Friday Morning Report. I am sitting here waiting for the meeting of the Legislative Commission; on Planning and Fiscal Policy to begin. This joint committee has been the venue of a lot of interesting discussion throughout the past few weeks, as it has been the place where spats between the legislative and executive branches over revenue options have taken place.

The subject this morning is the Governor's decision to move forward in the event that an agreement on revenue cannot be reached before Monday's constitutional deadline for the Legislature to adjourn. As reported yesterday, the Governor has decided to balance the budget using his line-item veto authority, the budget unallotment process (more on that below), and a delay in state payments (mostly in the E-12 area). There is question as to whether or not the Governor can implement the early recognition of property tax payments as proposed in his budget. Commissioner Tom Hanson of Minnesota Management & Budget contends he has the authority, but Senator Tarryl Clark (DFL-St. Cloud) has requested that the Commissioner show the citation that justifies that position.

Right now, the discussion is centering on the effects of the Governor's possibly delaying payments to school districts--as high as 64%/36% from the current 90%/10%--and how that would cause a ton of short-term borrowing for school districts. The other issue is how shifting payments this much would effect the federal stimulus package as maintenance-of-effort must be maintained in order to receive the stabilization funds from the stimulus package. Commissioner Seagren has just testified that the maintenance-of-effort is based on entitlement and not cash-on-hand, meaning that these shifts do not endanger our receiving federal stabilization funds.

Representative Lyndon Carlson (DFL-Crystal) has now brought up the subject of school district fund balances and how districts with little or no fund balance would slide dangerously close to statutory operating debt if a delay in payments were employed to the full extent being discussed. The answer appears to be that there is funding available for the Governor to direct to districts in this predicament, but that has now been disputed as given the fact that the E-12 conference committee does not contain a shift, no money was set-aside to protect districts from the adverse cash-flow effects emanating from a shift. Fifteen districts and eight charter schools are in this situation.

Republican legislators are now quizzing the DFLers as to why they are questioning the Governor's decision given their previous stance--particularly in the House--that advocated a significant shift (73%/27%) and the accompanying effects on school districts. Speaker Keliher has responded that regardless of what was previously proposed and what is being discussed now. Given the E-12 bill that went to the Governor had no shifts, revenue to assist districts either in or on the precipice of statutory operating debt was not included in the bill. This is why the question of what the Governor can do to mitigate this is relevant.

Senator David Senjem (R-Rochester), the Senate Minority Leader, has just queried whether the Legislative Commission on Planning and Fiscal Policy will the the venue where a mutual agreement between the Governor and the Legislature will be achieved. Senator Senjem is putting forward hopes for an agreement and is not particular whether or not this is achieved in public or amongst leadership behind closed doors in the Governor's office. The DFLers seem to be resistant to that.

Reresentative Marty Seifert (R-Marshall) is now suggesting that a bill be passed that would contain the House's 73%/27% shift accompanied by protections for districts with low or negative fund balances instead of leaving this all to the Governor. Representative Seifert makes a good point that leaving this in the Governor's lap restricts flexibility on both ends. Speaker Keliher's response is that this is a series of building blocks and Representative Seifert's suggestion may be part of the solution, but also pointed out that the Legislature has cut more than the Governor already and that the Legislature is not "spending wildly." She pointed out that the gap between projected revenues and expenditures has been addressed aggressively on the spending side by the Legislature.

Well, we are off education and onto discussion of the Governor's line-item veto of $381 million in General Assistance Medical Care in the second year of the biennium (FY 11) as part of his approval of the remainder of the Health and Human Services budget bill. This will affect approximately 31,000 Minnesotans who are generally older than the average Minnesotan participating in Minnesota Care (age 36), make less than $7,800 per year and have significant health problems, often mental illness. Commissioner Cal Ludeman believes it's difficult to draw any concrete conclusions, as the range of individuals receiving these benefits is quite broad. He did note, however, that approximately 40% of the medical payments under this program go for mental health services. Commissioner Ludeman believes that some of the problems resulting from the line-item veto can be addressed through Minnesota Care, a program for which most of the people affected by the cut should be eligible. Senator Linda Berglin (DFL-Minneapolis) has just pointed out that there is a difference between eligibility and actual enrollment and that the process of acceptance into a program may take too long to provide needed assistance to Minnesotans who need more immediate services. This is a point of contention between Senator Berglin and Commissioner Ludeman, as Commissioner Ludeman, in response to a later question from Representative Tom Emmer (R-Delano), contends that a great number of the individuals on General Assistance Medical Care can successfully transition to Minnesota Care.

Senator Pogemiller has made a request to Commissioner Ludeman to ascertain how many of these affected individuals are military veterans, chemically dependment, and mentally ill. He mentioned another category or two, but my fingers aren't as fast as my brain and my brain isn't as fast as my ears, but I think you get the gist of the question. Senator Pogemiller believes that this line-item veto will be of great hurt to some extremely vulnerable populations.

Sparks just flew as Representative Tom Huntley (DFL-Duluth), the chair of the House Health and Human Services Budget Division, contended that Republicans have had as a goal to eliminate middle-class people from Minnesota Care by flooding the Minnesota Care program with those who are poor and/or have considerable medical issues and by effect crowding out those with higher incomes (not high income in the traditional sense of how it's understood, but higher than those currently receiving General Assistance Medical Care. This is a similar argument used by national Democrats during the S-Chip debate nationally. Needless to say, Representative Huntley's assertion was objected to vehemently by Representative Emmer.

Now, it's onto property taxes. Representative Ann Lenczewski (D-Bloomington), Chair of the House Tax Committee, has distributed a memorandum prepared by House Research showing the effects--property tax increases--of an expected unallotment of the state's local government aid and market value credit programs. Representative Lenczewski has pointed out that the Governor did reduce local government aid last December to balance the FY 09 budget.

The Governor did propose significant cuts to these aid and credit programs in his biennial budget and given the gap between revenue and expenditures under the current state of affairs (budget bills approved at currently agreed levels without agreement on revenue) and it is trying to be determined in this discussion what the size of the unallotment would be given where we are at. Representative Lenczewski contends that the Governor will likely have to go further than he originally proposed (about $250 million) in February.

What legislative leadership is trying to get from Commissioner Hanson is a more firm idea of what the Governor's unallotment process would look like when implemented. Representative Paul Marquart (DFL-Dilworth) has just pointed out how property taxes are now the largest single source of revenue in the state and how this growth is beginning to reach critical levels. With greater cuts to local aids and credits, these increases will become even more steep.

Commissioner Hanson again stressed that property tax increases well beyond current projections can be avoided if there is a global agreement between the Governor and the Legislature.

(I haven't seen such a riveting serve-and-volley game since the days of Bjorn Borg.)

Unallotment Process. Time for your daily civics lesson on Minnesota government. What can the Governor constitutionally do with the unallotment tool? Good question and thanks to Joel Michael and Mark Shepard of House Reserach, we have answers. Michael and Shepard have put together an extensive memorandum regarding the unallotment process. I have provided a link below to the memorandum.

Link to House Research Report on Unallotment: http://www.house.leg.state.mn.us/hrd/pubs/unallot.pdf

Here is the Latest. The Tax conference committee is still kicking around trying to come to a revenue solution to fund the spending bills that will pretty much be passed by the end of today. The Governor has stated that he is inclined to sign all of the spending bills and using executive authority to balance expenditures (currently approximately $3 billion above the amount of revenue available in the absence of a tax bill, shifts, or the bonding-for-cash provision proposed by the Governor).

$3 billion isn't exactly the kind of money you can find by looking under the couch cushions, so the Governor would have to exercise the line-item veto in a machete like manner, un-allot large portions of state revenue, and (I didn't realize he could do this without legislative approval) change the aid payment shift for school districts.

At any rate, these last few days of the legislative session are going to be interesting. We will know by tomorrow morning how much of this will unfold as the Governor has until midnight to either sign or veto the omnibus health and human services appropriations bill. If he vetoes that bill, things are probably going to be very hectic all weekend long. Whether or not that means he will veto the E-12 bill in the event of a veto of the health and human services bill remains to be seen.

One mitigating factor would be that the whole subject of the New Minnesota Miracle has cropped up again. This is only "whispers in the back of the church" stuff, but rumor has it that the Governor has expressed some interest in using the New Minnesota Miracle as a vessel for some of his proposed reforms, which would be entirely appropriate. Those of us involved with PS Minnesota invited the executive branch over a year ago to investigate how some of their priorities would fit into the PS Minnesota framework, but, for whatever reason, there was little interest on the part of the Governor.

It is heartening, if these reports are true, that the Governor is taking an interest in the PS Minnesota/New Minnesota Miracle effort. I certainly welcome him to the effort. While I don't agree with everything he has proposed in the past few years, he has shown a great interest in many aspects of education policy and funding and if he, along with the Minnesota Department of Education, join in the combined effort, good things are likely to happen. They may happen slowly, but certainly the Administration's presence at the funding reform table would be welcome and telling.

Check out this editorial from the StarTribune today, extolling the New Minnesota Miracle. Whether or not we get further down the road in the next few days or the next few months, it is difficult to stress how important this initiative is and what it means to the future of education in Minnesota.

Link: http://www.startribune.com/opinion/editorials/44932682.html?elr=KArksc8P:Pc:UthPacyPE7iUiD3aPc:_Yyc:aULPQL7PQLanchO7DiUr

We Are Now in the Senate. The Senate is now discussing HF 2 and a vote will the forthcoming shortly. The Senate has less to talk about--in all likelihood--simply because they don't have a lot of provisions in the bill. They do need to explain some of the compromises that they made to House provisions, as the bills were dramatically different. It's hard to tell how long that will take and how riveting that discussion will be.

The first question to Senator Stumpf was in regard to the childcare allowances that were part of the Senate bill, but were surrendered in conference committee due to stiff opposition from the House confereees.

Discussion has now turned to the lack of a global agreement on the balance of revenue and spending between the Legislature and the Governor and how things will proceed from this point forward. That's a good question and there is no answer to it at this point.

Final passage is upon us and the final vote is 49-16 in favor with three Republicans joining all 46 DFLers in supporting the bill.

So it's onto the Governor and an uncertain fate.

Out of the Oven and into the Dining Room. HF 2, the E-12 Education Omnibus Funding and Policy bill, is currently on the House floor. Representatives Greiling and Slawik, the chairs of the K-12 and Early Childhood Funding Divisions respectively, have just completed their presentation of the bill, along with House Education Policy Committee chair Carlos Mariani.

One thing I neglected to report last evening was that there are no revenue shifts, either in terms of the state revenue payment schedule or the early recognition of property taxes, in this bill. Those decisions are going to be postponed for now, as there is a funding gap of approximately $3 billion between the Legislature and the Governor in terms of overall revenue right now. The Governor recommended about $1.3 billion in shifts and $1.0 billion of bonding-for-cash along with greater cuts to Health and Human Services to bridge this gap. It appears right now that the House and Senate are going to pass "full" bills, meaning at the amount they intend to spend with the revenue to support that level of spending decided in another venue.

Negotiations over revenue issues continue and we have to keep in mind that if those conversations do not produce the revenue needed to support the level of spending in this and other appropriations bills. Stay tuned.

The debate on the House floor is very polite, with Republicans pointing out that the Governor proposed more funding for E-12 than what is in this bill. Of course, he was able to accomplish that through the aforementioned shifts, bonding-for-cash, and budget cuts in other areas, which has created the situation of loggerheads that we are experiencing right now.

Well, the roll has been taken and the bill has passed the House by a vote of 85-49, with all Republicans voting against the bill and one DFLer joining them.

So, it's onto the Senate.

By the way, here is the link to the bill language of HF 2: https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=ceH0002.1.html&session=ls86

The draft summary can be found at: http://www.senate.mn/departments/scr/billdraft/09_hf2_cc_draft_summary_educx.pdf

Into the Oven. The recipe for the E-12 conference committee report has been written, the conference committee has mixed the ingredients, and after about 12 hours in the Staff 5000 oven, we are going to have a freshly baked conference committee report. Mmmmmm-mmmmmm good.

Not much in terms of calories and not much in terms of spice, as the overall budget situation makes this a pretty lean cake. It certainly isn't light and fluffy. And my guess is the Governor is going to spit it out once he takes a bite in a few days.

The big news here is that the agreement holds funding flat for the next two years. That's not good, but it certainly isn't as bad as the Senate's consecutive 3.5% cuts over the same period of time. Not much else in terms of spending, at least in a statewide sense.

Here are some other provisions that leap out:

• Modification of the maintenance of effort provisions in the safe schools levy to reflect FTEs and not revenue spent on counselors, nurses, and social workers.
• Provides for ongoing levy authority on a year-to-year basis for OPEB and provides for bonding for OPEB. In regard to bonding, bonds issued after October 1, 2009, will have to be approved by the voters in the district seeking the bonding authority.
• Removes the voters' ability to file a petition to force a revocation vote on a referendum levy.
• Establishes Office of Educational Accountability.
• Establishes growth model to measure student progress.
• Suspends 2% staff development reserve for the next two school years.
• Creates opportunity for district-created site-governed schools (the Education Evolving proposal that was presented at SEE's February meeting).
• A number of special education rules and statute revisions that bring Minnesota closer to federal statutes and rules.
• Changes in training and procedures in regard to the Behavior Intervention Rule and seclusion and locked time-out.
• New regulations pertaining to charter schools that arose from the Legislative Auditor's report.
• Raises the project threshold cost for requiring revenue and comment from $500,000 to $1,000,000.

There is more, but these are the highlights. There are a lot of items missing. Nothing--let me repeat that NOTHING--on shared services. Zero. Zip. Nada. Stop. Check please. After all of the oxygen sucked out of hearing rooms during the session (some of it by me), it somehow seems fitting that this, at least at this juncture, did not find its way into the legislation. The reason for its not being included boils down to a simple fact: the Senate bill mandated participation by school districts and the House bill did not. The Senate bill also required that a consultant be hired to find savings through cooperative purchasing and other shared services who would be paid based on how much in savings were generated by the work of the consultant.

The shared services initiative kind of took on elements of George Romero's series of zombie movies that began with "Night of the Living Dead," continued with "Dawn of the Dead," went further with "Day of the Dead," took it another step in "Land of the Dead," and then found a way to top that with "Diary of the Dead." This bill had more lives than your average zombie as it marched and marched and marched overcoming complaints at every juncture. For now, the zombie is dead. . .maybe. I'll get to that tomorrow.

A lot of folks wondered why the education community got so riled up over the shared services effort. I think the explanation is quite simple. When people talk about test scores and report cards and other assessment tools, educators often get uncomfortable but as long as the requirements are set fairly and implemented judiciously, schools accept the fact that there needs to be measures of accountability. The shared services initiative, on the other hand, seems to insinuate that school districts don't have the sense to come in out of the rain. Schools have been cooperating for years (over 40 years in terms of formal arrangements), but somehow unless Deloitte/Touche or some other nationally-recognized consultant doesn't recognize that cooperation, it obviously doesn't exist.

The consolidated levy is also missing, as is the New Minnesota Miracle. I wrote a bit about that in my first entry today. A number of items, including these two, were reportedly in the agreement reached by the conferees last evening, but were all discarded--and this is a rumour here--when the Senate insisted that their version of the shared services language be included. It was no dice.

It is highly possible that this bill will be vetoed. There is very little of the Governor's program in the bill, so he is likely to unsheath his veto pen and write a little missive to the Legislature as to why the bill comes up short.

Speaking of veto pens, where do you buy those. I was out at Office Depot (product placement) the other day and looked high and low and couldn't find any veto pens. Then it dawned on me. They aren't available in retail stores and I bet Governors throughout the country band together, call Deloitte/Touche, and buy veto pens by the truckload in a shared services agreement.

E-12 Funding Deal Imminent. The final content of the bill has yet to be completely determined, but a deal on the E-12 Funding and Policy bill is coming close to fruition. The conference committee worked tirelessly through the night in informal sessions and has developed what appears to be a final package that was delivered by the House in an offer this afternoon.

There is talk that the offer was to include a number of other provisions, including the New Minnesota Miracle, were slated to be in the offer as late as this morning, but a number of these high-priority items for each body were dropped from the bill when negotiations came to pretty much a crashing halt (at least that is what I was told) when one body or the other felt that the bill was out-of-balance in terms of content. Wish I could have been there. Oh, to be a fly on the wall in a world without flyswatters.

Commissioner Seagren also testified that the bill is extremely light on the Governor's pet provisions and is at risk of being vetoed unless a later iteration of the bill includes some of these initiatives.

All I can say right now is "Stay tuned. Film at 6. Or 7. Or 8. Or 10. Or . . ."

Friday night, nothing much to do but hang around Think I might just grab myself a cab and head downtown. May as well start this entry with some obscure lyrics (artist, title, and album will be listed below) to describe what's going on here at the Capitol. It is Friday night. There's not much to do but hang around. But I won't be grabbing a cab and heading downtown because the House just passed HF 885--the "curveball bill," (or the Plan B bill . . .or the "Hey Governor, look over there!" bill) for lack of a better term--and it's heading over to the Senate, where it will also be passed this evening and then head to the Governor where it will be dealt the ignominy of a certain veto.

This bill is another attempt by the DFL-controlled Legislature to shed some light on the Governor's budget package and try to highlight some of the items that frankly, are a little bit murky in the policy department. One of the items the Governor is trying to sell is about $1 billion in bonding for cash flow purposes. I term this as "deficit spending with a balanced budget." This is borrowing from the future in the same way that the federal government does, but, of course, the state is constitutionally bound to have a balanced budget so any borrowed money must be just that--borrowed, in this case from the future, because real-time biennial expenditures must be in balance with revenue.

Now the Governor isn't wimpy. Quite the contrary. But this does remind me of the character Wimpy (on the right) from the Popeye cartoons who often spouted the memorable line "I'll gladly pay you Tuesday for a hamburger today." The problem is that the price of the hamburger can go up precipitiously depending on the terms that govern how the money is paid back. In conversations with other Capitol wags, the price on the Governor's borrowed $1 billion is about $1.6 billion over the term of the bonds.

The Legislature can't seem to get the public riled up about this aspect of the Governor's budget package, which is really starting to result in a considerable amount of frustration. The option to the Governor's approach, and the $1 billion hole that is created if it is abandoned, is a tax increase of some sort. That is where the DFL has had its problems. As has been the case in all things public finance-related in the political sphere, the word T-A-X has little traction even if a case can be made that it is better than the alternative.

One thing that has surprised me, and it shows up a bit in HF 885, is the concept of a temporary surtax to raise the $1 billion (or thereabouts) in the short term and phase the tax out as certain revenue thresholds are met. The Senate has proposed something similar, but the House is resistant to the concept.

Experience isn't always a good thing to have. I keep thinking back to the fiscal challenges of the mid-to-late Quie admininstration when state finances went into the tank due to the energy crisis and the horrifying inflation/high interest rate situation that led to the recession of the late 1970s. To solve that crisis (and it was solved again and again and again in repeated special sessions) everything was on the table--taxes, cuts, shifts--and it took a little bit of each of those tools to get us back to a budget situation that was sustainably balanced. Right now, the situation seems to lack one leg of that stool, which is going to make it really hard to stand. But, it's not like we aren't going to have a special session to figure it out.

So, where does education sit in HF 885. There's not a lot of detail. The only thing pertaining to education is a very vague revenue number--it was stressed to me that it IS NOT a target--that explains (at least as it was explained to me) the revenue "space" available to the E-12 budget. Again, that's vague and I will try to get more detail from those in the know.

What I do know is that the E-12 conference committee will continue to meet and hammer out a final compromise, both on the financial and policy matters in HF 2. The only thing that happened today was that the Senate came forward with its second offer after reviewing the House offer that was delivered on Thursday. From my perusal of the offer, there doesn't appear to be a ton of progress being made as the proposal ping-pong continues. Whispers in the hallway seem to indicate that legislative leadership wants all major bills on the Governor's desk by next Tuesday that in the event that they are vetoed, there will be time to attempt overrides.

My guess is the conference committee on HF 2 will be meeting tomorrow (Saturday) in an attempt to come closer to a final agreement. So if you're not doing anything, just check the legislative schedule and head over to Room 200 of the State Office Building. But, if you have something exciting to do, like watching paint dry or neutering the ants in your backyard, by all means do that. Seriously, it would be nice to see some different faces in the audience.

Now, for the answer you've all been waiting for, the song lyrics introducing this entry were written by Todd Rundgren, from the song "Long Flowing Robe" which led off Todd's 1971 masterpiece, Runt: The Ballad of Todd Rundgren. Give it a listen sometime. It's got one of the great slow songs of all time, "Be Nice to Me," which is what I hope is paraphrased to "Be Nice to SEE" in the final version of HF 2.

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Today Made me Think about the Guy on the Left. Who is none other than the late Hank Snow. Hank had some awesome hits during his career, which spanned an amazing 69 years. Some of Hank's hits include "Going 90 Miles an Hour (Down a Dead End Street), which kind of describes where the session is heading as it enters its last 10 days. Another one of Hank's hits from 1955 was "Cryin', Prayin', Waitin', Hopin'," which pretty closely describes my state of mind right now (and also the collective state of mind of the entire lobbying community). One of Hank's hits from 1952 was titled "The Gold Rush is Over," which also has a certain poignancy as I think about the condition of the state budget. One of Hank's biggest hits was his rapid-fire iteration of geographic sites "I've Been Everywhere," which pretty much is the opposite of what I'm singing these days as my theme song right now is "I Haven't Been Anywhere (except the State Capitol)." I could go on and on, but I think you get the drift.

A major course change was initiated by the Legislature today in an attempt to break the budget deadlock that exists between both houses of the Legislature and additionally between the Legislature and the Governor. The differences that exist, especially in terms of revenue generation, between the Governor and the Legislature are massive. To both highlight these differences and create a platform on which the major budget areas left to be resolved (E-12 funding and Health and Human Services funding), the Senate and House have loaded up a mega-reva-spending bill that contains all of these provisions, which went into conference committee this evening.

The bill is HF 885, which until today was a bill containing a raft of tax policy technical changes but is now the vehicle for the lion's share of funding being approved by the Legislature this year, as the areas of Health and Human Services and E-12 Education are by far the two largest general fund expenditure categories in the state budget.

The conference committee is chaired by the same individuals who chaired the conference committee on the tax bill, Representative Ann Lenczewski (DFL-Bloomington) and Senator Tom Bakk (DFL-Cook).

I suppose an analogy that may apply here, as the "vehicle" has gotten larger is that what once were bumper cars are now full-size vehicles and what was once a kiddie ride of sorts has now been elevated to something more akin to a demolition derby. The vehicles are bigger and things are moving faster and there are going to be COLLISIONS! (Okay, the caps are a bit much).

As I write this, the conference committee is souping up their vehicle to send to the Governor, perhaps as early as this weekend, where it will likely be run over my the Governor in his monster "veto" truck.

Well, I've "driven" this analogy about as far as it will go and I will now speculate as to why the Legislature took this tack in its dealings with the Governor. Needless to say, the Legislature has been extremely frustrated all session as their efforts to bring clarity to some of the provisions in the Governor's bill--especially those relating to shifts, bonding for cash, and use of one-time money from the Health Care Access Fund--they view as irresponsible. Through the use of these tools (the Legislature would say "tricks"), the Governor has avoided raising state taxes.

I'm not going to get in middle of this one, but it's not a widely-known fact that the Senate and House both cut more in terms of state appropriations than the Governor does. It's also true that both the Senate and House raise income taxes, something that the Governor has avoided. The Legislature's problem is that up until this point, they have been able to paint a clear picture of how their decisions line up against the Governor's and what the possible ramifications of the Governor's choices are. And that is going to be the primary legislative goal of the next few days; to make clear the differences in their programs, both now and in the near future, as compared to the Governor's.

Unexpectedly Short Night. Just about everyone was buckled in for a long night of conferencing, but the Senate came into the conference committee late this afternoon and laid down a large offer containing a lot of different policy provisions from both bills. The provisions were so voluminous, that the House conferees thought it best to send everyone home as they peruse the Senate offer throughout the evening and prepare a counter offer for tomorrow.

The conference committee is supposed to finish its work tomorrow in accordance with the joint rules adopted by the House and Senate earlier this session. As it looks right now, several of the larger conference committees will not meet the May 7 deadline. Whether this will require a suspension of the rules on the floor of both houses of the Legislature or a simple detour to the Rules Committee in both bodies to get clearance for final passage remains to be seen.

Tuesday Afternoon. Name the band that made that song famous (Answer at bottom). Anywho. The conference committee reconvened around 4:00 PM and met until just a shade before 8:00 PM. I ran into Representative Kim Norton in the hallway and she asked me if the E-12 conference committee was a lot of "hurry up and wait." I replied, "No. It's more mosey around and wait." In other words, not a whole lot going on.

The three subjects the conference committee tackled in the latest session were the Senate's shared-services proposal, the Senate's early childhood proposal, and the high-stakes testing provisions found in both bills.

Shared-services is turning into the "issue that will not die." Some of the legislation's proponents seem to express this unspoken skepticism regarding school districts' decisions to save money by either buying in bulk or using other aspects of shared-services plans. Further, many of these same proponents don't believe that school districts can figure out how to share services and need the input of a consultant to maximize their savings.

I testified (along with about 10 other people, all but two expressing concern about the Senate's approach) without providing the 40-year history of shared services (I did that when the bill first came up in the Senate in February). Instead, I simply stated my impresssion that there (1) probably isn't a lot of savings to be had, (2) school districts don't need a consultant to figure this out, and (3) the legislature needs to proceed carefully because if they create any type of infrastructure to facilitate shared-services, that infrastructure may add to expenses that districts may want to avoid in the future.

I did express support for a clearinghouse or web presence that would help school districts find the best prices on goods and services. This is the basic approach to shared-services in the House bill, which creates a best-practices clearinghouse in the State Auditor's office. Whether or not the State Auditor's office is the right place for that is anyone's guess, as the same function could be performed in either the State Department of Administration or the Minnesota Department of Education.

The conference committee will be re-convening tomorrow afternoon and the fur is going to have to start flying pretty soon. There are only two conference committees that do not have their targets: taxes and E-12 education. If those targets are handed down tomorrow, we'll probably be in conference late into tomorrow evening and through much of the day Thursday, as work on all conference committees must be completed by legislative joint rules by Thursday, May 7.

With the deadline looming, my guess is I'll be living on caffeine, sugar, and salt for the next 48 hours. Watch the blog for updates.

The Whole Funding Kerfuffle. Many of you probably saw Sunday's piece in the StarTribune on Sunday in which Lori Sturdevant talked with Scott Croonquist regarding education funding. I was at (and participated in) the AMSD press event last week outlining how much cutting will be going on in the coming year if funding is flat (or worse). At that event, in response to a question from the press, Croonquist said, accurately, that the Governor had the most money for education on the table this session. All one needs are eyes and a rudimentary grasp of simple mathematical principles to know that is the case.

It goes like this -3.5% < 0% < +1%, with the -3.5% being the Senate proposal and the +1% belonging to the Governor. I also responded to the question with something more oblique than Scott's answer, sparing me from the scorn that has been heaped upon Scott by some in the Legislature. I've learned that if you don't want to be quoted, use a metaphor, which I did.

Does this mean that the Governor's package is the best package? That all depends. The Governor uses the shift and one-time money (and huge cuts to the health and human services budget) to create a small increase for E-12. Further, the Governor's proposed actions leave the budget out-of-balance for the next biennium, making the prospect of cuts--for E-12 and everybody else--pretty much a certainty unless the economy gains traction and then takes off with a solid and sustained growth spurt. Likely? Who knows?

The Senate has been buffeted about a bit with their cut proposal, but it does balance this biennial budget in a manner that leaves all the one-time money in the system, which would seem to spare school districts from significant cuts after this biennium (provided, again, that there is a solid economic recovery).

The big question for the Senate is why cut across-the-board? That's a simplistic approach that really shows an inability to set priorities, of which E-12 should be at the top of the list (Okay, I'm biased. If you ask a health and human services lobbyist, you'll likely get a different answer). There is no question that our economic future is going to be closely tied to the effectiveness of our education system and this is no time to be cutting education. Read President Obama's interview in the NY Times from last week for his comments.

So, what's the trade? We're going to find out. It's my guess that the Governor is going to really push for his budget and try to accomplish all of this without a tax increase (at least at the state level). How that fits into the process and what the legislative reaction looks like is anyone's guess. The next 10 days are going to be extremely interesting and we'll see how it turns out.

Sturdevant Article: http://http//www.startribune.com/opinion/commentary/44190667.html?elr=KArks:DCiU1PciUoaEYY_4PcUU

NY Times Obama Interview: http://http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html?_r=1&scp=1&sq=obama%20interview&st=cse

Rock Music Trivia Answer: The Moody Blues

Tuesday Morning Report. The E-12 Conference Committee met this morning and although no formal action was taken, there was ample discussion on several topics where comity will need to be reached before provisions can be approved.

One provision that received a lot of discussion was the provision in the House bill that would dramatically reduce the amount of revenue going to special education students currently being served in private schools. Under current law, these students get--for lack of a better term--100% of their costs re-imbursed by the state, as the state requires the resident public school district to fund the entire cost of educating the student so as not to place any funding responsibility on the private school. Of course, the public school does participate in the development of the Individual Education Plan under which the services for the student are prescribed and delivered, but there is no cross-subsidy for the private school as there is for a student in a public school.

There is a provision in the House bill that would bring Minnesota's regulations governing the delivery and payment of special education services to these students in line with federal law. Under federal law, districts only need to forward their federal aid to the private school at the same level at which students in the district's public program receive federal aid. Needless to say, removing the state support from children in private settings would create tremendous cost pressures for the private schools serving these students.

An amendment has been drafted that would bring funding for special education students in private settings into line with special education funding for students in the resident district where the private school is located. Even with this concession on the part of the public special education community, the private school interests seem to be balking a bit at any departure from current law. So, resolution remains to be seen.

One thing that would help would be to get a better idea of how many students, private schools, and school districts are currently affected and to what degree they are affected under current law. If nothing happens and current law is maintained, MDE should at least be directed to gather information on this dynamic.

Another provision that received a lot of discussion was the House initiative to allow for the creation of district site-based schools similar to charter schools but still under the direction of the district. This legislation was put together by Education Evolving and we were honored to have a presentation on this subject at our February SEE meeting. Bob Wedl and Curt Johnson provided interesting and compelling testimony regarding this provision, which was carried by Senator Kathy Saltzman in the Senate and Representative John Benson in the House.

Lastly, there was extensive discussion of a number of proposed charter school reforms contained in both bills. The bulk of these reforms were suggested by the Office of the Legislative Auditor's report on charter schools issued last year. In some instances, the proposals go further, including the 36-month moratorium for the establishment of a charter school within one mile of a closed building or in a consolidated or dissolved school district. The charter school association adamantly opposes this suggestion and it will be interesting to see if and how a compromise can be reached.

For my own part, I find the 36-month moratorium to be reasonable. Charter schools were established to bring greater innovation to the public school sector and not to "steal" students by simply swooping into abandoned geographic areas, reaping the anger of affected parents, and setting up shop. There are provisions in the bill that would allow either the school board in the resident district or the MDE Commissioner to waive the moratorium in the event a case is made that the charter should be able to open. I understand why the charter school community wants to avoid the insertion of this hurdle into the process, but I simply don't see it as a blow to their efforts.

I'll be back later with more comments, including a discussion of shared services. Senator Bonoff distributed an amendment on this provision as the conference committee recessed at around 11:00 this morning, ensuring the discussion of this subject this afternoon (or evening).

Conference Committee Work Continues. I'd like to say things are just humming along, but the E-12 conference committee continues to proceed in fits and starts. It's not their fault, as major decisions cannot be made in any of the conference committees dealing with budget matters until an overall spending/revenue target is established by legislative leadership.

That doesn't mean the E-12 conference committee has been slacking off. Today's session dealt largely dealt with discussion of the special education law and rule revision/repeal that is contained in both bills, albeit with slight differences in language. This effort was facilitated by the Minnesota School Boards Association and stakeholders from the advocacy community. Legislatively, Representative Jerry Newton (DFL-Anoka) and House legal staff in the person of Lisa Larson worked to take the stakeholder group's agreements and fashion it into legislation. The legislation was introduced as HF 1701, authored by Representative Newton, and SF 1800, authored by Senator Lisa Fobbe (D-Princeton). After it was heard as an individual bill, the language was folded into each body's version of the omnibus E-12 bill.

There are several provisions in this legislation that should prove helpful to school districts throughout the state. Perhaps the most important provision is the proposed prohibitiion on the Minnesota Department of Education's (MDE) ability to make rules outside of specific authority as instructed by the Legislature and then, only through the formal rule-making procedure. One of the frustrations of the education community over the past decade has been the informal promulgation of policies with the power of rule emanating from memoranda prepared by MDE staff. If the proposed legislation passes, this will be prevented and all policies will have legislative input.

That is how it should be. In fairness to MDE, there have been instances when lack of clear policy direction from the Legislature has left them in the uncomfortable position of having to "guess" where to go in policy terms. This legislation should help create a stronger communication link between the various parties in the policy development and implementation system, which should result in both better policy.

I will keep you informed as to the conference committee's progress tomorrow.

Type III Bill Signed. Lost in all of the hubbub was the Governor's signing of the Type III legislation that will lessen some of the regulations placed on drivers of Type III vehicles after an interpretation of last year's legislation by the Minnesota Department of Public Safety required that drivers of these vehicles receive physicals, submit to pre-employment drug testing, and receive training (including behind-the-wheel training).

Under this bill, which passed the Senate 64-0 and the House 132-0), individuals who operate these vehicles who are not hired "solely" to drive. In other words, teachers, coaches, and other staff who are clearly part-time drivers with other non-driving duties will no longer need to take a pre-employment drug test or a physical. They will still need to receive training and a behind-the-wheel test.

The bill was effective the day it received the Governor's signature--April 23--so the new regulations (or lack thereof) are in effect.

Back in the Saddle. Even Gene Autry's trusty horse--Champion for those of you who don't remember--would be tired if he was spending this much time of the trail. The conference committee was back at it this morning shortly after 10 AM after adjourning last evening at approximately 11:30 PM.

The conference committee's morning proceedings was spent discussing the changes to the Behavior Intervention Rule contained in the House bill. This provision is not in the Senate bill. In fact, it wasn't even heard in the Senate E-12 Funding and Policy Division, meaning that the Senators needed to be brought up to speed on how this provision came to be and what the provision is attempting to address.

This provision has a long and somewhat interesting history. Several years ago, the Legislature directed the Minnesota Department of Education to develop rules relating to time-out and seclusion for use with students identified as having an Emotional Behavior Disorder. Those rules were dismissed by an Administrative Law Judge last year. In view of this fact, the Minnesota chapter of the National Alliance on Mental Illness convened a working group of interested stakeholders last summer with the goal of developing language that would both provide training for teachers and staff in dealing with EBD students through Positive Behavior Supports and also limit the use of seclusion, particularly locked-time out, to very narrow situations.

This is not a perfect bill, but it does not take effect until August, 2011. This should give school districts and advocacy groups ample time to develop and implement local school building strategies consistent with this legislation. Further, the special education funding in the federal stimulus package can be used for staff development in this area. The time and resources available should give school districts a fighting chance in meeting the goals of this legislation.

The afternoon has been spent working on provisions in both bills that are similar but not identical. As you recall, the conference committee adopted almost all of the identicial provisions in both bills last evening and we are now in the wordsmithing process to create consensus provisions where the basic thrust is identical, but language differences exist.

Live from the Conference Committee. We're into our second evening of E-12 conference committee proceedings. The action (let me re-phrase, inaction) to this point has centered around the discussion of the provisions in both bills, highlighting both differences and similarities that exist between the House and Senate versions of the bill.

Last night was dedicated to the larger questions before the conference committee in terms of funding, particularly the House's flat funding and the Senate's 3.5% per year funding reduction. Special education, both in terms of funding and policy, was also discussed last evening.

Tonight, the remainder of the bill will receive its initial review by the conference committee. The portion of the bill dealing with early childhood programs were just presented and Representative Mary Murphy (DFL-Hermantown) just finished outlining her committee's position on libraries. Representative Murphy is not a member of the conference committee, but was brought in to provide insight on the House's approach to the library question, especially as it relates to maintenance-of-effort.

One of the big changes I have witnessed in my legislative career is the willingness of conference committees to bring in outside testimony. In the old days (when Alexander Ramsey and I used to sit around chewing plug tobacco and admiring each other's high-button shoes), conference committees rarely (and I mean really rarely) would allow participation of legislators who were not members of the conference committee to speak before the conference committee.

Well, back to the action. The discussion of Article 2--the education excellence article that contains a number of educational quality improvement proposals--is a bit slow in the coming, as there was an extended discussion of the consolidated levy. The consolidated levy, as many of you know, is a long-standing proposal that takes three levy categories--operating capital, equity, and transition--and combines them into a single levy category with a statewide levy percentage based on adjusted net tax capacity. This program does provide some measure of tax equity (although it's not even) by shifting effort away from most low property wealth districts. Because it mimics the general education levy, there is considerable opposition, mostly from the business community, to this measure. Stay tuned.

We're on to Article 2 and now discussing the differing shared services proposals in each bill. Senator Terry Bonoff (D-Minnetonka) is now providing insight and defending the Senate's proposal.

Concurrent enrollment between high school and post-secondary institutions was cut in the Governor's bill and both the Senate and House oppose that cut, the House by broadening the state requirements for the Advanced Placement and International Baccalaureate programs to include concurrent enrollment and the Senate through a $1 million per year rider. The House pointed out the Senate's position would be vulnerable to a line-item veto. The Senate funded their position, if not directly, through a reductions in the base level appropriations for the Advanced Placement and International Baccalaureate programs. There is an interest on both sides to maintain the option of concurrent enrollment, so look for negotiations to come to an agreement here.

Now, the 11th grade high-stakes tests are under the microscope. There are similar alternatives set out in both bills pertaining to the 11th grade math test and the House bill also allows for the awarding of a diploma under certain circumstances if a student has failed both the math and reading portions of the test. There is ample interest in reaching a compromise here, but the third party--the Governor--is now providing his input through the person of Minnesota Department of Education Commissioner Alice Seagren.

Commissioner Seagren is now pointing out her concerns (not only on testing) that were transmitted to the conference committee by letter. Among the Commissioner's 31 separate complaints:

1. Senate position on providing more resources for QComp in St. Cloud. Department has revoked St. Cloud's participation in the program for lack of progress toward a satisfactory alternative compensation model. The Senate provides St. Cloud with one more year of funding.
2. The Commissioner believes that language in the bill is not sufficient to ensure that state standards are aligned with federal expectations and would endanger Minnesota's eligibility for federal grants.
3. A number of items related to testing that the Department deems as unclear.
4. Proposed deadlines for applying for the QComp program the Department believes are detrimental to districts considering participating. Further, there are provisions in the bill that the Department believes allows participating districts to deviate from the state's QComp goals.
5. The Department disagrees with the Senate's proposal to put unappropriated QComp funds into a grant program to help small rural districts prepare QComp proposals. MDE believes this would discriminate against mid-size districts seeking to join the QComp program.
6. MDE wants to include the YMCA and Volunteers for America in the list of possible charter school sponsors. These groups, in MDE's view, are only vaguely aligned with religious organizations, which are prohibited from becoming sponsors because they are non-sectarian. Department wants to narrow limitation to "houses of worship" and allow sectarian groups to sponsor charter schools.
7. Lack of clear direction on charter schools creating non-profit building corporations.
8. Problems with the Deaf and Hearing Impaired Council created in the Senate bill, as it would have costs to MDE that are not reimbursed by the bill.
9. MDE believes the Senate's quality rating system for early childhood programs is too ambitious and cannot succeed in the absence of a statewide quality rating tool for evaluation purposes.
10. MDE does not support the increase in the number of signatures necessary to put a referendum revocation on a ballot.
11. Insufficient resources for charter school authorizers in House bill.
12. House bill takes curriculum evaluation and assessment cycles out of synchronization according to MDE. I believe Commissioner Seagren is referring to the House bill's delay of the new science standards by one year.
13. MDE wants to keep private schools offering special education services to remain "full service." Language in the House bill, arising from the task force led by Representative Jerry Newton, only requires that federal special education dollars be passed through to private schools serving special education students and that state revenue does not have to be passed through to them.

And that's leaving some things out. Needless to say, the Governor got short shrift from the Legislature this year, but that's not entirely unexpected. Several of the House and Senate provisions relating to charter schools and QComp were gleaned from Legislative Auditor's reports on those two areas, so it's not like the Legislature is going far afield in putting together its responses to those programs. Further, the old saying is "the Governor proposes and the Legislature disposes" and in an active democracy, that's how it should work (regardless of which party controls what).

Back to the bill discussion. QComp is back on the docket with both bodies looking to do something to help smaller districts seriously consider QComp as an option. Many smaller districts simply don't have the staff size to develop and implement a meaningful the evaluation system that is a mandatory part of Qcomp.

The beat goes on. . . . .we continue to slog through the bill. Article 2 has a ton of stuff in it. Right now, we're immersed in the new charter school regulations carried by Representative Linda Slocum (DFL-Minneapolis) and Senator Kathy Saltzman (DFL-Woodbury). One particular difference between the bills is the presence in the Senate of the 36-month prohibition on the opening of a charter school within a one-mile radius of a building that has closed or a district that has either consolidated or dissolved. The Senate has this prohibition, the House does not. One thing to remember about this provision is that a local school board can waive the moratorium if it so chooses.

Another big difference between the two bills is the presence in the House bill of a re-design of the integration revenue program. There are considerable revenue swings in the House plan, but they will not take place until there is money available to hold districts losing money under the changes to be "held harmless."

Well, that's it for Article 2. Now we are going to move on to see if we can adopt some of the same and similar provisions in the two bills. A number of same positions have been adopted and we're out of here for tonight. Back tomorrow at 10 AM in Room 200 of the State Office Building. Deadline is next Friday (May 7) for the conference committee to have its work completed, so in all likelihood, we are going to be here all weekend.

Late Day Update. The House and Senate continue hard at work on their versions of the Health and Human Services omnibus funding bill. This bill usually draws a lot of discussion and a lot of amendments and today is no exception. Both bodies are approaching hour number seven on this bill and who knows how long the discussion will continue.

Two education-related items were announced today. First, the E-12 conferees for the House and Senate have been named. They are (with links):

House

Representative Mindy Greiling (DFL-Roseville): http://www.house.leg.state.mn.us/members/members.asp?id=10218
Representative Carlos Mariani (DFL-St. Paul): http://www.house.leg.state.mn.us/members/members.asp?id=10399
Representative Nora Slawik (DFL-Maplewood): http://www.house.leg.state.mn.us/members/members.asp?id=10622
Representative John Ward (DFL-Brainerd): http://www.house.leg.state.mn.us/members/members.asp?id=15253
Representative Pat Garofalo (R-Farmington): http://www.house.leg.state.mn.us/members/members.asp?id=12262

Senate

Senator LeRoy Stumpf (DFL-Thief River Falls): http://www.senate.leg.state.mn.us/members/member_bio.php?mem_id=1063&ls=

Senator Chuck Wiger (DFL-Maplewood): http://www.senate.leg.state.mn.us/members/member_bio.php?mem_id=1067&ls=

Senator Kathy Saltzman (DFL-Woodbury): http://www.senate.leg.state.mn.us/members/member_bio.php?mem_id=1114&ls=

Senator Kevin Dahle (DFL-Northfield): http://www.senate.leg.state.mn.us/members/member_bio.php?mem_id=1160&ls=

Senator Gen Olson (R-Minnetrista): http://www.senate.leg.state.mn.us/members/member_bio.php?mem_id=1043&ls=

In related news, the conference committee will hold its first meeting tomorrow, Tuesday, April 28, starting at 4 PM in Room 200 of the State Office Building. The first meeting is used to compare the provisions in each bill by going through each bill section-by-section. In some instances, provisions where language is identical will be adopted, but there is no guarantee that will happen right out of the gate.

Surveys: Scott Croonquist from AMSD usually gathers data from his districts showing the level of cuts that will occur as a result of both bills. This year, he asked me to join him and invite SEE members to participate. Deb Griffiths e-mailed every SEE superintendent a copy of the AMSD survey to be filled out. The survery is a Word document that can be filled out and e-mailed back to me. Please do that by Wednesday, April 29, so we can present the level of cuts to the E-12 Conference Committee early in its proceedings. Thank you very much.

This Will be the Week that Was. The E-12 Funding bills have passed both bodies as have the tax bills, which puts pretty much everything of note into negotiations starting this week. Unlike other years, the negotations this year will pretty much be a mad dash, as conference committees must reach their agreements and close up their work by May 7. The resulting work of the conference committees will then be approved on the House and Senate floors before heading to the Governor, for a number of likely vetoes.

Vetoes are pretty much expected in the area of taxes and health and human services funding. The Governor has vowed to veto any tax increase and both the House and Senate tax bills contain considerable tax increases. The House bill creates a fourth-tier income tax bracket and also loads up on cigarette and liquor taxes to generate the money they seek to balance their budget plan. The House bill also contains a controversial change to the way Minnesota taxpayers' home mortgage interest is treated. The House bill eliminates the home mortgage interest deduction and replaces it with a tax credit of up to $420. This does a couple of things. First, it basically caps the amount of home mortgage interest considered for possible tax preference at $10,000. In other words, any home mortgage interest you pay in excess of $10,000 will no longer be recognized by the state of Minnesota for tax purposes under the House bill. The plus side of this approach, in the House's view, is that in changing the deduction to a credit, non-itemizers (usually those with low incomes) will be able to access a tax advantage now reserved for itemizers.

The downside of this approach is fairly clear. Politically, it requires a two-step explanation, which is almost always poison (even for the most sound policy, which I don't necessarily believe this is at all levels). Rhetoric against something usually stops at the "they took this away. . ." part of the equation, and it's often difficult to get people to stay tuned for the ". . .and they replaced it with this" follow-up phrase. That seems to be the dynamic at work here. The other problem has more of a policy angle. When you take away deductions and broaden the taxable base, the best way to deal with that is to lower marginal tax rates. That's not happening here, so people aren't seeing the "instant" trade-off. And while it's laudable to make the tax system more progressive and to target tax benefits to those at the lower end of the income spectrum, there are probably better ways to accomplish that, both politically and in a policy sense, than this. Further, SEE districts are heavily residential in nature, with many of our districts filled with young families. Because of when they purchased their house (before the collapse of the housing bubble), the home mortgage interest paid is likely to be over $10,000, making this change a drag on their household finances. It is already difficult for school districts in these areas that are growing and often filled with younger homeowners to pass referendum and debt service levies. Having these folks take a hit on their income taxes isn't going to help matters in that regard.

The Senate is more straightforward in its approach. It also creates a fourth-tier rate for high income earners, but it mainly increases--on a temporary basis--the income taxes paid by all Minnesotans. It institutes a "blinker" tax (meaning it ceases once enough money is raised) that would affect 85% of Minnesota taxpayers. When combined with the Senate's cuts to all division budgets of approximately 7 1/2%, the Senate balances both the current biennium and next biennium without using any accounting shifts, bonding against future tobacco settlements, or what they consider other budget legerdemain. Whatever one feels about their approach (and there are ample reasons not to like it), it is certainly an honest one.

I'll be back later today with further details.

House Bill Creeping Toward the Floor. The House K-12 Funding bill cleared the House Ways and Means Committee early this evening and will now head to the House floor for consideration later this week, most likely on Wednesday. Once it's off the floor, we'll be all set for conference committee, which should be extremely interesting. The House and the Governor are fairly close, with the House raising taxes more and shifting less and spending a bit more. The Governor has vowed not to raise any state taxes, which could complicate matters. The Senate position on cuts and no shifts will also cause some complications. As it gets closer to conference committee, I will be preparing a comparison summary of the major provisions in each bill and how they differ from the Governor's position.

Special Education in House and Senate Bills. One of the quiet victories, if it can be called a victory, is the decision by the Governor, House, and Senate to not reduce the special education base in their budgets this year. Instead, the appropriation levels set in the 2007 omnibus education funding bill are maintained in all the budget proposals being presented this year.

Those levels will provide an approximately $15 million increase for the 2010 fiscal year and an additional $50 million for the 2011 fiscal year for the special education basic formula. Excess cost aid is bascially flat for the next biennium. This is one bit of good news (albeit small as it won't prevent increasing cross-subsidy amounts) and an on-going recognition of the costs of special education.

House Tax Bill Unveiled. And that's about all I can tell you. There are a number of interesting provisions, but I have not had the opportunity to pore through the bill or the summary. I hope to have a chance to read it before it hits the House floor. I can point you to the
text of the bill and the summary if you are so inclined to peruse it for yourself.

Current Text of HF 2323: http://www.house.leg.state.mn.us/comm/docs/A09-0462.pdf

Summary of HF 2323: http://www.house.leg.state.mn.us/comm/docs/HF2323de1summary.pdf

Spreadsheet of HF 2323: http://www.house.leg.state.mn.us/comm/docs/2009ProposedOTB.pdf

House Bill Mark-Up. The House K-12 Funding Division is in the midst of discussing and amending HF 2--the House omnibus E-12 funding bill--as I write. The only major item that has been amended, in this case out of the bill, is the alternative teacher licensure piece that was opposed by Education Minnesota. The was offered by Representative Will Morgan (DFL-Burnsville) offered the amendment and it passed on a vote of 11-10.

There has been a lot of discussion on integration aid. The House bill changes some aspects of integration aid, focusing it more closely on achievement as opposed to interracial contact and althers the distribution of integration aid (although not for a few years). Representative Buesgens just offered an amendment to eliminate the program entirely, but it failed.

Representative Pat Garofalo (R-Lakeville) just offered an amendment that would remove the pre-Labor Day start allowance in the bill, but it failed on a voice vote.

This hasn't gone on as long as I thought it would. About fifteen amendments were offered and it looks like slightly less than half passed. Everything that passed was relatively non-controversial, the only exception being the removal of the alternative teacher licensure piece that was in the bill (as referenced above).

Speeches are no being given and the bill will pass, most likely on a straight party-line vote.

I'll speak in greater detail about the contents of the bill in my next entry. Live from Room 5 of the State Office Building, this is Brad signing off.

EDIT: I was wrong. Mark this one down (and the next one and the next one and the next one . . .) . The final vote on the K-12 Funding Bill in the K-12 Funding Division was not a straight party-line vote. Representative Pat Garofalo (R-Lakeville)--the lead Republican on the K-12 Funding Division--voted for the bill.

Integration Revenue. The House K-12 Funding Division had some very interesting working groups this year. Of course, there was the Shared Services Working Group and the Mandate Reduction Working Group, but perhaps the group that came up with the most rattling set of recommendations was that of the Integration Revenue Working Group headed up by Representatives Robin Brown (DFL-Moscow Township) and Jerry Newton (DFL-Coon Rapids).

Much of the working group's final product is a reflection of the Legislative Auditor's Report on Integration Revenue published in November, 2005. One of the primary issues with the Integration Revenue program as identified by the Legislative Auditor is that the program lacked focus and there was a question as to the primary purpose of the program: increased student achievement or bringing greater racial balance to school buildings by moving students within school districts and between neighboring school districts.

The Working Group's product clearly points more toward achievement than racial balancing and also suggests the integration revenue be delivered only to school districts with diversity levels at or above the state average. This would clearly redistribute integration revenue and even though the revenue distribution portion of the Working Group Report is not part of the K-12 omnibus bill, the specter of this redistribution occuring at some time in the future is clearly influencing the discussion of the issue. I will try to unearth the data run on the Working Group formula changes and distribute it to all of you.

Here is a link to the 2005 Legislative Auditor's Report on Integration Revenue: http://www.auditor.leg.state.mn.us/ped/2005/integrev.htm

Live! From the House K-12 Funding Division! It's Tuesday Afternoon! House finance whiz Greg Crowe is currently going through his monologue, otherwise known as a section-by-section explanation of the House K-12. He will soon be joined by his colleagues Tim Strom and Lisa Larson, both of House Research, to describe other portions of the bill.

What we have learned thus far (not much new as most of this has been discussed previously):

• The aid payment shift is set at 73% current year/27% subsequent year. This is seven percentage points greater than the level proposed by the Governor. The House proposal shifts--or saves depending on your perspective--the state budget another $400 million beyond the Governor's budget.
• The property tax shift is the same as recommended by the Governor.
• Unlike the Senate bill, which cuts school district funding beyond loss due to inflation, the House holds funding flat for the next two years. School districts should expect to receive the same amount of per pupil revenue that they received last year.
• Future OPEB bonding is limited with a requirement that voters approve this bonding.
• The Swails/McFarlane version of the shared-services initiative (contains no mandate or outside consultant) is in the bill.
• Schools are able to start school before Labor Day in the 2009-2010 and 2010-2011 school years. It has been brought up that this legislation--in single bill form--was defeated in the House Finance Committee, but it was also added to the bill that was fashioned by Representative Tilberry's through an amendment, making it part of the current bill (just think of the famous early 1970s Yes song "Roundabout" about this time of the year. It certainly helps make sense of the process.)
• Representative Newton's (and Senator Fobbe's) special education mandate reduction bill is contained in the House omnibus bill. Representative Davnie's language on the behavior intervention rule and limiting the use of locked timeout is also contained in the special education article.
• The project cost cap for requiring review-and-comment is raised from $500,000 to $1.4 million.
• One-time capital expenditure shift of last year is extended for the next two years at the same amount ($51 per pupil unit).
• Article 9 contains "The New Minnesota Miracle." It is phased in over a four-year period beginning in FY 2014.

There's a lot more here and a lot more detail to what I have written. Some general observations:

• Big time shift! Beyond the Governor's 80%/20% suggestion and in a different galaxy than the Senate's no-shift policy. Gee, guess what we'll be talking about in conference committee?
• Good, make that great, work in the mandate reduction area, but it could have gone further.
• No real increases in equalization in "The New Minnesota Miracle" proposal. There haven't been to this point (although Representatives Abeler and Gardner had bills heard on the topic this year) and that is something we need to work on, if not this year, in the future, and if not in this committee, then in the tax committee (use enough commas Faulkner?). In defense of its absence, we don't know what role the referendum will play as "The New Minnesota Miracle" takes hold, but the property tax burden is woefully out of whack (to the point of being just "whack"--hey I'm down with the kids and their lingo) and that needs to be corrected as we move forward.
• It's hard to get excited about flat funding (and believe me, I'm not excited), but this might be the best we get this year. Chilling thought.

As you can see, I've gone to a larger type size. Hope that helps.

Senate Bill (Part III). There isn't a whole lot more to say about the Senate bill. As I reported in the first segment, the bill passed on a 37-29 vote. There was an amendment offered by Senator Ray Vandeveer (R-Forest Lake) that would have changed the distribution of the cuts, but it failed on a 30-36 vote, but as in the case of the bill's final passage, there was never much doubt as to what the final results would be. Once a bill comes out of committee, significant changes in the bill are extremely rare and there was no exception in this case.

A couple positives came out of the testimony I provided to the Senate E-12 Funding Division. I had a very productive conversation with Senator Patricia Torres Ray (DFL-Minneapolis). Senator Torres Ray defended the Senate bill during the committee proceedings, but she, like many of us, is tiring of the way that the current education funding formula seems to pit sets of districts against each other. My conversation with Senator Torres Ray made all the angst of the previous week worth it.

The current K-12 funding formula is a broken mess. SEE, as part of an active coalition, invested in completing a study showing the state's education funding system is at least $1 billion short in resources of what needs to be in the system. Let me be clear, the issues of resources and distribution are separate and can be addressed apart from each other. My primary complaint with the current formula is that the general education basic amount has no connection to the real needs faced by districts and, given that fact, the differences between school districts take precedence over the experiences and cost pressures that they all share. For districts with low revenue yield from the categorical formulas, the only method to generate additional revenue to meet the revenue gap resulting from an inadequate basic formula is to attempt to pass voter-approved operating referenda. Given the erosion of the referendum and debt service equalization programs, low property wealth districts have less ability to pass these referenda, leaving them at the lower end of the per pupil revenue rankings. Given the demographic and geographic profiles of SEE districts and their property tax sensitivity, they will probably remain below the state average in funding (someone has to), but I don't think being below average would necessarily be that bad if the state were providing resources adequate to meet the needs of students in these districts. That simply isn't the case right now and is at the heart of my complaint.

Minnesota's current formula is extremely political (with a lower-case "p") in that it has been jimmied and contorted to funnel just enough money into just enough districts to create a viable coalition that can continue to pass education funding bills and keep the status quo relatively in place. The reason we enlisted John Myers was to show that the basic foundation beneath all school districts was crumbling and needed to be bolstered. There is a very telling quote from the Montoy v. State of Kansas decision in which the Kansas education funding system was declared unconstitutional in 2005. In affirming a district court decision, the Kansas Supreme Court wrote: "Specifically, the district court found that the financing formula was not based upon actual costs to educate children but was instead based on former spending levels and political compromise"

That sentence pretty much sums up the current situation in Minnesota. The current formula does not provide adequacy in a larger sense to any district in the state, which makes the Senate bill, more in its overall level of funding instead of its distribution, a step in the wrong direction. Hopefully, this painful exercise will galvanize the education community in seeking positive changes that will bring more revenue into the system.

The text of the Senate bill can be found at: https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S1328.3.html&session=ls86

Senate Bill (Part II). Now where did we leave off? That's right, the Senate E-12 Funding Division had unveiled its bill that applied significant funding cuts to school districts throughout the state. In reaction to these proposed cuts and the distribution of the cuts, I talked with several SEE area legislators and voiced my concern. Senator Amy Koch (R-Buffalo) had an amendment drafted that would have altered the way in which the cuts were distributed by putting all revenue streams into consideration for cuts. This would have implemented an across-the-board cut to all school districts of the same percentage amount in terms of state-generated formula revenue. As stated in the previous edition of the blog, fairness and equity can often be slippery and I am not going to be someone who can unequivocally state that doing it the way Senator Koch suggested is either the only or most correct way to implement the cuts, although it clearly treats districts at the bottom end of the revnue pile more fairly.

I was very pointed in my testimony on this amendment. I acknowledged that SEE was not a monolithic set of districts and that some SEE members would benefit from the manner in which the cuts in the bill were suggested, but that the Senate approach needed to be discussed both in a macro and micro sense. The first point I made is that the fact that education is being cut at all is a mistake and should be re-thought. I "get" the notion of shared sacrifice that the Senate has been promoting, but given that the Minnesota (and American) economic future is going to rely more heavily on preparing our human capital to compete successfully on a global scale, it's unwise to put education on a funding hiatus.

I then proceeded to talk about how the cuts were to be applied in the Senate bill and how districts with the lowest levels of per pupil general education revenue were going to be assuming a larger percentage cut due to the fact they receive little in terms of sub-formula revenue that is tied to the general education amount--compensatory, sparsity, equity, and transportation sparsity--and have little or no additional revenue provided through the referendum to offset these cuts.

Lastly, I talked about how Minnesota needed comprehensive funding reform that would raise the amount of revenue available for all districts, distribute that revenue so that differences in district demography and geography are recognized, and reduce reliance on the referendum. I pointed out how education funding reform has been one of SEE's top priorities over the past five years and that we, along with other organizations advocating for reform, have not had much luck getting the Senate excited about the subject.

Needless to say, the amendment and my testimony incited a spirited discussion, with proponents of the bill's language and proponents of Senator Koch's amendment sparring for about half an hour. In the end, Senator Koch withdrew her amendment, as there were some questions about technical aspects of the language and the fact that it probably would not pass.

One could ask--and it would be a reasonable question--as to why I got up and spoke sympathetically about an amendment that (1) was controversial, (2) might get people angry at me, and (3) wasn't going to pass. As for the first two points, I don't think a lobbyist has the luxury of taking a walk something needs to be said. If there are questions with a legislative approach, they need to be posed. As for the last point, it's often the best time to make a point when an amendment isn't going to pass because one can use the opportunity to make an argument more forcefully (and perhaps more forcefully than is wise at the time, which is a risk) in an attempt to promote a longterm viewpoint. That is what I tried to accomplish and I was somewhat successful.

The primary goal of our efforts this year should be--in addition to avoiding cuts--to create momentum for comprehensive education funding reform that provides adequate and equitable funding for students throughout Minnesota. This adequacy and equity should seek to create a funding system that recognizes the distinct needs of districts with high levels of need that distinguish them from districts that do not possess those characteristics without having the costs associated with the decisions to remedy these differences endanger funding adequacy for all districts. As we move forward as a nation, no future can be compromised.

Back to the Blog. I haven't been making good on my promise to provide on-going commentary on the blog and I apologize for that. The only thing I can say is that I've been busier than jumper cables at a hillbilly wedding (sorry Jethro and Ellie Mae) and haven't had enough time to get my thoughts both straight and down on paper.

Senate Bill (Part One) It's not like there has not been anything happening. The Senate E-12 Omnibus Funding and Policy bill passed the Senate floor on Tuesday by a vote of 37-29. This bill is obviously not the most popular item passing through the Legislature this session as it seeks to cut approximately $1 billion from the E-12 budget (primarily through reductions in K-12 general education revenue).

The primary problem--and it is the primary problem by about six light years--is the overall cut to E-12 spending contained in the bill. The Senate leadership's approach this year has been one of truth-telling and it's hard not to charge the Administration (and the House to a lesser extent) with political and policy legerdemain in avoiding the short- and long-term budget issues faced by the state. We are looking at approximately a $4.6 billion revenue shortfall (actually around $6.4 billion if one take the federal stimulus revenue out of the equation) and one can argue (although we haven't seen the House's set of appropriations bills) that no really difficult decisions have been made by anyone other than the Senate. I am not going to laud their approach as I believe the cuts to education are unwise anyway one views them, but I also believe it is important to look at both the spending and revenue generation sides of the budget equation and the Senate, unlike the Governor (who chose to cut corporate taxes), has done that.

The other problem, not nearly as serious, but troublesome for a vast majority of SEE districts and clearly indicative of the larger education funding formula issues SEE has been studying over the last five years is the decision as to how the cuts would be administered. Many of you who attended the regional meetings may remember the handout that showed what a 10% (or thereabouts) cut to the general education basic formula would mean in terms of per pupil revenue in each district. Because the general education basic formula is tied to a number of other general education sub-formulas (particularly compensatory, sparsity, and transportation sparsity), that run showed those districts with high levels of any of those funding categories getting cut more than districts with lesser levels of the geographic and demographic characteristics that fuel the set of sub-formulas. Clear on that?

The prevalence of these characterstics create considerable--but justifiable--differences in the amount of state aid each district gets. Districts with higher numbers and building concentrations of students receiving free-and-reduced priced lunches and districts that are geographically isolated receive more--sometimes considerably more--in terms of per pupil revenue that districts that lack those characteristics. Because a vast majority of SEE districts are geographically relatively compact and have lower levels (at least in the pre-real estate meltdown era) of free-and-reduced price lunch students, they get lower levels of general education revenue. According to my trusty annual revenue rankings for the 2008-2009 school year, the average for SEE districts in terms of state formula general education revenue (not counting the referendum) is $282 per pupil unit below the state average. Although not applicable to this specific situation, it should be pointed out that when the referendum is added into the mix, the difference becomes $372 per pupil unit.

In applying the proposed reductions--a net of approximately $273 per pupil (approximately $236 per pupil unit) after a cut of $590 per pupil in state aid is "back-filled" by approximately $317 per pupil in federal stablization aid delivered by the stimulus package--the Senate, instead of making the reduction in a way that included the revenue from the general education sub-formulas, decided to "fence off" revenue delivered through compensatory, english language learning, sparsity, transportation sparsity, and equity (didn't want to leave this one out because I wanted to show everyone that, yes, even though our districts don't get a ton of consideration through these formula adjustments, we do get some) and protect that from any cuts. Instead, the reduction is a "back door" reduction in the general education revenue basic amount applied after all the formulas tied to the general education amount have been allowed to "run to completion."

Whether or not this is fair is up for debate. I can understand the rationale for protecting the funding categories before applying the overall reductions, but that doesn't mean I necessarily agree with all aspects of this approach. Because of how the proposed cuts are applied in the Senate bill, a district like Sauk Rapids-Rice (339th out of the state's 340 operating school districts) would be saddled with an additional cut over 4.2% from its general fund from its current budget projections. A district like South Koochiching, with the highest level of state-formula revenue in the state largely through sparsity, would reduce its general fund by an additional 2.4%, 1.8 percentage points less than in Sauk Rapids-Rice. Minneapolis, which receives its largest adjustment through compensator, would cut its general fund budget by approximately 2.9% (due in part to its referendum--which neither Sauk Rapids-Rice nor South Koochiching have).

I don't want to make it sound like Minneapolis and other districts with high levels of compensatory or sparsity revenue are the "lucky duckies" in the Senate bill. No one comes out well in this bill. But the Senate's application of these cuts kind of spurred me to action. I will describe the actions I took in reacting to this bill in Part II.