Monday, December 07, 2009

Hanging Out in Room 15. If I ever write my autobiography, the title will probably be something like "Hanging Out in Room 15 . . . or Room 112 . . . or Room 200 SOB." I think you get the picture.

It's going to be a full day at the Capitol today, with the Senate Tax Committee meeting this morning to discuss the latest budget forecast and take a look at the Governor's proposed constitutional amendment that aims to limit (quite aggressively) state spending. They're currently discussing the budget forecast and nothing really new has been introduced into the conversation at this point. State economist Tom Stinson is describing (I imagine he can recite his testimony in his sleep for all the times he's had to repeat it) once again the condition of the state economy. It hasn't changed since last week and it's still not all that good.

It's always interesting to get inside the debate on issues like economic performance and the give-and-take of a legislative hearing provides some insight as to the dynamics--both political and in a policy sense--of the budget issue. Senator Julianne Ortman (R-Chanhassen) just asked a very pertinent question regarding Dr. Stinson's assertion that the economy is recovering. Dr. Stinson stated that inventories are low and that firms will have to increase hiring to re-build those inventories. Senator Ortman's point is that if unemployment remains high and individuals don't have the income to purchase products, why is there any reason for optimism as inventories will probably remain in a realistic position as they pertain to the realistic level of demand. Senator Ortman described her concern as a "chicken-and-egg" problem and it certainly is.

The commitee is now trying to determine the level of the Governor's unallotment powers as they pertain to transfers within the general fund. The Health Care Access Fund is losing revenue and if the Governor were to stop any transfers within the general fund to the Health Care Access Fund, care providers would be in a difficult position and would have to refuse care or recoup costs through another means.

We've moved on to the subject of the remainder of this fiscal year and the 2012-2013 biennium and the "real" level of the shortfall as it pertains to those budget periods. The point just made is that Legislature will have to take action to keep the budget shortfall projected for the next biennium at $5.4 billion. As I reported last week, the budget forecast assumes the unallotment of the General Assistance Medical Care (approximately $$920 million), but takes the K-12 funding shift back to 90%/10% from 73%/27%. In other words, the forecast is built on some assumptions that require legislative approval that may or may not happen.

The committee is now moving to discussion of the Governor's proposed constitutional amendment to limit state spending to the amount of revenue collected in the previous biennium. Senator Amy Koch (R-Buffalo) is the Senate sponsor of this amendment and is providing the background for the proposal. Senator Koch just mentioned that 30 states (18 through their constitutions and 12 through statutory guidelines) have limits on their revenue-raising and spending authority.

Senator Koch believes that this proposal provides more flexibility than previously-discussed approaches in this area, particularly the Taxpayers Bill of Rights (TABOR) that was enacted in Colorado.

At first blush, I'm not quite seeing the utility of this proposal. It would limit spending in the short-term and would also require that the Legislature enact tax increases prior to programs being implemented, which arguably would provide greater transparency. A few years back, there was an effort to require the Legislature to pass the tax bill before passing any of the funding bills and I am reminded of that effort in listening to the discussion of this proposal, although there is no question this proposal goes further by limiting the growth of the base level budget for on-going programs.

But, as Senator Bakk has just pointed out, limiting flexibility in the state budget may push funding needs to the local level and as we know, especially given the property tax disadvantages SEE members experience on a daily basis, the property tax is not applied equitably in terms of either burden or revenue generation. Further, there is always concern regarding amending the constitution and how constitutional changes may influence the ability of all branches of government to react to changing realities.

This proposal, or someting like it, is going to be discussed during the 2010 session. There's no doubt that the current economic slump and the resulting budget shortfall are going to spur a discussion of the future of Minnesota and the nature of government spending and how it fits into that future. So, as every good Boy Scout supposedly knows (I was a farm kid and hence a 4-H member and cannot speak with any measure of certainty on the matter): Be prepared.

The afternoon portion of my day at the Capitol was spent in the Senate Charter School Working Group meeting chaired by Senator Kathy Saltzman (DFL-Woodbury). The subject of the day was charter school lease aid and building decisions being made by charter schools.

The hearing provided a comprehensive look of not only how charter schools are making their building decisions and funding them, but also provided a thorough discussion of the funding tools used by other public entities--including the maximum effort loan program and the school debt service program--in the construction of buidings.

Belle Plaine Superintendent and SEE member Kelly Smith, along with Blooming Prairie Superintendent Barry Olson, provided background on the process used the public school districts on building issues, particularly the election process and the difficulty faced by many districts in gaining approval for bond issue elections. Gary Olson and Kristin Larson from Ehlers and Associates also provided insight on the process, giving a thorough description of how bonds are sold and how districts can get the best rates for these bonds. Mark Beltz, former Farmington school district Business Manager (and longtime friend of SEE) who currently provides consulting services to school districts and charter schools, outlined a proposal that would allow charter schools to own their buildings (currently prohibited by state law) and save the state lease aid payments in the process.

Charter school facilities has been a hot-button issue recently. A StarTribune article from about a week ago outlined how some charter schools have set up "building corporations" to construct and manage buildings and that this process, effectively skirting the prohibition on charter schools from owning buildings, has resulted in these corporations charging unwarranted fees.

Senator Saltzman has been working extremely hard on issues related to charter schools over the past two years and this is one area where reform is likely in the session ahead.

Below is a link to an article in Sunday's StarTribune written by Gene Piccolo, Executive Director of the Minnesota Association of Charter Schools, on the facilities issue.

StarTribune Article: http://

Saturday, December 05, 2009

MSBA Delegate Assembly. The 2009 MSBA Delegate Assembly concluded earlier today and it was once again an interesting exercise. Two proposed resolutions, both offered by SEE member districts, were of particular interest to me as the proceedings took place. The first, submitted by the Cambridge-Isanti School Board, sought to re-establish the general education levy, which was eliminated during the 2001 legislative session as part of then-Governor Jesse Ventura's "Big Plan."

Anyone who knows me knows my feelings on the elimination of the general education levy. It stands, in my estimation, as one of the dumbest single moves in the history of education funding in Minnesota. As a bit of historical backdrop, there are a number of culprits who contributed to this decision. Of course, it was former Governor Ventura and his august set of advisors who proposed the move in the first place. Add to this, the House of Representatives at that point in time made the decision to make the general education buydown part of its tax bill.

It's important to remember that the state was reaping the benefits of an economy that was enjoying peak performance in the late 1990s and had, in a stark departure from Minnesota's current fiscal position, considerable budget surpluses. This created a sense of security, false as it turned out, that the state was in a position to assume the close to $800 million in general edcuation levy with state resources. In fairness to the Ventura administration, it is important to remind ourselves that as part of the original recommendation to replace the general education levy with state revenue, it was suggested that the base for the sales tax be broadened to include clothing and services. This would have brought more state revenue into the equation and provided a cushion to ensure that the general education revenue amount could increase into the future.

However, the Legislature got a bad case of tax cut fever and the resulting decisions put state funding on shaky ground going into the future. Rumor had it that the state was already projecting a shortfall as the economy headed into recession and that was before the cataclysmic economic downturn that occured in the aftermath of the terrorist attacks in September of 2001.

The one thing that makes me bark a bit in retrospect is that Governor Ventura supposedly surrounded himself with hard-headed fiscal realists who were more than up to, at least in their rhetoric, the challenge of staring down legislators more interested in "politics over policy." Instead, the Ventura administration folded rather than stare down the Legislature, particularly the House of Representatives, when they refused to include the sales tax base-broadening as part of the final package.

The results of the decision to eliminate the general education levy proceeded to have disastrous effects. First, there was no state revenue available to provide increases to the general education program when the state economy took a turn for the worse. Further, the fairest levy that was applied across all property in the state at the same rate was replaced with greater reliance on the voter-approved referendum levy, which is both inequitable in burden and not applied across all school districts. Even though over 90% of the state's school districts currently have voter-approved referenda, the resulting per pupil revenue and tax burdens vary widely district-to-district.

But that's all in the past and I don't want to let my blood pressure get any higher, so I'll return to the MSBA Delegate Assembly. The resolution to bring back the general education levy failed on a vote of 56-62. Not bad considering the resolution wasn't aggressively "worked." While I'm a bit disappointed that the resolution didn't pass, any attention this subject receives is a bonus. Word on the street is that the Senate Education Committee might attempt to expand its consolidated levy proposal into something that more closely resembles, in both size and type, the general education levy.

The other resolution of interest was offered by the New London-Spicer School Board, calling for an increase in the equalization level for all current levies. This resolution passed by an overwhelming vote of 110-7. Of course, if resolutions passed by the MSBA Delegate Assembly automatically become law, we wouldn't have to worry about any cuts to any school districts, as spending for education would reach the mega-mondo-zillion level. What is heartening, however, is that the concept of equalization is something now etched deeply into the minds of school districts throughout the state. Now, if we can just get the Legislature to go along a bit more on this widely-shared belief we'll have a more adequate and equitable funding system.

Friday, December 04, 2009

Lawsuits? In the past couple of weeks, I've heard more and more from various (and unrelated quarters) that it may be time to consider a lawsuit against the State of Minnesota on the grounds that it is not meeting its constitutional duty to provide a "general and uniform, thorough and efficient" system of public education. Clearly, we've been on a funding yo-yo for the past decade, with four of the ten years witnessing frozen education funding formulas. Even in the years when we've seen an increase, the level of increases has not been enough to prevent program cuts or stem the continuing growth in the subsidization of special education expenses from school district general funds.

In another wrinkle, Minnesota's education funding system is also getting more inequitable. From documents we have put together, the gap between districts at the 5th and 95th percentile, in both raw dollar and percentage terms, have been steadily climbing (with a slight dip mid-decade) since 2001.

We all realize that lawsuits are quite an undertaking and it is instructive to look at what is currently happening in other states in the area of school funding litigation. One especially interesting case study is that of Colorado. In 2005, a group called Children's Voices sued the state of Colorado on behalf of 14 school districts. Both the district court and the Colorado state court of appeals ruled that the plaintiffs did not have standing to sue the state. In October, 2009, the Colorado State Supreme Court on a razor-thin 4-3 vote ruled that the plaintiffs do have standing and that the lawsuit will now be returned to district court to be heard.

Florida is another state that recently has seen the emergence of a lawsuit. Fund Education Now and Citizens for Strong Schools have joined several sets of parents in filing suit against the State of Florida in mid-November. This is on top of a lawsuit filed by the American Civil Liberties Union two weeks earlier. Florida currently ranks 50th out of 50 states in several education funding categories and a number of the states' districts have alarmingly high drop-out rates.

Needless to say, if Minnesota school districts decide to head down the litigation trail, there will be ample action in other states to both map strategy and judge prospects for success.



Children's Voices: http://

Great Education Colorado: http://


Fund Education Now: http://

Citizens for Strong Schools: http://

Thursday, December 03, 2009

Permanent School Fund Hearing. The Promoting School Trust Lands Subcommittee, chaired by Representative Denise Dittrich (DFL-Champlin), met this afternoon in the State Office Building. For those of you who need a refresher course, Representative Dittrich sponsored legislation during the 2008 session that changed the way that revenue generated by interest from the Permanent School Fund endowment is factored into the state's education funding system and how these lands are managed.

The public lands that comprise the generate the income for the endowment largely spring from a couple of sources, particularly the lands designated in each township for education purposes that date back to Minnesota's statehood. A number of these properties have already been sold, with the revenue going into the fund, but approximately 2.5 million acres still contribute to the fund. Most of the revenue now comes from leases and mineral exploration and mining rights.

The primary problem Representative Dittrich has sought to address in her original legislation and her subsequent involvement with the issue is how to generate greater revenue from this state-managed property. The Minnesota Department of Natural Resources currently manages these parcels and the general impression is that they are very conservative in the approach they use to promote these properties for revenue-raising purposes. Representative Dittrich's subcommittee has looked at how similar public properties are managed in other states and is trying to find a method by which greater revenue could be garnered through more aggressive promotion and investment. Utah is being studied as an example of how more aggressive management of state-owned property can generate considerably more revenue for school districts.

Given the condition of the state budget and the likelihood that we will see tight budgets for the next few years, any new revenue will be welcomed. Hopefully, Representative Dittrich's efforts will bear fruit. What she is asking the state's education community to do is become more aware of this issue and urge decision-makers to support a more aggressive approach to the promotion of these properties.

Charter School Issues Back in the News. Yesterday's StarTribune ran an interesting story on charter schools yesterday largely centered on the use of charter school lease aid to purchase bonds to construct buildings for charter schools. Loose regulation of these practices have resulted in the use of high-risk junk bonds and the questionable fees charged to charter schools by the companies helping them construct these buildings. Because charter schools cannot own property, they are in effect backed into these agreements because they have limited alternatives in seeking long-term facilities for their programs.

This and several other issues will be studied starting next week in hearings chaired by Senator Kathy Saltzman (DFL-Woodbury). The first hearing will be held on Monday, December 7, at 1:00 PM in Room 112 of the State Capitol.

Link to Charter School Story: http://

Wednesday, December 02, 2009

In the World of Hurt Department. The revenue projection is in and it is not good news. As I reported yesterday, whispers on the street had the revenue shortfall at about $1 billion and it came in about $200 million above that at $1.203 billion.

The primary reason for the revenue shortfall is the precipitous drop-off in income tax collections since the end of the 2009 legislative session. Income tax collections are $827 below the amount estimated in June which accounts for nearly 70% of the revenue shortfall. The bulk of the remaining shortfall comes in the form of less in terms of sales tax collections and capital gains taxes.

Falling wage levels--resulting from both unemployment and underemployment--are at the base of the problem with income tax collections. State Economist Tom Stinson believes that the economy has turned the corner and is performing increasingly well, but that even though Minnesota's economic performance overall was better than what was estimated in February 0f 2009, that performance did not translate into more jobs and/or higher wages.

All of this makes the 2010 session one that is going to be extremely painful. It's my opinion that if the shortfall had been half of this amount, the session would have been relatively short, as a number of relatively small adjustments could have been made to limp things through to the 2011 session. It would have been painful and tough, but it at least looked doable. At $1.2 billion, it no longer looks that way.

The forecast throws a monkey wrench into plans for a large bonding bill. The state's debt service is currently at 3.7% of total budget, well above the 3.0% guideline currently being used to estimate how much long-term debt the state should undertake. There is still sentiment to put together a large bonding bill, but it will be interesting to see if the Governor and Legislature can agree on both the magnitude and nature of such a bill.

As bad as the 2010 session looks, it's the 2011 session that's going to have legislators (and gubernatorial candidates) shaking their heads. Page 8 (the next to last page) in the Minnesota Managment and Budget document entitled "News Conference Handout" shows the painful prospects that lie ahead. The $5.4 billion projected shortfall is bad enough, but one look at the details shows that a gimmick-free, pre-unallotment, inflation-included budget shortfall would surpass $8 billion.

The $5.4 billion number does include the buyback of the aid payment shift to school districts from 73%/27% to 90%/10%, but does not include the nearly $1 billion in unallotment to the state's General Assistance Medical Care budget, the approximately $500 million in early recognition of property taxes, and $1.2 billion in inflation. It's hard to count the failure to fund inflation as a cut, but it would mean an erosion of purchasing power. Whether the Legisalture and the Governor can agree to include any or all of these changes as part of the permanent budget going forward to mitigate the size of the revenue shortfall for the coming biennium remains to be seen. I'll go out on a limb here and say the discussions are going to be political. It's also extremely important to remember that another federal stimulus package is highly unlikely.

State Economist Stinson did say that the economy is getting better and that while improved performance may not make the job appreciably easier for the remainder of this biennium, it may make things better for the 2012-2013 biennium. As he pointed out, however, higher economic performance resulting from the rebound are already built into those projections.

In other words, the day of reckoning is upon us to some extent. Senator Larry Pogemiller's (DFL-Minneapolis) comments in this morning's StarTribune clearly bear out that sentiment. The gimmicks are gone and we are now going to have to look at both the revenue and expenditure side of the state budget equation to come up with solutions that provide the services needed by the state's residents and also create greater stability in the system as a whole.

What does this mean for education? I don't really know and I don't think anyone does, at least at this point. I remarked today that we did dodge a bullet to a large extent last session, but we'll be dodging buckshot during the 2010 session. How much we get hit is anyone's guess, but it will be difficult not to at least be touched by more than a few pellets.


Managment and Budget Documents: http://

MN Post Article #1: http://

MN Post Article #2: http://

Star Tribune Article: http://

Tuesday, December 01, 2009

Let the Blogging Begin. It's the first of December so it's high time I dust off the keyboard and get back to blogging. It's been a somewhat uneventful interim, which is basically a good thing. With the mounds of economic bad news we've been seeing nationally (let me re-phrase that to an "absence of economic good news"), Minnesota's fall revenue forecast is expected to be a bad one with a possible revenue shortfall for the remainder of the biennium year in the neighborhood of $1 billion. Part of that is lagging revenue (at last report expected to be in the range of $240 million) and part of it may come through increased state expenditures, especially in the area of health care and income maintenance payment increases that would result from increased unemployment.

Another thing to remember is that although the picture for the remainder of this fiscal year (and by extension, the biennium) will likely be bad enough, things are really going to look ugly for the next biennium. The aid payment shift and property tax recognition shift are not in law and if they are not placed into the law, the problem for next biennium grows by $1.7 billion. Again, this does not affect the aid entitlement, but it does affect districts' cash flow and that more than one-third of Minnesota school districts have dramatically increased their short-term borrowing to meet their cash needs. Needless to say, tough decisions lie ahead.

I will provide you with the links to the revenue forecast documents when they are made available tomorrow.

Legislative Kick-Off Meeting. A group of SEE members met for a very interesting and comprehensive organizational meeting for the legislative kick-off event that is scheduled for Thursday, February 18, 2010, at the Kelly Inn just west of the State Capitol building. Things are obviously heating up for school districts and the problems are especially keen for SEE districts. If you have ideas for what you would like this event to entail, don't hesitate to contact either Deb Griffiths or myself.

Tuesday, June 02, 2009

Who's the Man? Okay, quiz time. Who is that witty, devilishly handsome lobbyist/political analyst and bon vivant who has been predicting for months that Governor Tim Pawlenty would not seek re-election? I guess if you drop witty, devilishly handsome, and bon vivant from the question, it gives it away. Yes, it's me. I've been predicting that. But, of course, I went to the Howard Cosell school of prognostication. I predict a ton of things and I remind everyone of when I am right, which is what I am doing right at this moment. You won't hear about the other 99 predictions.

The only thing that really surprises me here is the timing of the announcement, but I believe the timing indicates a couple of things that are going to have a pronounced effect on business in and around the Capitol for the next 19 months.

He danced around the question of "What's next?" at the press conference, but I think we are going to at least see an exploratory run for President. How does what is going to happen in the remainder of the Governor's term promote a Presidential run?

The Governor's decision to un-allot as opposed to calling a special session is likely to be extremely controversial in Minnesota, but it could make him look like a conservative Hercules nationally by promoting himself as the guy who can say "Here is how you deal with a Democratic Legislature (read: Congress). Who cares what happens in 2011? Governor Pawlenty has not only a bully pulpit, but a bully "scythe." For the next seven-plus months, he can make all kinds of executive decisions reducing spending and, in the process, re-directing priorities. And every one of those decisions is going to be accompanied by a press release. The state is going to be a Petri dish of sorts, with all types of experiments (let's hope none actually grow mold) taking place.

I'm not going to call the Governor out here. He's the Governor. He was elected. I was not. That certainly gives him a lot more latitude than I am afforded as someone on the sidelines. I firmly believe, especially after the Governor pledged to sign all the spending bills while vetoing any type of revenue increase through general taxation, that the Governor showed his hand. It was his intention to force a confrontation with the DFL-led Legislature at the end of the session and either prevail by having them knuckle under to his "bond for cash" idea of bring things to an untractable position where he would pull out the "un-allotment" card. And that's where we're at.

There are obviously political differences (think so, Sherlock?) between the Legislature and the Governor, but I view this more as a mega-political battle over a launch strategy for the Governor than a battle over policy per se. Everyone watching closely knew that the Legislature and the Governor were on a collision course. Mix in some personal animosity and political ambitions, and "soup's on."

Another thing to remember is that a poll was released late in the session showing (at least on that particular set of days) that most Minnesotans did not want Governor Pawlenty to seek a third term. The best way to kill Presidential aspirations is to lose your previous race.

In summation, no surprise here for me. My advice to all comes from Bette Davis' line in the character of Margo Channing in All About Eve, "Fasten your seatbelts, it's going to be a bumpy night."

Some things to look for in the days/weeks/months ahead.

  • The Franken/Coleman race will be over when the Governor says it's over, regardless of how the Supreme Court rules. As in the case of the un-allotment process, this may be unpopular in Minnesota, but I expect the Governor to try and earn some points playing "Horatio at the bridge."
  • Lots of new program ideas, including some in education, that streamline the system and don't cost (and purport to save) money.
  • About 300 people putting together exploratory efforts for a possible run for Governor (Okay, I jest and exaggerate. It will probably cap out at 100.
  • Look for the Governor on all types of national media, although I doubt he will host the next MTV Movie Awards or do a guest shot on "The Hills."
Here are the media links for the Governor's press conference:



Pioneer Press:

Tuesday, May 19, 2009

Session Wrap-Up and Analysis. Buckle up, folks. This might be a long one. It's less than 24 hours after the curtain came down on the 2009 Legislative regular (note that) session and I've had time to reflect and read through some of the other session analyses, so I am ready to go.

As I've said and written before, I often find myself thinking about legislative sessions the same way I think about baseball seasons. In baseball, I remember the season Pete Rose had a 44-game hitting streak, or the year the Twins went from worst to first, or the year my all-time baseball hero Hank Aaron hit his 715th HR (against the Dodgers' Al Downing for those of you hungry for another useless tidbit of information). In legislative terms, I think of 1981 and all of its special sessions. I think of the billion dollar tax cut of 1985. I think of 2001 and the Ventura administration's "big plan (which we still regret)."

So how does the 2009 Legislative Session stack up in baseball terms? After thinking about it, I think the apt comparison would be the 1994 baseball season, when the players went on strike on August 12 and as a result the World Series was cancelled. I'm not going to go as far as to say which governmental branch (Legislature or Executive) went on "strike," but like the baseball situation in 1994, neither side in the intellectual fray could find a way to bridge the gap and, as a result, there was no pay-off.

It's not that big a stretch to say this session was, if not doomed, certainly on the precipice of complication since its beginning. First, there was the unprecedented $4.6 (then $6.4) billion deficit. Second, there was the fallout from the 2008 election, which, as it energized the national Democratic forces and ideas, similarly emboldened the majority caucuses in both the House and Senate. Third, there was the residual effect of the election as most moderate Republicans, both nationally and in Minnesota (although the trend started in 2006), lost their elections to Democrats while Republicans in safely Republican districts returned, making the Republican caucuses (again both in Minnesota and nationally) more conservative. Add to this framework the federal stimulus package and all the confusion caused for state level policy makers in trying to make this welcome, but unwieldy, infusion of revenue and you could see why there were complications aplenty.

Much is going to be made of the personalities in the process in the next coming days, especially Senator Pogemiller (who was vilified and held responsible for the break-down by a couple of Republican Senators right after the session) and Governor Pawlenty (who, if he is not running for President is certainly making it look that way). Personalities are part of the system and always have been. The Governor has a right to run for President and Senator Pogemiller, as leader of his caucus, has a right to lead his caucus and stand for both his, and his caucus' principles. I guess what I'm trying to say is that different personalities and different viewpoints have always been part of the process. What made this year different is that so many factors came together that they created a (oh, I hate this hackneyed term) "perfect storm" in which the personality variables made things just that much more difficult.

I am going to finish off this chapter of my analysis with a factor that probably had more to do with the clumsy ending than anything else and that was the inability of the legislative majorities to work across their respective bodies to assemble a cohesive and singular message with which to combat the Governor. The Senate came out early with their package of huge cuts, tax increases, and no shifts or use of one-time money. This was a very noble gesture, but it was too extreme to be politically palatable. Once the Governor suggested the shift of education payments, the possibility of it became very likely. It's not good policy, but it is better than a base cut and it provides the state with a big chunk of money with which to solve the deficit.

The House actually went further than the Governor in terms of the shift, not so much to avoid cuts, but to retain the integrity of the one-time money in the health care access fund and to avoid the bonding-for-cash proposal put forward by the Governor. It was pointed out a lot during the session that both the Senate and the House cut more in terms of state spending than the Governor did in his budget proposal. The Governor did have a considerable portion of revenue expended with several tax-cutting proposals, raided the health care access fund, and, as stated above, proposed that the state bond against the revenue in the state coffers that emanated from the tobacco settlement. He actually put close to an additional $200 million in education spending, with most of his cuts coming to health and human services.

The verbal serve-and-volley that took place over the past month centered on what the Republicans called "misplaced priorities" and accused the DFLers of continuing to fund a bloated health and human services system at the expense of education. There is more to this than meets the eye. I believe it's important to recall the federal debate on S-CHIP (the federal health plan that provides coverage to children in lower and lower-middle class families) and how that relates to the larger picture when it comes to the design and delivery of health and human services programs.

One point of contention in the federal debate is that Republicans believe that if programs like S-CHIP begin to reach into the middle class, it will create a client base for the federal program and that will erode, at least in theory, the private sector role in health care. It's the same argument that plays into the Social Security debate. I believe Social Security benefits should be means-tested, but I also acknowledge that if the benefits are means-tested, some segments of the middle class who no longer qualify for the same benefit level my withdraw their support for the program. I've rambled, but this is a battle for the middle class, and (I'm riffing here) conservatives believe that once a government program finds its way into the middle class, it is extremely dfficult to eliminate, making overall government spending difficult to cut, making the delivery of tax cuts more challenging.

At any rate, it wasn't until the last couple of weeks that the Senate and House majorities began to work with each other in earnest. The Senate simply could not maintain its cut-intensive position, which left them, to some extent, on the outside looking in when it came to determine the actual content of the spending bills. In other words, what the Senate did was a useful exercise (I would say a very useful exercise), but the implausibility of it actually becoming law put a real dent in the Senate's ability to help dictate the final content on a number of bills. The big exception to this pattern was in the tax bill, where the Senate was a full partner in the construction of each of the tax bills that went to the Governor.

It's getting late, so I will sign off for now, but I plan on composing another entry tomorrow to talk about some other observations about the session.

Monday, May 18, 2009

We Are Now Adjourned. It was a rough last 47 minutes. The Senate and House got the last tax proposal to the Governor. It wasn't without a lot of verbal wrestling and parliamentary wrangling, but the bill prevailed. It's on its way to the Governor where it will meet an almost certain (I've got a better chance of being the next commencement speaker at Notre Dame than that bill has a chance of being signed) veto.

The mandatory teacher health insurance conference committee did not come up. Look for Education Minnesota to lobby the Governor all summer and fall to sign that bill. I don't know if it will make any difference or not.

So, unless there's a special session, I won't be haunting these halls on a daily basis until Thursday, February 4, 2010.
One More Try. The Tax Conference Committee has decided to send one more bill to the Governor with their position on how to remedy the $2.7 billion budget gap between projected revenue and projected budget commitments. The provisions of the latest iteration look a lot like has been sent to the Governor in the past
  • 73%/27% E-12 Payment Shift.
  • Early Recognition of Education Property Tax
  • New Tax Rate on High Income Minnesotans
  • Increased Excise Tax on Beer, Wine, and Spirits
  • Tax on Excess Interest
As a sweetener to the Governor, the conference committee included the sales tax exemption on new capital equipment purposes.

Some are wondering why the Tax Conference Committee is bothering, but I suppose there is nothing wrong-headed about sending up one more proposal, although it is likely to meet with the same fate as the tax bill that was sent to the Governor ten days ago.

I'll report on what happens in 47 minutes.
Update. The conference committee on the pension bill, SF 191, just passed the House on a vote of 125-9.

About the only thing I'm waiting on now is to see whether or not the mandatory teacher health care pool will come up yet tonight.
No Deal Yet. With a mere 5 hours left in the 2009 legislative session, we are still without a global deal on the budget. It appears that the Legislature is, if not satisfied with the absence of a deal, resigned to the fact that the Governor is not going to support the permanent revenue increases they are proposing and if that's the case, they are willing to let the Governor use his statutory and constitutional authority to correct the budget gap.

A few other bills are coming through the process and there's no shortage of energy as we head toward the witching hour. SF 191, the school bullying/harrassment prevention bill, passed the Senate 46-8 including amendments approved in the House. Because the Senate accepted the House amendments, the bill will now go directly to the Governor.

SF 191, the omnibus pensions bill conference committee (now without any pension provisions relating to education) passed the Senate 54-8. Because this is a conference committee report, it will also have to be approved by the House. With only two-and-a-half hours left before adjournment, things may get pretty tight. The House is discussing the cultural and outdoor resources dedicated funding bill (distributing the revenue generated from the 3/8 dedicated sales tax approved my Minnesota voters last election) and that may take a little time.

There still doesn't appear to be any type of deal brewing. Speaker Anderson-Keliher is chairng the House floor session, so she's not negotiating with the Governor. Senator Pogemiller is in caucus with his DFL members, so he's not with the Governor negotiating. And I haven't seen the Governor.

Back later with a wrap-up.
We Are Coming to the End. No deal has been struck yet and there doesn't appear to be one if the offing. In other words, this is the end of the legislative session but not the end of the effects of the legislative session. Things have reached loggerheads as the intellecutal--on principles and/or schools of thought and not mental candle power--gap on the approaches to raise revenue as part of the final solution are simply too far apart to be bridged at this juncture. It has boiled down to the Governor's bonding-for-cash versus the Legislature's tax increase package and a reluctance on both sides to reach across that divide.

Both sides have their ammo at the ready, so it's time to play Marvin Gaye's "Let's Get it On" and see where the chips fall with the public. In the absence of an agreement, this is going to be played out in dribs and drabs with the occasional activity spike throughout the summer.

The effects for the E-12 system are pretty clear and although not as dire as a cut to the education funding base, the almost certain action by the Governor to delay payments and employ the early recognition of property taxes will take $1.8 billion, if not totally out of the system, out of school districts' cash flow and force both fund balance reductions and short-term borrowing. I came into the session expecting a shift, but I thought that 80%/20% was probably the limit. The likely effects of the Governor's delaying of payments will go beyond that. But, it is too early to tell. At any rate, it is going to be a harrowing summer for school business managers throughout the state as discerning cash-on-hand issues will be a moving target.

Teacher Health Insurance Pool Conference Committee is Through. The conference committee on SF 915--the annual mandatory teacher health insurance pool legislation--is finished and the contents are as were reported yesterday. School districts who are currently self-insured (or will be self-insured by July 1, 2009) can opt out the pool by agreement between the local employees' bargaining units and the school board. Everyone else is in the pool. The conference committee report will be hitting the floor of the Senate later this afternoon.

Changes in Pension Bill. The portion of the pension bill--SF 191--that both remedied the deficit in the Teachers Retirement Fund and provided enhanced benefits for teachers was struck from the bill by the House Rules Committee last night (or this morning depending on if you believe morning starts at midnight or when the sun comes up). This is a good news/bad news situation (depending on who you are, of course) as deficiencies in the fund will be left uncorrected, but school district contributions will not go up in the short term, which would have been difficult given the tight budgets that exist throughout the state.

Negotiations Continue. Senator Pogemiller announced just prior to the Senate recess that legislative leadership and the Governor are continuing to meet in hopes of striking a deal. We are less than 13 hours away from adjournment, but I've seen more done in less time around here. That being said, I believe both sides are willing to bear the risks of unallotment.

I'll be back later with more to report.

Sunday, May 17, 2009

Things are Getting a Little Hot. The House of Representatives is going to attempt to override the Governor's $381 million line-item veto of the General Assistance Medical Care program. Both sides are giving speeches right now and it may be awhile before we get to the vote. I have to say that the speeches--on both sides of the issue--have been fairly impressive and, dare I say, moving.

Debate has wound down and the final vote was 87-47, three votes short of the number necessary to override the Governor's line-item veto.

It looks like override attempt day as the House has now decided to try and attempt HF 885, the vetoed tax bill that raised $1 billion in taxes instead of agreeing to the Governor's bonding for cash arrangment. So here we sit in the midst of the showdown we all pretty much knew was coming.

With this upcoming vote and the previous vote on the failed override of the line-item veto of the General Assistance Medical Care appropriation, the DFL is attempting to stake out its philosophical and political territory against what is certain to be an attack by the Administration and the House and Senate Republican minorities in the Legislature. It is going to be interesting to see how this turns out down the road, but these actions, taken with just a day left before the consitutionally-mandated adjournment at 11:59:59 tomorrow evening, make a deal look unlikely.

Update: After two-plus hours of really good debate--and I mean really good debate with both sides making their key points and differentiating themselves from their opposition--the House voted 85-49 on overriding Governor Pawlenty's veto of the tax bill--which raised taxes on high-income Minnesotans, beer and alcohol taxes, and fees on credit card companies--which is 5 votes short of the 90 votes needed to successfully override a Governor's veto.

Look forward to some big-time sparring tomorrow. Unless there is a breakthrough, it's going to be a real snark-fest with both sides taking pot shots and setting up the post-session blame-a-thon.
So Much for Separation of Church and State. It was church at 9:00 and state at 11:30 as I am back at the Capitol watching the teacher mandatory health insurance pool conference committee. The conference committee is working out the differences that exist between the bills.

Going in, there aren't a lot of big differences between the bill., The largest difference comes from a combination of amendments offered by Representative Phyllis Kahn (DFL-Minneapolis) in the House State Government Finance Division and Representative Kathy Brynaert (DFL-Mankato) on the House floor that would together allow districts who were either independently self-insured or part of a self-insurance pool by January 20, 2010, to opt out of the program by joint decision of the board and the teachers' local union I was a bit confused about the effects of the Brynaert amendment the other night in thinking that it allowed districts that were fully insured to opt out. That is not the case.

Teacher unions in districts that are self-insured as individual districts by July 1, 2009, can opt out of the program as the bill is part of the Senate bill.

The compromise that appears to have taken place is that districts that are individually self-insured will be able to opt out by joint decision between school boards and local unions. The deadline to be self-insured is July 1, 2009.

The final compromise has been informally agreed to and the conference committee is now breaking. They intend to come back later to look at the revised language in a bit and most likely will approve it. Here's hoping this thing is heading for a its annual veto.

In Other News. The Governor signed the E-12 funding bill, "reluctantly" in his words, without any line-item vetoes. His signing message was short and expressed disappointment that the conference committee did not include the $198 million in funding for QComp and Pay for Progress that he proposed in his budget and did not any of his reform initiatives, particularly the Teaching Transformation Act. His only other comment was directed toward the five-year exemption from requiring students to pass the 11th grade GRADS test in mathematics in order to receive a diploma.

Offers Circulating. Negotiations continue between the Legislature and the Governor, but if I were a betting man (and I am not), I'd say we leave here tomorrow night without an agreement. The Legislature has offered to cut more than they already have, but the sticking point remains the $1 billion in revenue generation that is keeping the sides apart. The Governor has clung to his plan to bond for cash while the Legislature wants a tax increase (either permanent or temporary) to bridge the gap.

As I stated yesterday, the stakes are high on both sides as the DFL-controlled Legislature is going to look as though it was unable to seal the deal, but the Governor is going to have to make some very painful cuts and he is going to own those decisions. We can rest assured that if there is no agreement, finger-pointing will replace hockey as the official state sport this summer.

Saturday, May 16, 2009

Governor's Latest Offer. The Governor has come forth with an offer to close the remaining $2.78 billion gap between projected revenues and expenditures. The offer to the Legislative Commission on Planning and Fiscal Policy is as follows:

  • Accept the House K-12 Shift of 73%/27%.--$1.75 Billion
  • Reduce LGA and related items--$450 Million
  • Other Items --$100 Million (Reduce Renters Credit, Taconite Aid, Political Contribution and other items)
  • Further Health and Human Services Cuts--$250 Million
  • Higher Education Cuts--$190 Million
While not being embraced wildly, there does appear to be some progress here. Note that there are no direct revenue increases in the Governor's offer, as he has replaced his approximately $1 billion in bonding-for-cash with cuts to services.

There are myriad issues with the proposal, many of which relate to how these proposed cuts would work with the federal stimulus package and whether or not the cuts to higher education would create a cut to E-12. University of Minnesota President Dr. Robert Bruiniks is now testifying on how the proposed $190 million in cuts could have an extremely adverse effect on the University's operations.

Dr. Bruiniks was followed by Dr. James McCormick, Chancellor of the Minnesota State Colleges & Universities system. His testimony echoed much of what Dr. Bruiniks said in that reserves are limited (and only one-time) and going back to the fiscal 2006 level of funding (the amount necessary to be maintained to not endanger eligibility for stabilization funds in the federal stimulus package) would cause massive additional layoffs (as a large number of layoffs has already taken place) and may push tuition higher. Not a pretty picture.

The commission's focus then returned to the health and human services cuts, both the line-item veto of $381 million in general assistance medical care and the additional cuts of $250 million in the Governor's latest offer. I have to say that Health and Human Services Commissioner Cal Ludeman did a great job being extremely straightforward what some of the effects of the proposed cuts would be. Not a single dodge during a series of tough questions.

Saturday Afternoon's (and Maybe Night's) All Right for Fighting. Nobody even remotely resembling Elton John is hanging around the Capitol today. I know that because I am here.

Both houses of the Legislature are clearing bills and conference committee reports off the docket and negotiations continue between the Legislature and the Governor in an effort to create a budget resolution package that has a bit (insert sarcam emoticon here) more clarity than simply surrendering to the unallotment process that would provide the Governor with wide discretion in matching available revenue to areas of expense.

As I touched on yesterday, unallotment is an extremely risky strategy for both sides. The Governor may initially get a popularity bump for looking like the responsible party. If the process can be made responsible and the Governor makes an honest effort to accept input, he may be able to maintain that popularity bump. But his popularity may well fall when people see what that responsibility means when the decisions are made. If the results of the Governor's decisions are unpopular, the Legislature gets a big advantage as they can depict the Governor as being heavy-handed during the negotiations in the regular session and intent on making decisions without accepting input.

At any rate, it's a process best avoided and we'll see if an agreement can be reached in the next 48 hours.

Update on Teacher Health Insurance Bill. SF 915 was returned to the Senate this morning and the Senate chose not to concur with the amendments placed on the bill in the House. As I reported last evening, Representative Kathy Brynaert (DFL-Mankato) placed an amendment on the bill that would allow districts where the board and teachers union agreed not to participate in the statewide pool to opt out of it. Education Minnesota opposes this amendment and would like to have it removed from the bill. That will be the goal of the Senate conferees if a conference committee is convened. There is talk that a conference committee will not be convened as given all the attention being paid to budget issues, it may stand a better chance of being approved if it lands on the Governor's desk first thing next year instead of the waning days of the 2009 session.

So, that's where we're at.

Friday, May 15, 2009

Statewide Teacher Health Insurance on the House Floor (or Zombie Alert!). Everybody's favorite bill, SF 915 (the mandatory statewide teacher health insurance bill) is now being discussed on the House floor. I need to apologize to the Shared Services initiative, which I described the other day as being akin to a series of zombie movies. Shared Services only looks like a zombie compared to this bill, which has risen after being defeated and/or vetoed again and again and again and again. All we need is Michael Jackson, complete with his white glove, the song "Thriller" playing in the background, and a pack of dancing zombies to make it official.

But here we are again, listening to the same arguments Representative Kathy Brynaert (DFL-Mankato) has an amendment on the floor right now making the program optional if the school board and bargaining unit agree to opt out of the mandatory pool, which would be greatly preferred to the mandatory plan. Debate is, as usual, quite spirited. The Brynaert amendment passed on a vote of 74-53, making the proposal optional at this point. The bill still has to go to the Senate, where attempts will be made to remove the Brynaert amendment, but at least at this point, the bill is less bad.

Representative Diane Loeffler (DFL-Minneapolis) now has offered an amendment that would lower the thresholds of the high deductible plans in the bill. That amendment failed on a voice vote.

Representative Phyllis Kahn (DFL-Minneapolis) has offered an amendment that would allow self-insured districts with more than seven bargaining units to opt out of the plan. The Kahn amendment failed on a vote of 43-85.

It's Representative Kurt Zellars' (R-Maple Grove) turn to offer an amendment. His amendment would require an actuarial study before the plan could take effect. After extended debate, the roll is being taken and the amendment failed on a vote of 51-77.

Representative Joe Hoppe (R-Chaska) offered an amendment which he withdrew after a point of order was raised by Representative Larry Hosch (DFL-St. Joseph), the chief author of SF 915.

Representative Steve Gottwalt (R-St. Cloud) is offering an amendment that requires that long-term care insurance be offered as part of the coverage package offered under the mandatory statewide insurance pool. In an odd set of arguments made during the debate, opponents of the amendment claimed that forcing long-term insurance to be part of the health care package was an infringement on the local bargaining process. Say what?!? Isn't this whole mandatory health care pool an infringement on the local bargaining process. At any rate, the amendment failed on a vote of 18-100. So much for logic.

Representative Hoppe offered two amendments, one, that would limit increases to no more than 25% over a two-year period, that was adopted on a voice vote and another, that would have added three state department commissioners as ex-officio members of the board that oversees the plan that was defeated.

Representative Tim Kelly (R-Red Wing) offered an unsuccessful amendment that would have made employers not liable for the obligations of the statewide health care plan.

Representative Connie Doepke (R-Wayzata), a former Wayzata school board member, is now offering an amendment that would truly make the plan optional by changing "must" to "may." In effect, this takes the Brynaert amendment one step further, as a school board could opt out of the program without approval of the local teacher union. This amendment failed on a vote of 51-79.

There are no more amendments, so here we are at third reading and the final vote on the 80-48. The bill now heads back to the Senate where the Senate will have to concur with the amendments placed on the bill in the House or move to send the bill to conference committee. The presence of the Brynaert amendment makes it likely that the bill will end up in conference committee.

Friday Afternoon Report. Not a whole lot new on the overall budget front. The Governor seems intent on allowing the Legislature to adjourn without an agreement on the revenue end of the budget equation. Instead of an agreement, the Governor appears to be comfortable taking the task on himself and balancing the budget through payment delays and unallotments. There may (or may not) be negotiations taking place as I write, but as was just pointed out to me, we've got a whole 72 hours left, so why hurry (Not trying to be a smarty-pants with that comment. I've seen more done in less time in this place, so neither side is panicking yet.)?

Pension Bill in Senate. The pension bill is up on the Senate floor right now and Senator Claire Robling (R-Jordan) just successfully had an amendment attached a bill that would eliminate the enhancement in teacher retirement benefits through both employer and employee contributions. The increase in employer contributions would go to fund the deficiency currently existing in the teacher pension funds and the employee contribution would go to enhancing benefits. Under the Robling amendment, the contribution rate for both employees and employers would be cut from 2% to 1% to fully fund the plan without benefit increases. It passed on a vote of 29-27 (on a "standing division," basically the same thing as a show of hands although those voting for one side or the other stand at their desks).

Now, in the monkey wrench department, a group of Senators who were in a conference committee and not informed of the floor vote on the amendment are pressing for a re-vote on the matter. Sounds simple, but the complaint was raised after the bill was given its 3rd reading, the procedural step that puts the bill on the docket for final passage. Usually, bills cannot be brought back before the body for purposes of amendment after third reading.

The legal eagles and rule interpreters are now debating whether or not the bill can be brought back before the body. Senator Pogemiller has moved to bring the bill back before the body, the Chair (currently Senator Dan Skogen) ruled that motion in order, and a roll call appealing the ruling of the chair moved by Senator David Senjem is now taking place. The ruling of the chair has been upheld on a vote of 43-20 and now a roll call is being taken on the Pogemiller motion. That motion has passed on a vote of 41-22. Senator Mary Olson (DFL-Bemidji) is now moving to reconsider the Robling amendment out of courtesy for those who were on unable to vote. That motion has passed on a 45-20 vote and the amendment is back before the body.

Debate on the Robling amendment is now proceeding and things are getting spicy. And now, the roll call. . . . . .and the amendment fails on a roll call vote of 31-34, meaning the higher contribution rates and enhanced benefits back into the bill.

Senator Rosen has now moved to strike the entire Article relating to teacher pensions, which would leave employer and employee contribution rates at the same level and leaving the teacher retirement plan underfunded in the process. The roll is being taken on the Rosen amendment and it is defeated on a vote of 23-38.

The bill has passed on a vote of 43-22. Make no mistake, the increase in the employer's share is going to take money out of classrooms.

That's all for now. I'll be back later if and when the Teacher Health Care bill hits the House floor.
Friday Morning Report. I am sitting here waiting for the meeting of the Legislative Commission; on Planning and Fiscal Policy to begin. This joint committee has been the venue of a lot of interesting discussion throughout the past few weeks, as it has been the place where spats between the legislative and executive branches over revenue options have taken place.

The subject this morning is the Governor's decision to move forward in the event that an agreement on revenue cannot be reached before Monday's constitutional deadline for the Legislature to adjourn. As reported yesterday, the Governor has decided to balance the budget using his line-item veto authority, the budget unallotment process (more on that below), and a delay in state payments (mostly in the E-12 area). There is question as to whether or not the Governor can implement the early recognition of property tax payments as proposed in his budget. Commissioner Tom Hanson of Minnesota Management & Budget contends he has the authority, but Senator Tarryl Clark (DFL-St. Cloud) has requested that the Commissioner show the citation that justifies that position.

Right now, the discussion is centering on the effects of the Governor's possibly delaying payments to school districts--as high as 64%/36% from the current 90%/10%--and how that would cause a ton of short-term borrowing for school districts. The other issue is how shifting payments this much would effect the federal stimulus package as maintenance-of-effort must be maintained in order to receive the stabilization funds from the stimulus package. Commissioner Seagren has just testified that the maintenance-of-effort is based on entitlement and not cash-on-hand, meaning that these shifts do not endanger our receiving federal stabilization funds.

Representative Lyndon Carlson (DFL-Crystal) has now brought up the subject of school district fund balances and how districts with little or no fund balance would slide dangerously close to statutory operating debt if a delay in payments were employed to the full extent being discussed. The answer appears to be that there is funding available for the Governor to direct to districts in this predicament, but that has now been disputed as given the fact that the E-12 conference committee does not contain a shift, no money was set-aside to protect districts from the adverse cash-flow effects emanating from a shift. Fifteen districts and eight charter schools are in this situation.

Republican legislators are now quizzing the DFLers as to why they are questioning the Governor's decision given their previous stance--particularly in the House--that advocated a significant shift (73%/27%) and the accompanying effects on school districts. Speaker Keliher has responded that regardless of what was previously proposed and what is being discussed now. Given the E-12 bill that went to the Governor had no shifts, revenue to assist districts either in or on the precipice of statutory operating debt was not included in the bill. This is why the question of what the Governor can do to mitigate this is relevant.

Senator David Senjem (R-Rochester), the Senate Minority Leader, has just queried whether the Legislative Commission on Planning and Fiscal Policy will the the venue where a mutual agreement between the Governor and the Legislature will be achieved. Senator Senjem is putting forward hopes for an agreement and is not particular whether or not this is achieved in public or amongst leadership behind closed doors in the Governor's office. The DFLers seem to be resistant to that.

Reresentative Marty Seifert (R-Marshall) is now suggesting that a bill be passed that would contain the House's 73%/27% shift accompanied by protections for districts with low or negative fund balances instead of leaving this all to the Governor. Representative Seifert makes a good point that leaving this in the Governor's lap restricts flexibility on both ends. Speaker Keliher's response is that this is a series of building blocks and Representative Seifert's suggestion may be part of the solution, but also pointed out that the Legislature has cut more than the Governor already and that the Legislature is not "spending wildly." She pointed out that the gap between projected revenues and expenditures has been addressed aggressively on the spending side by the Legislature.

Well, we are off education and onto discussion of the Governor's line-item veto of $381 million in General Assistance Medical Care in the second year of the biennium (FY 11) as part of his approval of the remainder of the Health and Human Services budget bill. This will affect approximately 31,000 Minnesotans who are generally older than the average Minnesotan participating in Minnesota Care (age 36), make less than $7,800 per year and have significant health problems, often mental illness. Commissioner Cal Ludeman believes it's difficult to draw any concrete conclusions, as the range of individuals receiving these benefits is quite broad. He did note, however, that approximately 40% of the medical payments under this program go for mental health services. Commissioner Ludeman believes that some of the problems resulting from the line-item veto can be addressed through Minnesota Care, a program for which most of the people affected by the cut should be eligible. Senator Linda Berglin (DFL-Minneapolis) has just pointed out that there is a difference between eligibility and actual enrollment and that the process of acceptance into a program may take too long to provide needed assistance to Minnesotans who need more immediate services. This is a point of contention between Senator Berglin and Commissioner Ludeman, as Commissioner Ludeman, in response to a later question from Representative Tom Emmer (R-Delano), contends that a great number of the individuals on General Assistance Medical Care can successfully transition to Minnesota Care.

Senator Pogemiller has made a request to Commissioner Ludeman to ascertain how many of these affected individuals are military veterans, chemically dependment, and mentally ill. He mentioned another category or two, but my fingers aren't as fast as my brain and my brain isn't as fast as my ears, but I think you get the gist of the question. Senator Pogemiller believes that this line-item veto will be of great hurt to some extremely vulnerable populations.

Sparks just flew as Representative Tom Huntley (DFL-Duluth), the chair of the House Health and Human Services Budget Division, contended that Republicans have had as a goal to eliminate middle-class people from Minnesota Care by flooding the Minnesota Care program with those who are poor and/or have considerable medical issues and by effect crowding out those with higher incomes (not high income in the traditional sense of how it's understood, but higher than those currently receiving General Assistance Medical Care. This is a similar argument used by national Democrats during the S-Chip debate nationally. Needless to say, Representative Huntley's assertion was objected to vehemently by Representative Emmer.

Now, it's onto property taxes. Representative Ann Lenczewski (D-Bloomington), Chair of the House Tax Committee, has distributed a memorandum prepared by House Research showing the effects--property tax increases--of an expected unallotment of the state's local government aid and market value credit programs. Representative Lenczewski has pointed out that the Governor did reduce local government aid last December to balance the FY 09 budget.

The Governor did propose significant cuts to these aid and credit programs in his biennial budget and given the gap between revenue and expenditures under the current state of affairs (budget bills approved at currently agreed levels without agreement on revenue) and it is trying to be determined in this discussion what the size of the unallotment would be given where we are at. Representative Lenczewski contends that the Governor will likely have to go further than he originally proposed (about $250 million) in February.

What legislative leadership is trying to get from Commissioner Hanson is a more firm idea of what the Governor's unallotment process would look like when implemented. Representative Paul Marquart (DFL-Dilworth) has just pointed out how property taxes are now the largest single source of revenue in the state and how this growth is beginning to reach critical levels. With greater cuts to local aids and credits, these increases will become even more steep.

Commissioner Hanson again stressed that property tax increases well beyond current projections can be avoided if there is a global agreement between the Governor and the Legislature.

(I haven't seen such a riveting serve-and-volley game since the days of Bjorn Borg.)

Unallotment Process. Time for your daily civics lesson on Minnesota government. What can the Governor constitutionally do with the unallotment tool? Good question and thanks to Joel Michael and Mark Shepard of House Reserach, we have answers. Michael and Shepard have put together an extensive memorandum regarding the unallotment process. I have provided a link below to the memorandum.

Link to House Research Report on Unallotment:

Thursday, May 14, 2009

Here is the Latest. The Tax conference committee is still kicking around trying to come to a revenue solution to fund the spending bills that will pretty much be passed by the end of today. The Governor has stated that he is inclined to sign all of the spending bills and using executive authority to balance expenditures (currently approximately $3 billion above the amount of revenue available in the absence of a tax bill, shifts, or the bonding-for-cash provision proposed by the Governor).

$3 billion isn't exactly the kind of money you can find by looking under the couch cushions, so the Governor would have to exercise the line-item veto in a machete like manner, un-allot large portions of state revenue, and (I didn't realize he could do this without legislative approval) change the aid payment shift for school districts.

At any rate, these last few days of the legislative session are going to be interesting. We will know by tomorrow morning how much of this will unfold as the Governor has until midnight to either sign or veto the omnibus health and human services appropriations bill. If he vetoes that bill, things are probably going to be very hectic all weekend long. Whether or not that means he will veto the E-12 bill in the event of a veto of the health and human services bill remains to be seen.

One mitigating factor would be that the whole subject of the New Minnesota Miracle has cropped up again. This is only "whispers in the back of the church" stuff, but rumor has it that the Governor has expressed some interest in using the New Minnesota Miracle as a vessel for some of his proposed reforms, which would be entirely appropriate. Those of us involved with PS Minnesota invited the executive branch over a year ago to investigate how some of their priorities would fit into the PS Minnesota framework, but, for whatever reason, there was little interest on the part of the Governor.

It is heartening, if these reports are true, that the Governor is taking an interest in the PS Minnesota/New Minnesota Miracle effort. I certainly welcome him to the effort. While I don't agree with everything he has proposed in the past few years, he has shown a great interest in many aspects of education policy and funding and if he, along with the Minnesota Department of Education, join in the combined effort, good things are likely to happen. They may happen slowly, but certainly the Administration's presence at the funding reform table would be welcome and telling.

Check out this editorial from the StarTribune today, extolling the New Minnesota Miracle. Whether or not we get further down the road in the next few days or the next few months, it is difficult to stress how important this initiative is and what it means to the future of education in Minnesota.


Wednesday, May 13, 2009

We Are Now in the Senate. The Senate is now discussing HF 2 and a vote will the forthcoming shortly. The Senate has less to talk about--in all likelihood--simply because they don't have a lot of provisions in the bill. They do need to explain some of the compromises that they made to House provisions, as the bills were dramatically different. It's hard to tell how long that will take and how riveting that discussion will be.

The first question to Senator Stumpf was in regard to the childcare allowances that were part of the Senate bill, but were surrendered in conference committee due to stiff opposition from the House confereees.

Discussion has now turned to the lack of a global agreement on the balance of revenue and spending between the Legislature and the Governor and how things will proceed from this point forward. That's a good question and there is no answer to it at this point.

Final passage is upon us and the final vote is 49-16 in favor with three Republicans joining all 46 DFLers in supporting the bill.

So it's onto the Governor and an uncertain fate.
Out of the Oven and into the Dining Room. HF 2, the E-12 Education Omnibus Funding and Policy bill, is currently on the House floor. Representatives Greiling and Slawik, the chairs of the K-12 and Early Childhood Funding Divisions respectively, have just completed their presentation of the bill, along with House Education Policy Committee chair Carlos Mariani.

One thing I neglected to report last evening was that there are no revenue shifts, either in terms of the state revenue payment schedule or the early recognition of property taxes, in this bill. Those decisions are going to be postponed for now, as there is a funding gap of approximately $3 billion between the Legislature and the Governor in terms of overall revenue right now. The Governor recommended about $1.3 billion in shifts and $1.0 billion of bonding-for-cash along with greater cuts to Health and Human Services to bridge this gap. It appears right now that the House and Senate are going to pass "full" bills, meaning at the amount they intend to spend with the revenue to support that level of spending decided in another venue.

Negotiations over revenue issues continue and we have to keep in mind that if those conversations do not produce the revenue needed to support the level of spending in this and other appropriations bills. Stay tuned.

The debate on the House floor is very polite, with Republicans pointing out that the Governor proposed more funding for E-12 than what is in this bill. Of course, he was able to accomplish that through the aforementioned shifts, bonding-for-cash, and budget cuts in other areas, which has created the situation of loggerheads that we are experiencing right now.

Well, the roll has been taken and the bill has passed the House by a vote of 85-49, with all Republicans voting against the bill and one DFLer joining them.

So, it's onto the Senate.

By the way, here is the link to the bill language of HF 2:

The draft summary can be found at:

Tuesday, May 12, 2009

Into the Oven. The recipe for the E-12 conference committee report has been written, the conference committee has mixed the ingredients, and after about 12 hours in the Staff 5000 oven, we are going to have a freshly baked conference committee report. Mmmmmm-mmmmmm good.

Not much in terms of calories and not much in terms of spice, as the overall budget situation makes this a pretty lean cake. It certainly isn't light and fluffy. And my guess is the Governor is going to spit it out once he takes a bite in a few days.

The big news here is that the agreement holds funding flat for the next two years. That's not good, but it certainly isn't as bad as the Senate's consecutive 3.5% cuts over the same period of time. Not much else in terms of spending, at least in a statewide sense.

Here are some other provisions that leap out:
  • Modification of the maintenance of effort provisions in the safe schools levy to reflect FTEs and not revenue spent on counselors, nurses, and social workers.
  • Provides for ongoing levy authority on a year-to-year basis for OPEB and provides for bonding for OPEB. In regard to bonding, bonds issued after October 1, 2009, will have to be approved by the voters in the district seeking the bonding authority.
  • Removes the voters' ability to file a petition to force a revocation vote on a referendum levy.
  • Establishes Office of Educational Accountability.
  • Establishes growth model to measure student progress.
  • Suspends 2% staff development reserve for the next two school years.
  • Creates opportunity for district-created site-governed schools (the Education Evolving proposal that was presented at SEE's February meeting).
  • A number of special education rules and statute revisions that bring Minnesota closer to federal statutes and rules.
  • Changes in training and procedures in regard to the Behavior Intervention Rule and seclusion and locked time-out.
  • New regulations pertaining to charter schools that arose from the Legislative Auditor's report.
  • Raises the project threshold cost for requiring revenue and comment from $500,000 to $1,000,000.
There is more, but these are the highlights. There are a lot of items missing. Nothing--let me repeat that NOTHING--on shared services. Zero. Zip. Nada. Stop. Check please. After all of the oxygen sucked out of hearing rooms during the session (some of it by me), it somehow seems fitting that this, at least at this juncture, did not find its way into the legislation. The reason for its not being included boils down to a simple fact: the Senate bill mandated participation by school districts and the House bill did not. The Senate bill also required that a consultant be hired to find savings through cooperative purchasing and other shared services who would be paid based on how much in savings were generated by the work of the consultant.

The shared services initiative kind of took on elements of George Romero's series of zombie movies that began with "Night of the Living Dead," continued with "Dawn of the Dead," went further with "Day of the Dead," took it another step in "Land of the Dead," and then found a way to top that with "Diary of the Dead." This bill had more lives than your average zombie as it marched and marched and marched overcoming complaints at every juncture. For now, the zombie is dead. . .maybe. I'll get to that tomorrow.

A lot of folks wondered why the education community got so riled up over the shared services effort. I think the explanation is quite simple. When people talk about test scores and report cards and other assessment tools, educators often get uncomfortable but as long as the requirements are set fairly and implemented judiciously, schools accept the fact that there needs to be measures of accountability. The shared services initiative, on the other hand, seems to insinuate that school districts don't have the sense to come in out of the rain. Schools have been cooperating for years (over 40 years in terms of formal arrangements), but somehow unless Deloitte/Touche or some other nationally-recognized consultant doesn't recognize that cooperation, it obviously doesn't exist.

The consolidated levy is also missing, as is the New Minnesota Miracle. I wrote a bit about that in my first entry today. A number of items, including these two, were reportedly in the agreement reached by the conferees last evening, but were all discarded--and this is a rumour here--when the Senate insisted that their version of the shared services language be included. It was no dice.

It is highly possible that this bill will be vetoed. There is very little of the Governor's program in the bill, so he is likely to unsheath his veto pen and write a little missive to the Legislature as to why the bill comes up short.

Speaking of veto pens, where do you buy those. I was out at Office Depot (product placement) the other day and looked high and low and couldn't find any veto pens. Then it dawned on me. They aren't available in retail stores and I bet Governors throughout the country band together, call Deloitte/Touche, and buy veto pens by the truckload in a shared services agreement.
E-12 Funding Deal Imminent. The final content of the bill has yet to be completely determined, but a deal on the E-12 Funding and Policy bill is coming close to fruition. The conference committee worked tirelessly through the night in informal sessions and has developed what appears to be a final package that was delivered by the House in an offer this afternoon.

There is talk that the offer was to include a number of other provisions, including the New Minnesota Miracle, were slated to be in the offer as late as this morning, but a number of these high-priority items for each body were dropped from the bill when negotiations came to pretty much a crashing halt (at least that is what I was told) when one body or the other felt that the bill was out-of-balance in terms of content. Wish I could have been there. Oh, to be a fly on the wall in a world without flyswatters.

Commissioner Seagren also testified that the bill is extremely light on the Governor's pet provisions and is at risk of being vetoed unless a later iteration of the bill includes some of these initiatives.

All I can say right now is "Stay tuned. Film at 6. Or 7. Or 8. Or 10. Or . . ."

Friday, May 08, 2009

Friday night, nothing much to do but hang around Think I might just grab myself a cab and head downtown. May as well start this entry with some obscure lyrics (artist, title, and album will be listed below) to describe what's going on here at the Capitol. It is Friday night. There's not much to do but hang around. But I won't be grabbing a cab and heading downtown because the House just passed HF 885--the "curveball bill," (or the Plan B bill . . .or the "Hey Governor, look over there!" bill) for lack of a better term--and it's heading over to the Senate, where it will also be passed this evening and then head to the Governor where it will be dealt the ignominy of a certain veto.

This bill is another attempt by the DFL-controlled Legislature to shed some light on the Governor's budget package and try to highlight some of the items that frankly, are a little bit murky in the policy department. One of the items the Governor is trying to sell is about $1 billion in bonding for cash flow purposes. I term this as "deficit spending with a balanced budget." This is borrowing from the future in the same way that the federal government does, but, of course, the state is constitutionally bound to have a balanced budget so any borrowed money must be just that--borrowed, in this case from the future, because real-time biennial expenditures must be in balance with revenue.

Now the Governor isn't wimpy. Quite the contrary. But this does remind me of the character Wimpy (on the right) from the Popeye cartoons who often spouted the memorable line "I'll gladly pay you Tuesday for a hamburger today." The problem is that the price of the hamburger can go up precipitiously depending on the terms that govern how the money is paid back. In conversations with other Capitol wags, the price on the Governor's borrowed $1 billion is about $1.6 billion over the term of the bonds.

The Legislature can't seem to get the public riled up about this aspect of the Governor's budget package, which is really starting to result in a considerable amount of frustration. The option to the Governor's approach, and the $1 billion hole that is created if it is abandoned, is a tax increase of some sort. That is where the DFL has had its problems. As has been the case in all things public finance-related in the political sphere, the word T-A-X has little traction even if a case can be made that it is better than the alternative.

One thing that has surprised me, and it shows up a bit in HF 885, is the concept of a temporary surtax to raise the $1 billion (or thereabouts) in the short term and phase the tax out as certain revenue thresholds are met. The Senate has proposed something similar, but the House is resistant to the concept.

Experience isn't always a good thing to have. I keep thinking back to the fiscal challenges of the mid-to-late Quie admininstration when state finances went into the tank due to the energy crisis and the horrifying inflation/high interest rate situation that led to the recession of the late 1970s. To solve that crisis (and it was solved again and again and again in repeated special sessions) everything was on the table--taxes, cuts, shifts--and it took a little bit of each of those tools to get us back to a budget situation that was sustainably balanced. Right now, the situation seems to lack one leg of that stool, which is going to make it really hard to stand. But, it's not like we aren't going to have a special session to figure it out.

So, where does education sit in HF 885. There's not a lot of detail. The only thing pertaining to education is a very vague revenue number--it was stressed to me that it IS NOT a target--that explains (at least as it was explained to me) the revenue "space" available to the E-12 budget. Again, that's vague and I will try to get more detail from those in the know.

What I do know is that the E-12 conference committee will continue to meet and hammer out a final compromise, both on the financial and policy matters in HF 2. The only thing that happened today was that the Senate came forward with its second offer after reviewing the House offer that was delivered on Thursday. From my perusal of the offer, there doesn't appear to be a ton of progress being made as the proposal ping-pong continues. Whispers in the hallway seem to indicate that legislative leadership wants all major bills on the Governor's desk by next Tuesday that in the event that they are vetoed, there will be time to attempt overrides.

My guess is the conference committee on HF 2 will be meeting tomorrow (Saturday) in an attempt to come closer to a final agreement. So if you're not doing anything, just check the legislative schedule and head over to Room 200 of the State Office Building. But, if you have something exciting to do, like watching paint dry or neutering the ants in your backyard, by all means do that. Seriously, it would be nice to see some different faces in the audience.

Now, for the answer you've all been waiting for, the song lyrics introducing this entry were written by Todd Rundgren, from the song "Long Flowing Robe" which led off Todd's 1971 masterpiece, Runt: The Ballad of Todd Rundgren. Give it a listen sometime. It's got one of the great slow songs of all time, "Be Nice to Me," which is what I hope is paraphrased to "Be Nice to SEE" in the final version of HF 2.