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."

St. Paul Pioneer Press link: http://www.twincities.com/opinion/ci_18912674

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.

StarTribune link: http://www.startribune.com/local/130092028.html

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:

MinnPost: http://www.minnpost.com/learningcurve/2011/09/08/31425/accounting_trick_explains_minnesota_schools_so-called_windfall

MPR: http://minnesota.publicradio.org/display/web/2011/09/12/republican-lawmakers-school-levies/

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.

A Bit of a Different Angle Today. Before I delve into the teacher evaluation piece of the bill omnibus education policy bill passed on Tuesday night/Wednesday morning, I wanted to blog about two money items that found their way into the bill. In Article 1, there are two sections (Sections 17 and Section 36, Subdivision 10) that distribute revenue to select sets of school districts.

Section 17 is the newly-established small schools revenue that will be part of the general education formula. Districts (charter schools are not eligible) with less than 1,000 pupil units will receive revenue on a sliding scale (the further a district is below 1,000 students the more revenue it will receive) with a maximum benefit of approximately $522 per pupil unit (this example would be the extreme case as it would be a district with one student). Cyrus is estimated to be the smallest school district in the state with an adjusted marginal cost pupil count of 36 during the 2012-2013 school year, making its benefit approximately $501 per pupil. The small schools revenue formula will be a permanent part of the general education formula going forward. While I'm not nuts about it one way or the other and it will augment current sparsity revenue for a number of districts, I am aware that smaller districts have higher marginal costs per pupil and this formula should be helpful in meeting those needs.

Subdivision 10 of Section 36 proposes a formula to distribute one-time money to the 20 largest districts in the state by augmenting the compensatory formula for any of these districts that currently receive less than 1,400 per pupil in compensatory revenue (in other words, every district in the top 20 in terms of student population except for Minneapolis and St. Paul).

There is an interesting dynamic at play here, especially at the bottom of the top twenty. For the current school year, Stillwater ranks 20th and Minnetonka ranks 21st in terms of students served. According to the February forecast, those two districts change places for the 2012-2013 school year. I find it a bit odd that a swing of 111 students to the good for Minnetonka and 325 in the opposite direction for Stillwater is going to cost Stillwater a gigantic chunk of change. I guess that shows what advertising on MPR will do for a district and why having a huge charter school in your district siphoning off students isn't. It's also a bit of a thumb in the eye, given Minnetonka is a district--and the only one in the top 20 in terms of student count for 2013--that is over the current referendum cap and Stillwater is more than $400 per pupil below the cap. I'm not saying Minnetonka doesn't need more revenue (all districts do), but it just kind of smacks of lunacy. Of course, it's not the 2012-2013 school year yet and who know what each district's pupil count will be when that rolls around.

I'm not going to go on-and-on about these two provisions, but they show once again why there is a need for comprehensive funding reform that achieves both greater adequacy and greater equity. What we see here are two piecemeal solutions that aim to do something in terms of funding needs for two distinctly different sets of districts. I'm not going to cry "#$!^*#+!@ POLITICS!" because this is no more partisan or political than what's been going on since 1858. Education funding, both in terms of level and distribution, is an extremely political process. Maybe someday I'll write a book about it, but for now, just take my word for it.

What is frustrating is that once again, the bulk of low-property wealth districts throughout the state find themselves on the outside looking in when it comes to revenue delivered through the framework of state and local education funding formulas. For the past school year, the state average per pupil general education funding was $7,046. For the top 20 districts in terms of student population, it was $7,364 (all four SEE members in this group are well below this average and all but one below the state average as well). The per pupil average for those districts below 1,000 pupil units is $7,019 per pupil. For SEE members--all but three with more than 1,000 and only four in the top 20 pupil unit count for the 2010-2011 school year--the average is $6,570.

I'm not going to go off on a Dennis Miller rant here. Even with the 60/40 shift, the education community made out better than a lot of other parts of state government this past session. The $50 per pupil unit increases in both years of the biennium are welcome. The new literacy aid program will send new revenue to all districts in the state. Maintaining current law growth factors for special education is important and welcome. The maintenance of local government aid at current law levels will also help a number of SEE districts by preventing the property tax atmosphere from becoming even more hostile and disadvantageous when compared to higher wealth areas. So it isn't all bad.

But it is still frustrating that the King Kong-sized gorilla in the room is being ignored. SEE districts continue to fall behind for two very specific reasons. First, the array of general education formulas continues to become more concerned about differences that exist between districts as opposed to having the basic formula be a closer reflection to the cost necessary to fully educate a student in the 21st century. Second, the failure to have the equalization factors for the referendum and debt service programs keep pace with property growth makes the referendum a less viable tool for low property wealth districts with each passing year.

Briefly, the plight of low property wealth school districts remains largely unsolved. After a lot of progress in the early 1990s in working to equalize property tax levies, low property wealth districts are now facing increasing challenges in both of their standing in terms of state formulas and an increasingly unbalanced property tax system and it's been hard for us to get our hands back on the dice.

Summary Part Deux. On to the reform part of the discussion. As many of you recall, HF 934 and HF 1381 (the two legislative conference committee reports that were vetoed) contained a plethora of measures that, in the eyes of legislative leadership, aimed to reform Minnesota's education system. The "Florida Agenda" (A-F grading system, opportunity scholarships for students in chronically under-performing schools, and retention of third-grade students who do not pass the third-grade reading test) and teacher evaluation were large parts of those two bills.

I don't know if I would put the elimination of integration revenue and the transfer of state revenue in that program to a statewide literacy program into the reform category, but it clearly re-focused a significant portion of state revenue into a, if not different, more refined focus.

SF 934 also incorporated comprehensive changes into the teacher bargaining process, by limiting the months in which school districts could bargain with teachers, creating a process by which school districts could force employees into binding arbitration, and putting the "qualified economic offer" process into law.

So, how did these items fare? The "Florida Agenda" headed south faster than a Minnesota snowbird in November. Where some agreement in terms of the literacy portion of that agenda was reached was in the creation of a more formalized set of standards and procedures that make reading proficiently be the end of third grade a more clearly defined priority. Under the bill approved last night, every school district must adopt a plan to have every child reading at or above grade level no later than the end of third grade and further requires districts to provide reading intervention to accelerate student growth.

The teacher bargaining changes, except for the repeal of the January 15 negotiating deadline and aid penalty, did not survive the negotiations between the Legislature and the Governor.

The place where some change may be coming is in the area of integration revenue. The initial legislative initiative on integration revenue that was part of the vetoed education funding bill called for an elimination of the aid portion of the program, effective for FY 13 (the 2012-2013 school year). Districts participating in integration efforts would have been able to continue to collect the levy portion of the program, but the aid would have been transferred into a statewide literacy incentive aid program.

In the agreement reached earlier this week and approved yesterday, the integration revenue program as we know it will be sunset after FY 13. In the meantime, the Commissioner of Education is directed to convene a 12-member task force to develop recommendations for re-purposing integration revenue. The task force's report will be submitted to the Legislature by February 15, 2012. While the current integration revenue program was extended an additional year, the final agreement did create the statewide literacy incentive aid program, which will expend $29.1 million (total entitlement is $48.6 million adjusted for 60%/40% payment schedule--get used to doing those calculations) during the 2012-2013 school year. This aid will be distributed to each district on the basis of $85 times the percent a district's of third graders meeting or exceeding proficiency in the third grade reading MCA and $85 times a district's percent of fourth graders making medium or high growth on the reading MCA.

The inclusion of literacy incentives aid is a coup of sorts for the Senate and is a bit of a surprise in view of the fact that it was initially funded through the elimination of integration aid. With integration surviving for an additional year, I was surprised that this program was also established given the budget constraints. Of all the reforms in this year's bill, I believe this one will have the greatest effect on the education system. It fits comfortably with the literacy plan requirement, but in order for all of these gears to work together, proper training and staff development are going to be key.

As someone who has long had interest in response-to-intervention and other research-based reading programs, I believe that both the framework set up in the bill to promote reading by third grade and the aid program to provide districts with the funding necessary to properly promote this goal will go a long way in strengthening achievement in the early grades and ultimately lead to greater student success as students continue through the system.

I'll be writing about the teacher evaluation section of the bill in my next entry.

Summary Part 1. I don't know how many summary and/or perspective entries I am going to post on the 2011 E-12 funding and policy bill, but it's going to be more than just this one. There is a lot in the bill; some of it to laud, some of it to bemoan, and some of it to simply accept as part of what had to be an agonizing negotiating process on the part of the chairs of the education committee and the administration.

Regardless of how one feels about the increase in the shift to 60%/40% (I hate it), it's impossible to dismiss this bill as a total pox upon the state's education community. There are some good things in the bill. For those of us who have ridden the state budget roller coaster over the past decade, we remember the 2003 session when education was funded not at current law base levels, but well below them. In 2003, the basic formula remained flat and the special education growth factors were repealed, making the only increase school districts would receive dependent on whether or not their free-and-reduced price lunch numbers had grown or if they could add to their existing (or non-existent) operating levy authority. This bill does put $50 per pupil on the formula in each of the next two years and while a good chunk of that is going to go to helping pay interest costs on borrowing, it could have been worse (I'm going to be saying that a lot for the next few weeks and months).

The bill also retains the special education growth factors at the current law levels of 4.6% for the basic program and 2.0% for the excess cost formula. Special education costs continue to rise and, as all of you know from my years of preaching on the subject, moving money out of special education only increases the cross-subsidy from the general fund to pay for special education costs. The most responsible way to deal with special education funding is to have as much funding for special education programs come through the basic special education formula in an attempt to keep a lid on the cross-subsidy from the general fund and it's heartening to see the Legislature and Governor take that approach.

There is also a considerable amount of mandate relief in the bill without (at least at first glance) a mountain of new mandates replacing those that have been removed (which is far too often the case). The mandates being repealed or modified are:

• The January 15th negotiating deadline and aid penalty (repealed).
• The maintenance-of-effort provision in the safe schools levy for counselors, social workers, psychiatrists, and school nurses (repealed).
• A two-year suspension of the 2% staff development set-aside (temporary).
• An increase in the population necessary for a district to maintain a community education director from 2,000 to 6,000 (modified).
• Requires the Commissioner of Education to approve school district fund transfer requests provided said requests do not increase state aid entitlements or local property taxes for the next two fiscal years. Transfers from either the food service or community service funds are not permitted (temporary).

I'll be back with Part 2 in a bit.

It's 2 AM. And if it were 3 AM, it would be a lyric from a song by Matchbox 20, but beggars can't be choosers at this time of night. At the very least, evoking another lyric from a classic pop tune, we are "in the wee, wee hours of the morning."

The House and Senate have been hard at it since early evening. Both bodies convened at approximately 3 PM and starting working in earnest after a recess. Bills have been filtering onto the House floor ever since (as all of these bills must originate in the House), passing, and then proceeding to the Senate for final approval. The agreement struck between the Governor and legislative leadership stipulated that no amendments would be offered and that agreement has been honored.

Most of the bills, the bonding bill and the Legacy bill the exceptions, have passed on almost exact party-line votes. I have been surprised by the relative lack of speechifying, although the debate on the tax bill qualified as spicy.

The K-12 education finance and policy bill has now been posted and can be found at this link:

Link: http://www.house.leg.state.mn.us/ss2011/11-3673.pdf

I breezed through it quickly and will give you the following highlights with a more in-depth analysis to follow tomorrow. Here are the most notable aspects of the bill:

• $50 per pupil on the formula in each of the next two years. Stated purpose of the increase is to help school districts with increased borrowing costs that will result as the shift is increased to 60%/40%.
• Special education funded at current law levels, with growth factors of 4.6% and 2.0% for the basic and excess cost formulas respectively.
• Repeal of January 15th negotiating deadline and accompanying aid penalty.
• Repeal of the Maintenance of Effort provision in the safe schools formula as it relates to counselors, school nurses, school social workers, and school counselors.
• Suspension of the 2% staff development set-aside for the next two years.
• Establishment of a small schools formula as part of the general education formula for districts with less than 1,000 students (Charter schools are not eligible to receive revenue under this proposal).
• Establishment of a literacy aid program, with half of the aid based on third grade passage rates and half of the aid based on the growth rate between students' third and fourth grade scores.
• Teacher and principal evaluation (the teacher evaluation is radically changed from what was contained in HF 934, the omnibus education finance bill passed during the regular session).
• Increase in the career and technical levy.

There's a lot more here--the bill runs a full 141 pages--than I thought there would be when the larger budget deal was announced last week. I will go deeper into the bill tomorrow, but I wanted to provide readers with at least a cursory look at the bill tonight.

And There Now is Something to Report. The special session will start today at 3 PM. No idea whether or not business will be concluded by the end of the day.

The education funding/policy bill has yet to be posted. Below is the site where the bills are being posted as they become available. I will be at the session, so don't hesitate to contact me if you need an update.

Link: http://www.house.leg.state.mn.us/ss2011/

Not a Lot New to Report. It's Monday and I thought there was supposed to be a special session. Alas, no such luck and the legislative sausage machine seems to have blown a fuse. And, truth be told, I half-expected things to transpire in this way. There's a ton of information to process and a lot of bargaining remaining.

In presenting his budget earlier this year, the Governor came with pretty much an "as is" budget. He did some cutting, but he also had a fairly hefty tax increase included in his figures. The Legislature passed an "all cuts" budget, which the Governor almost completely rejected. Further, in his veto messages, he pointed out items that he objected to without suggesting alternative measures. This leaves a lot of negotiating to be done.

Many of the provisions to which he has objected are simply non-starters for the Governor and are items that simply aren't going to become law. I can think of several pieces of the Legislature's education package to which the Governor objects and is probably deeming non-negotiable (vouchers, elimination of integration revenue) and my guess that a similar pattern is happening in other budget areas.

I can't say whether this happened or not, but Blois Olson in his Morning Take column reported that Representative Pat Garofalo (R-Farmington), chair of the House Education Finance Committee, blew up a bit during his negotiations with Governor's staff on the education finance bill. Both the House and Senate passed sweeping education reforms this past session and it's my guess that Garofalo's fit of pique (provided the reporting was accurate) likely centers around the administration's reluctance to accept a very abbreviated list (perhaps none) of these reforms.

Headway is being made, as two bills--Public Safety and Transportation--appear be put to bed, but that leaves another 8 to go.

Here is the latest from the StarTribune and MPR on the special session:

StarTribune: http://www.startribune.com/politics/statelocal/125722713.html

MPR: http://minnesota.publicradio.org/display/web/2011/07/18/shutdown-budget-agreement-details/

Making Sense of it All. I thought the StarTribune opinion section summed up things nicely yesterday (Sunday) with articles by Lori Sturdevant and D.J. Tice. Lori Sturdevant zeroed in on the need for re-design of how state services are delivered, especially in view of the fact that whoever controls the Legislature after the 2012 elections is likely going to be staring at a deficit and will have even less ability to "move sideways" as this Legislature has.

Tice covers the political fallout and points out that everyone is on a slippery slope after the shutdown, but that the fact that Dayton has three-and-a-half years left on his while the entire Legislature must stand for election in 2012 to accommodate re-districting gives the Governor a bit of an edge. That would be the conventional wisdom, but I don't think anyone comes out of this mess unscathed and my guess is in the more conservative parts of the state, Governor Dayton voodoo dolls may be flying off the shelves.

From my vantage point, the only thing that is most disappointing is that decision-makers chose to punt once again instead finding a middle ground that was palatable to all parties, which is easy for me to say because I'm not in the trenches.

Sturdevant Article: http://www.startribune.com/opinion/125667043.html

Tice Article: http://www.startribune.com/opinion/125667008.html

Monday's MinnPost also did a good job of outlining what lies ahead both in the immediate and short-term futures. Here are three stories that outline some of the issues that are holding things up.

Doug Grow story (not the comments about the education provisions): http://www.minnpost.com/stories/2011/07/18/30096/bogged_down_in_budget_details_two_sides_repeat_a_familiar_refrain_were_close

Jeff Stevens Guntzel story on what happens if LGA is cut (which it will likely be): http://www.minnpost.com/severnsguntzel/2011/07/18/30085/bracing_for_the_next_round_of_lga_cuts_and_property_tax_hikes

Beth Hawkins on affects to school districts: http://www.minnpost.com/learningcurve/2011/07/18/30083/with_budget_deal_schools_will_feel_the_pain_--_but_it_could_have_been_worse

Tom Petty Soundtrack. Rumor has it that Tom Petty isn't too happy about Michelle Bachmann using his song "American Girl" as background music at her rallies. But it's not just Congresswoman Bachmann for whom a Tom Petty song might be appropriate these days. Petty has always been one of my favorite artists (I saw him 4 or 5 times live) and his stable of songs contains a number of titles that are quite descriptive of the Minnesota government shutdown.

Let's go over the list in Kasey Kasem fashion with these short-distance dedications of Tom Petty songs going out to the following folks:

"Breakdown" to describe the shutdown itself.

"I Won't Back Down" for legislative leadership and the Governor.

"Free Fallin'" to describe more than a few government programs.

"The Waiting" describing what most of us lobbyists have been doing.

"Even the Losers" for those interests that didn't fare so well.

"Into the Great Wide Open" for Minnesota as it heads into a new set of challenges.

"Don't Do Me Like That," for just about everyone at some time during the past session.

Tom, you just have to quit writing such snappy songs with such malleable titles.

Saturday Morning Confusion. I couldn't resist using the title of that old Bobby Goldsboro song to describe what is likely the situation over at the Capitol (or should I say Dome of Silence). Anyway, it appears from newspaper reports that not everything is quite done--especially on the state departments appropriations bill--and that may prevent the Governor from calling a special session on Monday. I guess we'll just have to wait and see.

One thing that has been predictable and I'm sure the rhetoric will fly when the special session is the hubbub over the policy measures that are near and dear to many Republicans that will be absent from the final bills. Some of these policy measures will likely survive the negotiations, but my guess is many will be absent. Whether one agrees or disagrees with these measures, the disappointment is real and the complaints regarding their omission is understandable.

StarTribune: http://www.startribune.com/politics/statelocal/125672013.html

MinnPost (Budget Deal): http://www.minnpost.com/stories/2011/07/15/30073/some_questions_--_and_answers_--_about_minnesota_budget_deal_and_what_happens_next

Stadium Deal Out. I know Zygi Wilf, in his quest for a stadium, has to use every opportunity to press his case, but I thought he showed about the same level of judgment as Brett Favre throwing into triple-coverage when he stated that "the time is now" for a stadium deal. As my mother drilled into my head countless times as a youngster (it took more than a few admonishments), "there's a time and a place for everything."

The time for a Vikings' stadium is not now. The Governor and Legislature have just come out of an historic deadlock and, believe me, the camel has as much straw as it can possibly carry.

In fairness to Wilf and company, it's hard to tell when the time will be right. After swimming in these hyper-partisan waters and taking a passel of very tough votes to pass the budget, my guess is most members of the newly-minted majority will want to steer clear of St. Paul until the 2012 session convenes. That clearly doesn't help the Vikings case and while fairness isn't a term often used to describe the plight of professional sports franchises, the team really is having a hard time getting an opportunity to make a clear, unemotional case as to why a stadium deal is in the state's best interests.

A complicating matter is that if a number of policy measures are forfeited by the Legislature in the current budget deal, what would prevent them from passing them all again during a special session, even if that session were convened with the sole intent of endorsing a stadium deal? Once the session is called, the Governor loses control of it. That's the risk of special sessions and one the Governor likely won't take unless he has full assurance from legislative leadership that the only matter before the legislative bodies will be the stadium.

Just something to watch as we move ahead after this special session ends.

I'm Following Along at Home (Like Everybody Else). From what I can gather, there have been a few speed bumps as the various legislative chairs and representatives of the Governor's office attempt to put together their bills by 10 PM this evening. While I don't believe 10 PM is a hard and fast deadline, it is the Governor's hope that work will be completed on all the appropriations bill by that time and that the bills could go to the Revisor's of Statutes office tomorrow for formal drafting. This would allow him to call a special session on Monday at which these bills could be passed.

At this juncture, it appears there will be multiple bills: the tax bill and appropriations bills from each of the remaining appropriations divisions (all but Agriculture). The StarTribune reported that the negotiations on the state departments bill broke down this afternoon, as Senate Chair Mike Parry (R-Waseca) became frustrated over the administration's reluctance to agree to include a number of policy provisions, viewed by the Senator as reforms, in the final bill.

As I pointed out yesterday, there are a number of potential stumbling blocks that will likely slow down, but not derail, the final negotiations. One has to remember that the bulk of the negotiations between the Governor and legislative leadership has dealt with the overall budget framework in terms of the aggregate spending level for state government and the level of revenue and the manner by which it will be raised. There was little, if any, discussion of particular reform provisions passed by the Legislature since the delivery of the veto messages outlining the Governor's objections to these provisions.

So, on we go.

StarTribune link on state government bill: http://www.startribune.com/politics/blogs/125662488.html

Everyone is "Disappointed." That seems to be the gist of most of the comments coming from both the Governor and legislative leadership. I've always thought a good compromise was when everyone wasn't happy that they didn't get everything they wanted, but were happy with what they got. It seems to be the converse here, as everyone is relieved the shutdown is over and agreement has been reached, but disappointed content of the compromise. Should make for an interesting 2012 if nothing else.

The Good News is We're Off the National Radar. At least for now. My guess is we'll probably be back on it in two years as the budget agreement leaves a number of unanswered questions regarding how it will correct structural problems in the state budget and affect state government/local government relations in the immediate and long-term future. It is extremely difficult to gauge what the effects of the agreement will be.

How hard? Whenever I come to a situation like this one, I usually pull out one of my favorite quotes from former baseball great Ted Kluszewski. It goes like this:

How hard is hitting (a baseball)? You ever walk into a pitch-black room full of furniture that you've never been in before and try to walk though it without bumping into anything? Well, it's harder than that.

That's about the same way I feel when I contemplate the policy and political ramifications of this deal. About the only thing that can be said with some measure of certainty is that the final budget package will get few, if any, votes from DFL legislators. Reaction from the House DFL caucus to the budget agreement would best be described as cool (if it were that warm). Clearly, the increase in the payment shift is troubling, along with the unprecedented "bonding for cash" set-up.

A MinnPost story on the House DFL's reaction can be found here: http://www.minnpost.com/stories/2011/07/15/30054/dfl_legislators_may_be_the_most_dismayed_with_budget_deal/?utm_source=MinnPost+e-mail+newsletters&utm_campaign=ef68936d18-Newsletter_7_15_117_15_2011&utm_medium=email

I have yet to see much in terms of reaction from either of the majority caucuses.

School Shift Blues. When the question of increasing the shift is set before the education lobby, we try to be Solomonic. It's almost like, "Well, you can slow down the delivery of food to the baby, but please starve the baby." Pushing the metaphor along a bit, we go out and scramble to meet our caloric needs (in a fiscal, not physical sense) which inflicts increased borrowing costs on us, but in the end, we do get our money. But it ain't fun. And it's getting less predictable. And it ain't easy.

Beth Hawkins over at MinnPost, who has been doing a wonderful job covering education issues for the online paper, filed this story regarding the increase in the shift and how it may play into the Governor's education funding reform package that was assembled last spring.

Link: http://www.minnpost.com/learningcurve/2011/07/15/30057/latest_school_aid_shift_a_good_reason_to_revisit_plan_to_revamp_funding/?utm_source=MinnPost+e-mail+newsletters&utm_campaign=ef68936d18-Newsletter_7_15_117_15_2011&utm_medium=email

Whither Policy? Or should the title be "Policy Withers?" At this point, the education community has been on the outside looking in as it pertains to the negotiating process, as it should be if the folks beneath the Capitol dome want the shutdown to end quickly. A group of education management organizations, including SEE, have sent a letter to the Governor and legislative leadership urging them to include a number of measures in the final package. Foremost among these items is the mandate relief measures that were included in the omnibus education finance and policy bills. Hopefully, that will help keep some of these items alive.

And Just Like That. The proposal sent by Governor Dayton to legislative leadership has been accepted and now all that has to be worked out are the details as I laid out in the last post. I will fill you in as items become available.

StarTribune Link: http://www.startribune.com/politics/blogs/125600108.html

Prelude to a Deal? Governor Dayton today took a big step toward ending the half-month government shutdown by agreeing, in part (and let me stress, in part), to an offer forwarded by legislative leadership during the last few days of June. Under the framework of the deal, there would be no tax increase. Instead, the $1.4 billion in revenue needed to close the budget gap (along with $3.6 billion in cuts) would come from setting the education aids payment shift at 60%/40% (up from 70%/30% last year and 90%/10% currently proscribed by statute) and bonding for cash based on dollars currently in reserve due to the tobacco settlement. Each of these items would generate approximately $700 million. In order to help school districts with the increased costs of borrowing, $50 per pupil would be placed on the education basic formula in each of the next two years.

The Governor has also asked that a $500 million bonding bill be part of the deal and that a number of policy provisions sought by the Legislature be dropped.

Where confusion and potential stumbling blocks exist is in the yet unspecified policy provisions either contained in legislative spending bills or discussed as part of the negotiations that were held in June that the Governor has stated he wants dropped. At this point in time, it is unclear whether that means all policy provisions will be dropped and that current law will remain in place except where changes were made and accepted during the regular legislative session or that provisions that the Governor does not support will not be accepted from this point forward in the negotiations. The former is clear, but the latter leaves a massive gray area, as we don't know where exactly the Governor stands on a number of provisions in the education funding and education policy bills. He has provided some insight in his veto messages on those bills, but there may be a number of other provisions in those bills that he also finds troublesome but has yet to point out.

Hopefully, the mandate reform that we worked on during the 2011 session will survive. It would be extremely unfortunate if items like repeal of the January 15 negotiating deadline and the associated aid penalty, repeal of the 2% staff development set-aside and the 50%/25%/25% staff development distribution formula, and the maintenance-of-effort requirement for school safety revenue expenditures on school guidance counselors, school psychologists, and social workers were not allowed to become part of the final education policy package. A number of education groups worked very hard on all of these provisions this past session and even though schools will likely not see the massive cuts that will be experienced in the area of health and human services, no one is going to be swimming in money going into next year and the increases in the payment delay will drive up borrowing costs to ensure cash flow needs are met. Given these facts, mandate relief would be timely. In addition to mandate relief, increased flexibility by allowing transfers between budget areas for the coming biennium would also be welcome.

Progress in the area of teacher bargaining would also be of assistance to school districts as they seek to hold down long-term costs going forward.

Where the Legislature may have to gulp hard before accepting the Governor's offer is on the number of education reforms they have sought during the 2011 Legislative Session. What I call the "All Things Florida" reforms (3rd grade retention for below grade-level readers, opportunity scholarship or vouchers in common parlance, and the A-F grading scale for school buildings) and the comprehensive teacher evaluation language may be the items the Governor wants to see gone from the negotiations and those proposals are near and dear to a number of legislators. Would desire to retain those reforms prevent the Legislature from making a deal? Hard to say, but probably not. If they are dropped, look forward to a wild start to the 2012 Legislative Session when all of these things may once again find themselves on the Governor's desk.

Here are links on Governor Dayton's proposal:

MinnPost: http://www.minnpost.com/politicalagenda/2011/07/14/30012/dayton_offers_to_end_shutdown_by_accepting_gop_plan_--_with_conditions

StarTribune: http://www.startribune.com/politics/blogs/125567238.html

Stay tuned. Things will probably be moving fast.

A Malodorous Premonition. The Ghost of State Shutdowns Yet to Come visited me in a weak moment the other day as I thought, "What could be the worst thing that could possibly happen in terms of education funding?" Here's what I came up with.

Increasing the payment shift has been discussed and I would not be surprised if that happened, but the rest of this scenario is PURE CONJECTURE on my part. Not much has been said about the fate of the education policy provisions passed by the Legislature and vetoed by the Governor during the regular session, but what will be the Legislature's position on the items they worked upon if and when the framework?

Coming out of the legislative session, both the Legislature and the Governor were "around" the base amount for the coming biennium in terms of education spending. As stated above, the Legislature's approach also included a number of proposed reforms including A-F grading of schools, low-income scholarships for students in failing schools in cities of the first class (vouchers), the retention of 3rd graders who do not pass the state third-grade reading test, and annual teacher evaluation (part of which would be based on the achievement levels of students on standardized tests).

I thought, "What if there gets to be a tug-of-war over these reforms, with the Legislature being unwilling to maintain funding at the level contained in the bill passed during the session in the absence of these reforms?" In other words, the Governor, and the education community somewhat by extension, would have the choice of "revenue at base level with reforms deemed contentious and controversial" OR "revenue below base level and little or no reform."

I frankly have no idea and no inside information of what is likely to happen in regard to policy provisions as negotiations continue (when they do continue) and what I've done here is merely point out the worst-case situation. Stay tuned, we'll hopefully know soon.

Interesting Development at National Education Association's Annual Convention. In a bit of a surprise, the National Education Association (NEA) voted this past weekend to allow for student achievement levels to be used in the evaluation of teachers. As many of you are aware, this has been a huge barrier to progress in the area of teacher evaluation between the teaching profession and education reformers. While continuing to shy away from the use of standardized test scores in developing teacher evaluations, the NEA's move clearly signals movement by teachers on this issue.

New York Times link: http://www.nytimes.com/2011/07/05/us/05teachers.html?pagewanted=all

The New Republic link: http://www.tnr.com/article/politics/91632/teachers-education-nea-obama-convention

All Quiet on the Shutdown Front. Nothing new being generated on the shutdown front thus far today. It's probably more instructive to turn our eyes to Washington, D.C., and note that the latest jobs report appears to have emboldened the "no new taxes" group as they are pointing to continued sluggish growth on the jobs front to decry efforts being made by President Obama to construct a comprehensive budget proposal that would raise the debt ceiling, cut government expenditures, and raise some taxes. The news on jobs will likely stunt that effort, which in turn, will stunt any proposal to raise taxes in Minnesota as part of our budget solution.

Here's a story on the latest in the national discussion from The Huffington Post: http://www.huffingtonpost.com/2011/07/08/obama-jobs-report-unemployment-debt-ceiling_n_893251.html

A lot of folks go out of their way to trash Arriana Huffington and her journalistic endeavor (and yeah, it leans a bit to the left), but the site is timely and well-written.

Ad Wars. MinnPost ran an interesting article today about the ads that are popping up on television, radio, and billboards that aim to apportion blame for the current shutdown. It's difficult to tell whether the ads will make much of a difference in bringing the shutdown to conclusion, but my guess is there will be some hard feelings simmering all the way into next year's election as a result of them.

MinnPost Article: http://www.minnpost.com/stories/2011/07/08/29843/shutdown_battle_moves_to_billboards_and_radio_ads_to_pressure_both_sides_but_are_they_counterproductive

An Interesting Enterprise. Rosemount-Apple Valley-Eagan school board member Kevin Sampers stopped by my office this week to demonstrate his new web-based business Naiku. Naiku is a technology-based assessment program that helps students, teachers, and administrators find ways to promote both higher levels of achievement and more effective means of staff development. It's a very interesting approach to a number of challenges facing school districts and from the looks of it could serve as a very effective tool to bring together student achievement and teacher evaluation in a way that is far less cumbersome than a number of the proposals currently being discussed.

Here's a link to the Naiku website: http://www.naiku.net/

Clarification on a Story from Yesterday. It didn't strike me until this morning, but it looks like the "third way" panel headed that released its recommendations yesterday is advocating for a 90%/10% payment schedule for school aids. I don't know that for sure, but the recommendations called for $3.6 billion in cuts and $1.4 billion in new revenue and didn't specify whether the 70%/30% shift level proposed by the Governor in his budget and approved by the Legislature in its K-12 funding bill should be adopted. What makes me think the group wants to remain at 90%/10% is that it specifically decried further use of accounting gimmicks and shifts.

Special Education Ruling Handed Down. Judge Kathleen Gearin ruled today that special education funds will flow in addition to general education revenue. Last Friday, the Minnesota School Boards Association and the intermediate school districts appeared before Special Master the Honorable Kathleen Blatz, petitioning her to allow special education revenue to continue to be paid out to school districts. During the 2005 shutdown, these funds did not flow, although it made no difference to school districts due to the abbreviated nature of that shutdown.

I am not an attorney, but I was not surprised by this ruling as it appears to be in line with the framework outlined by Judge Gearin when she described how she would define a service as "essential." It was difficult to discern from news reports whether both school districts and intermediate districts would receive their special education revenue, but Judge Gearin's ruling is clear that all special education revenue--both state and federal--will flow to both district and intermediate district providers.

Link to Gearin ruling (Point #1 on Page 2): http://www.mncourts.gov/Documents/2/Public/Civil/Order_Regarding_Petitions_of_Minnesota_Department_of_Human_Services_licensing,ARC_MN,MN_School_BOard_and_INter.pdf

"Third Way" Commission Releases its Report. The group of former elected officials, business community members, and state finance experts that convened to assemble a package of budget cuts and revenue enhancements in an effort to break that deadlock at the State Capitol announced its recommendations today. Among the recommendations are:

• A temporary income tax surcharge on all Minnesota tax filers.
• An increase in tobacco and alcohol taxes.
• $3.6 billion in unspecified budget cuts.
• No increase in education payments or other accounting measures.

As expected, reception for the plan was cool and not just from the "no new tax" types. Governor Dayton objected to the income tax surcharge being levied against all Minnesotans, as his proposal calls for a tax increase on only the wealthiest Minnesota residents.

Here are a bevy of stories on the plan and its reception.

StarTribune: http://www.startribune.com/politics/blogs/125168168.html

MinnPost: http://www.minnpost.com/stories/2011/07/07/29826/all-star_budget_groups_plan_suggests_a_4_surtax_on_all_and_tax_increases_on_alcohol_and_cigarettes

MPR: http://minnesota.publicradio.org/collections/special/columns/polinaut/archive/2011/07/mondalecarlson.shtml

They're Fighting in Washington Too? Say it ain't so! Besides the debt ceiling debate, Congressman John Kline, Chairman of the House Education and the Workforce Committee, has been sparring with Secretary of Education Arne Duncan regarding the administration's authority to waive state requirements to No Child Left Behind. The debate began on late last month, when Kline sent a letter to Duncan asking him to explain the department's proposal to grant conditional waivers to a number of states and school districts. While acknowledging the need for greater flexibility for school districts, Kline questioned both the legality of the waivers and the wisdom of providing relief through waivers issued by the department, as providing flexibility in this way would cloud transparency and may cause confusion between school districts.

In his response, Secretary Duncan contended that he has the legal authority to grant waives and that he plans to proceed.

This is another example of how the nature of the debate in this country is not just about differing visions of tax and budget policy, but also regarding the powers of Executive and Legislative branches in both states and at the federal level. It should be interesting to see how this particular issue plays out, as the budget discussions at the federal level have impeded a number of committees' ability to tackle policy issues. All indications have been that Congressman Kline has every desire to be a very active chair of his committee and incorporate a number of changes into the re-authorization of the Elementary and Secondary Education Act.

Here are two sources on the exchange:

House Education and Workforce Committee: http://edworkforce.house.gov/News/DocumentSingle.aspx?DocumentID=248594

Huffington Post Article on Duncan Response: http://www.huffingtonpost.com/2011/07/05/no-child-left-behind-proposal-questioned_n_890795.html

No Progress. From reading the news reports, it appears (let me stress the word appears) that the shutdown is nowhere near being settled and that anti-progress was made today. At this juncture, it appears (again let me stress the word appears) that the Governor is trying to find any proposal that will stick, but he can't find a taker from the legislative side of the equation. The main problem now appears (again let me stress the word appears) is that the Governor has begun talking about tax increases again (sales tax on clothing/temporary income tax surcharge for high income earners/cigarette tax increase) and in the eyes of legislative leadership, that has moved the process backwards.

I have included a link from the Minneapolis StarTribune the letter from the Governor to legislative leadership that spells out the details of his latest proposal. Note that the increase in the education aids shift from 70%/30% to 60%/40%--which saves the state $490 million on a one-time basis--is contained in both of the scenarios presented to legislative leadership.

Counter-proposals by legislative leadership to the Governor weren't published, but I can imagine proposals will be forthcoming, perhaps as early as tomorrow.

Link to proposals (scroll down below Zellers comments): http://www.startribune.com/politics/blogs/125103129.html

Also on the negotiating front, MPR reported this afternoon that Commissioner Cassellius and the Senate and House Education chairs--Senator Gen Olson and Representatives Sondra Erickson and Pat Garofalo--will be trying to find common ground on the various education policy items contained in HF 934 and HF 1381.

Some Special Education Notes. The Minnesota School Boards Association and the intermediate school districts petitioned the special master to classify special education services as essential last Friday and the Governor's office has now agreed with this stance and has also asked the special master to make certain special education revenue continues to flow to school districts during the shutdown.

The question that remains for me is what the level of the special education appropriation for the coming biennium. As the regular session ended, the Governor's last offer was to put an additional $128 million into the education appropriation to increase the basic formula by $50 per pupil unit per year and fully fund special education with the 4.6% growth factor for basic special education aid and 2.0% for the special education excess cost aid. As the offers were being shipped back and forth between the negotiating parties just prior to the shutdown, the status of special education was unclear and remains so as the parties continue to try and find common ground. Perhaps we won't know the answer on this issue until a final compromise is reached.

Panel of "Wise Men" to Convene. Two Minnesota statesmen have commissioned a panel in an attempt to build a compromise proposal that can hopefully end the government shutdown. Former Governor Arne Carlson and former Vice-President Walter Mondale will be heading up the panel, which will be chaired by former State Senator Steve Dille and former State Representative and Finance Commissioner Wayne Simoneau. Wells Fargo CEO James Campbell and Affinity Capital Management Kris Johnson will be representing the private sector on the panel.

Former state Finance Commissioners Jay Kiedrowski, John Gunyou, and Pam Wheelock have also volunteered to offer their input to the panel, as has former United States Senator Dave Durenberger.

StarTribune link on Panel: http://www.startribune.com/politics/blogs/125016294.html

Negotiation Documents Posted. The Republican legislative leadership has released the last few offers from the failed budget negotiations and they are interesting. I say this with tongue firmly in cheek, but it looks like Minnesota school districts suddenly became the equivalent of the state's high income earners, because that's where both sides were looking for the revenue necessary to close the $5 billion budget gap.

From a cursory glance, the Republicans started the ball rolling with an offer to increase the shift from 70% current year/30% subsequent year to 60%/40%, with a later offer from the Governor to the Legislature increasing it yet again to 50%/50%. All offers included a $50 per pupil increase for both years of the biennium to cover borrowing costs that would result from cash flow problems associated with the shift. I could be reading the documents wrong, but I think I am following them correctly.

How central the increase in the shift was to the bargaining framework remains to be seen. The Republicans' refusal to accept any tax increase and the DFLs' refusal to issue bonds from the tobacco revenue (I'll have to go back to one of my old finance texts to decipher how that would be done) appear to be the major sticking points. Both sides now appear to realize the need for increased revenue, but their methods of raising said revenue diverge dramatically.

The suggestion that the shift be increased once again brings back the old "would you rather have your cash flow affected or your base reduced" question to the fore. When the move was made from 90%/10% to 70%/30%, the education community supported the move. We had been at or near the 70%/30% level a couple of times in the past and while scrambling to keep cash flow healthy is never a walk in the park, 70%/30% was tolerable. Increasing the shift beyond 70%/30% would be uncharted territory and the level of comfort would diminish drastically. The original question of whether or not this is preferable to a base cut remains, however, and the education community will have to parlay and determine how to react to the suggestion.

Mark this one down folks (along with all the rest of my inaccurate predictions). I thought that the 70%/30% funding schedule would be accepted by both sides and no further cash flow adjustments would be even suggested. Just imagine John McLaughlin, host of The McLaughlin Group, looking at my suggestion and bellowing his trademark "WRONG!" in reaction to my earlier prediction.

Here is the StarTribune links to the budget offers: http://www.scribd.com/doc/59101922/GOP-Negotiation-Handout

Special Master Hearing. Below is a link to the MinnPost story on the initial hearing held by Special Master Kathleen Blatz.

Link: http://www.minnpost.com/politicalagenda/2011/07/01/29699/judge_blatz_hears_pleas_for_continued_state_funding_despite_shutdown

Morning Take. If you haven't already done it, I strongly suggest that you subscribe to Blois Olson's Morning Take. Olson is a public relations specialist with the Tunheim Partners and does a tremendous job of providing an encapsulation of what's happened and what's happening in relation to state government issues all delivered to your e-mail inbox Monday through Friday.

Here's a link to subscribe to Morning Take.

Link: http://morningtake.posterous.com/pages/subscribe-to-morning-take

Day One. Not much to report on the shutdown front today. The hearing conducted by Special Master Kathleen Blatz, former Chief Justice of the Minnesota Supreme Court and State Representative from Bloomington, took place today with a number of state service providers filing petitions seeking to have the services they provide classified as essential.

The Minnesota School Boards Association has filed a petition calling for special education services to be deemed essential. As I reported yesterday, I believe compelling arguments can be made to have those services fall into the essential category and I would not be surprised at all if the Special Master were to rule in that direction.

Interesting that a spat broke out between the Attorney General's office and attorneys representing Governor Dayton at the hearing. If you recall, Attorney General Swanson petitioned Judge Gearin for pretty much a "non-shutdown" prior to Judge Gearin's ruling that was very close to that advocated by the Governor. Makes for big fun, if you like this sort of thing. Me, I'll just pass.

Bits and Pieces from the Last Night of Negotiations. One item that piqued my interest as I read the re-hash of the last few hours of negotiations between the Governor and the Legislature was a call for an increase in the shift by Republican legislators as they sought to close the budget gap. Governor Dayton wouldn't buy into that suggestion, which is one reason why we are where we are right now. It just goes to show you, just when you think the last can has been kicked down the road, someone comes out of the ditch with a new one.

Who is Going to Win? Besides no one. I think this opinion piece by the StarTribune sets out a fairly plausible estimate of how this might turn out in the short term. There are both political and policy angles to what will happen from this point, but the fact that DFL constituencies likely face more potential damage from the shutdown than do Republican constituencies shouldn't be lost on anyone. Just hard to believe that accord can be reached without some type of general tax increase.

StarTribune editorial: http://www.startribune.com/opinion/otherviews/124883939.html

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.

Judge Gearin ruling: http://minnesota.publicradio.org/features/2011/06/documents/gearin_shutdown_order

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.

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: http://education.state.mn.us/MDE/About_MDE/Shutdown_Planning/index.html

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.

HF 934: http://mn.gov/governor/multimedia/pdf/20110524_Education.pdf

HF 1381: http://mn.gov/governor/multimedia/pdf/ch-114-hf1381-veto.pdf

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.

Some Movement. 170 hours from now, the 2011 Legislative Session will be over. As mandated by the Minnesota Constitution, a mere tick past 11:59:59 PM next Monday night and the Legislature will have to adjourn. At this juncture, it appears that it will be difficult to avoid a special session. While the Legislature has completed the conference committee proceedings on its budget bills, all but one of those bills has not been approved by the full Legislature. Further, these budget bills are not in the form that the Governor wishes to see them, either in form or in the manner he wants them presented to him. From the beginning, the Governor has demanded that the Legislature provide him with the omnibus tax and budget bills as a set so that revenue and expenditures could be balanced in a "macro" sense before individual budget items were addressed. The Legislature has chosen not to do that and does not appear to be interested in accommodating the Governor's request.

The Governor took a step toward reconciliation today, offering to cut his tax increase pretty much in half (to $1.8 billion) and scale back his budget requests by an equal amount. The Legislature still appears wedded to the axiom that taxes will not be increased this session, even in the face of a Minnesota poll that showed Minnesotans wanting a mixed approach to solving the state budget shortfall, including an income tax increase on Minnesotans with higher incomes.

Below is a link to the letter the Governor sent to legislative leadership outlining his new proposal. It is interesting that the Governor proposes to increase the general education basic formula by $50/PU in each of the next two years as part of his budget, which necessitates larger cuts in other programs.

Dayton Letter Link: http://www.scribd.com/doc/55548438/Dayton-new-proposal

Minnesota Poll Link: http://www.startribune.com/politics/statelocal/121836869.html

Policy Bill in Hibernation. That's not to say it's dead. It's just sleeping and it's going to have to wake up pretty quickly to make it out the door. The House passed the K-12 Education Policy Bill last week after a fairly long floor debate and it now sits in the Senate waiting for action. As I reported last week, there are several measures in the policy bill that would likely cause the Governor to veto the entire bill and with the bill not even to conference committee yet, it may be difficult to put together a bill that would earn enough legislative votes without also triggering a gubernatorial veto. As in the case of last year's K-12 Education Policy Bill, the world won't come to screeching halt as a result of the failure to pass the bill, but there are a number of very helpful technical provisions in the bill that would be nice to see made into law.

As always, I will keep you posted.

They Came. We Watched. They Finished. Sorry I didn't post a wrap-up last night. The conference committee returned shortly after midnight and finished its business in a flash. The conference committee report is slated to hit the floor of the House on Thursday and the official bill summary will be available at that time. I will post it as soon as it is on-line.

One provision I failed to mention as part of the bill is the bargaining provision that limits the window for teacher negotiations and the ability of districts to go to binding arbitration if a settlement cannot be reached.

I'm currently at the Governor's formula reform task force. Lots of interesting talk this morning and some of it is troubling (at least to me). I have yet to write a report outlining my sentiments regarding this effort, but I will in the next day or two.

Back in Action. We're back and running through a slate of motions that will put the bill in shape. Thankfully, the framework I reported on earlier was adopted in one motion as opposed to taking the provisions one-by-one. With that accomplished, the conference committee is recessing again and will return in about an hour to finish up its work.