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A bill to financially hit school districts that sue the state gets blasted by those schools.

And there's high interest and interest rates.

A chat with the leader of the Cleveland Fed who will vote on those this week in the state of Ohio.

Just.

Welcome to the state of Ohio.

I'm Karen Kasler.

Half of the state's public school districts are sparring with a Republican state lawmaker who's proposed a bill to withhold state funding from them if they sue the state over that funding.

The bill, from Representative Jamie Calendar, would allow the Department of Education and Workforce to withhold state foundation funding for any school district as part of a legal action over state funding, including voucher programs.

The funding would be released when the legal action is either dropped or the case ends.

The bill does not have any co-sponsors in the House, but it has the support of Senator Jerry Serino.

There's long talked about lawmakers using what he calls the power of the purse, especially when the state is spending billions of dollars on public education.

we feel that we should not be funding legal action.

That is, is is, is costing the state money to defend, and is actually contrary to the interest and of of the appropriations that the General Assembly has granted.

You've talked about the power of the purse.

And so I guess this is part of that.

This is part of that.

And, look, we we not only have a stake in this year that we care deeply about the education of our children around the state.

We also are stewards of taxpayer dollars.

And, we think it's a it's inappropriate for school systems to use the tax dollars that we give them to turn around and challenge things that we do.

Serena said in an earlier interview with the Statehouse News bureau.

He can't say for sure if it would be found to be constitutional, but it shouldn't stop lawmakers from doing what they think is the right thing.

you can't say with certainty until it's adjudicated.

And so, you know, there may be something that we missed or that we got wrong or or maybe we were absolutely right.

In in taking this position, I don't see and people that I've talked with who are, much better at constitutional law than I am, have have indicated to me that there are no apparent obvious issues from a constitutional standpoint.

320 of the state's just over 600 public school districts are actively suing the state over its funding of the Ed Choice and Ed Choice expansion programs, which allow any family in Ohio to get a taxpayer paid voucher for a private school.

The vouchers heard.

Ohio Coalition is calling calendar's legislation the bully bill.

Their attorney, Mark Wallach, says the Constitution orders Ohio to secure a thorough and efficient system of common schools or public schools throughout the state.

cutting the funding off from about half the schools in the state when clearly violate that constitutional requirement, it's obviously unconstitutional.

Interestingly enough, when Senator Serino, one of the backers of the bill, was asked about whether it was constitutional, this was in the, Statehouse News Bureau report, he said, well, he's not sure if the bill is constitutional, but it shouldn't stop us from doing what we think is the right thing.

That's lawlessness.

Frankly, it's, and it's not a responsible thing for a public official who has sworn to enforce the constitution of the state of Ohio to say.

And if he wanted to find out if it was constitutional, he could ask a lawyer, he could try asking the state attorney general, which would be an interesting thing to do in this case, because it's so obviously unconstitutional to cut off funding when you've been ordered to fund schools.

Republican House Speaker Matt Hoffman has claimed on this show and elsewhere that the Ohio Constitution requires the General Assembly to provide the means of religious education, because that's important to the moral community.

Bill Phillis led the coalition that took Ohio's property tax based way of paying for schools to the Ohio Supreme Court in the 90s, resulting in four rulings that it was unconstitutional.

I can I can imagine, turning a legislator making a statement like that.

So he it, it's an argument that's been made in the litigation as well.

Not very seriously because the, the constitutional provision that they're talking about merely says that the state is supposed to encourage education and religion.

It doesn't say anything about funding religious schools.

And it would be hard to explain how it took, you know, from the time the this Constitution was adopted in 1851 until a couple of years ago, before they decided to start funding religious schools through this voucher program.

If they were supposed if they were required to do it, what would happen for that 150 years in between there?

You know, it's it's hard to explain.

So no, it's not a serious argument.

The case is now in Ohio's 10th District Court of Appeals, after a Franklin County judge ruled the voucher program is unconstitutional, but said it could continue while the case goes on.

Senators are looking over a bill that would allow the state to shut down public schools that have three straight years of poor performance as charter schools can be.

It sponsored by Senate Education Committee Chair Andrew Brenner, who says the bill would allow for the closure of public schools in the bottom 5% for performance Index and the bottom 10% for value added for three consecutive years.

Unless most staff is replaced or an entity with expertise in school improvement is brought in.

that, there needs to be a look at this because now if you take a look at academic performance of students, traditional public schools, many of those kids are now way behind the charter schools.

And I think people don't realize that the charter schools, because of the reforms we put in ten years ago, have closed all the bad performing charter schools.

There's still a couple here and there, but then they get closed.

But we have not done any of that with the traditional public schools.

And when you literally have hundreds of thousands of kids in Ohio who need remediation in math and English, I think it's highly important that we take a look at the buildings, focus in on what works, focusing on the curriculums that work, focus in on the methods that work.

Make sure that, you know, the curriculums are, at least the same.

And, I mean, you know, scientifically evidence based standards.

If you do that and go into those individual buildings, you may not have to close any traditional buildings.

You might be able to reorganize them and get them to work.

And that's really my objective, is let's make sure the kids are learning in every single school and that they're able to go on and graduate, go on to a career or college or something else and become successful.

There are no poor performing charter schools.

They've all been closed.

Is that what you were saying?

What I'm saying is, if you compare the charter schools to where they're located to traditional public schools, they're mostly now outperforming the traditional public schools in those areas.

Again, still, most we've changed the laws of the charter schools can now be opened up anywhere in the state.

That happened about four years ago.

But what you're now looking at is where they're currently located is still in areas of high poverty.

You put the kids in a charter school, you're going to they're going to outperform them usually, and they're going to outperform them for half the cost.

So that's that's the other key here is that, you know, if we're trying to control costs at the education level, what is in the best interest of the kid.

But what also is more efficient?

I think that's something that has to be looked at.

So that would be the solution.

If a school were closed, there would be a charter school that would be available to take the kids.

That's a possibility, or reorganize it, or put those kids in another traditional public school and reorganize those buildings.

You know, I think that there's there's been discussions and, you know, I'm in the Columbus area.

So we hear about Columbus Public a lot.

That's why I mention them.

But there's particular schools.

They're having a hard time closing buildings right now that probably needed have been closed for years.

They've got about 100 in some buildings.

They've gone down from, I think, 130 buildings.

They probably need about 60 buildings.

So they've got a long ways to go, but that requires major restructuring.

You've got a lot of locals that will have concerns about it that their neighborhood, building would be closed.

So I think if the state came in and helped them with the proper curriculum instructions and everything else, that I think we could turn those buildings around and make sure that those kids are performing well and then they don't have to go anywhere else.

Is the thought, though, that it's curriculum, it's staff.

These are the reasons why these schools are poor performing and not the level of poverty that's happening in the district, because there's there is a definite track between performance level and poverty level in districts around the state, but specifically in the urban areas.

Well, there is, but I think that if you take a look at that and you compare them to a charter school, who has the same high poverty kids, they're outperforming the kids in the traditional schools now.

So I, you know, but we're spending in a traditional schools, most of the urban districts are spending around 25, 26,000 per student.

The state averages around 16,500 per student.

So that, you know, that difference in money isn't seeing a performance improvement.

And given that the urban districts are denser, you would think the economies of scale would work better to be able to, you know, efficiently use those dollars.

That's also not happening.

So I think there's a lot of things from a management side that the state could do, bring in experts.

And it doesn't have to be the state themselves.

They can hire experts if they need to, and the state can work this out through the local schools to bring in the people that are needed to help turn those schools around and help those teachers help the the performance there, and even maybe reaching out to the parents and others in those districts to say, okay, this is what you need to do to help your kids.

We're going to help you help your kids improve.

And I think that's something that needs to happen.

And I'm not saying that doesn't happen in schools now because it does.

Teachers are doing that all the time, but I think that we need to make sure we're having a structured approach that is scientifically evidence based and are proven techniques that we know have worked in other districts.

I've toured, schools in Washington, DC in a high poverty area where those kids are doing well in some of those schools where they put in some of those major changes, those should be adopted and adapted elsewhere, like here in Ohio.

Brenner said he's working to try to make his bill a priority so it can pass.

By the end of the session in December, interest rates will once again be in the spotlight as the Federal Open Market Committee meets next month.

It's expected that once again, rates will be held steady in spite of pressure from President Trump to cut them.

One of those who will vote whether to raise lower or maintain current interest rates is Beth Hammack, the president and CEO of the Federal Reserve Bank of Cleveland.

I sat down with her this week to talk interest rates, inflation and the overall economy, starting with an overview.

Well, the Cleveland Fed covers all of Ohio, western Pennsylvania, eastern Kentucky, and just the northern Panhandle.

Think Wheeling, West Virginia.

That's our territory.

So even though Cleveland is in the name, we really do try to spend time across the whole district getting a sense of what's going on in the economy.

For me, in my role as a monetary policymaker, most people, when they think of the Federal Reserve, they think of monetary policy and interest rate setting.

And that is, of course, a key component of what I do.

And in order to do that, well, I need to have relationships across the district and get a real perspective of what's going on in this region.

The way that our central bank is set up, as is a decentralized central bank.

So you've got seven governors in Washington, D.C., that are part of the federal government, and then you've got 12 regional reserve banks spread across the country.

Cleveland being the center, the home of the fourth district, which is which is our reserve bank.

When we show up at those monetary policy meetings every 6 to 7 weeks, I try to bring a flavor of what's going on in the economy here.

So we were meeting yesterday with a financial services company.

I met with an energy producer.

We met with a retail, consumer retail, production company trying to get a flavor of what's working for them, what's not working for them.

Do they think growth is on the upswing?

Are they're hiring people?

Are they letting people go?

How are they handling price pressures?

All of that.

Because for me, I look at the official data as it comes out from often the Bureau of Labor Statistics.

But I try to couple that with the stories and anecdotes from people around the region, so that when I show up in Washington, I've got that fourth district flair to bring to the table and help share.

You mentioned monetary policy and interest rates.

So I just got to ask you, you are voting on that coming up is it's likely that if Kevin Ward succeeds Jerome Powell as Fed chair, they'll be this continued pressure on interest rates.

What are your thoughts on cutting interest rates?

Well, I think right now it's been a difficult time for monetary policy.

What we saw through the end of last year was we saw an employment picture that was weakening slightly.

We saw a little bit of softening in the labor market.

And we've had price pressures that are still too high.

So at the Federal Reserve, we have what we call the dual mandate, which is maximum employment and price stability.

When you see labor picture weakening some, that's a source of concern.

And that's a reason why we might want to reduce interest rates to help support that side of the picture.

On the other hand, when you have inflation that's above our 2% target, you want to raise interest rates to help bring it back down.

And so it's a challenging time for monetary policy because both sides of the mandate were under pressure.

We got some good data this morning on the on the employment side.

That shows to me at least it looks like the labor market is stabilizing, which is a great thing to see.

Now this is just one data point, but it does, amplify what we saw from December's data on on the payroll situation.

So it feels like things are starting to hit a bit better balance on the inflation side.

We're still running at 2.8%, which is again a bit above our target.

It's a long way down from the over 7% that we were in 2022.

But we've been bouncing around this just under 3% number for the past couple of years, and I'd really like to see us bring it back down to our objective of that 2% goal.

So what do you think interest rates are going to be?

I think we could be on hold for quite some time.

I think that monetary policy to me is in the vicinity of neutral.

I think it's in the range of maybe we're restricting the economy a little bit, maybe we're supporting the economy a little bit.

But broadly, I think we're within the context of neutral.

And so I think that we should be on hold as we see the labor picture continuing to stabilize and to make sure that we can continue to bring that inflation side of the mandate back into target, even as you're getting some pressure to lower those interest rates.

Yeah.

Having independence for monetary policy is critically important.

What that means to me is that when I walk into the room, I can be squarely focused on the data and squarely focused on the stories and experiences of people in my district.

That's really all I'm focused on.

And to me, that's how you deliver better economic outcomes for the country, for the American public.

You can look across the globe and you can see there's large bodies of literature that show that independent central banks are able to deliver more stable, lower inflation over time.

There are mixed signals coming from the economy and the economic indicators.

You've got unemployment is low, consumer spending is up, stock market hitting record highs.

But there are also the other, job cuts in January double what they were a year ago.

Consumer confidence index has dropped ten points in a month.

Consumer price index shows prices keep rising.

So what's the outlook on the economy?

The outlook is actually brightening.

What I see is that we have growth expectations that are going to that are going to be pretty good for this year.

We think that economic growth is going to be in the 2 to 3% range for this year, so holding up pretty well, and that's on the back of having about 2.5% in 2025, which was a reasonably strong year.

There are a lot of positive trends.

It looks to me like financial conditions, interest rates, broadly stock market prices, credit spreads are all very accommodative.

And that's helping to spur investment and growth.

And so that should help keep consumer spending high.

Consumer spending has been the bright spot for all of 2025.

There was a lot of uncertainty that we ran into last year, but consumer spending did not let up.

And so is that if that continues to be the engine of the economy, I think we'll be in a good position.

We often hear about the record highs on Wall Street, but you also hear that the stock market is not the economy.

Yes.

And I just wanted to add what what are the kinds of I mean, is that enough to, to really look at in terms of judging the economy or there are obviously other factors that you need to.

Yeah, I mean, Wall Street in the financial markets is not the real economy.

And so I do look at the financial markets as an indication of how easy or hard it might be for businesses to grow and for them to borrow money if they need to.

But I spend time talking to individual businesses and understanding their experience.

So when we were with the consumer products retailer yesterday, we were talking about what they've had to do with their client base that they've, not really raised their prices significantly.

But they're seeing value.

Shoppers are seeing that when they have more promotions.

That's when people are coming in and spending more money.

I heard the same thing from a grocery retailer up in Northeast Ohio that, you know, in aggregate, their sales are roughly flat.

But any time there's a promotion, people are moving in that direction.

So we do hear about a lot more value oriented shopping that's going on.

You've said the fed is interested in making sure that everyone can participate in the economy, and you want to find the barriers that keep people out of the workforce.

I'm sure you're hearing now from a lot of employers and employees that there is this uncertainty.

Yes, I certainly it's something that we're we're paying a lot of attention to.

You know, we talked about monetary policy, which is our most well known function.

But we do have four other functions that were responsible for one is financial stability.

So broadly surveying the landscape to see where things are working well, where there might be points of vulnerability, so that if something happens, we can help step in.

The second is supervising and regulating the banks.

The strong banking system is the foundation for a strong economy.

And I got to spend yesterday, lunchtime with the Ohio bankers and talking to them about my outlook on the economy and the strength of our banking system.

We're also responsible for consumer protection and community development.

So spending time with community partners to understand what the experiences of everyday individuals.

We focus on three different areas affordable housing, workforce development and small businesses.

And then the last one is we run the nation's payment system.

So whether that is instant payments like fed now ACH wire payments or those paper bills in your wallet that we refer to as fed notes, federal Reserve notes, we we have 28 locations across the country, two in the fourth district where we are looking at that currency to make sure it is good fit currency.

If it's too worn out, we shred it so you can come get bags of shredded money from the Cleveland Fed.

And if it's counterfeit, we send it to the, the Secret Service for them to have further evaluation.

And you can tell if a dollar bill is from the Cleveland that you can.

Yes, because it would have a D. So we are D for the fourth district.

And so if you look on and on a $1 bill, it actually says Federal Reserve Bank of Cleveland.

But on the other more modern bills it will say D4 at the beginning of it.

President Trump and his supporters appraise tariffs, bringing in billions of dollars, hundreds of billions of dollars and sparking investment in the United States.

Critics say they've been imposed at his whims.

They're uncertain and unpredictable, and consumers are paying for them.

What is our tariffs having an effect on the economy?

Is there any way to tell?

We saw a lot of uncertainty in what I heard from businesses when I was out in the district through last spring, and summer was just the level of uncertainty was making it very difficult for businesses to plan.

That's really stabilized towards the end of this year, and it feels like things are in a better path.

When you look at the underlying inflation data, what we see is that price pressures are coming from a number of areas.

Tariffs are one that businesses talk about a lot, but we also hear about pricing pressures coming from insurance that keeps on going, insurance prices going up and energy prices which continue to go up.

So there are a number of different pressures that are coming from prices.

If you break it down, we're seeing more pressure on the producer price index than on the consumer price index.

So that to me, looks like businesses are actually trying to buffer that cost.

When I'm out talking with businesses, they're telling me that they've been trying to bear that cost themselves.

We were talking with an automotive manufacturer who was saying, nobody wants to be the first one to raise prices.

They're trying to hold onto that as long as they can, but it may not be able to last forever.

So I'm hopeful that with the right level of monetary policy that we have set right now, that that will help to bring down inflation and that we'll be able to see the economy continue to do well here.

As I mentioned, the consumer confidence index is down.

People are saying things are too expensive, costs are going up.

You mentioned energy, for instance, and health insurance and all that.

What can you tell people about where the economy is?

And are these things that they are struggling with now going to get better at some point?

Well, that's my job.

My job is to be able to deliver on both sides of our mandate, maintaining maximum employment and helping to bring price stability back towards that 2% objective that we have laid out.

I believe that as we're looking at the economy, I'm trying to do my best to make sure that we can deliver on both sides of that mandate I do here.

Yesterday when I was down in Columbus, we spoke to a group of nonprofit partners hearing about the experiences of a lot of their community members and the people that they're serving, whether it be housing, unavailability or just how expensive it's become.

The cost of childcare, and other, you know, issues that they're experiencing.

You know, there is real strain that is continuing to go on for everyday Americans.

And so we often are referring to this as this k-shaped economy, people at the top who have a lot of money in the stock market and are feeling flush in their 401 K's, are out spending and they're thriving.

But at the bottom, in the lower and middle income parts of the communities, it's really been a struggle.

Places, you know, like a lot of the areas in Ohio individuals are struggling with, how do they make ends meet, how even when they have really good jobs that are paying them 18, $20 an hour, how can they afford child care and their car payments and their insurance payments and all the food and everything else, and so we're trying to focus on both sides of that.

And unfortunately, monetary policy is a blunt instrument, and we're not great at dealing with those kinds of differentials.

That's where our fiscal policymakers and elected officials come in.

But we're as a monetary policy maker, I'm trying to make sure that we're steering the economy towards those two goals at the same time.

Do you think people are educated enough about the economy and understand some of these factors?

Because I think people, you know, they understand budgeting, they understand investing.

But do you think people understand enough?

Do should schools be teaching more about the economy?

So we've been doing a lot of work at the Cleveland Fed.

Part of our mandate is, financial literacy and explaining both about how the economy is doing and also some of these more individual personal budgeting, financial topics.

We work with community partners and help, to share with them our views on what's going on in the economy.

I was out yesterday, as I mentioned, speaking at the Ohio Bankers League, I try to get out around the district in events like this or in one on one meetings and try to share our perspective, my perspective on what's going on in the economy.

But I'm sure there's more we can be doing.

We have a tremendous number of resources, a lot of which are available through our website, Cleveland fed.org.

So if you want any viewpoints on what's going on in the region, there's a lot there.

We, released at the beginning of every year what we call our district Almanac that goes through and breaks down all the different parts of the fourth district, MSA by MSA within Ohio as well.

So you can see how your how each of the regions is performing, whether it be in employment, whether it be in inflation, population growth, a lot of different, affordability, numbers that it's looking at.

And it compares at both across the district, across the state, and across the nation.

and we close this week with a remembrance of a giant of legal scholarship in Ohio and a friend, Stephen Stein.

Glass was considered the expert on the Ohio Constitution.

He was the dean of the Cleveland State College of Law and served as dean emeritus.

He was also the senior policy advisor for the Ohio Constitutional Modernization Commission ten years ago, and he appeared on the show several times to share his vast knowledge.

Stein glass died last week.

He was 83.

And that is it for this week for my colleagues at the Statehouse News Bureau of Ohio Public Media.

Thanks for watching.

Please check out our website at State news.org or find us online by searching State of Ohio Show.

Stay in the know by registering for Ohio State House alerts through this QR code, or by texting state news to this number.

You can also hear more from us on our podcast, The Ohio State House Group, which drops every Monday morning.

And please join us again next time for the state of Ohio.

You.

You.

Just.

Support for the Statehouse News Bureau comes from the law offices of Porter, right, Morse and Arthur LLP.

Puerto Rico is dedicated to bringing inspired legal outcomes to the Ohio business community.

More at porterwright.com.

Porter Wright.

inspired every da And from the Ohio education Association, representing 120,000 educators who are united in their mission to create the excellent public schools every child deserves.

More at OHEA.org.