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://

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