Tuesday, January 22, 2013

Governor Releases Budget.  When I was a lad and I would get out of sorts, my mother would admonish me, saying "Don't be a fussbudget."  Well, while there are good things in the Governor's budget, I can't help but fuss over it more than a little bit, so I guess that makes me a fussbudget.

The basic parameters of the budget are very straightforward.  The Governor is enhancing revenue by approximately $3.5 billion. These increases come from a new tax bracket for those in the top 2% of Minnesota's income earners and an extensive broadening of the sales tax base (that is accompanied by a significant drop in the sales tax rate).  The breakdown from these increases is $1.1 billion from the income tax increase, $2.1 billion from the sales tax changes, and approximately $400 million in the form of increased corporate taxes. Of this $3.5 billion, nearly $1.5 billion will be dedicated to property tax relief in the form of a property tax refund/rebate of up to $500 per homeowner and a considerable increase in local government aid for cities and counties. The remaining revenue goes toward retiring the expected revenue shortfall of $1.1 billion to balance the budget and add approximately $1.0 billion in spending added to the base.

Here's where I start to fuss a bit.  There is NO (repeat, ZIP, ZERO, NADA) money for school levy equalization programs.  I was very hopeful that there would be something there for referendum or debt service equalization, especially after all the time devoted to the discussion (and inclusion) of these programs in the Governor's Education Finance Reform Working Group.  It was certainly a splash of cold water (more like a Polar Plunge) when I read through the budget documents searching in vain for some measure of property tax reform and relief relating to education levies.  Granted, this is just the starting line, but those of us who are concerned about the property tax disparities existing in the education funding system, it was an initial setback that we will have to work hard to overcome.

The Governor puts $344 million of new revenue above the base in education along with a lot of streamlining of formulas.  For the 13-14 school year, the basic formula is increased by $52 per pupil unit.  For the 14-15 school year, the kindergarten weighting is increased to provide greater access to voluntary all-day kindergarten.  Further, in 14-15, there will be an additional investment of $125 million in special education.  There will also be significant changes to the special education formula, replacing the current cost-reimbursement formula with a census-based formula for certain disability categories, pupil weightings for other disability categories, and an enhanced excess cost formula.

Much of the streamlining comes from recommendations made by the aforementioned Governor's Education Finance Reform Working Group.  The biggest single change will come in the form of new pupil weightings.  Rather than continuing with the byzantine array of pupil weightings that currently populate Minnesota's education funding system, the new weightings will be 0.55 for kindergartners (increased to 0.70 in 14-15 to pay for all-day kindergarten), 1.0 for students in grades 1 through 6, and 1.2 for students in grades 7 through 12.  The marginal cost pupil calculation that set district pupil weightings at 77% current year/23% previous year is eliminated and would be replaced by a separate declining enrollment categorical funding stream.

Other changes include:
  • $22 per pupil unit in new revenue for districts not participating in the QComp program to pay for costs associated with the new teacher evaluation process.
  • A simplification of the equity formula.
  • Recalculation of referendum per pupil unit from resident pupils to pupil units served.
  • Folding of gifted and talented revenue into the basic formula.
  • Increased flexibility in the use of basic skills revenue (and the roll-in of extended time revenue into the compensatory formula).
  • Requirement that most serving school districts and charter schools assume 10% of the special education costs associated with a student with 90% being assumed by the resident district.
  • Elimination of the aid reduction for employer retirement contribution rates.
  • A new set of hold-harmless categories to prevent any district from losing revenue due to the changes.
  • Increase from 5 years of eligibility for funding for English Language Learners to 7 years.
  • Changes to the integration revenue program that would reduce the amount of revenue available to school districts and distribute it on the number of children of color in participating districts as opposed to current law parameters.
  • Addition of graduation rate to the factors used to determine the distribution of literacy aid.
  • $44 million in early learning scholarships for pre-kindergarten children.
  • Provisions to pay back the funding shifts--both the aid and property tax shifts--in the next biennium.
So, all in all it's an ambitious set of proposals.  While there are a number of recommendations from the Governor's Education Finance Reform Working Group, much of the core of that set of recommendations did not make into the Governor's budget proposal.  The general education levy is not being proposed to be brought back.  There is (as I stated earlier) no increased commitment to greater equalization.  No roll-in of the referendum (at any level).  The absence of these changes will only exacerbate the disparities that exist both in terms of the revenue available and taxpayer burden experienced when comparing low property wealth school districts and those districts with higher property values.

I will be providing more input as it becomes available.  The budget is being presented by Commissioner Brenda Casselius and Dr. Tom Melcher to a joint committee meeting of the House Education Finance Committee and the Senate E-12 Division tomorrow morning.

Here is the link to the Minnesota Management and Budget Webpage with documents outlining the Governor's budget proposal (all documents can be downloaded):

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