Thursday, June 30, 2011

Where We're at Right Now. We're eight hours away from state government turning into a squash (I'd say pumpkin, but Judge Gearin's ruling made sure we didn't get all the way to pumpkin status) and there's still not a budget agreement. While the sides have been meeting and a quorum of legislators is present and ready to convene if a the Governor and legislative leadership reach accord on the budget.

The scenario remains the same as has been reported with regularity in the press. The Republican Legislature refuses to go beyond $34 billion in biennial spending, while Governor Dayton wants to spend $35.8 billion. Briefly, the base budget for the coming biennium--the budget that would be in effect if the Legislature and Governor were not to reduce any expenditures--is approximately $39 billion. The Legislature has proposed to continue the state aid payment shift for education at $1.4 billion in the first year of the biennium and then bridge the remaining gap with spending cuts of $3.6 billion. The Governor has agreed on the shift, but wants to split the remaining $3.6 billion of budget gap evenly with $1.8 billion in cuts and $1.8 billion in tax increases, particularly an income tax increase on Minnesotans who make in excess of $150,000 ($250,000 for couples).

It's really difficult for me to say what happens next. The closed-door meetings may be generating progress, but it's hard to tell from the statements being given to the press by legislators and gubernatorial staff whether this progress (if there is any progress) is meaningful. The Governor has said that he will not call a special session unless there is an agreement and one thing I am relatively certain of is that that agreement will be signed in blood (figuratively, but I can't say that for certain). There is no way the Governor calls a session without an agreement because once the session begins, adjournment lies solely in the hands of the Legislature. In other words, they could use their own bully pulpit of sorts and take the discussion in any direction they so wished. Given the average Minnesotan's disappointment with how things have transpired thus far this year, that would be a high-risk maneuver on the part of the Legislature, but nothing would surprise me at this juncture.

Judge Gearin Ruling. I referenced Judge Kathleen Gearin's ruling from Wednesday in the first part of this entry. While there weren't any earth-shattering surprises in the ruling, there was good news for school districts, as Point 21 in her ruling holds that the Minnesota Constitution calls for the maintenance of a general and uniform system of public education, making that system essential. From this language, it has been determined that the three open-and-standing funding streams that are available to school districts throughout the state will continue to flow. These funding streams are:
  • General Education Revenue
  • Debt Service Equalization
  • Property Tax Aid and Credits
The revenue from these three funding streams comprise nearly 80% of the state revenue school districts receive. The other angle on this is that the payment schedule for state aid to school districts will revert to the 90% current year/10% subsequent year schedule that was in place prior to the changes made in the past couple of years to distribute the aid on a 70%/30% schedule. The change to the 70%/30% schedule was not codified as statute, meaning that the payment schedule reverted in the absence of legislative action to extend the 70%/30% framework. Ironically, it's the one place where the Legislature and the Governor agreed.

One of the odd effects here is that school districts' cash flow won't change much as a result of the return to the 90%/10% payment schedule. Seeing districts are slated to receive 90% of 80% of their revenue, the resulting percentage is 72% (it's actually a bit higher). 70% of 100% is 70%. The problem, of course, is that the subsequent year "catch-up" payments will be far less as the base is being reduced. In other words, it's not a good deal. An Excel spreadsheet showing the aid amount going out to each district in the first round of payments will be up on the Program Finance section of the Minnesota Department of Education webpage tomorrow.

The primary revenue categories that will not be funded as a result of the shut-down and the decision by Judge Gearin not to classify them as essential state services include special education, integration revenue, community education, adult basic education, and early childhood and family education. There will undoubtedly be a challenge on the special education revenue. In her ruling, Judge Gearin--in Point 22--wrote that the federal government has supremacy over the state in terms of intergovernmental compacts and I believe it can be argued that in order to make good on its part of the compact created by federal special education law, the state will have to expend special education revenue at a level that ensures maintenance-of-effort requirements outlined in federal law are being met. Now, I'm not an attorney (although I was accepted into law school at one juncture in my life), but I think this point would at least appear logical.

What's Next? It's anybody's guess. I've always believed that if this didn't get taken care of relatively early in the wake of the session's adjournment, the curiosity (and belief on the part of both parties that they would win the toss in this game of political football) about what a shutdown would look like and how Minnesotans would react would simply be too great a temptation to forego. In a philosophical sense, one can't prove the negative and if both sides ardently believe they are going to "win" in the event of a shutdown (or have responsibility for the "loss" apportioned more to the other side), everyone needs to point to a reality of what a shutdown actually entails.

My advice is stay tuned to the major news outlets. If an iron-clad agreement is reached, the possibility exists that a "lights on" bill could be passed in a matter of hours and that the 22,000+ employees who won't be showing up for work tomorrow will be back on the job immediately upon passage. That would leave a few days to put the major agreement together and that could be passed in a one-day session. Even if the votes are lined up, there will still be an opportunity for foot-dragging and contentiousness, although my guess is Minnesotans wouldn't look kindly on dragged-out proceedings.

I'll be watching closely as well and will provide you with pertinent information as well.

Job Well Done by MDE. I want to take some time to recognize staff at the Minnesota Department of Education who have met with the education lobbying community three times over the past two weeks getting us ready for the possible shutdown. MDE Communications Director Charlene Briner has been leading these meetings and has done a marvelous job in this effort. Other MDE staff members who have contributed mightily are Tom Melcher, Rose Hermodson, Brian Shekleton, and Christina Gosack. Thanks are in order for their very hard work during these difficult times.

Friday, June 17, 2011

It's Been a Month and I'm Feeling Guilty. I looked at this blog just the other day and saw that I hadn't posted in a month. My first thought was "I should post something!" My second thought was, "What would I post?"

The near-total breakdown at the end of the legislative session has been hashed and re-hashed to death and as I write, negotiations continue and legal arguments are being honed for the upcoming date with the court system to determine how much of Minnesota government can be shut down if a budget agreement is not reached by June 30.

At this point, it's my guess that there will be a shutdown. Both sides contend that they have come forward with their best (and final) offer and unless one side blinks and makes a major move toward a settlement, there doesn't appear to be any recourse but a shutdown. Perhaps I've been in this business too long, but the stakes seem to be so much more elevated in the past decade than in previous decades. For whatever reason, political combatants now cling to the poles of the debate rather than searching for the middle ground. Both sides believe they can get 100% of what they want, so why negotiate. As a result, there is this lurching along of the system, as the focus of the debate changes dramatically with the change in legislators. Given the change in legislative control coming into the 2011 session, I fully anticipated that the content of the debate would be much different than in the past few years. What I didn't anticipate--although I predicted a special session from the get-go--was the problem with budget negotiations being as pronounced as they are.

As for the shutdown itself, I don't think anyone is wishing for it, but I do sense that both sides have a perverse curiosity about what will happen if there is a shutdown. DFLers seem to think there will be a major upheaval in people's lives and the blame will all fall on the Republicans for not raising taxes to cover a portion of the budget problem. Republicans seem to believe that there will be less disruption to people's lives and that they can paint the Governor as being so intent on raising taxes that he'll take the whole state hostage if he has to in order to accomplish his goal.

I'm tempted to tell a somewhat off-color story about one of my cousins who came out from town to visit the farm and his curiosity with the electric fence and what would happen if he . . . uh . . .did a certain something in the proximity of said fence (I think you get the picture). Let's just say his curiosity was satisfied (although it was hard to tell through all the painful wailing). Needless to say, he stayed away from the fence for the rest of the day.

It will probably be the same thing here. Everyone is curious about what's going to happen. In this instance, the decision makers know there is going to be pain in the form of 20,000 or 30,000 state employees being out of work and a raft of state services being unavailable to Minnesotans, but it's hard to gauge what that pain actually means and maybe curiosity has gotten the better of the system. At any rate, my guess is once it's done, no one is going to want to do it again. . .at least for awhile.

MDE Shutdown Plans. The Minnesota Department of Education (MDE) has put together an FAQ page to deal with questions you might have regarding how things will proceed if and when there is a shutdown. MDE convened a group of education lobbyists yesterday to outline their plans and to answer questions from us and to ask us questions regarding our memberships' concerns. I want to applaud MDE for bringing us together and giving us the opportunity to share our concerns. Another meeting is planned for when the shutdown looms ever larger.

MDE's webpage dedicated to shutdown-related questions can be found here:

I urge you all to take advantage of the opportunity to have your questions answered through this medium.

Governor Vetoes Everything. It's old news now, but the Governor vetoed both HF 934, the omnibus education funding bill, and HF 1381, the omnibus education policy bill. Below are the veto messages for each bill.

I don't want to come across as picayune in pointing out one problem I have with the Governor's veto message as it pertains to the omnibus education funding bill, but the phrase "I will not sign an education funding bill that pits student-against-student or district-against-district" raises my hackles a bit (not all of my hackles and only a little bit).

When I worked for then-Senator Randy Peterson in the late 1980s when he was chair of the Education Funding Division (or whatever we called it back then), one of the sayings he repeated often was "we can only spend a dollar once." In other words, if it was spent on a single purpose or for a categorical formula that benefited one set of districts more than another, the dollar was gone. It couldn't be spent again on something else. If a dollar goes to a relatively small set of districts, other districts are going to be at a funding disadvantage. Whether or not the difference in distribution can be justified is another matter entirely, but what I guess I'm trying to say is that students and districts have been pitted against each other since the state became involved in the funding of education. It's only the competition for dollars that has become more keen.

I write this not to chide the Governor or to disagree with his veto of the omnibus education funding bill. Like almost all omnibus bills, HF 934 is a collection of items, some of which merited support and some of which yodeled "veto me" at the top of their imaginary lungs. Where I take minor issue is that over the past decade, we have seen more and more attention given to the qualities--demographic and otherwise--where school districts differ as opposed to where they are the same. As a result, we see more revenue distributed through various categorical programs at the expense of the general education formula. A vast majority of SEE districts are what I call "basic formula districts;" districts in which the basic formula assumes a much greater percentage of the total general revenue available to the district than in other districts with either high levels of categorical funding or a big referendum. This concentration on categorical funding has pitted districts-against-districts and the result has not been to SEE members' advantage. I agree with the Governor that districts should not be pitted against districts and the task force he appointed to update state education funding formulas that recently finished its work has some very good suggestions. Whether or not these suggestions take root at the Legislature remains to be seen (and the report is not perfect), but it is my hope that a system in which the basic formula plays a much larger role than it plays now will be the result of the discussion surrounding this effort.