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State Operating Subsidies Belong To Educational Service Centers Not Their Client School Districts

In a case with state-wide implications for the entire educational service center (“ESC”) financing structure, an Ohio appellate court found that the state operating subsidies provided to ESCs belong to ESCs – not their client school districts. McGown & Markling represented the Lake County ESC in this matter.

By way of background, ESCs provide uniform educational services and programs to school districts and are funded in several ways. First, an ESC receives a state operating subsidy, which changes annually, but has varied from $35 to $26 per average daily enrollment or membership (“ADM”) during recent years. Second, an ESC receives $6.50 per ADM from the state via local funds. Third, ESCs may also compete for and receive federal and state grants.

In the case of Mentor Exempted Village School Dist. Bd. of Edn. v. Lake Cty. Educational Serv. Ctr. Governing Bd., 2016-Ohio-7649, the Mentor Exempted Village School District Board of Education (“Mentor”) filed suit asking that a court conclude that former R.C. 3313.843(G) mandated that an ESC’s 2014 state subsidy payment, based on a client school district’s enrollment numbers, must, as a matter of law, “be used by Lake ESC solely to pay for and offset services to” client school districts. Mentor at ¶ 59. Mentor likewise sought the court to declare that Lake ESC was precluded from using its subsidy for any other purpose. A ruling in Mentor’s favor could have cost educational service centers across the state millions of dollars in state subsidy payments made prior to 2014.

The state appellate court disagreed with Mentor, however, finding that “nothing in former R.C. 3313.843(G) dictates how an educational service center is to spend its state subsidy.” Mentor at ¶ 72. The same is true for the current version of R.C. 3313.843(G). According to the court, the state subsidies are “intended [solely] to support the educational service center’s basic operations and pay for its statutorily mandated services” and not to pay for and offset services to client school districts. Mentor at ¶ 90.

This case serves as a reminder that state operating subsidies provided to ESCs belong solely to fund ESCs and their operations – not their client school districts.

To read this case, please click here.

Authors: Matthew John Markling and Patrick Vrobel

Note: This blog entry does not constitute – nor does it contain – legal advice. Legal jurisprudence is like the always changing Midwestern weather. As a result, this single blog entry cannot substitute for consultation with a McGown & Markling attorney. If legal advice is needed with respect to a specific factual situation, please feel free to contact a McGown & Markling attorney.

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