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5/6/08 Update:
ECFE licensure flexibility legislation becomes law
Good news! The Governor signed SF2796 (Sen. Saxhaug/Rep. Bly) into law on Monday clearing the way for the Board of Teaching to begin granting permissions for teachers without ECFE licenses to continue working in ECFE programs. Last year, the legislature passed a law requiring early childhood licensure for teachers working in early childhood programs. The legislature has always allowed the Board of Teaching to issue permissions for certain situations where fully licensed candidates can’t be found. However, the legislation passed last year was written so strictly that the BOT didn’t have the authority to grant permissions for early childhood licenses. This session, MREA and others worked on legislation to give the BOT the flexibility they need to grant permissions in early childhood education. Thanks to Sen. Tom Saxhaug and Rep. David Bly for their efforts in moving this legislation through the process.
Education policy conference committee finishes work
At 11:30 pm Monday night, the education policy conference committee (SF3001) finished work on their bill. Rep. Carlos Mariani and Sen. Chuck Wiger chaired the conference committee and brought closure to the bill, leaving some people very happy and others very disappointed. The advocates pushing a state mandate that school offer a comprehensive sex education course in grades 7-12 lost out at the end of the day. Rep. Mariani recognized that inclusion of this provision meant the policy bill was destined for a veto by the Governor. However, the conference committee decided to include a provision requiring the Department of Education to develop a growth model or value-added measurement that is to be added to school district report cards. The “report card/growth model” is also likely to draw a veto from the Governor, but the legislators involved wanted to take a stand on this issue on behalf of schools.
The Report Card/Growth Model legislation is the result of months of work between legislators and school district assessment coordinators who argue that it will give the public a more thorough picture of school district achievement gains. Opponents of the bill, including MDE and business groups, argue that the new measurement will detract from focusing specifically on whether or not districts are getting students to meet standards. Proponents argue that districts will still be held accountable for standards, but that showing growth in student performance is just as important. The legislation is also a result of growing frustration with NCLB and the lack of flexibility from the feds to allow states to develop meaningful accountability systems.
Listed below are the major provisions that were included in the final education policy bill:
A provision to allow charter school students to participate in district extra curricular activities was not included in the final bill. If there are questions about the final education policy bill, please forward them to sam@capitolhillassoc.com
Budget balancing negotiations still underway
Legislative leaders and the Governor met all weekend and continue to do so in hopes of reaching a budget balancing agreement for the state’s $935 million deficit. At stake in these negotiations is a proposal to send $51/pupil to schools in 2009 in one-time funding and an on-going revenue stream of $36/pupil from the Permanent School Trust Fund. The legislative session must end by Monday, May 19.
It appears that the legislature is going to send a budget balancing bill to the Governor next week with or without his blessing. Assuming he vetoes the bill, the legislature can attempt an override. If they can’t override, the legislature will have to go back to the drawing board and start a new budget balancing bill.
Education Policy Conference Committee
Two weeks ago, the Senate passed an education policy bill (SF3001), and Monday night the House finally passed their version (HF3316). The education policy legislation is now set for a conference committee that will begin work this evening. The major components in play in this conference committee are:
Many people around the capitol, including several legislators, agree that the education policy bill has major problems and could face a veto. The report card proposal and the requirement for sex education courses are the most controversial and could lead the Governor to veto the bill if these provisions are still in the bill when it lands on his desk.
DFLers argue that the HCAF is a specific tax levied on health insurance premiums that funds health care access for low income Minnesotans. They also want to use the HCAF to finance the health care reform package that is tied up in a separate conference committee. The Governor wants to use the HCAF as a means to avoid using the cash flow account and because he doesn’t want to see the DFL health care reform package come to fruition. So far, the two sides have traded budget balancing offers that neither side is really willing to look at. The Governor offered to use only half of the HCAF reserve and to make another $125 million in unspecified cuts.
This back and forth will go on for a while, and history has demonstrated that budget negotiations inevitably go on until the last minute. The 2008 session must end on May 19th so there is just over three weeks to go to wrap up a deal. At stake in these negotiations are an increase of $51/pupil to schools in 2009 and an on-going source of revenue from the Permanent School Trust Fund(PTSF). The PSTF would finance $36/pupil each year starting in 2010 and has potential to grow. Of course, the education proposal from the legislature also freezes QComp for two years and recaptures $22 million in funds for that program. This is another deal breaker for the Governor.
Education policy legislation adrift
The Senate passed an education policy bill last week, but the House has yet to take action on the bill. Some of the key issues in play in the education policy arena are:
The education policy legislation will most likely make it to a conference committee, but from there it is uncertain. The Governor is not fond of the new report card concept, and the business community is opposed to it as well. The sex education proposal is also very controversial with the religious right, a base the Governor wants to keep happy as he eyes a potential Vice Presidency run with Sen. McCain.
As always, contact your legislators and let them know what you think about the issues in play right now. Please contact them, and let them know the budget proposal for $51/pupil in 2009 and $36/pupil in on-going Permanent School Trust Fund revenue is needed.
4/16/08 Update:
Budget Balancing Conference Committee Breaks into Work Groups
The budget balancing conference committee met on Monday and announced that work groups would be formed to hammer out differences between the House and Senate budget balancing provision. An E-12 work group was formed and met Tuesday morning. To the surprise of most in the room, the work group, led by Sen. Stumpf and Rep. Greiling, had already worked out an agreement. The work group process is informal, but the plan they put together will be recommended for inclusion in the budget balancing conference committee.
Here are the highlights of the E-12 work group plan:
Aside from the $3/pupil safe schools reserve, this is a good proposal for education in an off-budget session, when the state is facing a $935 million deficit. Keep in mind that this is a work group recommendation to the full budget balancing conference committee. The work group recommendation still has a long way to go, and hanging onto the new funds for education still faces an uphill fight. Please contact your legislators and ask them to support the E-12 work group plan, specifically the $51/pupil in one-time funds in 2009 and the future, on-going revenue generated from the permanent school trust fund lands.
Dozens of legislators, including Speaker of the House Margaret Kelliher, held a press conference at noon today to announce the new legislation. Rep. Mindy Greiling, the House chair of the funding reform task force and of the K-12 committee, handled most of the questions from the press. Difficult questions were asked, namely about how to pay for the proposal and whether or not tax increases are needed to get the job done. As skilled politicians often do, the legislators danced around this issue. Rep. Greiling did say that the proposal is “scaleable”, meaning it can be phased in over several years. Rep. Greiling also said, “This is a large proposal with something in it for everyone to love and for everyone to hate.”
Here are the major elements of the proposal. All K-12 students are counted as 1.0 with a new base allowance of $7,500. Operating Sparsity and Transportation Sparsity remain linked to the formula and therefore are increased with the larger base formula allowance. Declining enrollment funding is based on a three year enrollment average. Limited English Proficiency funding goes to all districts with LEP students. The LEP funding is 20% of the formula allowance and there is no concentration factor for this program. Compensatory revenue is computed at the district level (not school site) and funded at a minimum of $2,500/pupil. The compensatory concentration factor is greatly reduced resulting in a lot more compensatory aid for districts with smaller numbers of compensatory students. A location equity index is established that would drive about $160 million of the new $1.7 billion to metro area districts. An operating referendum roll-in of $500/pupil is included in the proposal. The special education formula is fully funded as well. Debt Service Equalization is also increased substantially and is indexed so it doesn’t depreciate over time. All districts qualify for deferred maintenance and alternative facilities authority.
The legislators present at the press conference said this is a work in progress, but that it’s important to get this proposal out in the public now. Legislators want to take the proposal on the road this summer and fall and discuss it locally. Their goal is to come back next January, when the legislature and Governor start the budget process, and have a bi-partisan consensus on how to move forward with education funding. The biggest hurdle, the one they don’t want to talk about yet, is getting the political willpower to stabilize the state’s revenue structure and to increase revenue in order to support a new, adequately funded education formula. As they make the rounds this summer and fall, we need to engage them in that discussion as well.
The next step for this legislation is an informational hearing on Thursday morning at 9am. The House K-12 committee is holding the hearing, and Senators are invited to join in.
The House debated their bill until 2:45am (Friday morning) and dealt with 62 amendments to the budget bill. Only a handful of those amendments were adopted, including one of particular interest to education. Rep. Bud Heidgerken was able to get an amendment into the bill that would delay implementation of the one-half credit physical education graduation requirement until the 2010-11 school year. Delaying implementation of this requirement would give districts currently not offering physical education in high school another year to plan and prepare for the requirement.
The Senate debated their bill until 8pm Thursday and then laid it over until Monday, when they will finalize action on their bill. The Senate processed 27 amendments, and there was one in particular interest to education. Sen. LeRoy Stumpf was able to add an amendment that would slightly increase the equalization factors for the Referendum, Equity and Transition levies in 2010 and 2011. The equalization factors for these levies is currently $476,000/pupil. Sen. Stumpf’s amendment would increase the equalization factor to $487,950/pupil in 2010 and $489,115/pupil in 2011. This is a small but positive step forward for state equalization that has been lagging in recent years.
The Senate bill also contains a provision that was added in the Tax committee by Sen. Rod Skoe. The provision would allow sparsity districts to levy $80/pupil for transportation needs for the 2009 school year only. Sen. Skoe’s original amendment would have allowed the levy to be on-going, but there was resistance in the Tax committee to creating a new on-going school levy. Sen. Skoe was willing to change his proposal to a one year option, and that is what remains in the Senate budget bill today.
Next steps and possible new revenue for schools:
The House and Senate will probably establish a budget balancing conference committee by Wednesday or Thursday of next week. It will be difficult for leadership to appoint the conference committee because each body can only select five members to serve, and the budget bill encompasses all areas of the state budget. Education would be best served is Sen. Stumpf and Rep. Greiling are appointed to the conference committee. If they are appointed, they will be in a strong position to fight for their proposals to increase school revenue. Sen. Stumpf will be able to defend their proposal to recapture the on-going Permanent School Trust Fund revenue for schools at $36/pupil. Rep. Greiling will be able to fight for their proposal to put $51/pupil of one-time revenue into school budgets next year.
Hanging onto these proposals will be difficult because the legislature’s budget balancing proposals recommend elimination of QComp funds in 2009 (and beyond in the Senate bill). The Governor is adamant that these funds remain, and this will cause trouble for the overall budget balancing effort. There are many other areas of contention between the legislature and Governor that will make it difficult to maintain new revenue for education.
These updates are going to sound like a broken record, but it is essential that you contact your legislators and urge them to support the efforts to add new revenue to education. Budget negotiations will take place through April, and it will be tough for Sen. Stumpf and Rep. Greiling to hang onto new revenue for education while all other budget areas are getting cut. The legislature and Governor need to hear from you about the importance of securing new revenue for education this session.
4/2/08 Update:
New education funding still within reach
The House and Senate have finalized their budget balancing bills, and the last stop before conference committee is floor action in the House and Senate. The House and Senate will take up these bills today and tomorrow along with tax bills that help pay for some of the budget balancing efforts. The House bill still contains $51/pupil in one-time aid for schools. The Senate bill still contains the proposal to recapture Permanent School Trust Fund land revenue that would add $36/pupil in school funding next year and beyond. The budget balancing bills will probably be in a conference committee next week. The House budget bill is HF1812 and the Senate budget balancing bill is SF3813.
MREA members and others need to keep the pressure on legislators to find new revenue for education this session. The off-budget sessions have not been good for education funding. The House and Senate proposals are a positive step forward, and we need to keep the pressure on to make sure something positive happens for education this year.
Other education issues in play
The proposal to fix border state tuition reciprocity is still on the move and is included in both the House and Senate budget balancing bills.
The proposal to neutralize the ballot language for operating referendum renewals is still moving in both budget bills. However, the Senate amended the language in the Tax committee so the differences between the House and Senate will have to be worked out in conference committee.
The proposal to allow districts to make a one-time transfer from their operating capital funds to their general fund is still in the House budget bill. The Senate doesn’t have a similar proposal in their bill. The proposal will have to be worked out in conference committee.
The proposal to require school districts to offer one-half credit of physical education is still in the House budget bill. The same proposal is being carried in the Senate education policy bill, SF3001.
The proposal to require school districts to reserve $3/pupil from their safe schools levy for counselors is still in the House budget bill. The proposal is not in either the Senate budget or education policy bills. This is a problematic proposal for all districts. The set aside would generate very few dollars in small districts, dollars that are already being used for another purpose, and force districts to spend it on counselors. The proposal might reallocate $600-$2000 in smaller districts, which isn’t much in terms of purchasing counselor services. If districts want to purchase counselor services they can do so already, and this is an unnecessary mandate.
The House budget bill also contains a provision that would require Minnesota to end its participation in No Child Left Behind. There is no comparable provision in the Senate budget or education policy bills.
Last, but not least, is the bill allowing the Board of Teaching to have flexibility in approving ECFE licenses. This legislation would give the Board of Teaching the same flexibility it has for all other licensure areas. The legislation is needed to fix a problem that was created in last year’s education bill. The legislation has cleared the Senate and awaits action in the House. Once the House passes the bill, it will be on the Governor’s desk. Please urge your House members to support passage of SF2796/HF2617.
3/28/08 Update
Education Finance Proposals:
The Senate E-12 Budget Division unveiled a school finance proposal yesterday. After the committee's work on the bill, it will be sent to the full Finance committee and then on to the Tax committee next week. Chairman Stumpf’s bill includes a major proposal that captures revenue generated from the Permanent School Trust Fund lands. Current law requires the state to reduce school districts’ general education aid by the amount they would otherwise receive from PSTF revenue. The new proposal eliminates this offset and would immediately capture $28.9 million that would go out to districts; an average of $36/ADM. Since the proposal eliminates the offset this would be on-going revenue with potential to grow. The Senate’s education finance proposal also cancels $21.2 million in unspent Q Comp funds back to the general fund.
The House K-12 proposal by comparison provides more general education aid in the next school year, $51/ADM, but it is one-time funding. The House proposal also cancels about $20 million in unspent Q Comp funds and uses those dollars and some general fund dollars to pay for the one-time increase.
Both education finance committees deserve credit for coming up with new revenue in an off-budget year with budget forecasts showing a $935 million deficit. The House and Senate are in the process of putting their budget balancing bills together. Education is the only major budget area to receive new funding under these plans. All other budget areas have been scheduled for cuts. The proposed funding increases are nice to see, but sustained grassroots support is needed to carry it through to the end. The legislature and Governor are a long way away from reaching a budget balancing deal.
Education also hasn’t done well in previous off-budget sessions. In 2002, there was a projected deficit and no additional funding. The 2004 session was the infamous “do nothing session”, which some speculate could happen again this year if time runs out (May 19th) without a budget deal. The 2006 session saw a Senate proposal that would have added $35 million in emergency fuel aid, but only $3.5 million survived conference committee. Let’s not let the 2008 end in this fashion. Contact your legislators and let them know they need to find additional funding for schools this session.
Education Funding Issues in Play:
Physical Education Standards
Proposals requiring a half credit of physical education for graduation appeared dead last week, however, it has emerged again in the last 24 hours in both the House and Senate. The proposal was added to the House K-12 finance bill Wednesday. When the K-12 bill is reviewed again, there will be an attempt to remove this from the bill.
The Senate education policy bill didn’t have this proposal in it on Wednesday, when the E-12 budget division finished work on it. However, yesterday a new version of the Senate’s policy bill was unveiled and the half credit requirement was included in the new version. There will be attempts made in committee to remove the provision.
This is an unfunded mandate, and if you have concerns about the proposal you should contact your legislator ASAP.
Who represents you? http://www.leg.state.mn.us/leg/districtfinder.asp
House contact information -- http://www.house.leg.state.mn.us/
Senate contact information -- http://www.senate.leg.state.mn.us/
Operating Referendum Renewal Ballot Language
The House K-12 bill contains a proposal to clarify ballot language for referendum renewals that are the same amount per pupil in the previous year. Current law requires the ballot language to say that voters may be voting for a tax increase. The new proposal would simple say to voters that they are renewing a referendum for the same amount per pupil currently in place. This change would neutralize the required ballot language.
The same proposal was on the move in the Senate until the new policy bill was unveiled. The new proposal removed this language which was in the bill as of Wednesday night.
If this proposal would be helpful to your district, please let your Senator know.
Senate contact information -- http://www.senate.leg.state.mn.us/
3/24/08 Update:
House K-12 Finance Proposal on the Move
This week begins the final rush of committee activity in the legislature. The third bill deadline is Friday, March 28, when omnibus education and other finance bills must clear their original committees. The House K-12 finance bill is on the move and is described below. The Senate E-12 budget division is expected to unveil a proposal on Thursday.
Rep. Greiling (DFL-Roseville), chair of the House K-12 Finance committee, released an education finance proposal for the 2009 school year. The proposal calls for freezing $24 million in unspent Q-comp dollars and directing them to a one-time general education revenue increase in 2009. Current Q-comp participants would not be impacted by the freeze. $19 million in additional state funding would be added to this amount to generate a one-time general education increase of $51/pupil for the next school year. If adopted, the funding would help mitigate the next round of budget cuts many schools are facing.
The House bill includes a provision that would allow districts to make a one-time transfer of operating capital reserves to their unreserved general fund. The transfer would have to occur before June 30, 2008, and can’t exceed $51/pupil. The transfer could only occur after the school board adopts a written resolution stating the amount of the transfer and declaring that district operating capital needs are being met.
The bill contains a proposal to clarify the ballot language required for an operating referendum renewal when the renewal is for the same amount per pupil. Instead of saying “By voting yes for this ballot question, you may be voting for a tax increase,” it would say “You are renewing an existing property tax referendum. You are not changing your operating referendum from its level in the previous year.” The bill also contains the border state tuition reciprocity proposal that has been worked out between Minnesota and South Dakota. The language would allow agreements to be worked out with other neighboring states too.
Balancing the Budget
The 2008 session started out at a break neck pace with early passage and veto override of a transportation bill. A tax bill conforming Minnesota’s tax code to recent federal changes was quickly adopted. The bonding bill was sent to a conference committee almost two weeks ago. Then the budget forecast came out showing a $935 million deficit by the end of the current biennium and lagging state revenues into the next two year budget cycle as well. Economic signs continue to drop, meaning state general fund revenues will likely continue a downward spiral. State economist Tom Stinson and many former state Finance commissioners have said our tax code is outdated and revenues are highly vulnerable to economic downturns.
The legislature has until May 19th to finish their work, and, initially, it appeared that a late April adjournment was within reach. However, balancing the budget is going to prove more difficult than many had hoped. The Governor’s proposal relies heavily on use of one-time general fund and health care access reserves and leaves much of the budget problem in place in the next biennium. His proposal does hold education “harmless” in the meantime, but the outlook for inflationary increases in 2009, 2010 and 2011 are unlikely under his plan.
The House is expected to release a budget balancing proposal this week that does not include tax increases. The Senate will likely put together a budget balancing bill this week too. The House and Senate proposals will be ushered into a conference committee the following week, but it is likely that negotiations with the Governor will drag on for several weeks. At the end of the day, it’s possible that a budget balancing bill won’t be enacted. If that’s the case, the Governor will be put in a position to use executive authority to “unallot” or reduce the general fund budget reserve and general fund appropriations necessary to bring the budget into balance. Under this scenario it’s possible that funding for education programs could be targeted for reductions.
3/17/08 Update:
Committee deadlines have arrived and the House and Senate education policy committees have forwarded omnibus policy bills to their respective education finance committees. The omnibus policy bill numbers are SF 3001 (Sen. Wiger) and HF 3316 (Rep. Mariani). The education finance committees could add more provisions to these proposals as well. We still don’t know if education policy and finance proposals will travel separately or together. In the end, the finance provisions will probably end up in one large budget balancing bill that has been the recent tendency for off-budget sessions. The policy provisions would be negotiated in a separate conference committee if that’s the case.
Education finance committees may receive budget targets this week. For most budget areas that will mean cuts. There are many requests for education finance, but with a $935 million deficit to balance, and no new revenue to help, those initiatives are unlikely to move forward after this week.
Below is a summary of some of the policy provisions MREA has been monitoring or working on this session that are still moving in the House and Senate. Most provisions are included in the omnibus policy bills, but some are still moving as stand alone bills.
Operating Referendum Ballot Language:
The Senate policy bill contains language clarifying operating referendum renewal ballot language. The new language would say, “By voting yes on this ballot question, you are renewing an existing property tax referendum. You are not changing your operating referendum from its level in the previous year.” This is a change from current law which states, “By voting yes on this ballot question you may be voting for a property tax increase.”
The House K-12 finance committee reviewed this proposal as well.
Online Learning:
Legislation to clarify on-line learning provider responsibilities to enrolling school districts is included in the Senate’s policy bill. The new language would require that:
An online learning provider must make available to the enrolling district the course syllabus, standard alignment, content outline, assessment requirements, and contact information for supplemental online courses taken by students in the enrolling district. The enrolling district must confirm that the courses will meet the student’s graduation plan before the student is enrolled in the online program.
This proposal hasn’t been reviewed by the House.
School Technology Standards:
Over the last year a task force composed of school officials and Department of Education personnel have worked on a proposal that would initiate a process of establishing educational technology standards. The proposed legislation, included in the Senate policy bill and likely to be included in the House education proposal, would require MDE to maintain a list of technology infrastructure data from school districts. The MDE, in partnership with a formalized Minnesota Education Technology Task Force, would be charged with developing technology standards geared toward several objectives including student achievement, assessments, instructional improvement, administrative services and facilities infrastructure. District technology expenditures would then be required to align with state technology standards.
School District Plans to Improve Students’ Academic Achievement:
The Senate policy bill includes language requiring school districts experiencing disparities in academic achievement to develop a plan to significantly improve students’ academic achievement. The House policy bill includes this language, but districts are “encouraged” to develop such plans instead of being mandated to develop them. The proposal also creates an advisory group charged with reviewing the plans and submitting recommendations to the legislature. This proposal is being forwarded by legislators from the urban core as a means of tackling the achievement gap. Other legislators and school officials are concerned about adding another report to the many reports districts are already required to develop.
Border State Tuition Reciprocity:
The House and Senate have reviewed legislation that would authorize the commissioner of education to enter into tuition reciprocity agreements with neighboring commissioners. The proposed legislation is the result of negotiations that have taken place with South Dakota, but such agreements could be negotiated with other states if this legislation passes. The legislation basically treats students crossing the border as open enrolled students between two Minnesota districts. The commissioners are charged with developing tuition rates between their respective states. This will remove the burden of contentious tuition negotiations from local districts.
Science Assessments:
The Senate policy bill includes language requiring the commissioner to develop an “Earth and space, life, and physical sciences assessment in the grades 9-12” starting in the 2011-12 school year and beyond. The proposal goes on to say that “Each assessment given in the high school grade span will be administered at the end of the course for which science standards instruction is completed in each content area of biology, earth and space, and physical sciences.”
The House K-12 finance committee reviewed this legislation last week.
Health and Physical Education Standards:
Legislation requiring MDE to develop health and physical education standards has been reviewed by House and Senate committees. During the Senate E-12 budget division hearing, questions about costs and unfunded mandates arose. During the House K-12 Finance hearing last Friday, the bill was tabled, which means it is effectively dead in the House.
Growth-based, Value-added Assessment Program:
The House and Senate policy bills contain varying language requiring the commissioner of education to restructure the reporting of student achievement to the public. The proposals are lengthy and vary in degree, but they basically require MDE with stakeholder input to develop a growth model for measuring student achievement on standardized tests. The proposal is a contentious one with MDE.
Capital Account Transfers:
The House K-12 finance committee adopted an amendment by Rep. Bud Heidgerken to a bill authorizing fund transfers for a school district that would give all districts flexibility over their operating capital accounts. The language states:
A school district may transfer money from its reserve for operating capital account to its undesignated balance in the general fund. This transfer may occur only after the school board has adopted a written resolution stating the amount of the transfer and declaring that the school district’s operating capital needs are being met.
The language has not been reviewed by the Senate.
ECFE Licensure Flexibility:
The legislation reinstating the Board of Teaching’s ability to provide flexibility for ECFE licensure traveled as a separate bill this session. It has already passed the Senate and awaits action by the House.
Repeal of the recent Board of Teaching Rule Change on Science Licensure:
Legislation to repeal the new BOT science licensure rule was introduced in the House (HF 3814), but not in the Senate. The House proposal was never heard, and the first bill deadline has now passed making the bill ineligible to travel on its own. It appears that this initiative is dead for the current session.
3/10/08 Update:
Governor Pawlenty Releases Budget Balancing Measures
On Friday, March 7, the Governor released his proposals for solving the state’s projected $935 million deficit. The Governor did not recommend any cuts or payment shifts to any early childhood or K-12 program. In fact, he includes $5 million to pay for the K-12 initiatives he announced in his state of the state address. Instead, the Governor relies mostly on the use of one-time funds in the state’s budget reserve and in the Health Care Access Fund (HCAF). In a surprising move, he also recommends reducing the sales tax 1/8 of a percent, “to partially offset the impact of the recent tax increases passed by the DFL controlled legislature and provide some additional economic stimulus on the state.” This is a slap at the legislature for overriding his veto of the transportation bill, but most people have already acknowledged that this one is dead on arrival. Lastly, the Governor is now recommending state conformity with federal law on treatment of Foreign Operating Corporations. This change would raise $102 million for the remainder of the current budget cycle.
Here are the major components of the Governor’s budget plan to erase a $935 million deficit:
While the Governor’s proposal would balance the budget for the current biennium, it leaves a projected shortfall in the next one. If the Governor’s budget were to pass, it would leave a $693 million deficit in the next biennium. This figure doesn’t include an estimate for inflationary costs to programs like public education. If such estimates were included, the Governor’s proposed budget leaves the state even further behind, closer to $1.7 billion. The use of one-time funds is problematic because they don’t help in the future. Furthermore, the Governor’s proposal to raid the HCAF to the tune of 80% of available funds hardly has a chance of gaining approval in the legislature. Every organized health care group, from doctors to consumers groups to the insurance industry and key committee chairs, will protect this money to the end.
The only other option would be to draw down more of the state’s budget reserve, but legislative leaders don’t like to do that either because it could weaken the state’s bond rating. The bond rating is important because of the traditional bonding bill that passes every two years. It’s even more important now with passage of the transportation bill and the use of bonds in that bill. When you consider these political realities on top of a no new state tax mantra from the Governor, there is only one other major source of revenue to use – shifting K-12 aid payments.
Current law states that if school aid payments are shifted they are paid back when the state gets back into budget surpluses. Actually, the aid payment shift gets paid back after the budget reserve is replenished to the level of $653 million. Given the projected deficit next biennium, it could be four years until the first possibility of getting paid back occurs. The Governor noted in his budget presentation that some economists think we’re in the middle of a recession and some think we’re just at the front end of one. Either way, it’s unlikely that state revenues will grow the budget back into surpluses for several years.
This means schools would be on the hook for loaning the state hundreds of millions of dollars at the same time the state will have to freeze the general and special education formulas once again. This means wasteful short-term borrowing for schools and continued reliance on operating referendums to keep pace with costs and new mandates moving through the legislature this year. This means another four years of under-funding schools and another four years of reduced opportunities for students and another four years of dividing communities over school property taxes.
If you don’t like this scenario, which MREA leadership certainly doesn’t, you need to get on the phone with your legislators immediately. They will begin reviewing the Governor’s proposal this week and then head home for the Easter break on March 20th. DFL leadership has already said that taxes are off the table when it comes time to balancing the budget. They need to know that payment shifts to schools are off the table too.
3/3/08 Update:
State Economic Forecast:
The February forecast update was released Thursday, and it projects a state budget deficit of $935 million. The long term outlook is also a concern. The forecast projects a deficit of $1.1 billion in the next biennium (the two year period from July 1, 2009 - June 30, 2011). If inflation were included, that deficit would rise to $2.1 billion. The Governor will be releasing his budget proposal next week, and it is expected to contain significant budget cuts. Legislative leaders have also indicated that they intend to solve the deficit with budget cuts rather than tax increases. Both the Governor and Legislature are pledging to spare the classroom from cuts. That doesn't mean that the rest of the education budget will be safe. Governor Pawlenty will unveil a proposal for solving the deficit soon. His proposal will most likely include massive cuts to health and human services programs. Use of the state’s budget reserves ($653 million) and school aid payments shifts are likely to be on the table as well.
Despite the difficult budget news, MREA and other education organizations continue to push the legislature to find additional resources to help with the next school year. Last Wednesday, MREA and others testified in the Senate E-12 Budget Division about shortages in school district budgets. MREA surveyed its members and found that about 4% of full time positions are being considered for elimination next year. If the Governor and legislature are going to use a payment shift to solve the deficit, they need to find a way to help districts pay for the short term borrowing they will have to engage in.
Licensure:
The legislation giving the Board of Teaching flexibility for ECFE licenses may appear this week for House and Senate floor votes. If you haven’t done so, be sure to contact your legislators early this week and remind them to support these bills:
HF 2617; Rep. David Bly
SF 2796; Sen. Tom Saxhaug
Legislation that would repeal or change the recent Board of Teaching rule change on science licensure has not been introduced to date. The Board of Teaching rule change is a positive step forward giving schools appropriate and necessary flexibility to meet highly qualified status for science education.
Wind Energy Tax Withhold:
The House K-12 Finance committee heard legislation by Rep. Robin Brown (DFL – Austin) that would repeal the wind energy tax revenue offset that was put into law last session. The offset requires the state to eliminate general education aid to a district in the amount of wind energy tax revenue they receive locally. The Department of Education argued that the offset is needed to protect the overall integrity of school financing in Minnesota. However, the amounts generated (and offset) by the wind energy tax are relatively small, but important enough for Grand Meadow and others to come forward last week. They argued that promises were made to local farmers that investments in windmills would benefit their local schools. Without the local benefit to their schools farmers have become more reluctant to take land out of production for windmills.
Labor Day Start Repeal:
Efforts to repeal the Labor Day start date are moving in the House. Rep. Kathy Brynaert (DFL – Mankato) is the author of HF 3262. The legislation was amended in committee to allow schools to start on August 31, 2009, and August 30, 2010, and then go back to a post Labor Day start. The bill recognizes the late school starts for 2009 and 2010 if nothing changes.
School Technology:
The House Education Policy committee heard Rep. Ryan Winkler’s (DFL – Golden Valley) bill (HF 3470) requiring the Department of Education to begin the process of developing technology standards for school districts. The legislation is meant to bring more uniformity to school technology across the state and to improve school district technology capacity in the classroom and as it relates to assessments. This is important legislation that could drive the school technology debate for several budget cycles in the future.
Sen. Terri Bonoff (DFL – Minnetonka) has the companion legislation in the Senate (SF 3194).
General Education Formula and Special Education:
SF 3125, introduced by Sen. Tom Saxhaug (DFL - Grand Rapids), would raise the general education formula by 2% in the second year of the biennium (in addition to the 1% increase already scheduled). The bill would also require the state to fully fund 68% of special education expenditures every year by forecasting it in the state budget. The Senate E-12 Education Budget Division will hear the bill on Wednesday, February 27 at 8:30am in Room 112, Capitol.
The House will consider similar funding legislation this session as well. Rep. Will Morgan (Burnsville) has introduced the companion legislation, HF 2978.
Property Taxes:
Last Friday, the House Property Tax committee heard legislation on putting Seasonal & Recreational property back into the operating referendum and pulling them out of the statewide levy. Pulling out of the statewide levy would save S&R taxpayers between $32-36 million, but local tax shift runs haven’t been completed. This proposal also shifts the same amount onto C&I property. I have also spoken directly to Sen. Tom Bakk, Senate Tax Chair, who said this proposal will be in the Senate Tax bill again. It was included in last session’s Senate Tax bill.
Last Thursday, the Senate Property Tax committee heard from rural property tax assessors. They commented that rural homestead property values are falling between 5-10% while S&R property values are stable in most areas and still growing in others. Agricultural land values are stable as commodity prices remain high.
School Technology:
There are three hearings coming up on the subject of school technology:
On Tuesday, February 26 at 8:30am in Room 112 Capitol, the Senate E-12 Budget Division will hear SF 2392, Senator Chuck Wiger's bill to dedicate school trust land revenue to school technology and library media programs. On the same agenda is another bill that would ensure that school trust land revenue goes to education, but does not dedicate the revenue to technology.
On Tuesday, February 26 at 8:00am in the Basement Hearing Room of the State Office Building (SOB), the House E-12 Education Committee will hear a bill that will be introduced Monday by Rep. Ryan Winkler to implement the recommendations of the K-12 School Technology Task Force.
On Tuesday, February 26 at 2:15pm in Room 10 SOB, the House K-12 Education Finance Division will hear HF 2973, a bill introduced by Rep. Denise Dittrich (DFL - Champlin) to dedicate school trust land revenue to school technology and library media programs. The Division will also hear HF 3206, introduced by Rep. Tom Rukavina (DFL - Virginia) to dedicate school trust land revenue to school technology.
School Facilities:
To date there hasn’t been discussion of last session’s legislation on Debt Service Equalization for schools. Rep. Tim Faust was asked by K-12 chair Rep. Mindy Greiling to take on facility issues. He visited a few communities and talked with local school officials about their needs and possible funding solutions. He hasn’t introduced legislation yet, but announced in a K-12 hearing that he thinks a project priority list should be developed with the help of MDE. He also mentioned having MDE come up with a handful of architecture plans to give districts a menu of options that will help reduce overall costs.
Rep. Faust didn’t mention this, but the Cooperative Facilities Grant program could provide the framework he’s looking for to finance a list of projects prioritized by MDE and local districts. He has acknowledged that funding this proposal isn’t going to happen this year. In the meantime, a handful of Cooperative Facilities Grant requests have been put forward this session for inclusion in the bonding bill. Bonding proposals are still working their way to the full Capital Investment committees in the House and Senate. Here is a list of requests that have been forwarded in the House so far:
Rep. Brita Sailer has legislation (HF 3178) to fund renewable energy grants for schools. The bill was heard in the House K-12 committee last week with the Cooperative Facilities requests.
2/18/08 Update:
The first week of the 2008 session is over and, as promised, work on transportation and bonding legislation is moving quickly. Education proposals are starting to be heard in House and Senate committees too. The first bill deadline is a month away (March 14). MREA advocates made the rounds at the Capitol the first week, and here’s what they have picked up so far:
ECFE Licensure:
Rep. David Bly (Northfield) is carrying HF 2617, clarifying that the Board of Teaching has authority to grant ECFE waivers and variances. The bill was heard in the House Education Policy committee on Thursday the 14th and was sent to the floor. Sen. Tom Saxhaug (Grand Rapids) is carrying the companion, SF 2796, and it will be heard in Senate Education on Wednesday the 20th.
Science Licensure:
Legislation scaling back the Board of Teaching science license rule change is forthcoming. MREA members need to contact their legislators and urge them to oppose this legislation. The Board Of Teaching rule change allows a licensed science teacher with at least three-years of experience to pass a PRAXIS-II content exam in another field and achieve that license as well.
Commissioner Seagren supports giving the change a chance to work and then examine how it is working.
State Budget:
The state is currently facing a $373 million projected deficit by June 30, 2009. The February forecast will be out at the end of the month, and there seems to be agreement that it will grow to $600-800 million. There is growing speculation that a school aid payment shift will be used to balance the budget. A 10% shift (90% current year to 80%) would ‘save’ the state about $600 million. The budget reserve has $653 million in it, but there is resistance to use it because it could affect the state’s bonding rating. Legislators are also reluctant to use up the reserve this year knowing that the forecast for the next biennium is showing a $211 million deficit, assuming flat state funding for current programs. If CPI estimates are added, the projected 2010-11 deficit grows to over $1 billion.
Payment shifts are costly for schools, as many will be forced to engage in short term borrowing to absorb the shift. Many districts use interest income on local reserves to help fund programs, and these revenue streams could be lost with a shift as well. The only positive aspects of a shift are that they allow the state to avoid making real budget cuts and current law requires an immediate buy-back of a shift once the budget sees surpluses again.
Adequate school funding for the 2008-09 school year:
SF 2815, Sen. Tom Saxhaug, and HF 2978, Rep. Will Morgan
MREA is working with these legislators and several education organizations to increase the basic formula allowance by 2% over current law (3% total for 2009) and to move toward forecasted special education funding. The cost of this proposal is about $180 million, including $100 million for the 2% formula increase and $80 million to pay 68% of the special education costs in 2009. The budget bill passed last session falls short of student and district needs for the next school year. Most districts will see just over a 1% increase in state aid next year and are planning further budget cuts. The situation is worse for those districts that failed to renew or pass operating levies this fall.
The state’s budget deficit is an enormous hurdle for achieving this legislation. The Governor continues to pledge his veto of any tax increase which would be needed to pay for this legislation. There is distant speculation that some GOP members of the House would be willing to support changes to the Foreign Operating Corporation (FOC’s) tax code to improve compliance. These changes could generate $100 million in 2009, enough to pay for a 2% formula increase.
The 85 member House DFL majority needs at least 5 GOP members to support them in any veto override attempt to send a tax bill to the Senate. The Senate DFL has a 45 member veto proof majority. The veto override test will probably first be conducted on the transportation bill sometime in March.
School District Tax Bases:
Operating Referendum (Referendum Market Value)
The Senate DFL will once again forward legislation removing seasonal and recreational property (S&R) from the statewide property tax levy (created in 2001) and putting it back into the operating referendum. The proposal would help lower the recent spikes in homeowner property taxes in lake property rich districts with referendums in place. It was reported that this change is supported by the organization representing seasonal and recreational property owners (MSRPO). The proposal would relieve them of $30 million in statewide levy obligations and require them to absorb a share of local operating referendum obligations.
The Chamber of Commerce opposes this because the cost of the $30 million pullout from the statewide levy would be shifted on the commercial and industrial properties (C&I). This week the Senate Property Tax Committee will review property tax trends since the 2001 overhaul, and it will show largely reduced effective tax rates for C&I and S&R properties while homeowner rates have increased dramatically. The property tax relief created by the state takeover of the general education levy in 2001, which has never been paid for, has been levied back through operating referendums. The average referendum in 2009 will be $901/pupil.
Debt Service Equalization (ANTC)
Efforts to alter the Debt Service Equalization (DSE) tax base to reduce agricultural obligations to a house, garage and one-acre are unlikely because funding for equalization is lacking with the deficit. Without improved DSE, the proposed tax base change would negatively impact homeowners who are already asking for property tax relief.
Permanent School Trust Lands:
Sen. Chuck Wiger (Education Policy Chair) and the Minnesota School Boards Association are pushing legislation this year that would eliminate the permanent school fund subtraction. Estimates vary on how much funding would go back into school budgets if the formula subtraction were eliminated, but $20 million is currently being floated ($20/pupil on the basic formula). There are also proposals to dedicate this new funding to technology needs. The Department of Natural Resources is opposed to these efforts because it would reduce their operating budget. However, school budgets are being reduced across the state and valuable programs for kids are in jeopardy.
School Facilities:
A handful of proposals for Cooperative Facilities Grants are in play this session for possible inclusion in the bonding bill. The Governor and Legislature have already agreed to the size of the bonding bill at $965 million. However, if the February forecast shows a growing deficit, that figure will shrink as needed to stay within the 3% margin for state debt service obligations.
These are just some of the education and budget related issues we’ll be facing this session. Weekly updates are forthcoming. If any of these issues concern you, don’t just let us know, let your legislators know also. If you need help finding your legislator or navigating the legislative process or are planning a visit to the Capitol, please feel free to contact the MREA office or MREA’s Directors.