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5.17.10 Update -- Budget Agreement
Shortly before midnight last night, legislative leaders and Governor Pawlenty announced that they had reached a budget deal and that a special session would begin at 12:01am. This would give all of the parties' time to study the details of the budget balancing bill to ensure that there were no errors. Originally, they had hoped to adjourn the special session by 6am, but ultimately they decided to reconvene around 8am this morning. A couple hours later the budget bill (HF 1 2010 special session) was sent to Governor Pawlenty and the legislature adjourned the special session. The budget deal balances the budget without any new taxes or surcharges (a surcharge on hospitals and health plans had been in included in the budget bill passed by the Legislature early Sunday morning). Here are the key pieces of the budget deal:
K-12 Bill Defeated
The omnibus K-12 bill (HF 2072) that was hastily assembled on Saturday night / Sunday morning passed the House after a two hour debate Sunday afternoon, but was defeated in the Senate Sunday evening. Opponents argued that it did not contain sufficient reform and they also objected to a provision allowing school boards to extend existing levies without voter approval.
Pension Bill Signed
After threatening to veto the pension bill due to a lack of reform, the Governor signed the bill late Saturday night. His veto threat was probably more of a stick to use to get the DFL moving toward a budget package. The pension bill phases in an increase in employer and employee contributions for TRA over the next few years.
5.13.10 Update -- Legislature on Hold - sort of
Legislative leadership is meeting with the Governor behind closed doors today working on a budget fix. The House passed the education bill but the Senate has things on hold for now. In the meantime, the Governor is threatening to veto the pension bill that made changes to stabilize the TRA fund. This bill passed both houses and now sits on the Governors desk. He says that it is too costly and doesn't have enough reform which is disappointing news to those who were looking for a fix.
We will let you know once the log jam breaks and things begin to happen.
Federal Legislative Alert - (information provided by Noelle Ellerson, AASA and Joel Packer, CEF)
Sen. Harkin (D-IA) introduced S3206, the Keep Our Educators Working Act of 2010. This bill includes $23 billion to provide additional assistance to states in the form of continued funding for the State Fiscal Stabilization Fund.
Sometime today, the full Senate Appropriations Committee will markup the emergency supplemental appropriations bill. They will use another bill as a vehicle bill, H.R. 4899. The Senate Appropriations committee version will be a little different and they will need to work out their differences.
However, the $23 billion jobs fund will not be included in the Senate version so Sen. Harkin will offer the $23 billion education jobs bill as an amendment on the floor, with the support of Sen. Reid. It will take 60 votes to pass.
The Senate could take up the bill as early as next week, but it will depend on a number of other finance bills. It is critical that you contact both of your senators and urge them to vote for Sen. Harkin's amendment.
Use these links to send them your message. http://klobuchar.senate.gov/emailamy.cfm; http://www.franken.senate.gov/contact
5.12.10 Update -- House K-12 Education Bill
Last night the House passed the K-12 Education Omnibus bill off the floor on an 86 to 47 vote. There was extensive discussion and several amendments. The first amendment offered to the bill was by Rep. Greiling. Her amendment removed the provisions codifying the aid payment deferral and property tax recognition shift. She said those provisions were being held back at this time and would become part of the final budget balancing bill later this week assuming leadership and the Governor can negotiate a new deal after Pawlenty's veto of the last budget balancing bill.
Rep. Davnie successfully added an amendment to address concerns by the 34 districts seeking school improvement grants from the Department of Education. The issue of the lowest performing schools is having to remove their principals and teachers to as part of the school turn around grants. Last week the House Education Policy committee took testimony from administrators across the state who are frustrated with the MDE claim that they have to fire everyone in the building to participate in these grants. Although it is unsure how this will work with the federal grant, there was discussion about the uniqueness of districts and how they came to be identified originally.
Rep. Mariani added an amendment that will require districts to evaluate teachers and principals each year. The evaluations will be developed locally and are to include multiple measures for evaluation. Districts had argued the proposal creates a substantial burden and may not be workable in some instances including small schools with only one principal. The evaluation proposal also appears to be a core piece of QComp, leading some to argue that under the new mandate districts and bargaining units not in QComp should find their way into the program to at least get the state revenue that is available for these efforts.
Rep. Westrom was unsuccessful in getting two amendments passed. At the request of his area superintendents he offered an amendment to allow schools to post board minutes and other notices on their website instead of having to publish them in a local newspaper. The Newspaper lobby has successfully defeated this effort in the past and they were successful once again. The other amendment offered by Rep. Westrom would have allowed local boards by a 60% vote to opt-out of any unfunded mandates. Rep. Greiling argued that this would get us in trouble with the feds over special education and the amendment was defeated.
Race To The Top and the Governor's education reforms were offered as a comprehensive amendment to the education bill. In the end the DFL House held the line and kept the proposals out of the bill. One amendment in particular, alternative licensure or Teach for America, took substantial time. On a 65-68 vote the proposal was defeated.
The House Education bill is now in the Senate's hands, but at this time it is unclear as to whether or not the Senate is going to move a separate education policy/finance bill. There is a proposal, but it is sitting in the Senate Rules committee chaired by the Senate Majority Leader Larry Pogemiller. Sen. Pogemiller is not inclined to move the bill forward due to controversial items in the bill, namely the Governor's education reforms opposed by Education Minnesota. At this point it doesn't look like there will be a separate education policy bill.
Budget Balancing Part II
House and Senate leadership continue to meet with Governor Pawlenty to come up with a $3 billion budget solution. In reality they have agreed to $2.6 billion which is basically a codification of the Governor's unallotments that were ruled illegal by the supreme court last week. The remaining $400 million or so will hopefully be solved by new Medicaid funding, but it isn't clear when the feds will send that our way. Minnesota leaders have until midnight Sunday to pass any legislation under constitutional restrictions. Look for a budget deal to be announced sometime on Saturday.
5.11.10 Update -- House Passes Budget Bill
Last night the House passed HF 2037 in a 71 to 63 vote. This bill now moves onto the Governor for his consideration. His promised veto would put the legislature back to trying to figure out a solution to Minnesota's budget woes but now with only six days left.
www.revisor.mn.gov/bin/bldbill.php?bill=H2037.3.html&session=ls86
House Takes Up Education Bill Today
The House will take up Rep. Greiling's HF 3833, the Omnibus K-12 Education bill sometime today on the floor. With the contentious debate last night over the budget fix still fresh house representatives will surely hotly debate the future costs in HF 3833. This bill contains the "Minnesota Miracle" along with some of the education reforms that the Governor has been looking for.
www.revisor.mn.gov/bin/getbill.php?session=ls86&number=HF3833&session_number=0&session_year=2009&version=list
Governor Vetoes Statewide Health Insurance Bill
Governor Pawlenty vetoed the statewide health insurance bill early last evening. This is the third year that he has done so. The union and the Governor have been feuding in the past month or more with the latest being over alternate pathways to become a teacher. EdMn began airing ads against this concept and then a pro-alternate pathways group just began airing some supportive ads. In any event, this bill will probably be considered again next year with a new Governor having been seated.
5.10.10 Update -- The Big Fix Begins to Move
The Senate debated and narrowly passed HF 2037 late Monday afternoon on a 34-33 vote. The bill would balance the state's budget by enacting the Governor's unallotments from last June which the state's supreme court ruled illegal last week. The biggest portion of the $3 billion budget balancing act is a codification of the school payment shift and property tax recognition shift which total almost $1.8 billion. Another $750 million in previous unallotments are included as official budget cuts in the bill as well.
That leaves a $450 million budget gap that everyone is hoping the federal government will close for us by sending more Medicaid funding to Minnesota. In case the Medicaid funding doesn't come through the budget plan includes a 1.25% increase on the top tier of the income tax bracket (families making $200,000 or more each year). The income tax increase would blink off if the state's budget reaches a $500 million surplus which could happen if the Medicaid funds arrive. In total, 85% of the HF 2037 budget balancing measure is made up of the Governor's unallotments and the remaining 15% is a DFL upper income tax hike that has been proposed each session for several years running.
Governor Pawlenty is opposed to the tax increase in the bill and has promised to veto it as soon as the House passes the bill and delivers the message to his desk. The House will vote on the measure Monday night and it will probably pass 68-66. The DFL majorities let as many of their vulnerable members off the hook from voting for a tax increase. That's why we see the thin margins for passage. Once the bill is vetoed we will be back to square one with a $3 billion problem and just a few days to go until the session must adjourn. The large DFL majorities in the legislature could try to override the veto, but all of their members and three House GOP members would need to assist in that effort. The last time any member of the House GOP joined in an override of Pawlenty they were taken to the woodshed and two of them lost their re-elections through intra-party fights. Speculation of a special session is starting to float around the Capitol.
Education Issues
In the meantime there is no action on a separate education bill. The House has a bill ready to go, HF 3833, and will likely debate it Tuesday on the House floor. The Senate on the other hand is sitting on their education policy bill in the Rules committee chaired by Sen. Pogemiller. The teacher's union is fighting vigorously to kill the Race To The Top reform provisions in the ed policy bills and has things bottled up for the time being. The pension bill is in a conference committee and is likely to be negotiated and re-passed in the next few days. The pension bill includes a phase in of a 2% increase in employer and employee contributions over the next few years that will help stabilize the TRA fund.
Update 5.9.10 -- State Budget Problems
Saturday morning the Senate Finance committee took up the issue of fixing the budget hole by introducing a bill that they intend to become the vehicle bill to carry the various pieces of legislation that will be used. The Senate is using HF 2037 as the bill that will contain the fixes to the $2.962 billion dollar shortfall. This would include all of the pieces in play today, including the Supreme Court decisions impact. The Health and Human Services Bill, if passed, will provide $114 million in savings making this total $2.8 billion.
The HF 2037 bill includes the K-12 shift brought into play through the unallotment process. It would have the 73/27 shift for the FY10 and FY11 years with that changing to 90/10 in FY 12 and later. This bill would also have many cuts and about $433 million in new revenues amounting to about 20% of this budget fix.
While this bill has just been introduced, it will require quite a bit of work before it can fix the deep hole that we find ourselves in.
Update 5.7.10 -- House K12 Omnibus Education Bill
Mindy Greiling guided the K-12 Omnibus Education bill through the Ways and Means committee Friday morning. There was discussion about the alternate teacher preparation and in particular Teach For America as well. This clears the bill to move onto the house floor. There are a number of new items in this bill as we have reported in the past. Here is a link to HF 2431 - https://www.revisor.mn.gov/bin/bldbill.php?bill=H2431.2.html&session=ls86 - understand that this will probably change when it hits the house floor and the many amendments begin to be thrown at it. But this will give you the latest in print.
Statewide Health Insurance
The Education Minnesota supported Statewide Health Insurance bill passed out of the House last night. Since the bill previously passed out of the Senate, it is now on its way to the Governor's desk. Governor Pawlenty has vetoed similar bills for the last two years. Rhetoric between the Governor and the union have definitely heated up in the past couple of months and it will be interesting to see what the Governor might do but if history is our teacher we could expect him to veto it once again.
School District Referendums
Late Tuesday night, the House Tax committee passed out a bill that would allow existing referendums to be renewed by the school board without going to the voters. This ability to renew levies could be continued in perpetuity however language was added that would allow voters to override the school board's extension. It would require more than 30 percent of registered voters to sign a petition to end the excess levy. If they did, then the issue would go onto the next general election in November. Look for this to take some serious debate in the next few days but Rep. Mindy Greiling, Chair of the house K-12 Education Finance is trying to help districts find ways to stay afloat during these unsettling times. This has been incorporated into HF 2431 Article 1, Section 11, Subd. 9a - or if you follow the link in this edition you can find it beginning on line 8.26.
Update 5.6.10 -- Supreme Court Ruling - Game Changer
This week's Supreme Court ruling regarding Governor Pawlenty's unallotment changes the discussion at the Capitol. Prior to the ruling, the legislature was looking at filling a $1 billion dollar hole - now it might be closer to three or four times that amount. The tensions and process at the Capitol this week had been ratcheted up anyway because the close of the session was near, but this ruling puts incredible pressure on them to find some solutions - and quick!
The Supreme Court ruling was limited to a small portion of the unallotment, but the implications are that others affected by the unallotment could follow suit. (To read the opinion, check out this link - www.mncourts.gov/?page=230 - then click on supreme court opinions in the upper right. Scroll down through those opinions a litle way and you will find the entire opinion)
The Governor had asked, and we have supported, that the 73/27 payment shift be enacted into law thereby insuring that someday we would be paid back. But only the House has placed that into their education bill. There are many discussions racing around the capitol about how to fix the budget. Just know that it doesn't look good right now. As this is being written both houses are in session and battling over the financial hole that needs to be filled.
We have all known that Minnesota has a structural deficit in that it spends more than it takes in. This is going to be very difficult to fix.
New Reforms in House and Senate Bills
Race To The Top is driving a bunch of language into each of the education bills following along the requirements for RTTT grants. Some of these are quite controversial such as alternative pathways for teacher licensure. The Commissioner continues to talk about another grant application and yesterday said on MPR that the decision about whether or not to submit an application will be made by May 9th.
The House Education Policy committee held a discussion about School Improvement Grants and the impact to those districts identified as lowest performing. There was compelling testimony by several districts that the changes that must be made by school district not only aren't welcome but will be harmful to the progress that is being made.
Pension Bills
The various pension bills are still in motion and we expect might see some action in the next couple of days. These funds are at very low funding levels and these bills will provide some stability for the funds. The Senate passed the pension bill yesterday and it is now awaiting House action.
4.30.10 Update -- Two Weeks until Adjournment
With two weeks remaining, the 2010 Session has a long way to go to finalize their work. A projected $682 million deficit remains, and there is still no word on when the feds will send Minnesota another $408 million in Medicaid funds. It’s possible that session will end and a $408 million budget question will remain. Work on education policy is starting to move forward in the House, and the Senate is expected to unveil an education policy bill next Tuesday. Work on trimming upwards of $154 million from Health & Human Services programs is underway as well.
A fight between the DFL Legislature and GOP Governor Pawlenty over education reforms for Race To The Top has begun. The Governor’s proposal was voted down in the House K-12 Committee on Wednesday. The Senate hasn’t tipped their hand yet, but with strong union opposition to the reform measures, it’s unlikely they will include the Governor’s plan in their education bill. As for education funding, the House bill includes a $732,000 cut to MDE but no other programs. The Senate, however, is proposing about $18 million in cuts across several program areas. What is moving forward in the House and Senate so far is detailed below.
Highlights of the House K-12 bill include:
The Senate E-12 Committee began work on reducing expenditures in the following manner:
Additional detail of the House and Senate education bills is posted on the MREA website. The comprehensive review was prepared by representatives from several education organizations, including MREA.
http://www.mnrea.org/HouseSenateEducationPlans2010.pdf
4.27.10 Update -- House K-12 Omnibus Bill Released
This afternoon the House K-12 Finance Committee unveiled a draft omnibus education bill (HF2431). The draft includes some of the highlight issues from this session. Codification of the Governor’s aid payment deferral from last June into a statutory payment shift (90/10 to 73/27) is included. The draft also includes a repeal of the statute allowing the state to borrow district reserves to help with cash flow problems. It wouldn’t be a House K-12 bill without inclusion of the new funding formula labeled the New Minnesota Miracle. The new formula would be phased in over a four year period starting with the 2014 school year. Unfortunately, there is no revenue available in the K-12 bill or any tax proposals to date to pay for a phase in of any amount.
The House K-12 proposal also includes a number of provisions that MREA has worked on this session or are of interest to our members. Here is a brief list of some of the issues in the proposal:
The House bill will be amended on Wednesday in the K-12 committee. From there it will go through the Tax, Finance and Ways & Means committees before it gets to the House floor. There’s no word yet on when the Senate will release a competing version.
Change in Real Per Pupil Revenue
Jeff Van Wychen has produced information for every Minnesota school district on the change in real per pupil revenue, levies, and state aid from FY 2003 (the year of the state gen ed takeover) to FY 2011 based on MDE data. For the vast majority of districts, the increase in levies has not been sufficient to replace the decline in real per pupil state aid, so real per pupil revenue has fallen. This study came from the MN 2020 organization who has taken keen interest in public funding issues for schools in the past. To view your district's data, the link to the study is www.mn2020.org/schoolfunding.
4.22.10 Update -- Federal Legislation
The reauthorization of ESEA is being discussed with both the House and Senate holding hearings. For REAP qualifying districts, while it is only mentioned in the budget, the US Dept of Education still plans on setting aside a portion of REAP dollars for a competition. Work with your congressional delegation to make sure they know what the impact of a competitive component of REAP would do to your district.
FY11 Budget - is being marked up this week, but we don't have any details yet. We will pass this on when we get them.
Jobs Bill - Senator Harkin introduced Keeping Our Educators Working Act of 2010 (S3206). This bill has $23 billion that would flow to states via the same mechanism as under the State Fiscal Stabilization Fund. The only difference is that the use of funds is more limited for districts, in that the money can only be used to create jobs, save jobs or for training under the workforce training act. If passed, the money would flow through the states primary K-12 and higher education funding formulas. They are going to try to move this bill before Memorial Day. Senator Franken is a co-sponsor on this bill. The downside is that there doesn't seem to be anything to prevent states from supplanting their efforts with these federal dollars and/or cutting education disproportionately to other budget areas.
A "Down-Time" Legislatively
Things were pretty laid back early this week as both parties prepared for their political conventions - the DFL this week and the Republicans next week. On Tuesday, a joint session of the Senate and House education committees to address the Governor's proposals for reform was held. There was a packed house with all of the legislators and key influencers of education in the room. For all of the hype, not much was accomplished, except that there might have been a little momentum for the various groups to work together. Wednesday will find the key leaders together all day at a USDOE meeting on Race To The Top in Minneapolis. Commissioner Seagren announced that she and Education Minnesota President Tom Dooher would meet during the day on Thursday to try to work on resolving differences they have about the Governor's proposals. Specifically, the Governor wants to create an alternative pathway to licensure through the Teach for America program, reform tenure by requiring teachers to go through a tenure renewal process every five years, expand QComp statewide and tie 35% of a teacher’s salary increase to test scores. Whether or not these will provide any activity regarding an education bill will remain to be seen. Once legislators come back from their political conventions, expect things to spring to high speed mode as they work to finish up by their May 17 deadline.
TRA Pension Bill
There is some talk that Education Minnesota might be willing to support the stabilization of the fund and then consider dealing with the post-1989 hires at a later date. It is very important that we deal with this fund and make sure that it stays healthy.
Secure Rural Schools - a Survey
If you receive a survey from Mark Kelley at Campaign for Rural America, this is a legitimate survey. Please take a few moments to complete it.
4.15.10 Update -- Legislative Session Now Idling
With most of the work finished and waiting on news from the federal government about health care dollars, the 2010 legislative session has ground to a halt. Legislative leaders are considering a recess over the next two weeks due to the lack of work. The recess would give gubernatorial candidates time to do last minute campaigning before their endorsing conventions at the end of April.
In the meantime, news of an education bill is mixed. Finger pointing over the failed Race To The Top (RTTT) application has legislative leaders meeting in the Governor’s office about what to do next. Rep. Greiling and Sen. Stumpf will host a joint hearing next week to discuss the issues involved in improving Minnesota’s RTTT application. The Governor wants controversial reform measures included in any education omnibus bill that lands on his desk, but Education Minnesota is battling him on all fronts. At play are measures to allow a new alternative path to licensure through the Teach for America program, an expansion of QComp pay for performance to all districts and a move to a five year revolving tenure system. As Rep. Greiling said about the joint hearing, “We are going try to pull a rabbit out of a hat.”
Also in the mix are changes to TRA to increase teacher and district contributions to stabilize the fund. Education Minnesota doesn’t want any freezes to retiree benefits and would like to see changes for post 1989 employees currently ineligible for the rule of 90. Education Minnesota’s proposal to create a mandatory statewide health insurance system is floating around as potential trade bait for the reform measures.
On Friday, the Department of Education is hosting a meeting of education stakeholders to discuss the RTTT application. At this time, the amount of funding Minnesota could receive continues to change. Some estimate that up to $250 million could come to Minnesota over the next few years while figures of $175 million and $60 million have floated around as well.
Other issues at stake in a potential education omnibus bill are codification of the Governor’s $1.2 billion aid payment deferral. Legislation is pending before both the House and Senate education finance committees and received favorable hearings. However, some don’t want to codify the deferred payments into a statutory payment shift because it could make Governor Pawlenty look bad if school district budgets suffer as a result. Critics of enacting a shift argue that the Governor needs to provide a means of paying back the deferred aid before such action should be taken.
Legislation changing the statute allowing the state to borrow school district reserves is up in the air as well. On Monday, the Legislative Planning Commission reviewed information on the state’s cash flow situation for next year. Beginning early next September, the state will enter another period of negative cash flow through January. However, starting mid January, the state goes into negative cash flow again until the end of fiscal year 2011. Without a law change, schools could be lending the state hundreds of millions of dollars throughout most of next year.
We will know more over the next few weeks if the legislature is going to be able to put an education bill together that the Governor will sign. Given the level of controversy and political maneuvering, the odds of an education bill coming to fruition are beginning to decline.
4.12.10 Update - 2010 Legislative Session is Adrift
After starting the 2010 session at a rapid pace, the legislative session is slowing down. The Legislature is waiting for a decision from the state Supreme Court regarding Governor Pawlenty’s unallotments and for Congress to extend additional Medicaid funding for another year. Until these two issues are resolved, legislative leadership isn’t going to make another move toward balancing the state’s budget. The DFL and GOP statewide endorsing conventions begin in two weeks (DFL April 23-25, GOP April 30 – May 2) and with so many legislators running for Governor, there is pressure to be away from the Capitol, especially if they are waiting for others to make decisions.
The House HHS Finance committee cancelled all of their meetings from now until just following the DFL convention. We are hearing that the House will unveil a K-12 bill sometime during the first week in May. There is no word on when the Senate plans to unveil HHS or E-12 legislation.
Tomorrow morning, the Legislative Commission on Planning and Fiscal Policy will review the state’s cash flow situation. Most school officials are well aware of the impact of the state’s cash flow situation as school payments are being delayed. There is still a big concern about the cash flow situation beginning next September. Tomorrow’s hearing may shed more light on the situation.
Race To The Top and Education Reform
The battle between the Governor and the DFL Legislature over education reform issues is heating up again. The Governor is using the state’s failed RTTT application as proof that Minnesota needs to adopt his alternative licensure and tenure reform proposals. The DFL Legislature and Education Minnesota are digging in against both proposals. Governor Pawlenty has said that unless the Legislature makes these changes he won’t instruct MDE to submit a second round application for RTTT funds.
Mandate Relief
Mandate relief and all other education issues are on hold until the session picks up. In the meantime, we still need to make legislative contacts specifically requesting the elimination of the maintenance of effort requirement for school support staff.
Please make every attempt to contact your legislator in person, via phone or email. All of us working together can make a difference – but we all need to do a little. Thanks for your help!
3.31.10 Update - Budget Gap Narrows with Passage of HF 1671
The Legislature wrapped up another major piece of business on Monday before they broke for a week long recess. HF 1671, which cuts $312 million from state government, is now on Governor Pawlenty’s desk where his signature is expected. Monday’s work caps off what has been a rapid pace for a legislative session. The Legislature and Governor have finished work on the bonding bill, a fix for the GAMC program, a jobs investment bill and now a third of the budget deficit for the next fiscal year.
The Legislature returns to work on Tuesday, April 6. Their efforts at that point will focus on closing the remaining $682 million budget gap for next year. Congress is expected to extend the 60/40 split for Medicaid for another year, which means $408 million for Minnesota. The new federal health care reform legislation likely means another $60 million for Minnesota next year. Therefore, the remaining deficit the Legislature must grapple with is about $214 million, although we are hearing the figure is smaller.
The House will release budget cuts for Health & Human Services, next week, totaling $154 million. At this point, the House is not planning on any cuts to education outside of a $1 million cut to the Department of Education. The Senate has not tipped their hands yet on any proposed cuts to HHS or E-12. Senate Majority Leader Larry Pogemiller is pushing for long-term structural budget solutions that would include deep cuts to both of the two big budget areas, but there is little political willpower in a tough election year to make those choices. It looks like the education budget could be spared for another year and the tough decisions about taxes and spending will have to wait until the next Governor takes office.
Mandate Relief: MOE for Support Staff
Current law requires schools to do two things when it comes to support staff. The first is to set aside $3/pupil out of the safe schools levy and dedicate that amount toward support staff expenditures. The second part of the same statute requires districts to maintain from year to year either the same level of spending on support staff or at least the same number of FTEs for support staff. Education organizations are asking the Legislature to repeal the second half of the statute. The Maintenance of Effort requirement has led some to avoid hiring new support staff out of concerns that a district can never reduce staff at a later date. The MOE is an employee protection that isn’t found for any other class of employees. Some districts have received federal funding for support staff through grants, and as the federal funding disappears, the district’s general fund is on the hook to maintain those staff. Please contact your legislator over the recess and urge them to support efforts to repeal this unnecessary mandate.
3.29.10 Update - Budget Balancing Measures: GAMC, HF 1671 & FMAP
Earlier this week, the House passed a fix to the GAMC program. The new program focuses resources on hospitals that are coordinating care for the about half of the original population served by GAMC. The legislation will reduce the state’s short-term deficit by $146 million. On Monday, the House and Senate will convene floor sessions to pass the phase I budget balancing bill (HF 1671). HF 1671 will reduce the deficit for next year by $313 million. If the federal government extends the 60/40 split for Medicaid funding for one more year, which is likely, Minnesota will receive an additional $408 million. Taken together the GAMC bill, HF 1671 and the FMAP funds will reduce Minnesota’s short-term deficit from $994 million to $127 million.
This means the two largest remaining budget areas, Health & Human Services and E-12 Education, are looking at a much better scenario than eight weeks ago. Instead of hundreds of millions in cuts and payment delays to HHS and education, the two systems will likely be held to much smaller budget cutting targets. In fact, it is possible that K-12 could be spared any additional cuts or shifts at this point, but we need to continue pressure on legislators to hold education harmless. One new hang up is that the Governor is asking the Legislature to find $200 million to put in a cash flow account to help deal with the state’s cash flow problem next year. It’s unclear at this point if the Legislature is willing to help find an additional $200 million for cash flow purposes. An additional 3% payment delay would accomplish this. The other scenario is that the state will enter into short-term borrowing from schools next fall to help with cash flow. Education is likely to help with cash flow either way you look at it.
Legislative Recess: Spare Education from Cuts & Mandate Relief
After Monday’s work, the Legislature will head home for the Passover/Easter recess. They reconvene at noon on Tuesday, April 6. While the Legislature is in recess, we encourage all MREA members to visit with your House and Senate members about sparing the education budget from any cuts. We need to continue with the message that education is sharing in the budget pain through payment deferrals and short-term borrowing.
When it comes to mandate relief, most education organizations are of the mind that we should focus on one issue this session and hammer away on it. Of all the mandate relief proposals we have brought forward, there is one that seems possible. Repealing the maintenance of effort requirement for school support staff is doable this session if we all focus our efforts on this issue. Repealing this law would create flexibility for school districts as they put together budgets for next year. The current MOE law creates a special protectionism for a class of employees that doesn’t exist anywhere else in the education statutes. The law creates an adverse mindset by districts toward hiring additional support staff because they will be permanently on the hook for them. As student demographics change, districts need the ability to adjust staff accordingly. For smaller districts, the need to share support staff in the future will become more important. Current law inhibits the sharing of services between schools.
3.22.10 Update - Budget Balancing – Phase I
Monday morning the House will go into session. They will immediately break for caucuses, then reconvene to debate HF 1671. HF 1671 is the first phase of the Legislature’s attempts to reduce the $994 million deficit for the remainder of this biennium. The bill on the House floor would reduce all budget areas except the largest two, E-12 and HHS. The bill reduces agency budgets, higher education ($47 million), LGA ($105 million) and a dozen or more other program areas for a total reduction of $308 million.
Assuming the Senate passes and the Governor signs the bill, they will still have another $686 million to go. If Congress passes two key pieces of legislation (Jobs and Health Care Reform), the state will receive hundreds of millions in federal help; $408 million would come from Federal Medicaid (FMAP) funding in the Jobs bill by extending the 60/40 split on MA for another year. There are estimates that another $250 million could come to Minnesota if the federal health care reform bill passes. People that Minnesota is already covering would be covered by the federal program, so Minnesota would likely receive additional MA matching funds. If these two bills and their funding come to fruition, Minnesota’s budget shortfall will be solved.
This means that phases II and III wouldn’t be necessary. Phase II would include anywhere from $150 - $350 million in cuts to Health & Human Service programs. Phase III would include cuts to K-12 education and possibly further payment delays.
Ice Arena Air Quality (HF 3512/SF 3175)
Legislation is moving forward that would require operators of ice arenas to maintain air quality conditions over a one hour period of no more than 12.5 parts of carbon monoxide per one million parts of air by volume. The current standard is 30 ppm, and the Department of Health is moving forward with a rule to lower the standard to 25 ppm. The legislation is supported by a long time ice skating coach and others who argue they have suffered health problems due to carbon monoxide exposure from time spent in ice arenas. The legislation would require ice arenas to contain an operational electronic air monitoring device with an alarm that is set to activate when the CO level exceeds 12.5 ppm. The alarm must automatically activate exhaust fans in the facility when exceeding 12.5 ppm.
Discussion about the legislation has involved costs to local governments, the lack of availability of a sensor that can effectively monitor CO levels at or near 12.5 ppm and the availability of new, electric ice resurfacing machines.
We are interested in knowing if this legislation will impact any of our member school districts.
Mandate Relief – MOE for Support Staff
Mandate relief efforts have been reduced to a small handful of initiatives. The House K-12 Finance committee has legislation before it that would repeal the MOE requirement for school supports staff. The provision was eliminated from one bill in committee earlier in the week, but remains in the Governor’s recommendations that are before the same committee.
Those interested in seeing this provision eliminated should contact their legislators this week, as the House and Senate education finance committees begin putting an omnibus bill together.
High School Assessments (HF3421)
The House has been discussing this bill which came from a working group established last legislative session to develop recommendations for high school assessments as part of Minnesota’s K-12 educational accountability system. The proposal postpones aligning the standards and assessment for Math for one year. It does provide for some end of course testing, but these tests must become a large part of the student’s course grade. The bill calls for 25% of the grade, but that was contested and it might go lower than that. While there are many more important areas to this bill it still has much to be discussed, and not everyone agrees with what is being proposed. Watch for this bill to lower the percentage before it gets to the floor.
Alternative Certification
There has been some work in the past to allow alternate pathways to certification. There are some that believe this might have been one of the reasons why MN didn’t get selected for Race To The Top. This has moved out of the Senate Policy committee on a split vote. Much of the discussion seems centered on Teach For America and their work in the urban core, but it might also be of assistance to rural districts down the road if it would help us find highly qualified teachers who wanted to live and teach in our communities. We have some circumstances where it is hard to fill certain positions. No one wants to see certified teachers lose their jobs, and while we know teachers for the hard to fill positions are out there, not all of them want or can to move into rural districts to find work.
Permanent School Trust Lands
This week, experts from Utah testified before the legislature regarding how they have completely turned around the revenues generated from their school trust lands. In the past, they brought in about $100 million a year from these lands, but there were many who felt they weren’t managed well. They ended up creating a separate agency to manage these lands, and today they bring in $1 billion dollars for education! They were telling their story and answering questions from legislators. In MN, our school trust land is managed by the DNR, who uses them to pay some of their expenses. We receive 27 cents for every $1 generated. In Utah, they receive 71 cents for every $1 generated. While this discussion will take many turns before it ever comes to legislation, it is a good place to start.
3.15.10 Update - Senator Bakk Proposal
The chairman of the Senate Tax Committee, Sen. Tom Bakk, introduced legislation (SF 2980) that would reduce the state sales tax by .25 percent and expand the tax to clothing. The net result would be $257 million of new revenue in fiscal year 2011 to help with the $1 billion deficit this biennium. From fiscal year 2012 to 2021, the state would shift $120 million each year back to the K-12 payment schedule until it gets back to 90/10. Sen. Bakk argued this is the fiscally responsible thing to do for education and for future legislatures that could find themselves in budget troubles and in need of using a payment shift. By setting a repayment schedule in statute, the legislation takes care of one major problem this session. There are questions about what the repayment obligations are under a deferral made through unallotment versus a shift enacted in statute. The consensus is that a statutory shift makes it clearer that schools are able to borrow short-term for cash flow purposes.
Despite being a net tax increase, the Minnesota Chamber of Commerce has been neutral on the proposal. Most businesses would see a tax break ($79 million/year estimated) under the plan. Governor Pawlenty has yet to weigh in, and the House Tax Chair, Ann Lenczewski, represents Bloomington and the Mall of America who opposes expanding the sales tax to clothing.
Balancing the Budget
The House and Senate are moving smaller budget bills into a larger budget cutting bill that would cut $217 million. This bill is the first of at least three budget balancing bills aimed at closing the $1 billion shortfall. The second bill is said to include $330-$350 million in cuts to health and human service programs. The third bill will target K-12, and there is a lot of speculation about what kind of contribution K-12 will make toward the budget balancing plan. If the federal Medicaid funds arrive before the end of the session, K-12 could be spared cuts.
Senator Stumpf, chair of the Senate E-12 Funding Committee will likely receive a target, including a hard cut to the basic formula. Representative Greiling and others in the House are still fighting for a zero cut target despite opposition from other finance chairs in her caucus. Rep. Greiling will likely include the MN Miracle formula in the house education bill this year, even though there is no plan to provide funding for the formula. MREA is supportive of the new formula despite on-going concerns with the Location Equity Index. However, without new funding, it makes it difficult to get this proposal into law. The Senate has concerns about adding new spending obligations to the budget tails at a time when the forecast shows an on-going structural shortfall of $5.8 billion next biennium.
Both chairs have until about March 25th to release their budget plans for K-12. In the meantime, keep up the pressure on your legislators to set priorities and hold education harmless this year.
3.9.10 Update - Speaker Kelliher
This morning the education lobbyists met with Speaker Margaret Anderson Kelliher. She said that there is strong sentiment in her caucus to keep cuts in K-12 education to a minimum. There may be a few cuts to programs other than public schools, primarily so that the argument can be made that the pain is being shared.
Speaker Kelliher noted that the U.S. Senate is moving today to invoke cloture so that it can pass the bill containing the additional medical assistance funds that the Governor has included in his budget. Minnesota will receive $387 million if the bill passes. In addition, the health care reform bill would provide another $250 million for Minnesota, and President Obama has said he wants the bill passed by the end of next week. The Speaker said that if this happens, Minnesota's budget would be balanced after the first round of cuts are passed. There would be no need to pass further cuts, and the Legislature would adjourn early. This is an admittedly rosy scenario, but it sure is nice to think about.
Budget Cuts, Round One
The first round of budget cutting bills are moving this week in both the House and the Senate. These bills make cuts to every area of the budget except K-12 education, health & human services and aid to cities and counties. By the end of the week both the House and Senate Finance Committees will have combined the bills into one omnibus budget bill.
Letter to Secretary Duncan
In the past few weeks, Senators from around the country have begun to wrestle with rural issues and the President's budget proposal. Below is a link to a letter from a number of Senators to Secretary Duncan asking him to make sure that rural states and districts get equal opportunities under their new programs. We are pleased that both of Minnesota's senators signed this letter and asked us about the letter prior to doing so. It is hard to know how much impact such a letter has, but having quite a few senators as signatories has to get somebody's attention.
3.1.10 Update - This Week at the Capitol
On Tuesday, the state will receive an update on the budget situation. The March forecast is the first update since last November’s forecast showed the state had a $1.2 billion deficit for the remainder of the current biennium. Indications thus far point to little change from the November figure, but there are still concerns about a further decline in state revenue.
The legislature will review the forecast information this week and are still a ways off from providing a comprehensive budget solution to the Governor. There is speculation that the legislature will attempt to solve the deficit through several rounds of budget cutting legislation. If they go this route, the first budget cutting bill will include about $217 million in cuts to state agencies and the higher education systems. The second round would involve several hundred million in cuts to the health and human services systems. The third round would include cuts and possibly deeper payment shifts to the K-12 system. There is speculation that this bill wouldn’t have the votes to pass and would lead to a budget stalemate.
In the meantime, legislative committees continue to review individual bills. Check out this week’s schedule to see what the education committees are up to.
SCHOOL TRUST LANDS: A CALL TO ACTION
Most Minnesotans have never heard of School Trust Lands. We know our income taxes pay for the state’s education system, and people have a keen sensitivity to property tax statements and local school levies. But few of us know anything about the lands set aside in the state constitution that deliver tens of millions of dollars to our schools every year.
Because few people know about this important resource, we aren’t getting as much out of the lands as we should. Less public scrutiny over School Trust Lands means less oversight and less revenue for our students. That’s why, on behalf of our students, the Minnesota House of Representatives is encouraging the state’s education community to get informed.
What Are School Trust Lands?
More than 2.5 million acres of land and an additional 1 million acres of mineral rights were set aside when Minnesota became a state. Today School Trust Lands are managed by the Minnesota Department of Natural Resources. Revenues earned from those lands are invested by the State Board of Investment and are constitutionally dedicated to be used for schools. Tens of millions of dollars earned on those lands are spent in classrooms every year, in every corner of Minnesota.
How Do the Lands Earn Money?
The interest and dividends from the Permanent School Trust Fund generated $27 million in 2009. Revenue is generated from many activities, including sale of timber, wild rice leases, mining leases, state forest campground fees, lakeshore leases, easements across state trust land, utility licenses, the sale of a few parcels of land, and several other types of surface use. In addition, revenue is generated from rents and royalties on taconite iron ore removed from the land.
How Does This Benefit Students?
Revenues from Minnesota’s School Trust Lands are deposited into the Permanent School Trust Fund. Interest and earnings from the Permanent School Trust Fund are distributed directly to Minnesota school districts. Those funds provide resources for learning supplies, teacher salaries, building maintenance, school curricula, and everything that makes Minnesota’s schools among the top- performing, most rigorous schools in the country.
What Can You Do To Help?
Efforts are already underway to improve management of our School Trust Lands. Legislation passed in 2008 improved oversight of the Permanent School Trust Fund and resulted in an additional $33 in new ongoing funding for every student in Minnesota.
Working together, for the sake of our students, we can and must do more. I strongly encourage you to keep asking questions, and learn more about our School Trust Lands. But more importantly, I urge you to engage your friends, neighbors, teachers, and local school boards in conversation about what we can do together to more effectively manage this important asset for years to come.
Please contact matt.swenson@house.mn with any questions.
Matt Swenson
Communication Specialist/Writer
MN House of Representatives
Federal Legislative Update
Rural-ness in the USA
Did you know that –
These facts often find their way into the federal legislative discussions. Both sides of an issue revolving around funding and ruralness use these facts to argue their points.
Title I formulas
Many of our formulas use the census count to help derive how much money we received. Since the census uses projections or extrapolations to project how many people live in a county instead of actually counting people, rural areas get hit with an under-count using this method. If you get a chance to share your ideas with federal legislators, tell them we want free and reduced lunch counts used to determine Title I formulas since they more accurately reflect the need in rural communities.
Federal Money – you have to compete for it
There is a growing trend toward federal money being available through grants. This debate is happening regarding the REAP bill and certainly we have seen it with other areas as well. This shift toward competitive grants might not be the best for small / rural districts since we typically do not have the staff or expertise to write extensive grants to access this money. Weigh in on your thoughts with your congressional representative or senator on how this will impact your district.
REAP Bill
If you are one of the many Minnesota districts that receive funding under the REAP bill, this is coming up for reauthorization. We need to continually reinforce the importance of this approach for our smaller districts. Although the date when this will come up for consideration isn’t known yet, we hope that it will be soon.
E-Rate – under fire
E-Rate has always been a bit controversial. The Telecom groups typically don’t like it. They collect about 25 cents a month on each bill. The money collected gets forwarded to Washington and becomes the E-Rate money that schools and libraries access. Today this money is capped at about $2.25 billion with about $4.2 billion in requests from 43,000 applications. This is 3000 more applications seeking $200 million more than was requested last year. There has been some talk of making other entities eligible to access this money. (Community Colleges and Head Start) If that were to happen, there would be even less money to go around. Right now we think things will turn out OK.
There is some Investing In Innovation (I3) grants coming up as part of Race to the Top – but these will be competitive and must align with non-profits and have local matching funds as well. This will be pretty hard for many rural districts because they simply don’t have the potential to have matching funds available or some type of business partnership to assist them. The regulations are not out yet, but it looks like they will be 350 – 400 pages long.
2.22.10 Update - Budget Debate Underway with GAMC Veto
Last week ended with Governor Pawlenty vetoing legislation to partially restore the General Assistance Medical Care program. Pawlenty ended the program by line-item vetoing its $375 million appropriation last June. Pawlenty proposed moving GAMC recipients into the MN Care program last fall. Last week he included this in his budget balancing plan. The change is paid for by eliminating 21,000 current enrollees from the MN Care program.
The Senate would take up any override attempt first, but Majority Leader Pogemiller ruled out quick action on such a move. He said he would give the Governor time to come up with an alternative, but if that doesn't happen, there will be an override vote. The original version of the legislature’s GAMC fix was paid for with Medicare and Medicaid surcharges. The Governor threatened a veto because of the surcharges, so the Senate amended the bill and paid for it with general fund dollars. The House adopted the Senate’s plan and skipped the usual conference committee process for major legislation. House Minority Leader Kurt Zellers commented about the process and suggested a compromise could have been worked out in conference committee. However, 38 of his 47 members voted for the bill. Now the pressure is on to secure at least three of those votes if an override attempt is made. The House GOP will likely support the Governor's veto and the GAMC battle will end up back in the budget balancing mix.
There is a lot of support for saving the GAMC program. 125 votes out of 134 on the House floor makes that clear. However, the vetoed version would have cost the general fund money. The previous version included surcharges paid for by health plans that allow for drawing down more federal health care funds. The HMO’s reportedly are not happy with these options as it would cause cash flow and other financing problems for them.
MS 127.46 and the Shift
About cash flow; the House and Senate education finance committees reviewed proposals to repeal MS 127A.46. The statute will be used for the first time ever this spring to delay cash payments to schools for a short period of time. The current short term borrowing plan seems reasonable, but there is growing concern about the next fiscal year. The state is looking at negative cash flow for almost the entirety of fiscal 2011 (July 1, 2010 – June 30, 2011). Former State Finance Commissioner Jay Kiedrowski testified in support of repealing the statute arguing that the state created the problem and should be the one to take out a loan. He argued that it makes little sense to mess up the books for 340 school districts plus the higher education systems.
In response to the argument that the bond houses would downgrade Minnesota’s credit rating if the state borrowed money, Kiedrowski noted that Moody’s Investors Services’ recently moved to lower the outlook for Minnesota’s debt rating, although they did retain their second highest (Aa1) rating for Minnesota. Minnesota hasn’t been forced into short-term borrowing since 1985, and the loan was immediately paid off then. MS 127A.46 was enacted in 1986.
The education finance committees also reviewed legislation to enact the $1.2 billion of aid payment deferrals Governor Pawlenty instituted through unallotment last June. Rep. Garofalo, a vocal opponent of using shifts, is authoring the legislation to put the deferral plan into statute. He’s doing so out of concern that politics will get in the way, and the next Governor, facing a huge deficit, could simply not repay the deferral and blame Pawlenty for cutting schools well over $1.2 billion. Risking a cut of that size is a high stakes political gamble; one Rep. Garofalo believes the legislature shouldn’t engage in. During both the House and Senate hearings on the shift, legislators commented that it will be very difficult to spare the K-12 budget this time around.
Education, Health & Human Services, LGA and Balancing the Budget
Education advocates often hear frustration from their counterparts representing other spending areas of the state budget. The comments usually revolve around “education getting all of the money” and “education needs to be a part of the solution too.” Both of these comments need to be challenged. For starters, K-12 education has been on a steady decline as a share of the general fund since Governor Ventura’s “big plan”, or school funding takeover, went into law a decade ago. In 2001, K-12 education cost 44% of the state’s general fund, while Health & Human Services programs cost 27%. The forecast for this biennium is that K-12 will cost 37% of the general fund and HHS 33%. If nothing changes, HHS will likely take up a larger share of the general fund than K-12 education in a few years. This is a far stretch from the claim that K-12 receives “all the money” or even a majority of state dollars.
Furthermore, K-12 education is already self-financing a major portion of its entitlements because of the state’s fiscal crisis. $1.2 billion in aid payments are being deferred into perpetuity. The property tax recognition shift saves the state $600 million this year. Another $423 million in aid payments will be delayed this spring with a May 30 payback scheduled. If MS 127A.46 isn’t repealed, schools could see massive payment cancellations in fiscal 2011 and no revenue plan to pay back the loan.
Cities and counties are in a similar situation to schools. Local Government Aid payments have been unalloted in the past, however, cities and counties can levy back a certain portion of unallotments. This budget tool isn’t available to schools, and the idea of giving schools this authority is very unpopular among legislators. If the state isn’t going to give schools a revenue safety valve, they need to be very cautious about actual cuts to education programs. Even in these tough budget times, the public is demanding more of the schools. According to State Economist Tom Stinson, education is the best economic development tool available to states. When you talk to your legislators, remind them of these things and urge them to avoid making cuts in the K-12 budget.
New Legislation of Interest
HF 2944 Greiling; a new version of the MN Miracle
HF 2966 Norton; allowing school to begin before Labor Day, but no school on the Thursday and Friday before Labor Day weekend
HF 3000 Howes / SF 2785 Saxhaug; prohibiting pre-labor day start for Flexible Learning Year programs
HF 3041 Seifert / SF 2575 Frederickson; allow Health & Safety levy to cover costs associated with H1N1 prevention
HF 2994 Nelson / SF 2638 Scheid; allow Health & Safety levy to cover costs associated with H1N1 prevention
HF 3063 Newton; allowing a school board by majority vote to extend an operating referendum
SF 2670 Torres Ray; amending third party billing
SF 2683 Michel; repealing the January 15th penalty
SF 2716 Saltzman; creating a charter school facility commission
HF 3074 Slocum / SF 2757 Bonoff; creating a limited teaching license for new teachers coming from innovative licensure programs
2.15.10 Update -- Governor Pawlenty Releases Budget Balancing Proposal
Governor Pawlenty released his proposal for closing a projected $1.2 billion budget gap for the remainder of the current biennium. At this time, we are seven and a half months into the 24 month budget period in question. His proposal mirrors his state of the state speech. Public safety, veterans and K-12 education were spared cuts. The budget balancing plan relies on cuts to cities, counties, higher education and health and human services programs. The Governor is also relying on the federal government to continue paying 60% of the Medicaid program instead of the usual 50/50 split. The feds began the 60/40 split under the stimulus legislation enacted last year, and the U.S. House of Representatives has included an extension of this for another year.
Specifically, the $1.2 billion gap is closed by cutting the following:
Total: $825 million in cuts
The remaining balance is made up by the assumption that the feds will kick in another $387 million by continuing the 60/40 split for Medicaid. If that doesn’t come through then further cuts will be on the table, including the K-12 budget (or a deeper shift for school aid payments).
The Governor’s proposal includes enacting his 73/27 education payment deferral into statute. There is also a very small provision in the proposal that would fund $15,000 to the Department of Education for "Teacher Contract Reporting". The proposal would require districts to share with MDE teacher collective bargaining information, including settlement date, salary and fringe benefit costs, and duty days for teachers. The $15,000 is for MDE to integrate this information into financial statements.
The Governor’s proposal extends into the next biennium and would reduce $2.994 billion from a projected $5.426 deficit. If enacted, the Governor’s plan would leave a projected structural problem in fiscal years 2012-13 of $2.432 billion.
This week at the Capitol
Legislative finance committees will spend much of this week reviewing the details of the Governor’s budget balancing proposal. The education finance committees in the House and Senate are scheduled to review new legislation that would enact the 73/27 payment deferral into statute. Both House and Senate education finance committees will review legislation repealing MS 127A.46, which allows the state to engage in short term borrowing from school districts based on their fund balances. The statute is being utilized this spring for the first time since its creation in 1986. The state’s cash flow problem is so bad in the next fiscal year that many are concerned that without a repeal or change to the statute that schools could face massive cancellations of aid payments beginning on September 15.
TRA Not Fully Funded
TRA exists from the contributions of employees and employers who hire them. While the state, on a very rare occasion, has put a little money in the fund, it was developed over time by steady contributions and wise investments. A number of years ago (1997-98) the fund had a very high funding ratio, so the amount of contributions by both the employees and employers was decreased. Contributions went from a funding rate of 8% by employers and over 6% by employees to a common rate for both -- a little over 5%. The extreme downturn in the market added to the large numbers of TRA eligible retirees dealt a real blow to the TRA fund. In fact, at the end of FY2009, TRA’s funding ratio, which should be around 90 to 100%, was 77%. To reverse this trend, employee and employer contributions would both have to increase a little over 5%!
Minnesota Pension plans, which include TRA, use a 5-year smoothing process so that only 1/5 of the losses experienced last year were recognized. The rest of that loss will be recognized over the next 4 years. If the full loss had been recognized this year, both the employee contribution and employer contribution rates would need to rise 11% to stop the bleeding.
TRA funds assume an 8.5% return on investment. But investments alone, even if they do that well, will not turn this downward trend around. In one case estimate, an increase of 20% per year for 5 years would be needed to make up for the losses in the fund.
If the fund is going to be “fixed”, it will need to bring in additional revenue and reduce benefit obligations. Raising employee and employer contributions isn’t going to be very popular during this economic time, and the state isn’t in much of a position to kick extra money since they don’t have any and are borrowing from education. Reducing the liabilities also must be considered. TRA is proposing to freeze the benefits for a couple of years of those who are already retired; phase in increases in contributions; and reduce the interest rate paid for refunds. All of these may have to be implemented in order to fix the fund.
2.8.10 Update -- 2010 Legislative Session is Underway
The Legislature reconvened last Thursday in what is supposed to be a short session focused on passing a major capitol improvements bill – the bonding bill. The Legislature put forward a $1 billion proposal that is substantially higher than Governor Pawlenty’s $685 million proposal. The Legislature will work next week to get their proposals into a conference committee where negotiations between legislative leadership and the Governor can begin. Besides the bonding bill, the Legislature has an immense amount of work dealing with the budget.
The first week of session also saw an introduction of legislative proposals to restore portions of the General Assistance Medical Care program (GAMC). The proposals would extend GAMC for 16 months and cover about half of those originally eligible for the program. Covered services are reduced in the proposal, and those providing services to GAMC patients would see 50% reductions in reimbursements over the same time period. Hennepin County Medical Center (HCMC) and Regions Hospital in St. Paul serve 40% of the GAMC population and would bear the brunt of absorbing these changes to the program.
The Governor will deliver his state of the state address next Thursday where he will outline his budget balancing proposal and policy goals for this session. As of today, the state is facing a $1.2 billion deficit for the current biennium. The Legislature will critique the Governor’s proposal until they receive an updated forecast in about a month (possibly March 3). The Governor’s budget proposal will likely include massive cuts to health and human services programs. K-12 could be on the Governor’s chopping block. The Governor will propose enacting the property tax recognition shift and aid payment delay into statute, negating a potential problem if the courts overturn his unallotment actions from last June.
Education Funding & Policy Debate
The administration’s decision to use short term borrowing from schools based on district reserve amounts will be examined by the Legislature. On the first day back, legislation was introduced to repeal MS 127A.46, the statute that allows the state to do this. Taking this solution off the table might sound nice, but it would narrow the options available to the state to deal with a deficit. Under “no new tax” governance this means either cuts, levy increases or both. A third solution could allow the administration to examine all local government and HHS reserves in the name of shared sacrifice. Of course those interest groups would argue that education should be part of the shared sacrifice when it comes to cutting $1.2 billion for fiscal 2011.
Mandate relief will once again be part of the legislative mix. Education groups sought relief from several mandates last session, but very few passed into law. The federal stimulus funds softened what could have been a deep budget cutting session last year and took away the sense of emergency and need for mandate relief. However, the continued structural deficit and likelihood of cuts (or deeper aid delays) mean the atmosphere at the capitol has shifted somewhat toward providing mandate relief. It will be an uphill battle once again, but we need to continue to push legislators on mandate relief.
Update 1.22.10 -- Funding and Budget Information
Much has been said about the pending delayed aid payment we are about to see. The Governor said it is going to happen and that they really don't have a choice about implementing MS 127A.46. In a meeting yesterday, he also said that they hope to have the information out in a few business days just how much money they are actually planning to delay. We sent you the potential maximum amount of delayed payment as per statute but the Governor said that he is expecting that it will be lower than the maximum. How much lower we will have to wait to find out. It probably will come out in a district by district spreadsheet. We will get that out to you as soon as it is available to us.
He also talked about the unallotment, or 73/27 payment shift as we all seem to be calling it today. He would like to see that enacted by the legislature as a shift which would guarantee that it would be paid back to us. With today's unallotment, it might not be paid back and essentially become a cut. There are those in the legislature who would like to see education cut, so it would be in our best interest to support having the 73/27 become statute to ensure that we will be paid back one day. We told the Governor that we supported that as well.
The Governor said he wanted to shield education from outright cuts since we are carrying part of the budget solution with the 73/27 and the delayed aid payments. It probably is too early to know if that will happen.
We had an earnest discussion about the problems these actions have on districts. Hopefully, we will get information from the Governor's office in the next week or so that you can use in your budget determinations.
Update 1.18.10 -- Wonderful Information on Fund Balances
With all of the discussion about delayed aid payments, fund balances, and potential cuts from the state, it can be hard to sort it all out. Today, MASBO (MN Assn of School Business Officials) put out a statement about fund balances that is an excellent document to use with your staff, public and legislators to explain why we have fund balances and the impact of not having them.
We thank Connie Nordquist of MASBO for sharing this with us!
MASBO Statement on School District Fund Balances
Update 1.15.10 -- From the Financial Frying Pan into the Fire
On Wednesday, Finance Commissioner Tom Hanson presented his cash flow analysis for the state to a legislative commission subcommittee on the budget. The bottom line is that the state will run out of cash in late March or early April of this year and not be above zero until late May or June. In their presentation they showed several methods for dealing with this cash flow crisis. One of those which is receiving a majority of the scrutiny is MS 127A.46 which says that if the state runs out of cash, it can delay payments to districts if they have a certain level of fund balance. This law has been on the books for the past 20 years; put in place after the cash crisis in the early 1980’s. This statute can be enacted by the administration at any time between September 1st and May 30th of any given fiscal year.
Included in this update are links to the statute and the most recent spreadsheet that was sent out late yesterday afternoon. You should be able to go through the spreadsheet and see the maximum amount of delayed payment by month your district could be seeing. In speaking with Lori Grivna from the Governor’s office, she was emphatic that this is the maximum under the statute and that we wouldn’t be seeing that high of delayed payments. While this might be the case – certainly questions about the projected revenue to pay back these payments will come up. It is possible that we might not see the money paid back to us until June 20th – which by itself could cause problems because of the year end payouts many districts need to provide to their staff.
The problem is exacerbated in that this is above and beyond the 73/27 split, and next year the cash flow projection for the state is to be out of cash for much of the year! Now before we all go to the balcony to considering jumping, it is hard to look out that far and be accurate with cash projections. However, they are probably in the ball park, and given that the legislature might not want to change this statute during this session, we might see delayed payments again next year.
Next week there will be a meeting with the Governor to talk about this. Many of our concerns will be aired. Believe me; we are raising many questions and problems with the implementation of this statute. You might want to contact your local representatives to share what the impact to your district could be. We will update you after next week’s meeting. Hang in there – we have gone through this as a state before and we will get through this again!
Legislative Session to Begin
The next legislative session is scheduled to begin on February 4th – only a month away. Already some committees are beginning to hold hearings; expect more to begin in upcoming weeks. The topic of the state budget will be the focus and will take specific shape after the February budget forecast at the end of February. With the statutory close to the session in mid-May, look for some legislators to be interested in finishing up early since their state conventions will be held near the end of April and this is an election year.