Equity Redux.  The Senate E-12 Division heard SF 929 (the Senate companion to HF 755), authored by Senator Sean Nienow today.  As a refresher, SF 929/HF 755 is the bill that guarantees all school districts in Minnesota at least 90% of the statewide general education revenue average.  By my count, 32 of SEE's 62 districts would generate additional revenue from the bill and while the effects are not universal, they do zero in on districts with low levels of referendum and/or categorical revenue.  Milaca Superintendent Jerry Hansen testified on the bill as he did at the House hearing, but the day belonged to North Branch parent Julie Belisle, who pointed out the concerns of parents in a low property wealth school district that is unable to generate revenue through the referendum levy and she spelled out those concerns clearly and with passion.

The North Branch story is clear to most everyone who follows education funding in Minnesota.  After passing a referendum levy in the late-1990s (a levy that was subsequently rolled into the general education formula as part of the Ventura administration's Big Plan enacted in 2001, North Branch has tried several times to generate additional revenue through a voter-approved levy, but has failed in those efforts each time. This has forced the district into a number of difficult decisions, particularly the one to go to a four-day school week.  SF 929/HF 755 attempts to remedy this situation at least partly by concentrating its benefits at the lower end of the revenue spectrum.  Whether or not it receives further consideration remains to be seen, but it, along with a number of other bills, have highlighted the plight of districts well below the state average and hopefully this attention will net some results.

Tomorrow will be an interesting hearing in the Senate E-12 Division, with the two equalization bills the Senate is considering--SF 177 (Skoe) and SF 569 (Hoffman)--will be heard.  Both of these bills are very important to low property wealth school districts and I will report on them tomorrow.

House and Senate Budget Targets Set.  The House and Senate majority caucuses have set their budget priorities.  Both the House and the Senate propose higher taxes than in the Governor's scaled back budget proposal.  What differs between the caucuses (and the caucuses and the Governor) is that the House proposes to pay back the school funding shift while the Senate does not and the Senate proposes to do more in terms of property tax relief and higher education spending (at least it appears that way at first blush). The House appears to have more revenue in their budget targets for PK-12 funding and both bodies appear to be committed to weighting kindergarten students at the same level as that of students in early elementary grades.  I hope to have the target documents available electronically tomorrow and I will send them along when I obtain them.

Long Day with Four Meetings.  All of the education-related committees in the House and Senate met today and covered a lot of territory.  With the passage of the first policy committee deadline, the education finance-related committees in both the House and Senate are starting to dig into the bills that have been referred to them by the education policy committees.  The finance-related committees are also using their time to discuss bills with finance/formula implications that have trickled in over the past couple of weeks.  With the relatively late start to the session for a budget year (January 8) and the early first deadline (March 15), not a lot of time was available for members to quickly get their ideas drafted into bill form.  This has led to a backlog over the past couple of weeks as bill authors and committees are playing the legislative version of "Beat the Clock."

While there were a lot of bills of interest presented today, perhaps the most pertinent of these to SEE members is HF 1406 (Radinovich), the House companion bill to SF 576 (Skoe), the creates a $300 per pupil unit roll-in of referendum revenue.  Districts with referenda of less than $300 per pupil unit will be allowed to levy on through a board-approved discretionary levy up to a $300 per pupil unit amount, while districts with referenda above $300 per pupil unit will have their referendum reduced by that amount and replaced with a board-approved discretionary levy of $300 per pupil.  I testified in favor of the bill along with a number of other education groups, included AMSD, MREA, Isaiah, and a pair of students (one from North Branch and one from Cambridge-Isanti).  There seems to be a lot of interest in doing something for low-revenue districts this session and this bill (or something like HF 755/SF 929) would be a big step forward in that regard.

Speaking of HF 755/SF 929, that bill will be up in the Senate E-12 Division tomorrow morning.  I will let you know how things turn out.

Wrap Up From Last Week.  The House and Senate omnibus education policy bills were passed out of committee last Thursday and will be re-referred to their respective education finance committee this coming week, where they will be heard.  The bills had to pass the House and Senate Education Policy Committees by last Friday and did so by being voted on Thursday evening.  The proceedings in both the House and Senate were spirited, but there weren't that many amendments so things moved quickly and the proceedings finished on the same day the discussions began.  That might not seem rare to an outsider, but given the protracted discussions that have taken place over the past few years on most major policy bills, it was a pleasant surprise.  All this said, my guess is there will be more amendments offered to these policy provisions as they become part of the combined omnibus education funding bills (into which the omnibus education policy bills will ultimately be amended).

HF 755 Heard.  Representative Bob Barrett's HF 755 was heard in the House Education Finance Committee last Thursday morning.  HF 755 is a bill that guarantees any district with general education revenue below 90% of the state average revenue up to that amount.  32 of SEE's 62 members receive revenue under the bill and most of these districts either have low levels of categorical revenue, low levels of referendum revenue, or both.  SEE President Todd Anderson, St. Michael-Albertville Superintendent Jim Behle, and Milaca Superintendent Jerry Hansen all testified. in favor of the bill after braving a rough commute to the Capitol because of Thursday morning's snow.  The bill partially addresses the funding issues faced by low-revenue/low-property wealth districts without taking money from districts with high levels of categorical aid or high levels of referendum revenue.  One can quibble about aspects of the bill, but HF 755 is a valid way to address funding shortages faced by many districts and charter schools throughout the state that don't have access to high levels of state aid and have obstacles (or in the case of charter schools a prohibition) attempting to raised revenue through the referendum.

The Senate E-12 Division will be hearing SF 929, the Senate companion to HF 755 authored by Senator Sean Nienow, on Wednesday morning.  I will report on the hearing after it takes place.

Policy Bills Posted.  The House and Senate Education Policy Committees have released their initial omnibus bills.  These bills will serve as the framework to which amendments will be offered over the next two days.  I would assume there will be attempts to both add to and subtract language from the bills.

Here are links to the two bills:

House File 1151:  http://www.house.leg.state.mn.us/comm/docs/0H1151DE3.pdf

Senate File 978:  http://www.senate.mn/committees/2013-2014/1005_Committee_on_Education/scs0978a-3.pdf

I'll let you know if any big changes occur over the next couple of days.

Deadline Week.  This week marks the first committee deadline (Friday, March 15).  All policy bills must clear at least one policy committee in at least one house of the Legislature (any bill that is required to be heard in multiple policy committees must be approved by all related committees in one house).  Companion bills of bills that meet this week's deadline can be heard next week with the second deadline being Friday, March 22.  Of course, nothing is ever officially dead during the legislative session until the curtain comes down at the session's end, but these deadlines govern most everything and one rarely sees major policy legislation enacted if it doesn't meet the deadline framework.

So this will be a very busy week for policy committees in both the House and Senate.  The House released the framework of its omnibus policy bill today.  The Governor's policy bill is serving as the vehicle for the House omnibus education policy bill, but a number of other provisions are contained in the bill beyond the Governor's recommendations.  They will start taking amendments on Wednesday so my guess is Wednesday is going to be a really long night, as a variety of amendments (ranging from cuddly and friendly to downright hostile) will be offered and discussed.

Fast-moving Day.  It's difficult to be three places at once, but I tried and succeeded this morning at the Legislature.  The Senate Tax Committee moved two equalization bills--SF 177 (Skoe) and SF 569 (Hoffman)--to the Senate E-12 Division by motion after recommending the bills to pass.  In addition to recommending SF 177 to pass, the committee amended much of SF 576, the bill that indirectly roll in $300 per pupil unit of referendum levy authority into a board-approved levy of the same amount.  This would help districts with less than $300 per pupil in referendum levy while reducing the voter-approved referendum levy amount by $300 per pupil.  In its original form, SF 576 re-established the general education levy, but the changes made in today's amendment that was attached to SF 177 does not accomplish that.  It is difficult to discern whether or not equalization will play a central role in the Senate's education funding and property tax relief and reform strategies in 2013, but all indications are the subject will be discussed thoroughly and will be given every chance to succeed.  This is the best position property tax equity proponents have been in over the past decade and a half and it is important that we put forward every effort to push the Legislature toward progress this year.

The Senate E-12 Division dealt with three bills and I was called upon to add my perspective on the SF 221, Senator Terry Bonoff's (DFL-Minnetonka) bill on creating a location equity index.  It is difficult to endorse the approach taken by Senator Bonoff in her bill, but the districts she represents have similar problems as a number of SEE districts when it comes to general education revenue.  Senator Bonoff's school districts do not generate much revenue through categorical formulas (compensatory revenue, ELL revenue, sparsity revenue, transportation sparsity revenue).  The difference between those districts and the average SEE district is that they have higher levels of property wealth and are able to translate that advantage into higher than average levels of referendum revenue.  The point I made in my testimony is that increasing use of categorical formulas to deliver revenue to districts has created another set of inequities, some of which can be corrected through the passage of referendum levies, especially in high property wealth districts.  I stressed that we have to get back to a system with a greater commitment to putting the basic formula amount at a level that meets the needs of the average student and has categorical revenue that aims at the "outliers" as opposed to what I perceive is the case now in which the basic formula reflects a minimum level of funding with categorical revenue being distributed from the first instance of "difference."  It's hard to describe with words right here, so I'll let it drop, but we have to bring greater fairness to both the general education formula system and the property tax system and we may have a chance to make progress in both these areas in 2013.
 
Last, but not least, in a busy morning was the House Education Policy Committee's discussion (and approval as amended) of HF 771 (Davnie), a bill that would extend the allowable use of prone restraint in emergency situations.  This bill (and previous bills extending the allowable use of prone restraint) is necessitated by a unilateral decision made at the Minnesota Department of Education (MDE) to ban the procedure by memorandum in the spring of 2011.  MDE convened a working group this past fall to work on an agreement that would hopefully reduce the use of seclusion and restraint through the provision of training to school district staff, more thorough reporting, and a continued ability to use prone restraint in emergency situations.  The report of the working group called for a four-year extension of the ability to use prone restraint, but that was amended to two years in committee today.  Because the bill contains money for training of school district personnel, it will now move to the House Education Finance Committee.

The afternoon slowed down.  The Senate took up the Health Care Exchange bill and was working on amendment number 20 (out of a reported 90) midway through the afternoon, which necessitated the cancellation of the Senate Education Policy Committee.

Legislative Auditor's Report on Special Education Released.  The Office of the Legislative Auditor released its long-awaited report on Minnesota's special education system.  Like all work performed by the office, it is top-notch and comprehensive.  The report gives provides a thorough description of how Minnesota's system of special education works and provides an excellent statistical analysis on a variety of dynamics within the system.

The report was prepared by project manager Jody Hauer along with Sarah Roberts Delacueva and Jodi Munson Rodriguez.  They provided the presentation to a joint meeting of the House Education Finance Committee and the Senate E-12 Division and it was professionally done and elicited a considerable amount of interest from the committee members.  And that interest is what may separate the fate of this report from that of previous special education studies, performed by both the Office of the Legislative Auditor and Legislature.

There's nothing earth-shattering in this report.  Anyone who has worked around special education funding or education funding as a whole over the past couple of decades is well aware of the cross-subsidy from the school district general funds to pay for unreimbursed special education costs resulting from the failure of state and federal funding levels to meet the fiscal needs of school districts.  What is different now than when earlier special education reports were issued is that the environment has changed dramatically.  School districts are under much greater fiscal stress than they have been and the StarTribune article from Sunday has helped frame the issues brought about by unique and costly special education needs and the inadequacy of school funding, both in terms of regular and special education.

The convergence of these dynamics may result in some action across a broad range of special education issues, including funding, in the session ahead (and beyond).  The report clearly calls on the Minnesota Department of Education (MDE) to look at their internal operations and discern if there are aspects of the department's oversight duties that are adding costs to school districts.  MDE Commissioner Brenda Cassellius pledged that the department will evaluate its operations to make certain school districts get assistance in meeting reporting, compliance, and service delivery needs and also pointed out initiatives contained in the Governor's budget that should help those efforts.

Here is a link to the Office of the Legislative Auditor's report on Special Education:

Link:  http://www.auditor.leg.state.mn.us/ped/2013/sped.htm

Snow and a Flurry of Legislative Activity.  A lot of legislative activity, but who knows how much will end up in the ditch on the slippery roads of the legislative process?  Okay, I'll quit with the snow jokes.  If you are all like me, you're wondering how much Florida real estate is going for these days, but why would anyone want to be in a sunny climate when you can have this much fun following legislative activity.

It was a full day of committee meetings, kicking off bright and early with the House Education Finance Committee and the Senate E-12 Division.  Those meetings were largely devoted to local bills, but the discussion surrounding several of these bills was very interesting as it touched on issues like why districts cannot automatically transfer excess debt service revenue and why the current equity formula is structured the way that it is.  A lot of interesting questions.

The House Education Policy dealt with bills relating to school siting decisions (keeping them away from former landfills) and allowing schools to keep a supply of epinephrine pens.  But the lion's share of time in that committee was dedicated to two bills dealing with students in care and treatment programs.  The first bill on this subject is an attempt to make certain that students in care and treatment programs remain eligible for extra-curricular activities to the same extent as Minnesota State High School League rules allow.  It is believed that this bill is redundant as Minnesota State High School League rules are silent on the status of students in care and treatment programs and students cannot be declared ineligible solely on the basis that they are in a care and treatment program.  The Minnesota State High School League plans on sending a letter to all school districts in the state clarifying this policy, hopefully making the passage of this bill unnecessary.

HF 361 (Slocum), a bill that would dramatically change the way school districts interface with care and treatment programs, was next on the docket and discussion went so long that the debate spilled over into an evening meeting.  The big question facing this bill is funding.  There are a lot of changes that would increase costs for school districts, but the bill also calls for increased funding, largely to pay for projected increases in transportation and education costs.  Several groups voiced the need for clarification of many of the provisions.  While there are some concerns with the bill, those concerns shouldn't detract from the work done by Sue Abderholden, Executive Director of the Minnesota branch of the National Alliance on Mental Illness, in pulling this legislation together.  This bill is the work product of an informal working group that has met over the past three years.  There are still some things that need to be ironed out (and the cost may prove prohibitive), but NAMI's commitment to children with mental illness and/or drug and alcohol issues cannot be questioned.

The anti-bullying bill was heard in committees in both the House and Senate today.  The Senate Education Policy Committee heard SF 783 (Dibble), the first committee stop for the bill on the Senate side of the street.  The House Civil Law Committee heard HF 826 (Davnie), the House companion to SF 783.  This was the second stop for HF 826, as it was recommended to pass and re-referred to the Civil Law Committee by the House Education Policy Committee last week.  While the discussion in the Civil Law Committee was supposed to focus only on those provisions relating to data collection, that admonishment largely went unheeded, as the debate was as much about free speech rights and other constitutional issues as anything else.

Big day tomorrow (Wednesday) with the Office of the Legislative Auditor releasing its study on Minnesota's special education system.

Statewide Health Insurance Pool Legislation Hits Committee (Yet again).  I have a cousin whose favorite saying is "If it's not one thing, it's the same darn thing."  He usually utters that line with a bit of gusto and more colorful language (delete "darn," insert "#%*$%#+#"), but his assessment is pretty much on the mark when it comes to the proposal calling for the creation of a statewide insurance pool for school employees.  Like the swallows returning to Capistrano or pitchers and catchers reporting to spring training. every February or March, the mandatory statewide health insurance pool seems to finds its way into the legislative lexicon.  With Republican control of the Legislature the past two years, the bill never really surfaced, but with the change in the legislative majorities, the proposal is back on the radar in the form of SF 446 (Dibble)/HF 573 (John Ward) and was heard today in the Senate Commerce Committee.

As introduced, the bill would require all districts except those that are self-insured and insuring more than 1,000 employees would be forced to participate in the Public Employee Insurance Program (PEIP).  Currently, employee groups can opt into PEIP without the approval of the management side of the bargaining process at the local level.  In its original form, SF 446/HF 573 would flip the process over.  Instead of being allowed to "opt in," districts would be forced to "opt out" with both labor and management needing to agree to either buy insurance in the open market or self-insure.  Further, districts would be able to access the premium reserves that have been built up by the service cooperatives currently selling insurance.  Amendments offered and approved in committee this afternoon changed the landscape considerably, making participation in PEIP voluntary and not mandatory and also allowing the service cooperatives to retain their reserves.

A number of SEE members testified in opposition to the bill, including personnel from Elk River ISD #728, St. Francis ISD #15, Albert Lea ISD #241, and Prior Lake-Savage ISD #719.  Each made it crystal clear that the bill as introduced would limit school district choice and, as a result, drive up insurance premium prices due to lack of competition.  The testimony was powerful and really helped lay the groundwork for the adoption of the two amendments that make the bill much more palatable.

The bill now moves on to the Senate State and Local Government Committee, where it will likely be heard later this week or early next week.  The key thing for SEE membership to do at this point is to contact their legislators and tell them to support the amendments attached to the bill in the Senate Commerce Committee.

Catch up Day.  I apologize for not blogging for a bit.  Things got backed up with a few trips out to districts and a couple of night hearings (hard to believe for February, but yes) and I couldn't get back to the blog.  Anyway, it's been a hectic few weeks and there is a lot to report on so without further adieu, here we go.

Budget Forecast Looks Healthy.  The February, 2013, Budget Forecast was released last Thursday and it contained good news for both the rest of the current fiscal year (FY 13) and for the next biennium (FY 14 and FY 15).  The revenue forecast showed an increase of $295 million for the remainder of this fiscal year.  All of this revenue will go toward repaying the school aids payment shift, cutting the remaining portion remaining to paid back to Minnesota school districts by over one-third and setting the aid payment schedule at 86.5%/13.5%.  The upward tick in the revenue forecast was not sufficient to reduce the property tax early recognition shift, which remains at $551 million.

The change in the forecast comes from both less-than-expected spending ($63 million), a reduction in the stadium reserve ($15 million), and higher-than-expected revenue collections ($217 million).  The forecast contends that the economic performance projections aren't slated to change considerably, which means that the increase in revenue is likely due to an increase in income tax collections due to individuals collecting capital gains on investments prior to the higher capital gains taxes that were enacted as a result of the fiscal cliff negotiations in early January.

The news for the next biennium was a bit more surprising.  Given the fiscal cliff negotiations and the likelihood that the expected change in the capital gains tax rate would generate more short-term revenue in Minnesota, the current year shortfall was expected to shrink.  Most of the scuttlebutt around the Capitol is that the situation for the next biennium would worsen, but instead the budget situation improved by $463 million.  Of this $463 million, $323 million is projected to come in higher tax collections and $117 million being saved through lower-than-expected expenditures.  Again, the stadium reserve (which I don't totally understand) would be reduced, resulting in $39 million in savings to the state.

This is obviously good news all the way around.  The payment shift gets better and the billion dollar plus projected shortfall in the next biennium is cut by over 40%.  Part of the Governor's proposed $3.5 billion in tax increases is intended to close a $1.090 billion revenue gap and this relieves the pressure to increase taxes to that level.  The size of Governor Dayton's tax proposal has sent a shiver through the majority caucuses and this should make things much easier.

Here is a link to the forecast documents at Minnesota Management and Budget.   There is a wide range of information available, from a short summary to a more detailed document.

Link:  http://www.mmb.state.mn.us/forecast-documents-feb13

Equalization Hearings.  Last Wednesday (February 27) increased equalization bills were heard in both the House and Senate.  The House Education Finance Committee heard HF 248 (Runbeck) and HF 579 (Hortman).  These bills are similar.  HF 579 sets the equalizing factors for the referendum and debt service equalization programs at 150% of the state average property value (referendum market value for the referendum equalization program and adjusted net tax capacity for the debt service equalization program).  HF 248 increases the equalizing factors by an unspecified amount.  Both of these bills index the equalizing factors to the average statewide property values, which is a very important move.  Many districts have seen the favorable mix of aid-to-levy ratio that was present when a levy question was passed dissipate dramatically as their property wealth has grown and the equalizing factor has remained static.  Indexing the equalizing factor will help districts "make good" on their promise to local taxpayers when promoting a levy question as considerable cuts in equalization aid should be avoided by making this change.

The Senate Tax Committee heard SF 177 (Skoe) and SF 569 (Hoffman).  SF 569 is the Senate companion to HF 579.  SF 177 doubles the equalizing factors for the referendum and debt service equalization programs to $952,000/PU of referendum market value and $6,098/PU of adjusted net tax capacity respectively.  SF 177 also doubles the second-tier equalizing factor to $540,000 for per pupil referendum revenue above $700/PU.

SEE was well represented in the testimony in both the House and Senate.  In the House, Rockford Superintendent Paul Durand, Rosemount-Apple Valley-Eagan Business Manager Jeff Solomon, Albert Lea school board member Bill Leland, and Anoka-Hennepin Superintendent Denny Carlson all spoke in favor of equalization.  In the Senate, Waconia Superintendent (and SEE Legislative Chair) Nancy Rajanen along with Waconia school board members CathyThom and Naomi Erickson and New London-Spicer Superintendent Paul Carlson all testified in favor of increased equalization.  I also testified in both the House and Senate.

I am optimistic that we will make some progress on this issue in 2013.  Much will be determined by if (and how much) state taxes will be generated during the session in order to buy down property tax levies and the stronger-than-expected budget forecast makes that hill less steep.  The Governor's plan to widen the sales tax base and drop the rate is running into a fair amount of resistance, but with the shortfall looking more manageable for the next biennium, there is less revenue needed to balance the budget, leaving more flexibility for funding greater equalization.  The important thing for SEE members to do contact their legislators and urge them to use enhanced equalization as the method for delivering property tax relief in the year ahead.

StarTribune Article on Special Education.  In an article that is certain to heat up discussion for the remainder of the legislative session, the StarTribune published a thorough critique of the state's special education system and how costs have spiraled over the past decade.  The article provides a very good synopsis of the growth in certain disability categories and how the costs of accommodating the needs of some students has become extremely high.

Here is the link:  http://www.startribune.com/local/194572221.html

In a  related special education matter, the Offce of the Legislative Auditor will be releasing its study on special education on Wednesday, March 6.