Some Thoughts on Martin Luther King, Jr. Day. I was reading this article from the December 17, 2009, issue of The New York Review of Books and came across this quote from an article by Dr. Tony Judt, professor of European History at New York University. The article was entitled "What is Living and What is Dead in Social Democracy?" It's a great article outlining two opposing mindsets regarding social organization and public investment: The Austrian School of Friederich Hayek versus the approach advocated by John Maynard Keynes.

The quote is as follows:

As in the eighteenth century, so today: by eviscerating the state's responsibilities and capacities, we have diminished its public standing. The outcome is "gated communities," in every sense of the word: subsections of society that fondly suppose themselves functionally independent of the collectivity and its public servants. If we deal uniquely or overwhelmingly with private agencies, then over time we dilute our relationship with a public sector for which we have no apparent use. It doesn't much matter whether the private sector does the same things better or worse, at higher or lower cost. In either event, we have diminished our allegiance to the state and lost something vital that we ought to share--and in many cases used to share--with our fellow citizens.

The crux of Judt's comments are aimed more toward the privatization of government services, but I found elements of the quote interesting and especially salient as I think of Dr. King and education. Dr. King helped extend the franchise to a broader range of Americans and education is the one service overwhelmingly provided by the state through local school districts. I don't subscribe to the theory that the state should provide everything or that it is infalliable in the services it does provide, but it is something that should ideally be an expression of our common identity as Americans, Minnesotans, or local government entity.

Looking ahead, as we tackle the budget challenge facing Minnesota, hopefully Dr. Judt's words will be heeded. Arguments as to what the size and scope of government are appropriate, but we should seek to strengthen our commitment to our shared identity in that process.

Further, education is the government service that all consume either directly or indirectly. Students obviously receive the direct benefit, but all of us are served daily by those who have graduated (hopefully) from some educational institution. Our future depends on a strong and effective education system. It is the one item provided by government that touches everyone and hopefully the year ahead will see a continued commitment from the state that will ensure that all children, as the SEE mission statement so eloquently states, "will have access to a high quality education regardless of where they live in Minnesota."

Enough pseudo-intellectual prattling. I'll be back again tomorrow.

Soo-prize! Soo-prize! Soo-prize! Gomer Pyle probably sums it up best here because I don't know if there's a more appropriate thing to say (or a more appropriate person--real or fictional--to say it) after finding out that there is yet another way in state statutes to mess up the cash flow of school districts. At Wednesday's Legislative Commission on Planning and Fiscal Policy, Commissioner Tom Hanson of Minnesota Management & Budget unveiled the latest discovery by the administration, a nugget put into law in 1986 in Minnesota Statutes 127A.46 as a temporary measure to deal with cash flow problems the state was experiencing. Rather than let the provision lapse, it was made permanent during the 1987 legislative session and has just remained there without garnering much attention. Until now, of course.

The thing that must be stressed here is that this is not a cut to the education funding base. That's about the only good thing that can be said about it. The provision requires that school aid payments be delayed if and when the state is in the position to short term borrowing problems burrowing into school district fund balances in the process. As in the case of the change in the aid payment shift, the state is once again using school districts to balance its cash flow issues. Not to sound cheeky, but why should we be expected to educate kids when we are doing such a good job as a bank?

As it has been explained to me, the state will likely withhold three payments to school districts (March 15, April 1, and April 15) and begin paying back school districts what they have borrowed from them, with full repayment of the borrowed portion made by the end of the fiscal year. This does not change the 73%/27% payment schedule that the Governor enacted through executive action last June. I look at it this way, much like Shakespeare placed a "play within a play" in Hamlet, state government is putting a "shift within a shift." Alas, poor cash flow. I knew it well.

Here are a few of the particulars. Dr. Tom Melcher has prepared an Excel worksheet outlining the maximum amount a district's cash flow could be affected due to this provision. The total revenue available to the state when the formula outlined in this provision is approximately $950 million. The state's cash flow needs are estimated to be about $550 million, or slightly less than 60% of the $950 million figure. Districts with fund balance per pupil of $350 or less are exempt from the provision and will not have aid withheld. About 90% of school districts have fund balances in excess of $350 per pupil (296 or 341) with the state average sitting slightly above $1,000 per pupil unit.

Fund balance politics have always been dicey for school districts. At least this is a great improvement over the fund balance reduction that was in place during the 1980s. Many of you may recall that fund balances could not exceed $500 per pupil unit without a district being subjected to a revenue reduction during that era of state budget woes. It is maddening beyond belief though that anyone would have the temerity to criticize school districts for carrying fund balances given the uneven path of school funding since 2001. Let's go over a quick review.

• 2001--Nice increase with $415/PU roll-in.
• 2002--Nice increase for second year of the biennium and no reduction after the economic downturn.
• 2003--Zero.
• 2004--Nada.
• 2005--Four Percent.
• 2006--Four Percent.
• 2007--Two Percent (Big money into special education).
• 2008--One Percent (Money into special education).
• 2009--Zilch.
• 2010--Zip (at best).
• 2011--Goose Egg in all likelihood.
• 2012--Flat-line.

In other words, more ups-and-downs than the biggest roller coaster at ValleyFair. Who could blame a school district for putting a little money away, especially given the latest economic downturn and the uphill battle a number of districts will face when it comes to renewing or adding to their referendum levies. But, smacko! Why bother employing sound financial practices when you are going to get punished for it?

I will be posting an abbreviated version of the spreadsheet prepared by Dr. Melcher on the SEE website, hopefully by this weekend. The spreadsheet will simply give two numbers: (1) a district's current fund balance per pupil unit, and (2) the maximum amount of reduction a district could suffer under MS 127A.46.

This latest fracas is making me so excited for the session to start (where's the sarcasm emoticon when I need it?). My guess is the relationship between the Governor and the Legislature will be about as cozy as the Leno-O'Brien squabble and is going to last a lot longer.

Rumblings on Formalizing the Shift. There's been a lot of whispering going around the last few days that the Governor is proposing to formalize the state aid payment shift and early property tax recognition shift that he implemented as part of his $2.7 billion in budget corrections after his administration and the Legislature could not come to an agreement at the end of the 2009 Legislative Session. The recent rumblings are undoubtedly a reaction to the temporary restraining order issued by Ramsey County District Court Judge Kathleen Gearin last week. As I reported yesterday, Judge Gearin's order has certainly thrown an element of uncertainty into the budget-balancing efforts of the last year and will cast a shadow over the additional efforts needed to balance

The Governor will be meeting with legislative leadership later this week. While I doubt a final agreement on formalization of the payment and property tax recognition shifts will be reached this far in advance of the Legislative Session, here's hoping that some progress is made toward an agreement.

Increasing payment shifts are never an optimum policy. Basically, the state is using school districts as a credit card when it employs these policies. However, formalizing the shift would provide school districts throughout the state with a better idea of what their cash flow will look like in the coming year and will avoid falling off a funding "cliff" in the event the shift would revert to 90%/10% automatically and leave all state funding other than the general education program in a murky state of "funded. . . .or not?"

Even if the payment and property tax recognition shifts are formalized, education funding is likely to go under the microscope for possible cutting to help solve the $1.2 billion budget gap facing the state for the remainder of the biennium. I will keep you posted.

The Stage is Being Set. We're one month away from the beginning of the 2010 Legislative Session, but the last week witnessed the issuance of a judicial decision that will likely frame the debate both leading up to the session and once it begins.

Judge Kathleen Gearin, chief judge of Ramsey County District Court, issued a temporary restraining order (effective November 1, 2009) that blunt, at least temporarily (it is a temporary restraining order after all), Governor Pawlenty's unalltoment powers. Judge Gearin's ruling relates to the Minnesota Supplemental Diet Aid program, which the Governor unalloted in late June, 2009, after the Governor and the Legislature failed to reach agreement on a budget accord for the 2010-2011 biennium.

You recall at that time, the Governor made a variety of decisions that either reduced or delayed state appropriations to a number of local governmental units and individuals. The primary effect on school districts was cash flow problems resulting from a shift to delay state aid to school districts from a 90% current year/10% subsequent year to 73% current year/27% subsequent year payment schedule. In addition, the governor also called for the early recognition of property tax revenue paid for education purposes, bringing the total amount of savings to the state to $1.7 billion in educational purposes. Again, it's important to be mindful that these actions do not constitute a $1.7 billion reduction to the education base. It represents a $1.7 billion delay in payments to schools that will still cause financial problems for school districts, but not anywhere near the extent of the total funding delay.

What does the Gearin decision mean in practical terms? As stated above, it is a temporary restraining order so it is unclear what would need to happen to make the ruling permanent. Further, the Governor plans to appeal the ruling, which may keep the original policy in place. Further, the Legislative Session starts a month from today and indications are that the Governor would like to formalize a number of his budget-balancing measures by seeking legislative approval. Of course, that will require give-and-take and that's a chasm that neither branch of government has seemed to successfully bridge over the past few sessions.

One comment from the Governor that I found a bit humorous was his assertion that the court was treading into the realm of the political with its action. To the extent that all policy has a political bent, he is absolutely right, but I believe what the Governor was referencing was that he believed the court was taking sides in a political fight. To the extent that the DFL House of Representatives' Finance Committee chair filed an amicus curiae with the plaintiffs, I suppose the Governor's argument can be be construed in that direction without being inappropriately stretched as well. At the same time, there can be no doubt here that the separation-of-powers doctrine that constitutionally defines Minnesota state government has been, if not totally subverted, less than ideally applied by the Governor's actions. Hopefully, the coming session will see a little more positive cooperation between the branches of government.

Stay tuned. I'm sure there will be more to this story.

MN Post Link on Gearin Decision: http://http://www.minnpost.com/ericblack/2009/12/30/14596/bulletin_judge_grants_order_temporarily_restraining_pawlentys_use_of_unallotment#comments_section

Session Preview. State Senate Majority Leader Larry Pogemiller (DFL-Minneapolis and Speaker of the State House of Representatives Margaret Anderson Kelliher (DFL-Minneapolis) were guests on today's Midday Program on MPR.

To listen to their comments, go to this link: http://http://minnesota.publicradio.org/radio/programs/midday/

For something more uplifiting, go to this link: http://http://www.hulu.com/. There's plenty there to lift your spirits!

When You Can't Sleep. . . I'm not recommending C-SPAN as a cure for insomnia, but I woke up early one day last week and watched a bit of the public affairs channel. The guest being interviewed on Washington Journal was successful Washington D.C. attorney and education reformer Kevin Chavous and I found Chavous' remarks interesting.

Like many reformers, Chavous isn't enamored with the current public education system and his rhetoric did feature several comments in the vein "it's all the fault of the teachers' union," but overall his tone was more realistic and congenial than many of parental choice and charter school advocates. Chavous clearly favors vouchers and touts Washington D.C.'s efforts in providing greater parental choice as proof that choice "works." The problem with Chavous' assessment is that he seems to base his opinion on the fact that parental satisfaction is higher in systems where there is a greater amount of choice. That is likely the case, but the same argument could be made that parents were satisfied with their schools--irrespective of achievement levels--prior to the development and implementatin of No Child Left Behind. This is a really slippery slope and to Chavous' credit, he did say that charter schools that are not performing well should be closed. That statement made me at least give me hope that there may some middle ground in the reform debate.

For more information on Kevin Chavous, check out his website: http://http://kevinpchavous.com/