Tuesday, September 20, 2011

Thanks Commissioner. Commissioner Brenda Cassellius gets a double thank-you for (1) appearing at our SEE general membership meeting last Friday and doing a great job sharing her insights with us, and (2) for writing a great opinion piece in Sunday's St. Paul Pioneer Press. As everyone knows by now, the fact that some school districts are seeking increased revenue through ballot questions this fall has raised the hackles of a few legislators who believe (sincerely) that enough revenue was delivered to school districts in the 2011 omnibus education funding bill that districts should not need to seek more revenue.

As I wrote on the blog last week, there are a lot of reasons to dispute (politely) the assertions of these legislators and I'm not going to re-hash them. It was great to see Commissioner Cassellius weigh in on the issue as well in her opinion piece. I am especially appreciative of the line near the end of the piece where the Commissioner writes: "Minnesota's Constitution requires the state - not local school boards - to provide a "uniform system of public schools through taxation or other means." That constitutional mandate for uniformity is threatened as the quality of a child's education is growing increasingly dependent upon which zip code he or she lives in, the property wealth of that community, and the district's ability to pass a levy."

Thanks once again Commissioner!

More Property Tax Consternation. One of the hottest items of discussion since the end of the legislative session deals with the elimination of the homestead credit and its replacement with a homestead market value exclusion. The homestead credit was based on a calculation made at the state level that went directly to local units of government in the form of an aid against local property taxes. While separate from local government aid, it achieved a similar purpose in holding down local property taxes by supplying local units of government with state revenue. The homestead credit was first slated for phase-out and eventual repeal as part of Governor Ventura's "Big Plan" passed in 2001, but subsequent Legislatures extended the date of repeal. This year, the Legislature acted to finish it off. This was part of the initial tax bill that found its way to the Governor's desk and was vetoed and there is some verbal wrangling going on between the branches of government over whose "fault" this is.

Due to the elimination of the homestead credit, property taxes will rise by an estimated $261 million for Pay 2012. Where the increased burden will fall has not yet been calculated, but it will hit business property throughout the state harder than residential property, as the new homestead market value exclusion will take some portion of home value off the property tax rolls and pushing relatively more burden onto business property. The bottom line is, however, that everyone's property taxes will be going up and it will be a result of legislative action and not that of local units of government. It will be Christmas in November when those property tax notices hit the mailboxes!

Laurie Blake from the Minneapolis StarTribune outlines the policy change in this article. Needless to say, higher property taxes is just about the last thing that's needed in local units of government where the property tax sensitivity is already high. Stay tuned. I'll fill you in as more details become available.

Monday, September 12, 2011

Legislative Heat Over Levy Proposals. Paraphrasing the old saw "As goes Maine, so goes the nation," I guess when it comes to legislative opposition to this falls excess levy questions, it looks like it's "As goes Drazkowski, so goes Garofalo." Approximately two weeks ago, an e-mail was circulated by Representative Steve Drazkowski (R-Mazeppa) to his e-mail update subscribers outlining his assertion that school boards should withdraw their requests for voter-approved referendum levy increases this fall (the e-mail was vague on whether or not school boards should give the same consideration to straight referendum levy renewals where no increase was requested and I believe the Representative was not opposing those efforts). Central to Representative Drazkowski's case is his contention that school districts got enough revenue during the 2011 legislative session and that additional revenue generated through voter-approved levies is not needed.

Today, House Education Funding Chair Pat Garofalo (R-Farmington) echoed Drazkowski's sentimments in a story on Minnesota Public Radio. Garofalo was clear that he thought straight renewals in which no additional revenue was being sought should be approved, but like Drazkowski, he firmly believes that sufficient revenue was provided to school districts over the coming biennium, which negates the need for further locally-approved increases.

How are they mistaken? Let me count the ways. First off, while education did receive increases this past session (and the additional revenue was greatly appreciated), the lion's share of that revenue came through the automatic increase in the special education funding base revenue categories (basic and excess). A $50 per pupil unit per year increase in the basic formula was also included in the bill, but the rationale behind that move was to help school districts with the increased borrowing costs they will likely incur as a result of the increase in the aid payment shift. There was also additional revenue in the second year of the biennium delivered through the newly-established literacy aid and small schools revenue programs, as well as some one-time money to a variety of districts. So there is new money--considerable new money--but most of this money came through an increase in the special education formulas, which still won't be enough to totally defray additional special education costs in most school districts.

Second--and this has been an almost decade-long position of SEE--is that the level of funding accorded to school districts has no direct correlation to the true cost of education. A number of studies have been done over the past two decades trying to at least estimate the cost of educating a child in Minnesota and those studies all show at one level or another that Minnesota's education funding system is underfunded. Related to this problem is the fact that education funding from 2003 until the past session has been on a roller coaster. Two bienniums during the past decade saw healthy increases in either the basic or special education formula, but other than those exceptions, funding was fairly flat. There is no question that the basic formula has not kept up with inflation since the early 1990s and districts have been trying to play catch up, with voter-approved referenda being the only route to close the gap between the level of funding needed and the level actually needed.

Third, each district in the state has a different set of circumstances under which they attempt to pass a referendum levy. A number of districts are experiencing declining enrollment or, due to the housing crisis, not growing at the rate at which the estimated in the mid-1990s. In many cases, the decline in pupil numbers more than outweighs any increase in the basic formula, with districts coming up short in terms of revenue. Even in districts enjoying growth, there are often additional costs related to that growth in terms of increased transportation costs and capital needs and formula increases might not be enough to address those cost pressures.

Finally, it seems that some sing the praises of local control, but then decry it when local units of government attempt to employ it. I spoke with St. Cloud Times reporter Dave Aeikens this afternoon and expounded on this angle as he interviewed me for a story. School districts do not relish going before the voters for additional revenue, especially during these difficult economic times. The thought that goes into these ballot questions is considerable both in terms of how much revenue is sought and how the proposal is framed.

While I disagree with Representatives Drazkowski and Garofalo, they are certainly entitled to their opinion. School districts often seek the support of their local legislators when the try to pass referenda, so it would be hypocritical to tell legislators that they can't voice their concerns about or flat-out oppose these questions. I'm disappointed that these legislators aren't pointing out that most of the state-delivered increase is simply an updating of base level formula expenditures and instead make it look like every district in the state are in tall cotton. Needless to say, they've kicked off the discussion that will be taking place over the next seven weeks.

Here are some stories related to this topic:

Tuesday, September 06, 2011

School's In for Fall! Alice Cooper only recorded "School's Out" and for the life of me, I can't think of any song that hails the start of the new school year, but, accompanied by an anthem-quality song or not, the lion's share of Minnesota school districts began their 2011-2012 school year today.

I hope you all got off to a great start this morning. I'm sure that there was a stranded child here or there, likely due to an unmailed request for transportation, and my guess is a number of students, especially those entering high school or junior high, bounced around the hallways a bit in search of their hourly destinations. But that's to be expected.

What has also come to be expected is a political sparring match as class-sizes continue to go up while course offerings continue to dwindle. That the Minnesota education system is underfunded should come as no surprise to those who have been watching over the past couple of decades. Numerous studies, including one initiated by then-Governor Pawlenty in 2003, have shown that the basic formula has not kept pace with inflation. I will give critics of the current system their due in agreeing that the level of underfunding is based on the traditional system of education delivery and that some changes could reduce costs. That said, the level of underfunding is so dramatic (check out this graph from the SEE website: http://www.schoolsforequity.org/files/40608084.pdf), that no amount of reform save for sending about 20% of the kids home would put a dent into the funding shortfall.

New Cannon Falls' Superintendent Beth Giese sent me two articles today, one of which discusses the funding issues facing Minnesota schools. You can see several SEE schools listed in the story, which outlines fairly accurately the challenges being faced by a number of Minnesota school districts. Link: http://www.startribune.com/local/129240583.html

DFL house members held a press conference today, maligning former Governor Pawlenty and the Republican-controlled Legislature for failing to adequately fund schools and delaying payments to schools to balance the state budget. The House DFLers are planning a string of town hall meetings in school districts throughout the state to discuss the issue.

Here's a blurb from the StarTribune's Hot Dish Politics blog outlining the press conference. Link: http://www.startribune.com/politics/statelocal/129316618.html

And here's a Pat Kessler Reality Check from the Channel 4 six o'clock news regarding the issue.

Link: http://minnesota.cbslocal.com/2011/09/06/reality-check-whos-to-blame-over-education-funding/

The other article from the StarTribune that Superintendent Giese sent me deals with the elimination of the market value homestead credit (a state aid to local units of government) and its replacement with the newly-established market value exclusion. The net result of this exchange will be an increase in property taxes for pretty much everyone in the state, but property taxes in low-property wealth areas will increase more than they will in high value areas. This was one of the things that former Representative (and current judge) Ron Abrams, who represented Western Hennepin County, wanted to do and a phase-out was included in Governor Ventura's "Big Plan" of 2001. Well the proverbial something-or-other hit the metaphorical fan this past session and this exchange was made.

Because SEE is largely composed of school districts with much higher levels of property tax sensitivity than higher wealth districts, this is an issue of great importance to the organization. I will be spending a lot of time as the organization prepares for the 2012 legislative session working to find ways to mitigate the negative effects of this change.

Here is a link to the article by Jim Anderson regarding the elimination of the market value homestead credit. Link: http://www.startribune.com/local/east/129270323.html.