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Shifting Poverty Indicators and K12 Poverty Funding in Ohio

By Ernie Strawser posted 7 days ago

  

By Ernie Strawser and Meghan Homsher, Frontline Senior Analytics Advisors

Overview: This article discusses the issues below and does a deeper dive into the student demographics and funding formula.

• Percentage of Economically Disadvantaged Students Increased Statewide

• Ohio’s Calculated K12 Poverty Funding Decreased

• Some Districts Gained Poverty Revenue and Other Districts Lost Revenue

• Children’s Health Insurance Program Enrollment Recently Declined

• Economic Disadvantage Ratio Squared

Are there winners & losers? 

The economic disadvantaged revenue landscape changed dramatically in FY 2024 with a 9.6% increase in the statewide percentage of economically identified students. The percentage increased from 49.52% in FY 2023 to 54.3% in FY 2024 (May #2). The average indicates that statewide 54.3% of K12 students are economically disadvantaged (ED). A district’s percentage of ED students can impact the district’s poverty funding. Ohio’s funding of poverty declined in FY 2024 and this phenomenon is a direct result of the significant shift in this statewide average. 

And, as you might expect, if the average increased significantly there were districts that experienced decreases in their ED% or change that was lesser-paced than the statewide average change. When the state’s new Fair School Funding Plan (FSFP) was implemented in FY 2022 there was a significant increase in calculated statewide Disadvantaged Pupil Impact Aid (DPIA). This source of poverty funding declined from FY 2023 to FY 2024 while the statewide average percentage of ED identified students was increasing. The calculated funding per the Department of Education and Workforce (DEW) is depicted in this graph which shows that funding declined about $57 million from $637.9 million in FY 2023 to $580.4 million in FY 2024. These funding results seem counter-intuitive thus requiring a deeper dive into the data.

Impact from Total Poverty Funding Declines
In reviewing the year-over-year changes from FY 2023 to FY 2024 there are winners and losers in the funding calculation. The analysis is complicated by the “phase-ins” of the new FSFP formula and therefore calculated (as if fully funded) DPIA funding is used. When this calculated funding is analyzed, some very telling results emerge.

Over 530 districts experienced an increase in ED% from FY 23 to FY 24, and on average the increase was 6.8% points. At the same time about 80 districts experienced a decrease intheir ED% with an average reduction of -4.7% points. The positive change districts had a higher average change than the negative change districts. The average positive change in DPIA funding was $82,410 while the average decrease in DPIA funding was $603,135. On average district net gain was much less than the losses districts experienced which can help explain the overall state reduction in funding. Of the districts experiencing an increase in their ED% their average 2024 DPIA funding is $303,697 while the districts losing ED% had funding of $2,826,214. Districts with the largest DPIA funding experienced the greatest average loss in funding with only half the loss of their ED% compared to the districts that gained financially. Are there winners and losers – YES. 

Deeper Dive: Why are there winners and losers? -- (ED% ‘Squared’)

The DPIA formula includes a ratio to determine a district’s poverty aid. This ratio measures a district’s poverty level relative to statewide poverty. The ratio is the district’s ED% divided by the statewide average ED%. The result is then squared. For a district that is already at 95%, when the state was at 49.5% (FY 23) the district’s ratio was (95.0/49.5 = 1.91) x 1.91 (squared) = 3.68. Next the ED per pupil funding is calculated at the ratio, 3.68 x $422 = $1,554. Using the same formula in FY 2024, the district’s per pupil funding would decline by almost $262 per DPIA student, a decrease of over 16% per student. As the district’s 95% gap to the statewide average closes - they lose exponentially more money. It can be challenging to explain fewer dollars and fewer services locally when serving the same number of economically disadvantaged students. There is no question that the ED% squared can benefit districts exponentially and penalize districts exponentially as well.

Changing Oho Student Demographics?

The indicators for identifying economically disadvantaged students in Ohio include at least these three independent measurements:

1. Student is qualified for free and reduced lunch.

2. Student is identified as Medicaid eligible (direct certification).

3. Student is served by a district maintaining a Community Eligibility Program (CEP): In this case, all district enrolled students are identified as economically disadvantaged.

 

Medicaid eligibility, specifically the Children’s Health Insurance Program (CHIP), has trended up in recent years as the pandemic loosened eligibility requirements. States were required to keep all beneficiaries enrolled in Medicaid or CHIP without completing the annual eligibility determination. However, since the peak in 2023, Ohio’s CHIP enrollment has declined. This decline may reflect the restored annual application requirement. As of April 2023, families must complete renewal paperwork and the required date will vary by household. The trend was an increase in Medicaid eligibility. And now, as the state’s data reveals, there is a declining trend in CHIP enrollees that could result in declining ED percentages through direct certification.

The Community Eligibility Program (CEP) allows qualifying districts to provide breakfast and lunch at no cost to all students without collecting applications. In October 2023, USDA rules were amended to decrease from 40% to 25% the share of identified students to qualify for CEP. Ohio allows participating districts to count their student population at, or very near 100% ED identified. CEP application may be district or building wide. The CEP has the effect of pushing districts into a much higher ED ratio and possibly exponentially more DPIA revenue. Many districts have expressed interest in pursuing CEP as the rules have changed and additional districts meet the qualifying threshold. Frontline’s forecasting software has been used multiple times by districts to model the potential DPIA revenue change resulting from a CEP induced student economically disadvantaged percent at or near 100%.

 

Going Forward

  • To serve more students and gain funding, more districts are researching the impact of Community Eligibility Programs on their federal and state funding. This will serve to further increase the statewide ED%.
  • Medicaid eligibility may have peaked and recent declines in Medicaid eligibility may be a leading indicator of reductions in K12 economically disadvantaged students. This may serve to reduce the statewide ED%
  • Districts at the highest percentage of economically disadvantaged students are the most exposed to exponential reductions in their poverty/DPIA funding when the statewide ED% average increases.
  • Districts whose economically disadvantaged percent of students is growing faster than the statewide average are more likely to exponential increases in poverty/DPIA funding.
  • Current DPIA funding laws could change with the next state of Ohio budget.
  • Education, as required by the General Assembly in the last state budget, has commissioned a comprehensive study to understand the needs of economically disadvantaged students and make recommendations; the study is expected to be complete in December 2024.
  • The current dollar amount in the per pupil calculation formula, $422, is only in law for FY 2024 and 2025; that amount will be reviewed by future General Assemblies.

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7 days ago

Great article, thank you Ernie!