Equalization Part of Final Tax Agreement.  With all of the talk about the funding increases in the E-12 bill, not much was said about the just under $10 million that was contained in the tax bill for referendum equalization.  It's below what we were hoping for and less than what was either in the House or Senate initiatives passed by the respective bodies (House $25 million in their E-12 omnibus bill and Senate $15 million in their tax bill), but it clearly is a step in the right direction and it is greatly appreciated.  The tax relief is accomplished through an increase in the now first-tier equalizing factor from $510,000 in referendum market value per pupil unit to $567,000 in referendum market value per pupil unit.

As measured annually by the Minnesota Department of Education, the gap between districts at the 5th and 95th percentile of funding in the categories of the operating referendum, local option revenue, equity revenue, and transition revenue is widening again after being narrowed dramatically by changes made during the 2013 and 2014 legislative sessions when the $300/PU board-approved operating referendum was established and the $424/PU local option revenue was made uniform for all districts.  Narrowing that gap will likely fall to individual districts passed voter-approved levies.  The increased equalizing factor will not deliver relief to districts that will now be at zero in referendum authority (the $300 per pupil unit board-approved referendum and the $424 per pupil unit local option revenue has now been combined into a single category of local option revenue equalized at the current rates for each of the previous categories), but as those districts seek to pass new referendum authority, those districts below $567,000 in referendum market value per pupil unit will receive some measure of state aid.

The challenge for low property wealth districts going forward will be to further increase the equalizing factors across-the-board and then have those factors indexed to averages in statewide property wealth growth.

Here is a data run for the increase in referendum equalization.  The increased aid is found in the column labeled "Q".

District-by-District Referendum Equalization Aid Increase Run

For Your Reading Pleasure.  Here is a link to the E-12 bill on which agreement was reached yesterday.  Only 140 pages as there is very little in terms of new policy.  As I reported yesterday, the major parts of the agreement are:

• 2% increase in the general education basic formula in each year of the biennium.  This costs $388 million.
• $90 million to prevent the special education cross-subsidy from increasing further.
• $47 million to maintain the 4,000 pre-kindergarten spots that were part of the School Readiness Plus program.
• $30 million in school safety grants.  This program is contingent on there being an additional surplus at the end of the current fiscal year.

All told, those appropriations end up being above the $540 million target, but the school safety grants hang in the balance due to the forecast surplus requirement.

Link:  E-12 Agreement--Bill Language

Link:  E-12 Agreement Summary (Note Initials in Upper Righthand Corner)

Education Deal Struck.  It went an extra day, but the final education conference committee deal for E-12 has been agreed to by leadership.  The last time the conference committee met during the regular session was at 4:30 on Monday, but with floor responsibilities for the members and the difficulties associated with dividing up the remaining revenue in the budget target, there was simply too much ground to cover in a short period of time to finish on time.  Here is the final agreement:

• 2% on the formula in each year.
• $3.4 million for Tribal Contract School Funding.  Funding is permanent.
• $46 million to preserve the existing voluntary pre-K seats.
• $90 million to freeze the special education cross-subsidy.
• $30 million in school safety grants contingent on positive balance at the end of the current fiscal year.
• $1.5 million for each body for grants contained in their bills.
• No additional policy other than the same/similar provisions already adopted in the conference committee.

There will undoubtedly be more details on the individual grants and I will provide them when they become available.

Conference Committee Begins on Last Day.  The conference committee has just convened and the House has put forward its first offer.  The 2% increase in the basic formula is agreed upon in the global pact and the House has put forward the Governor's recommendations of $90 million for special education and $46 million to preserve the existing pre-kindergarten slots.  Other items deal largely with grants.

Budget Deal Reached.  A global budget agreement has been reached with individual budget targets set for each area of the budget.  The E-12 budget target is set at $540 million, which is approximately $160 million below the Governor's budget proposal and $360 million below the House's.  If it approximately $250 million above the Senate's last budget proposal.  The budget agreement calls for a basic formula increase of 2% in each year of the biennium, which would absorb around $390 million of the $540 million target.  That would leave revenue for special education, early childhood education (school readiness plus or early learning scholarships), and school safety.  We'll have to see where things go from here.  Speaker Hortman indicated she would prefer a special session to be held on Thursday, May 23.  Lots of work to be done between now and then, but things could get done quite easily.

Where We Are At.  In today's Morning Take, Blois Olson described the current debate at the Capitol attempting to reach a budget/policy compromise as taking place in the Cone of Silence.  As a baby boomer, I immediately caught the cultural reference and can't agree more with Olson's apt illustration.  For those of you too young to remember Get Smart, here's the Cone of Silence.

Even with the close-to-the-vest nature of the negotiations, it's pretty obvious where the major points of contention lie.  The Governor laid out a very ambitious platform in January that called for an increase in the gas tax and an extension of the medical provider tax.  The House went further proposing greater investments in education and health and human services and suggesting these investments could be paid for with adjustments to the Minnesota tax code.  The Senate went a totally different direction, coming forward with smaller budget targets and a no-new-taxes approach.  It was always easy to imagine that the initial approaches by each of the branches would be what they were and anticipating that, the Legislature put forward deadlines that aimed to speed up the decision-making process and ensure a more organized, if not amicable, end to the session.  The overall and individual conference committee budget targets were to be set by May 6 and conference committee reports were to be finished by May 13 under that framework.

So much for good intentions.  It's May 16 and the overall budget situation remains unresolved.  At this point, it's difficult to see the session ending smoothly or on time, but given the power of technology to put together substantial bills in a short period of time, it's certainly not out of the question that business can conclude by the 11:59.999999........... on Monday, May 20.  I am not a betting man (I lost fifty cents to an Augsburg College classmate on the 1972 Purdue/Notre Dame football game and have relegated myself to $2 show bets on the favorite at Canterbury Downs ever since), so I'm not going to post any odds regarding how this turns out.  I can only say that no one wins in a special session; one side simply loses more.  Given the uneven electoral swings in Minnesota over the past decade, I'm not going to venture reading the tea leaves as to what any of this means for the 2020 election cycle.

In the meantime, how about some of this with a slow theme (and oh, so mellow)?

I hope to provide some answers in my next post.

So, What is Happening?  It's been a couple of months and there has been a lot of action, but it's all boiled down to an impasse that few hoped, but many predicted, would happen as the 2019 legislative session rolled along.  All of the major conference committees have been meeting, but there has been very little headway on items that will have major impact in terms of policy or finances.

It's been no different in the education conference committee.  The first few days consisted of:

In which the two sides outlined their vision and the provisions of each bill were presented and discussed.  After that was finished, the conference committee launched into:

And provisions that were either the same in both bills or similar were discussed, sometimes amended, and adopted.  Since then, action has slowed and much of that is due to the overarching effect that the unresolved budget situation is having on the proceedings.  Everyone across the board in both bodies are waiting for a decision on the fiscal parameters that the various conference committees will be accorded as their final bills are put together.  Unfortunately, it seems this song is an apt description of the loggerheads that leadership has found itself in:

As expected, the tax issue is the cloud through which the sun cannot pierce at this point.  Much of the Governor's and House's plans rely on extension of the medical provider tax and an increase in the gas tax to both bolster the state general fund by removing road repair/construction costs from it and provide funding increases in a number of budget areas, including E-12 education.  This approach resembles a loose thread on a sweater (I called the Tortured Analogy Department for this one).  Currently, the revenue leakage from the general fund is like a loose thread and the Governor's tax policy is trying to snip that thread with his proposed tax policies.  The Republicans, while not yanking on the thread, don't seem willing to snip it by increasing taxes, which leaves us in a limbo from which a rapid escape seems unlikely and the fate of the sweater lies in the balance.

I do want to report that there are referendum equalization provisions in both the House and Senate, with $25 million in the House E-12 bill and just below $15 million in the Senate Tax Bill.  I have informed decision-makers that SEE prefers the higher amount (thanks Captain Obvious) and would like it in the Tax Bill as opposed to the E-12 bill.  Like everything else, the ultimate fate of the proposal will depend on how much revenue will be on the table for this and other purposes.  I want to thank all the authors of our equalization bills (Representative John Huot, Representative Brad Tabke, Senator Roger Chamberlain, and Senator Carla Nelson) for their support and the chairs of the committees (Representative Jim Davnie and Senator Roger Chamberlain) who are carrying the provisions in their omnibus bills.

I haven't been using the blog with regularity this session (as you have likely noticed), but as the regular session comes to a close over the next week, I hope to keep you informed of the action (or inaction).  Let me know if you have any questions or comments regarding the status of particular pieces of legislation.  Catch me at 612-220-7459 or brad.lundell@schoolsforequity.org.