Ohio Supreme Court Holds That State Education Department Can Retroactively Claim Funds From Districts' Budgets

The Ohio Supreme Court recently reversed a trial court ruling and held that the State could retroactively lower school districts' funding without running afoul of the state constitution's retroactivity clause. The case arose when the State Dept. of Education determined that school boards in the Cleveland, Cincinnati, Dayton, and Toledo districts had been overpaid for fiscal year 2005 when it mistakenly counted students as part of district budgets even though the students were attending community schools outside of their home districts. The department recouped the overpayment by deducting the amounts from the boards’ school-foundation funding during fiscal years 2005-2007. The Cincinnati School District sued the department over its fiscal-year-2005 adjustment of Cincinnati’s school-foundation funding but settled before the Ohio Supreme Court could decide the case. In the meantime, the Ohio General Assembly passed legislation that allowed the department to adjust school funding retroactively and  immunized the department from liability for any legal claim for reimbursement brought by a school district. The school districts argued and won a claim at trial that the elimination of their funds and of potential state liability violated the constitution's retroactivity clause because it impaired the boards’ substantive right to accrued education funding. The Ohio Supreme Court agreed with the department's position that the retroactivity clause was historically interpreted to protect private parties, not arms of the state, relying on U.S. Supreme Court holdings that political subdivisions do  not have the same rights as private corporations or individuals, and authority from other state courts concluding that legislatures may retroactively reclaim money from school district budgets. The case is Toledo City School Dist. Bd. of Edn. v. State Bd. of Edn. (Ohio May 4, 2016).