Depending on how the state reacts, the defeat could jeopardize state funds for a downtown baseball stadium in Dayton and the city's 2003 celebration.
With 83 percent of the vote counted, 80 percent of Ohio voters opposed Issue 2 and 20 percent favored it. Issue 2 would have increased the state sales tax by a penny on the dollar to raise $1.1 billion a year, half for the schools and half for property tax relief.
A companion measure, State Issue 1, also was defeated, by a narrower margin. With 84 percent of votes counted, 61 percent of voters opposed it and 39 percent voted yes. Issue 1 would have allowed the state to issue low-interest bonds to pay for school construction.
The legislature placed the issues on the ballot in response to a state Supreme Court decision last year that declared unconstitutional the current way of funding schools. The high court told the legislature to develop a funding method less reliant on local property taxes and which provides every child with a "thorough and efficient education."
The legislature passed several laws in response to the order, including one providing annual increases in the amount of per-pupil funding provided each school district by the state. Issue 2 was to have been a main funding source for the changes.
The proposal's defeat is not likely to have an immediate impact on local schools. The state budget for the school year beginning next September has already been approved and funded. The money from Issue 2 was needed, supporters argued, to fund the school plan beginning a year from September.
But educators said they still expect the Legislature to act.
"I didn't expect it to pass, but I didn't know it would be that dramatic," Dayton school superintendent James A. Williams said of the vote. "The voters are sending a message to the legislature that they have to do what the Supreme Court said they need to do....
"They need to come up with a new funding formula, not just come up with additional dollars. I'm hoping they get a bipartisan group together and really work this out."
Some anti-tax conservatives in the House were quick to claim they are more in touch with the voting public than their colleagues.
"This is a clear repudiation of the tax-raisers in Columbus," said state Rep. Jeff Jacobson, R-Phillipsburg. "They misread the electorate completely. People want to see more bang for their buck in Columbus."
Issue 2's opponents successfully attacked it on two levels. One group, mostly conservative Republicans, said the tax was unneeded and that more school money could come from the state budget surplus and reallocating other funds.
The other anti camp consisted of most local school administrators and the Ohio Coalition for Equity & Adequacy of School Funding, the group that brought the successful lawsuit against the current funding formula. They said Issue 2 did not provide a "systemic" overhaul as demanded by the Supreme Court. Although they never made public their own plan, they contended that even more money and more formula changes are needed.
Curt Steiner, director of the Issue 2 campaign, said the two-fold attack on the proposal "was overwhelming. One group said it was too much money, the other said it wasn't enough, and our message just never got through."
Ohio Senate Minority Leader Ben Espy, D-Columbus, and William Phillis, executive director of the school coalition, called for the Legislature to return immediately to the capitol and begin work on a new school plan.
But Senate President Richard Finan, R-Cincinnati, House Speaker Jo Ann Davidson, R-Reynoldsburg, and other leaders say that is unlikely. Finan said that the vote should be interpreted as citizen opposition to increased taxes and that lawmakers will have to consider cuts to other state programs.
"The ball is now back in the hands of the courts," said House Majority Floor Leader Randy Gardner, R-Bowling Green. The state has already filed legal briefs with Perry County Common Pleas Judge Linton Lewis, who originally ruled the funding system unconstitutional. The state argues that since the original case was filed in 1991 changes have been made, and school funding increased, to make the system constitutional.
Lewis has been awaiting the outcome of Tuesday's vote before proceeding in the case. The losing side will certainly appeal his decision to the Supreme Court by the losing side. It's not clear what action the courts might take, nor when they will decide on the validity of what the Legislature has done.
Voinovich and Republican leaders in the Legislature are expected to soon approve a capital improvements bill that provides $300 million to $400 million for school construction.
Shifting such money to school buildings could affect state financial support for local community projects, such as a proposed baseball stadium in Dayton and other funds for downtown development and the city's 2003 celebration.
Normally, a capital improvements bill is introduced early in the year, but Voinovich wanted to wait until after Tuesday's voting. Prior to the vote he said defeat of Issue 2 would force the state to divert those community funds to school construction and renovation.
The defeat of Issue 2 could also affect the campaign between Republican Bob Taft and Democrat Lee Fisher to succeed Voinovich as governor. Both Taft and Fisher won their parties' nominations Tuesday. Both supported Issue 2.
Taft planned a press conference today to further address the school funding problem. Sources close to the campaign said he will announce that, if he's elected. his first budget would increase school funding by eliminating increases, even for inflation, for other state agencies.