Wednesday, March 18, 2015

Wednesday Just Flew By.  The Senate Education Committee discussed its version of the omnibus education policy bill this morning and will be taking amendments tomorrow.  The feedback on the bill was generally positive.  There will always be a few bugs in an omnibus bill when it is first released because so few bills are amended in the committee process prior to their incorporation into the omnibus policy or funding bill that the first opportunity to discuss serious amendment comes after the omnibus bill is released.  The House Education Innovation Policy Committee will also be marking up the first iteration of their omnibus education policy bill tomorrow, so I am prepared for a long day.  I don't get to the gym as often as I would like during the session, but I'll be putting in a few miles in the tunnel tomorrow keeping track of items in both bills.

There are some significant similarities between the House and Senate policy bills, most notably in changes to teacher licensure provisions as they pertain to teachers licensed in other states and the use of community experts.  The bills also contain most, if not all, of the technical provisions contained in the Governor's bill.  There will be discussion surrounding the testing issue.  Both the House and Senate are proposing a reduction in testing, but the Senate has gone beyond both the House and the recommendations of the working group convened by the Minnesota Department of Education in putting together its recommendations.  Most everyone agrees students are subjected to too many tests and many of these tests don't add much in terms of usable information to improve pedagogy.

After the bills are finished tomorrow, they will head to the funding division of each education committee to be incorporated into the omnibus funding and policy bill.  The deadline for the funding bill to be constructed is April 24, a full two and a half weeks after the Legislature returns from a week-long Easter/Passover break.  While most of the discussion that will take place after this week will center on revenue--both in terms of amount and distribution--I am certain policy differences will arise and will continue to be discussed.

Education Property Tax Bills Discussed in House Education Finance.  The House Education Finance Committee discussed four bills relating to the role of the property tax in the education funding system this afternoon.  First up was Chair Jenifer Loon's bill to eliminate the Student Achievement Levy (also known as General Education Levy Lite) that was passed during the 2013 legislative session.  This levy is set at $20 million, which is not an exorbitant amount of money in the whole scheme of things, but it looks enough like the old General Education Levy that some would like to squish it like a bug before it gets too large.  This bill is a classic example of "good news/bad news" depending on how you view it.  First off, getting rid of the Student Achievement Levy creates a $20 million revenue hole in the education funding formula.  That might not be too much of a problem to fill this year with such a robust budget forecast, but keep the Student Achievement Levy may come in handy if the state's economy were to ever experience a downturn.  On the other hand, if the House has a zero levy target, this $20 million in levy savings from the elimination of the Student Achievement Levy could be directed toward other programs into which the $20 million could be folded.  Increased deferred maintenance comes to mind as a possible destination for levy dollars.  It will be very interesting to see how this plays out in the House.  The one big plus of the Student Achievement Levy from SEE's perspective is that it is fully equalized and any program into which the levy dollars would be directed will not be fully equalized.  At the same time, other equalization programs could be enhanced to bolster a sense of fairness in the system and the levy could be moved to a different program that would actually infuse new revenue into schools.  Stay tuned.

Representative Steve Drazkowski was up next with SF 596, a bill that aims to provide relief to owners of agricultural property on school district debt service.  Agricultural property is not included in the referendum market value tax base, but it is included in the adjusted net tax capacity tax base that is used on debt service questions.  With skyrocketing agricultural land values, this has saddled owners of agricultural property with a pretty hefty share of the taxes paid on these questions when they are successful.  Like I testified today, fifteen or twenty years ago, all that would have needed to be done to solve this problem was to increase the debt service equalizing factors.  Unfortunately, changes in the student populations--they are declining in most of Greater Minnesota--accompanied by a steady rise in agricultural values have made this avenue a non-viable solution for those districts that have more than half of its total property base in agricultural property.  SF 596 takes a different tack in that it changes the tax base used for future debt service levies.  Under the bill, half of the tax base for these questions would be referendum market value and half would be adjusted net tax capacity.  To cushion homeowners and business owners from assuming too heavy a tax load resulting from the removal of agricultural property from half of the property wealth used to calculate the tax burden, the debt service equalization program would be enhanced.  If I had my druthers, the debt service equalization would be enhanced to an even greater degree, but we still have time to cross that bridge.

The final bill discussed today was Representative Tom Anzelc's bill--HF 1641--that would enhance the equalization factor for local option revenue for school districts with high levels of seasonal/recreational property and high levels of students who qualify for free or reduced-price lunch.  Most of these districts are in Northern Minnesota.  Like agricultural property, the value of seasonal/recreational parcels has continued to rise dramatically, which has sapped the value of the equalization formulas in these districts, forcing the entire burden onto local property taxpayers.  As witnessed by the high levels of free or reduced-price lunch numbers in many of these districts, the income of the residents does not match the value of the land in the district.  This is a double-whammy for districts in this situation.  In order to remedy the situation, Representative Anzelc's bill would hike the equalizing factor for districts in this situation and allow them to access the full $424 per pupil in local option revenue at a reasonable cost to their taxpayers.  Pine River-Backus is one district that finds itself in this unfortunate situation and Superintendent Cathy Bettino and Business Manager Jolene Bengtson provided excellent testimony that provided insight for the committee into the problems faced by these districts.  Like the agricultural property tax issue, the seasonal/recreational property issue falls unevenly throughout the state, leaving many districts at a huge disadvantage when it comes to the union of the property tax and education funding issues.  While SEE does not have a lot of districts that would either be considered "deep rural" with heavy concentrations of agricultural property or with heavy concentrations of seasonal/recreational property, our organization has always stood on the principal that students should have access to high quality education programs regardless of where they live in Minnesota and if the property tax system is an impediment to districts to ensure a reasonable shot at this goal, changes need to be made.

So thanks to all of the Representatives who came forward with these bills.  It's always an enlightening discussion when bills like these are heard and indications are the area where education funding and property taxation meet will receive considerable attention during the remainder of the session.

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