher provision from the bill. 2. Expansion of Choice & Unintended Consequences As you know from previous testimony. We urge you to consider including our proposal in the budget so that we might proceed in our pursuit of cost savings for schools. Some community schools sponsored by traditional public school districts provide teaching and other services on a contractual basis. We oppose the provision that would require districts to lease buildings to some charter schools for $1. More documentation about our concerns is attached as Attachment D. We urge you to remove this provision from the bill. Additionally. as you can see the progression of the budget. We also support provisions that would allow boards of education to make decisions about staffing that are best for students and their districts when reductions in force are necessary.and Reductions in Force Our organizations have supported proposals to move to a merit based pay system for teachers and other school employees.both those taking a voucher and those students left behind in the district. We assume the intent of this provision is to utilize buildings that are currently sitting empty.one that we have discussed in testimony and with individual House and Senate members.

" If the provision applies to students on home instruction. The intent of this provision is unclear. Please feel free to contact us if have questions. it removes the authority of the local board of education to regulate participation as it monitor academic eligibility.etpi-ohio. that would amend R. We urge you amend this provision to allow continued cooperation community schools and traditional public schools. and shared services among The House version of the budget bill had several provisions related to community school operators and other community school expansion measures that would have led to decreased accountability for those entities. Thank you for the opportunity to weigh in on these important issues. we want to call your attention to one other issue related to budget discussions. it is unnecessary. We strongly disagree with that assumption.org. 3313. . Sub. We share this information with you because the study continues to get attention by the media and others as a valid study.4 billion collectively statewide if school districts would follow the study. If instead it applies to home schooled students. A copy of a rebuttal to the Ohio Smart Schools study prepared by the consultants for the Education Tax Policy Institute (ETPI) can be found on the ETPI website: www . We support the Senate's removal of those provisions. The question raised by the provision is whether it applies to students on "home instruction" or students who are being "homeschooled.C. HB 153. we have expressed concern about references to a study sponsored by the KnowledgeWorks Foundation. as districts currently have authority to permit these students to participate in extracunicular activities. In previous testimony. 3.539 that would require school districts to permit homeschooled students to participate in extracurricular activities at the school-district operated school to which the student would otherwise be assigned. in that the R.C. We urge you to avoid the community school operator expansion measures proposed in the House.sponsors in the private sector. we believe the sharing of services among two public entities is an efficient use of taxpayer dollars. We hope you will consider our requests. Home Schooled Students and Extra-curricular Activities The Senate version of HE 153 contains a section. Finally. and we object to the use of the study as a way to offset the funding reductions contained in Am. We urge you to remove this provision from HB 153. It makes claims that districts could save nearly $1. section identified applies to students on home instruction for medical or other factors that would preclude attendance at the school of assignment.

. The additional revenues added to education in both the House and the Senate versions are primarily targeted at wealthier. HB 153 will force further reductions in programs and staff in those districts. It does not include federal IDEA and Title stimulus dollars lost from this biennium. Table 2 shows the breakdown of the Senate performance incentive provision by typology. Below are Tables 1 & 2 prepared by the consultants forETPI. We urge you to add funds to the lower wealth districts in the Senate's final version of the budget so that those districts most dependent on state funds will be able to weather these tough economic times. high-income districts. Many will end the current biennium already experiencing financial difficulty and offering "bare-bones" academic opportunities.State Aid. Those districts which will benefit from the performance incentives and the 2011 state aid guarantee included in the Senate substitute bill are thankful for the increase. We would suggest as performance incentives like the $17 per pupil award are developed. Sub. has recommended this type of indicator. The additional funds added by both the House and the Senate notwithstanding. We believe expert Eric Hanushek who the Senate and House Education Committees consulted on performance policy. you consider utilizing some measure of student growth as a qualifying indicator. They show the effects of budget reductions on school districts by typology as contained in the current version of HB 153. Property Tax Replacement Amount. Table 1 includes a comparison based on total resources as defined by OBM -. we are still concerned for some of the more disadvantaged districts across the state. The reductions proposed in Am.Attachment A Equitable Distribution of Any New Revenues We thank both the House and the Senate for the additional funding appropriated for education over the biennium in each version of the budget as it progressed. Local Property T axes and federal stimuI us funds that were used in place of state foundation funds in the current biennium. further widening disparities in funding and in educational offerings.

99% -4.71% -5.778.84% -5.l2 school districts as computed by OBM multiplied by two to account for funding over both FY12 and FY13.684 $4.59% FY12-13 Senate -3.090.223.14% -4.59% -3.131 $31.01% -4.256 $3.71% 4.31% -4.61% -4.65% -4.93% -4.32% Rural High Poverty Rural Low Poverty RurallSmall Town Urban High Poverty Major Urban Urban/Suburb High Income Urban/Suburb Very High Income Total Total Resources Base includes the total State and local resources ofK-.733.840 $5. * FYll Table 2: Number ofDistriets Benefiting from Senate FYll Harmless Provision by District Typology # of Hold Harmless Districts in FY12 9 20 21 15 0 State Funding Hold # of Hold Harmless Districts In # of Districts in Typology Group 97 161 81 102 15 107 46 District Type FY13 14 29 28 19 0 53 28 Rural High Poverty Rural Low Poverty RuraIlSmall Town Urban High Poverty Major Urban Urban/Suburb High Income Urban/Suburb Very High Income Total 58 39 162 171 609 .597.205.799.502.656 FY12-13As Introduced -3.864.Table 1: Comparison of Percentage Loss Relative to the FYll Level of Total Resources (As Computed by OBM) in FY12-FY13 by District Typology District Type FYll Total Resources Base* $2.518.44% -4.037 $2.94% -4.300 $7.150.71% -4.84% FY12-13 House -3.392.30% -4.14% -4.409 $6.06% -4.287.43% -4.605.668.62% 4.76% -4.35% -5.093.

have joined together to create an electricity purchasing pool for school districts called Power4Schools.a clear example of what the governor has indicated to be a necessity efficient purchasing for schools and local governments. We are able to maximize the purchasing power of school districts by combining their electricity "load. we would like to be able to take advantage of even bigger savings through a "pre-purchase" agreement with a supplier." purchasing electricity from a competitive "third party provider" under Ohio's electricity deregulation laws. . We thank Senator Oelslager and Senator Beagle for working with us on the amendment. the Buckeye Association of School Administrators (BASA) and the Ohio Schools Council (OSC). OSBA. We anticipate those new options becoming available in the near future. However. While we have been able to offer competitive "Kilowatt Hour" pricing to districts through our pooling program. This could allow for an additional savings for schools over and above the lower pooled purchase price of electricity. as competitive pricing becomes more viable. OASBO. Sub. HB 153 is an amendment requested by our three organizations and the Ohio Schools Council (OSC). 2011 Q. the program has started in the FirstEnergy service area. (OSC is a "Council of Government" as defined by the Ohio Revised Code). a legislative change would be necessary to allow the OSC to qualify under its status as a COG. in today' s market. Power-Schools is a newly formed electricity purchasing pool for school districts sponsored by the Ohio School Boards Association (OSBA). in partnership the Ohio Schools Council (OSC). What is Power4Schools? A. the Ohio Association of School Business Officials (OASBO). We hope you will consider including the provision in the final version of the bill. In order to take advantage of tax free bonds. Power4Schools A "shared service" electricity purchasing pool for school districts! Request for Legislative Language for a Pre-purchase Option June 2. we would purchase the electricity up front for the life of the contract by selling bonds for the purchase. we will also be able to help school districts located in the other utility service areas around the state. cost saving option for schools . BASA. the additional savings would only be possible if we could utilize tax free bonds for the pre-purchase. a council of government (COG). The provision would allow us to attempt to maximize one shared services. Because of the pricing and purchasing options in the marketplace.Attachment B Electricity Pre-purchase Arrangement Not included as part of Am. However. If the electricity provider agrees.

The OSC "Council of Government" needs legislative authority to qualify to sell "taxexempt" bonds to pre-purchase the electricity and realize savings.We are able to maximize the buying power of school districts by combining their electricity "load. but with a discounted price because of the pre-purchase savings. However. Why does Power4Schools need legislative changes to allow for a pre-purchase option? A. the IRS rules for allowing the tax-exempt status for the purpose of selling bonds for purchasing electricity require that the government entity have a history of providing electricity. Yes. That is why the current Power4Schoois program was started in the FirstEnergy service area. We hope to make the pre-purchase option available to all districts." to negotiate excellent electricity pricing from a competitive "third party provider" under Ohio's electricity deregulation laws. The OSC would take on the debt on behalf of the districts. Why does the amendment request apply to the OSC "Council of Government?" A. Will the Power4Schools program and potential pre-purchase option be offered to school districts statewide? A. rather than receiving payments over time. the electricity market is changing in other areas and we expect competitive pricing to be possible statewide. the statute needs to be specific. This could allow for an additional savings for schools over and above the lower pooled purchase price of electricity. Because Power4Schools through the OSC will also need to have approval from the U.' would pay for the electricity on behalf of the school districts up front for the life of the contract by selling bonds for the pre-purchase. Why is Power4Schools requesting a legislative change to allow for an electricity "prepurchase" option? A. S. . Internal Revenue Service (IRS). If the electricity provider agrees. Q. Q. Additionally. Because of the pricing structure in the various utility service areas. Without the "tax-exempt" status the current bond market conditions and the cost of seIling the bonds would exceed any savings that could be generated for the school districts. Q. While we have been able to offer competitive "Kilowatt Hour" pricing to districts through our pooling program. and the districts would pay their electricity bills as usual. Q. because the provider will have the use of the money sooner. Power4Schools through the OSC 'Council of Government. competitive pricing for third party or "pooled" purchasing has not been available to all districts around Ohio. we would like to be able to secure even bigger savings for schools through a "pre-purchase" agreement with a supplier. The OSC has sponsored an electricity purchasing program for school districts for many years after Ohio passed utility deregulation legislation.

School districts must buy electricity and natural gas to operate their buildings. The qualifying council of governments issuing the non-recourse revenue bonds will not be liable for repayment of the bonds issued in the event of a default because the financing will be a non-recourse revenue bond issuance. While each individual school district participant could make arrangements with electricity suppliers on its own. with the school districts monthly energy payments pledged as revenues to payoff the revenue bonds. A prepayment financing. combined with the ability to lower the cost of acquisition through the use of non-recourse revenue bond financing. Non-recourse revenue bonds may be issued by the newly authorized qualifying council of governments. Please feel free to contact us if you have further questions. The energy supplier generally will be responsible for paying off the bonds if there is a shortfall. Rather.they will merely pay a lower price for whatever electricity or natural gas they do purchase.com (216) 523-5469 William T. it is a certainty that some amounts of electricity or natural gas must be purchased. This financing arrangement will not create debt of the participating Ohio school districts. lowers the cost of acquisition for the energy that must be purchased. School districts would not have to "take or pay" for electricity or natural gas . The issue then becomes how to acquire the commodity at the lowest cost possible. Krassen gkrassen@bricker. Conard wconard@bricker .Bricker & Eckler ATTORN EY S AT LAW June 3. While the precise amount of electricity or natural gas that will be used will vary from year to year. the benefits of an aggregated and centralized process. The use of non-recourse revenue bonds means that no taxes will be levied or pledged for repayment. provides the potential for saving financially strapped Ohio public school districts money on their essential ongoing energy purchases. funded and secured only by a non-recourse revenue obligation.2011 Schools' Proposed Energy Prepayment Legislation The proposed Schools' energy prepayment legislation employs a non-recourse revenue bond financing to provide an innovative solution to the rising cost of energy for school districts.com (614) 227-2351 4600847v2 . This non-recourse revenue bond financing is not at all the same as traditional bonded indebtedness issued by Ohio public school districts. Glenn S. the school district obligation is to make monthly payments for energy purchases under a contract that is subject to annual appropriation. The proposed legislation permits eligible school district participants to jom together to lower the cost of the acquisition of energy.

and a teacher's status as "highly qualified" under federal law . Require that observations of teachers include at least two formal observations of at least 30 minutes conducted by credentialed evaluators for those teachers whose contracts are expiring or who have been rated as "ineffective" in the previous year. including student growth as one of multiple significant factors. This is necessary if we are to continue to qualify for those federal funds aimed at quality reforms to our education system. Require that the performance evaluation system encompass multiple measures. Approximately 300 school districts and a total of over 600 educational entities (including both school districts and community schools) will have some form of performance-based pay system. Require for all other teachers whose contracts are not expiring or who have not been rated as "ineffective" that the observations include multiple classroom "walkthroughs" by those trained in this evaluation procedure. There are some who would argue that the teacher performance issue is related to some kind of "end around" the provisions of Senate Bill 5. Merit Pay and Reductions in Force Our organizations supported the provisions in Am. Sub. Sub. We urge you to reinstate these provisions into the hill. Boards of education and administrators would like the flexibility to make the best decisions for students and their districts when lay-offs are necessary. which would include a student growth measure as significant input. Not only will they provide flexibility for districts in managing the appropriate staffing levels and salaries. The original bill would also have permitted boards to pay additional compensation for those who agree to perform additional duties that the board believes should receive added pay. HB 153 that would allow boards of education to establish a new salary system tied to teacher performance. The fact is thatthe provisions of HB 153 more closely align with Ohio's previously filed and approved application for $400 million in RttT funding. Require that the evaluation system is aligned with the standards for teachers adopted under section. • . HB 153 that our members supported is a change in the reduction in force process. licensure levels. Another employee related provision in the House version of Am. We do not concur.Attachment C Teacher Evaluations_. This could be problematic for teachers moving from one district to another and for the districts recruiting them. they will also put the state in compliance with the Race to the Top (RttT) requirements. We believe that the following elements are necessary in order to sustain compliance with the RttT requirements: • • • • Evaluation systems must be aligned with the criteria established by the state. the state will in essence be creating two separate pay systems. By not adding some form of performance-based pay system to Ohio law.

pilot implementation be established in 2012-2013 and full implementation in 2013-2014.• • • • • • Require that the evaluation systems assign a rating in accordance with standards and criteria. Require that salary be based on an assessment of the above elements. Require that each teacher be provided with a written report of the results of any formal observation or classroom "walkthrough". Require than an annual evaluation be conducted for all teachers and principals. Require that training in the evaluation system be conducted in 2011-2012. Identify measures of student growth for grades and subjects that do not receive valueadded reports (with guidance issued by the state superintendent of public instruction). .

We firmly believe that the current system is designed to meet the individual needs of students and we are concerned that the proposed changes could result in undermining services for some children. All school districts are required to meet the Federal Individuals with Disabilities Education Improvement Act (IDEIA) provisions in serving special education students.Attachment D Special Education Vouchers Our organizations also oppose the provision contained in the Senate version to create a special education voucher program to be available to up to 5% of Ohio's students with an Individualized Education Plan (IEP).0009% of the total number of students served. an Individual Education Plan is jointly developed by the school district in cooperation with the parents. This was disappointing to hear and we certainly understand their frustration and desire for an alternative opportunity. The goal of this program is three-fold: to enhance positive communication between parents and the school. Each school district must find ways to deliver services to every qualified student. to improve educational outcomes for students with disabilities. even in those instances where parents do not agree with the way the school district is serving their child. Before the IEP is put into place.9% through mediation--at no cost to the parent or school district. Once in place. Over 30 states have a similar program that seeks to resolve potential disputes at the earliest possible opportunity. . including the parents. This represents 0. This provides parents and school districts with an ODE trained mediator. Once a student has been identified.000 in the 2009-2010 school year). ODE only received 252 formal complaints. it is important to know that complaints are rare. ODE has also launched a facilitated IEP pilot program. Parents can make a complaint and take advantage of due process hearings. Rationale: It is important that we understand the way special education students are currently served. However. For school year 2009-2010. The Ohio Department of Education (ODE) Office of Exceptional Children provides a mediation program to deal with issues that parents have related to special education services for their student. However. ODE reported a success rate of 81. it is signed by all parties. Parents and students already have options under current law and ways to obtain relief when they believe the system is not meeting their needs. It is our position that the best way to serve special education students is to maintain and strengthen the current public system of education as it relates to students with special needs. either by providing the services directly or by contracting with another provider. there are procedures in place for them to pursue a remedy. Mediation can take place even if hearings have not yet occurred. We understand that a number of individuals testified before this committee about problems they encountered in securing an appropriate IEP for their children. Of the total number of students with IEPs (over 261. it is the responsibility of the school district to identify and obtain the resources necessary to fulfill the provisions of the plan. and most importantly. to reduce the number of formal complaints.

By diverting public dollars for a few students. Under the Senate provision.In addition to these highly effective ways to alleviate parental concerns.. We are concerned about proper monitoring of the expenditures and also the qualifications of the providers. Our organizations have concerns about the accountability for the dollars spent with private providers through special education vouchers. we urge you to reconsider this provision of Am. If they choose to accept a special education voucher. Sub. . School districts. Private providers are not subject to this requirement. Parents should be wary as well. in compliance with No Child Left Behind (NCLB). For these reasons . we urge you to consider the special education students who remain in the school district. This process helps to control the cost of securing the services and allows for contract oversight. the ability of public school districts to meet federal and state standards is compromised and students' educational experiences will suffer. be it another school district or a private entity. HB 153 and remove the special education voucher program. Students moving outside the public school system would not have access to the general education programs and high academic standards taught in the least restrictive environment that is available in a school district. they relinquish their rights under IDEIA for due process hearings. Ohio already has a variety of parental choices for meeting the needs of their special education student within the current system. must meet federal standards for highly qualified teachers. there are no requirements that private providers meet the same federal and state operating standards as those required of the public school district. the school district has the ability to negotiate the terms of the contract and the price for services. Finally. Under the current system when school districts contract with another provider. We believe that privatization in the name of choice jeopardizes the good of the whole.