Thursday, January 29, 2009

Budget Released. The Governor released his budget for the next two years and I can honestly say that I was expecting it to be more . . . well, harsh. Not to say that this is a friendly document, but slighltly under half of the needed $4.8 correction comes in the form of direct cuts. The remaining revenue comes from other one-time adjustments including $1.3 billion in payment and property tax recognition shifts in the education budget and the federal revenue coming to the state through the federal economic stimulus package (estimated at $920 million).

The surprising part of the budget--and a pleasant surprise it is--is the increase in K-12 spending contained in the bill. Of course, these gains are balanced by the short-term borrowing costs that will result from the changes in the payment and property tax recognition timelines and the elimination of the $51/PU in one-time money passed last session and the $55/PU in technology aid passed during the 2007 session that was appropriated the past two school years.

The Governor's budget contains two revenue enhancement programs for school districts. The first requires all districts to submit an application for the Q-Comp program, which is increased from $260/PU to $300/PU. Under the Governor's proposal, all districts would have to develop a plan and submit it to MDE for approval. Then there's the tricky part. MDE is not required to approve the application and the teachers in the district can vote not to participate. In other words, the only mandatory part of mandatory Q-comp is putting together the application.

I generally agree with the concept of Q-comp. Steps and lanes are a somewhat antiquated way of paying employees and there are inherent costs that have to be absorbed whether or not the district has revenue growth. Q-comp gets away from that somewhat and I have always supported the staff development component of Q-comp as well.

But the way the system is applied is troublesome. Not every school district has the personnel in place to dedicate the person hours necessary to put together a well-reasoned and comprehensive Q-Comp plan. Cuts to MDE staff haven't helped matters in this regard.

With the Legislator's Auditor's report on the educational effectiveness of districts with Q-comp out soon, there will be yet another set of data to inject into the discussion.

The other portion of the Governor's recommendation that would bring revenue to school districts is his "pay for performance" provision that would reward schools for students making at least one year of progress--1% of the basic formula per student making one year of progress, and 2% of the basic formula per student making more than one year of progress--every academic year. I don't know how many of you are familiar with the six-box growth model grid that MDE uses to map district progress, but the simple explanation is that districts will receive funding for students in four of the six boxes. The only students not receiving increased funding would be those making less than one year of progress during an academic year.

One part of the budget that hasn't been talked about a whole lot is the special education formula. There is no change in the funding mechanism, which means that once again costs will outpace the growth factor, which at least was not eliminated. But further prorations will result and the cross-subsidy will once again grow.

Main Budget Page:

Education Budget Document:

Federal Stimulus Package Moving. The federal stimulus package passed the US House on Wednesday evening and will now head to the Senate, where it will meet approval within the next week or so. There will likely be changes that will force a conference committee, but it appears that the President's goal of having the bill passed and signed by mid-February will be met.

As I have written previously, there is a nice chunk of federal money for education in the bill. I found out today that there is language in the bill that would allow states to apply for a waiver that would allow school districts to use this increased special education revenue to address cross-subsidy issues. Currently, 50% of any increase in federal revenue can be used to address state formula cross-subsidies. If Minnesota would request a waiver that would loosen this control and that waiver were granted, more revenue could be dedicated to protecting school districts' general funds.

I will keep you posted of the progress of the federal stimulus package and how state policy makers are reacting to the measure.

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