Full Day at the Capitol. It was a dawn to past-dusk day at the Capitol on Tuesday with a number of meetings. I'll give you the highlights. The House Education Policy kicked off the day, taking testimony from a variety of education interests on their policy goals for the session. Seeing we weren't talking about money (at least directly), my testimony revolved around the need to have no additional mandates and to re-visit a number of mandates currently in place and allow school districts more flexibility in facing their financial challenges. I also spoke in favor of the innovation revenue section of the New Minnesota Miracle proposed by Representative Greiling (DFL-Roseville) as a way to bring about last policy change.

The subject discussed at House K-12 Funding Division meeting was alternative education, with a presentation by the Legislative Auditor's office of their recent study "Alternative Education Programs." It was a very instructive meeting and the findings of the Legislative Auditor bear out much of what most have believed over the years in that alternative education works. While test scores in alternative programs still lags, growth models are showing that students in alternative programs--especially those receiving targeted services--often gain more than a year's worth of academic progress.

While the report does point out the need for increased monitoring of alternative education programs, the report left little doubt that alternative education programs are extremely valuable for a number of students (15% of the state's total student count is involved with alternative education for at least part of the school day). One of the report's recommendation is to allow school districts to offer targeted services outside of alternative settings. That would provide more instructional time for students who are at academic risk. Clearly, the need also exists to re-visit the 2003 decision to greatly reduce extended time revenue. If we are going to raise test scores, more instructional time-on-task should be made available to students. Hopefully, this report will help make that case easier to sell.

Kudos again to Judy Randall, Evaluation Manager at the Office of the Legislative Auditor, for putting together another solid report relating to an education program.

Alternative Education Programs Link: http://http://www.auditor.leg.state.mn.us/PED/2010/alted.htm

Great Breakfast. The University of Minnesota's College of Education and Human Development sponsored another of its policy breakfasts last Friday morning and I left wishing that they held them more often. Of course, the University, like every entity public and private, is facing more than its share of financial challenges these days and those challenges clearly prevent it from doing many of the things I am sure it would love to do.

The topic for the breakfast was "Benchmarking Teacher Quality for Policymakers in Minnesota." Dr. Karen Seashore Lewis, the Robert H. Beck Professor of Ideas in Education at the University of Minnesota, served as moderator for the session with a panel of experts consisting of Dr. Misty Sato, Assistant Professor of Teacher Development and Science Education at the University of Minnesota; Peter Hutchinson, President of the Bush Foundation; Dr. Valeria Silva, Superintendent of St. Paul Schools; Matt Kramer, President of Teach for America; and Garnet Franklin, Education Issues Specialist at Education Minnesota.

It was a very spirited discussion with a lot of great ideas thrown around by the panelists. I was especially impressed with Peter Hutchinson's comments regarding the need for innovation and the reluctance of those along the education spectrum to think "outside the box." I realize that's easier said than done (and Hutchinson would likely agree), but there is clearly a frustration by all of those operating in the current paradigm who are attempting to promote teacher preparation and maintain teacher quality that is starting to come out sideways in reactions ranging from recriminations to resignation (Oooh. Nice alliteration purely by accident.) In one of his comments, Hutchinson urged local school districts to make contracts with higher education institutions to promise to hire graduates provided they were trained in the manner that fit the needs of the district. Obviously, smaller districts would not have the leverage of larger districts in trying to go down this road, but I found the suggestion something worth discussing. I talked with Hutchinson after the breakfast and I hope to have him speak to SEE membership at either the April or May meeting.

Hutchinson was not the only interesting panelist. Each of the others brought interesting data into the discussion. Matt Kramer did a great job pointing out how Minnesota is not doing well in closing the achievement gap with a very good power point (that I am going to try and obtain). Valeria Silva's presentation, both in her formal comments and responses to questions from the audience, was electrifying. Her passion clearly came through in describing the challenges facing not only St. Paul, but the entire state. Garnett Franklin did an excellent job as well, pointing out the concerns of teachers and the need (and desire on the part of teachers) to be part of the solution.

All told, it was an excellent event. Thought-provoking and vital in its description of the challenges facing Minnesota and the nation in the area of teacher preparation and on-going professional development needs. Kudos to the University's College of Education and Human Development in continuing its outreach efforts. The University has a wealth of information on best practices and they are doing an excellent job of trying to get that information into the systems where it can be applied.

Dr. Rod Paige on Mid-Morning. I don't get to sit around and listen to the radio during the session, but I was fortunate to be in the car yesterday morning and caught former US Secretary of Education Dr. Rod Paige with Kerry Miller on Mid-Morning. Paige, along with his sister, Dr. Elaine Witty, have written a new book entitled "The Black-White Achievement Gap: Why Closing it is the Greatest Civil Rights Issue of our Tine." Although I couldn't listen to the whole interview while it was broadcast, I found Paige's comments that I did hear to be interesting.

To listen to the whole interview, go to this link: http://minnesota.publicradio.org/display/web/2010/02/08/midmorning2/

Session Begins. Is it just me or does anyone else think that it's ironic that the 2010 Legislative Session is kicking off the same week as the final season of the ABC drama "Lost?" Think about it. Castaways scratching for their lives on a magical island where strange and gruesome things happen. Conspiracies. Warring tribes. Time-travel (as in history repeating itself). Parallel universes. You name it. "Lost" is eerily similar to the legislative session. Thank goodness that the seasons for these items always comes to an end and usually with a cliff-hanger.


Thursday saw the beginning of this edition of the Minnesota Legislature and things got off to a smooth start. The biggest item of business was the massive number of bill introductions in both houses of the Legislature. The House saw 329 new bill introductions while the Senate saw 193. A lot of those bills are capital projects that are being heard for possible inclusion in the 2010 bonding bill.


There isn't much to report on the education front in regard to these bills introductions. Representative Mindy Greiling (DFL-Roseville) has re-introduced the "New Minnesota Miracle" as HF 2431. Representative Pat Garofalo (R-Farmington) has introduced HF 2508, which would formalize the school payment shift and early property tax recognition shift enacted as part of the Governor's unallotment measures taken just before the beginning of the 2010 fiscal year. There are currently no Senate companions to these bills.


SEE will obviously have great interest in both of these bills. We have worked hard on the "New Minnesota Miracle" and although revenue to implement this bill immediately clearly isn't available--and probably won't be for several years--it is crucial that the education community continue to make the case that the level and distribution of the current education funding formula is not sufficient to meet the needs of Minnesota's student population.


Representative Garofalo's bill would probably help make the best of a bad situation. No one likes funding shifts, but they are preferable to base reductions. Further, putting the shifts into statute would provide school districts with stronger planning ability. My guess is decisions on the Garofalo bill will not take place until the waning days of session, which should occur just about the same time frame as Kate will decide between Jack and Sawyer on "Lost."


Another bill of interest that has been introduced is HF 2645 (Greiling)/SF 2328 (Bonoff), a bill that would repeal MS 127A.46, the statutory provision that requires the Governor to withhold payments to school districts with sufficient fund balances as defined by law. This bill will also likely be part of discussions as the final budget balancing package is put together.

It's Ground Hog's Day! I guess it's kind of appropriate for the Legislature to be starting the same week as Ground Hog's Day. I heard on the radio the Punxsutawney Phil saw his shadow this morning, meaning he'll be rolling out of bed in six weeks. If his hole were in Minnesota, he'd be waking up just in time to see the Minnesota Legislature embroiled in the difficult task of reconciling a budget situation that is way out of whack. If I were Phil, I think I'd head down the hole for another ten or twelve weeks, just to make certain that the Minnesota Legislature is done with its work and it's safe to come out. Of course, if he remained too soundly asleep, who knows what he'd miss? Could be anything from a shifting of Ground Hog's Day to earlier in the fiscal year, a cut in ground hog-related services, or a property tax increase on his burrow. Be scared Phil. Be very scared.


Actually, the upcoming Legislative Session reminds me more of the movie Ground Hog's Day. Last session, we woke up to enormous budget problems. This year, we're waking up to. . .more enormous budget problems. Next year I'm guessing we'll be waking up once again to. . . enormous budget problems if recent projections remain accurate. My only hope is that the session this year ends with as happy an ending as that movie, although I doubt that we will witness much comedy--at least intentional comedy--during the 2010 Legislative Session.


Actually, I probably shouldn't be so gloomy (at least about the long term). The national fourth quarter economic growth figures reported an initial estimate of 5.7% growth. Obviously, with the economy being down so long, the first lurches upward are likely to be significant, but I'll take any growth at this point. While job growth remains uninspiring, a recent story on MPR reported that online job postings rose by nearly 9,000 listings between December and January, the largest increase since 2006. That same story reported that residential building permit requests are up from last year, but still dawdling well behind the halcyon housebuilding days of 2005 and 2006.


MPR Story: http://http//minnesota.publicradio.org/display/web/2010/02/01/jobopenings/Before

I close off the ground hog theme, I nearly drove off the road this morning when I heard that the People for the Ethical Treatment of Animals (PETA) actually lodged a complaint regarding the treatment of Punxsutawney Phil and suggested that a robot be used instead of a live ground hog for the annual media event surrounding Ground Hog's Day. PETA believes "it's unfair to keep the animal in captivity and subject him to the huge crowds and bright lights that accompany tens of thousands of revelers" to Punxsutawney every February 2nd. William Deeley, the head honcho of the club that sponsors the annual event says that Phil is "being treated better than the average kid in Pennsylvania," which means Phil's got it great or it really stinks to be a kid in Pennsylvania. At any rate, I think Phil probably enjoys lounging in his ground hog bachelor pad more than being pursued by the predators who'd be trying to order the Ground Hog Extra Value Meal in the wild. Further, I don't the the "P" in PETA will ever stand for "public relations." My suggestion to PETA is to head down to Haiti and help some of the Haitian wildlife displaced by the earthquake and while they are there, put their collective shoulder to the wheel for the people that live there as well.

Precinct Caucuses Tonight. I hope many of your will be attending your precinct caucuses this evening. Whether you're a Republican, Democrat, or Independenter (they need to have a contest to determine what they should call members of the Independence Party), it's important to have your voice heard and cast your vote in the gubernatorial straw ballot. Convention season comes early this year, as all three parties will have their endorsed candidates determined (if the delegates necessary for an individual endorsement can be garnered by a single candidate at the respective state conventions) by May. So go out and have some fun!

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

The quote is as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hanging Out in Room 15. If I ever write my autobiography, the title will probably be something like "Hanging Out in Room 15 . . . or Room 112 . . . or Room 200 SOB." I think you get the picture.

It's going to be a full day at the Capitol today, with the Senate Tax Committee meeting this morning to discuss the latest budget forecast and take a look at the Governor's proposed constitutional amendment that aims to limit (quite aggressively) state spending. They're currently discussing the budget forecast and nothing really new has been introduced into the conversation at this point. State economist Tom Stinson is describing (I imagine he can recite his testimony in his sleep for all the times he's had to repeat it) once again the condition of the state economy. It hasn't changed since last week and it's still not all that good.

It's always interesting to get inside the debate on issues like economic performance and the give-and-take of a legislative hearing provides some insight as to the dynamics--both political and in a policy sense--of the budget issue. Senator Julianne Ortman (R-Chanhassen) just asked a very pertinent question regarding Dr. Stinson's assertion that the economy is recovering. Dr. Stinson stated that inventories are low and that firms will have to increase hiring to re-build those inventories. Senator Ortman's point is that if unemployment remains high and individuals don't have the income to purchase products, why is there any reason for optimism as inventories will probably remain in a realistic position as they pertain to the realistic level of demand. Senator Ortman described her concern as a "chicken-and-egg" problem and it certainly is.

The commitee is now trying to determine the level of the Governor's unallotment powers as they pertain to transfers within the general fund. The Health Care Access Fund is losing revenue and if the Governor were to stop any transfers within the general fund to the Health Care Access Fund, care providers would be in a difficult position and would have to refuse care or recoup costs through another means.

We've moved on to the subject of the remainder of this fiscal year and the 2012-2013 biennium and the "real" level of the shortfall as it pertains to those budget periods. The point just made is that Legislature will have to take action to keep the budget shortfall projected for the next biennium at $5.4 billion. As I reported last week, the budget forecast assumes the unallotment of the General Assistance Medical Care (approximately $$920 million), but takes the K-12 funding shift back to 90%/10% from 73%/27%. In other words, the forecast is built on some assumptions that require legislative approval that may or may not happen.

The committee is now moving to discussion of the Governor's proposed constitutional amendment to limit state spending to the amount of revenue collected in the previous biennium. Senator Amy Koch (R-Buffalo) is the Senate sponsor of this amendment and is providing the background for the proposal. Senator Koch just mentioned that 30 states (18 through their constitutions and 12 through statutory guidelines) have limits on their revenue-raising and spending authority.

Senator Koch believes that this proposal provides more flexibility than previously-discussed approaches in this area, particularly the Taxpayers Bill of Rights (TABOR) that was enacted in Colorado.

At first blush, I'm not quite seeing the utility of this proposal. It would limit spending in the short-term and would also require that the Legislature enact tax increases prior to programs being implemented, which arguably would provide greater transparency. A few years back, there was an effort to require the Legislature to pass the tax bill before passing any of the funding bills and I am reminded of that effort in listening to the discussion of this proposal, although there is no question this proposal goes further by limiting the growth of the base level budget for on-going programs.

But, as Senator Bakk has just pointed out, limiting flexibility in the state budget may push funding needs to the local level and as we know, especially given the property tax disadvantages SEE members experience on a daily basis, the property tax is not applied equitably in terms of either burden or revenue generation. Further, there is always concern regarding amending the constitution and how constitutional changes may influence the ability of all branches of government to react to changing realities.

This proposal, or someting like it, is going to be discussed during the 2010 session. There's no doubt that the current economic slump and the resulting budget shortfall are going to spur a discussion of the future of Minnesota and the nature of government spending and how it fits into that future. So, as every good Boy Scout supposedly knows (I was a farm kid and hence a 4-H member and cannot speak with any measure of certainty on the matter): Be prepared.

The afternoon portion of my day at the Capitol was spent in the Senate Charter School Working Group meeting chaired by Senator Kathy Saltzman (DFL-Woodbury). The subject of the day was charter school lease aid and building decisions being made by charter schools.

The hearing provided a comprehensive look of not only how charter schools are making their building decisions and funding them, but also provided a thorough discussion of the funding tools used by other public entities--including the maximum effort loan program and the school debt service program--in the construction of buidings.

Belle Plaine Superintendent and SEE member Kelly Smith, along with Blooming Prairie Superintendent Barry Olson, provided background on the process used the public school districts on building issues, particularly the election process and the difficulty faced by many districts in gaining approval for bond issue elections. Gary Olson and Kristin Larson from Ehlers and Associates also provided insight on the process, giving a thorough description of how bonds are sold and how districts can get the best rates for these bonds. Mark Beltz, former Farmington school district Business Manager (and longtime friend of SEE) who currently provides consulting services to school districts and charter schools, outlined a proposal that would allow charter schools to own their buildings (currently prohibited by state law) and save the state lease aid payments in the process.

Charter school facilities has been a hot-button issue recently. A StarTribune article from about a week ago outlined how some charter schools have set up "building corporations" to construct and manage buildings and that this process, effectively skirting the prohibition on charter schools from owning buildings, has resulted in these corporations charging unwarranted fees.

Senator Saltzman has been working extremely hard on issues related to charter schools over the past two years and this is one area where reform is likely in the session ahead.

Below is a link to an article in Sunday's StarTribune written by Gene Piccolo, Executive Director of the Minnesota Association of Charter Schools, on the facilities issue.

StarTribune Article: http://http://www.startribune.com/opinion/commentary/78555452.html?elr=KArksUUUoDEy3LGDiO7aiU

MSBA Delegate Assembly. The 2009 MSBA Delegate Assembly concluded earlier today and it was once again an interesting exercise. Two proposed resolutions, both offered by SEE member districts, were of particular interest to me as the proceedings took place. The first, submitted by the Cambridge-Isanti School Board, sought to re-establish the general education levy, which was eliminated during the 2001 legislative session as part of then-Governor Jesse Ventura's "Big Plan."

Anyone who knows me knows my feelings on the elimination of the general education levy. It stands, in my estimation, as one of the dumbest single moves in the history of education funding in Minnesota. As a bit of historical backdrop, there are a number of culprits who contributed to this decision. Of course, it was former Governor Ventura and his august set of advisors who proposed the move in the first place. Add to this, the House of Representatives at that point in time made the decision to make the general education buydown part of its tax bill.

It's important to remember that the state was reaping the benefits of an economy that was enjoying peak performance in the late 1990s and had, in a stark departure from Minnesota's current fiscal position, considerable budget surpluses. This created a sense of security, false as it turned out, that the state was in a position to assume the close to $800 million in general edcuation levy with state resources. In fairness to the Ventura administration, it is important to remind ourselves that as part of the original recommendation to replace the general education levy with state revenue, it was suggested that the base for the sales tax be broadened to include clothing and services. This would have brought more state revenue into the equation and provided a cushion to ensure that the general education revenue amount could increase into the future.

However, the Legislature got a bad case of tax cut fever and the resulting decisions put state funding on shaky ground going into the future. Rumor had it that the state was already projecting a shortfall as the economy headed into recession and that was before the cataclysmic economic downturn that occured in the aftermath of the terrorist attacks in September of 2001.

The one thing that makes me bark a bit in retrospect is that Governor Ventura supposedly surrounded himself with hard-headed fiscal realists who were more than up to, at least in their rhetoric, the challenge of staring down legislators more interested in "politics over policy." Instead, the Ventura administration folded rather than stare down the Legislature, particularly the House of Representatives, when they refused to include the sales tax base-broadening as part of the final package.

The results of the decision to eliminate the general education levy proceeded to have disastrous effects. First, there was no state revenue available to provide increases to the general education program when the state economy took a turn for the worse. Further, the fairest levy that was applied across all property in the state at the same rate was replaced with greater reliance on the voter-approved referendum levy, which is both inequitable in burden and not applied across all school districts. Even though over 90% of the state's school districts currently have voter-approved referenda, the resulting per pupil revenue and tax burdens vary widely district-to-district.

But that's all in the past and I don't want to let my blood pressure get any higher, so I'll return to the MSBA Delegate Assembly. The resolution to bring back the general education levy failed on a vote of 56-62. Not bad considering the resolution wasn't aggressively "worked." While I'm a bit disappointed that the resolution didn't pass, any attention this subject receives is a bonus. Word on the street is that the Senate Education Committee might attempt to expand its consolidated levy proposal into something that more closely resembles, in both size and type, the general education levy.

The other resolution of interest was offered by the New London-Spicer School Board, calling for an increase in the equalization level for all current levies. This resolution passed by an overwhelming vote of 110-7. Of course, if resolutions passed by the MSBA Delegate Assembly automatically become law, we wouldn't have to worry about any cuts to any school districts, as spending for education would reach the mega-mondo-zillion level. What is heartening, however, is that the concept of equalization is something now etched deeply into the minds of school districts throughout the state. Now, if we can just get the Legislature to go along a bit more on this widely-shared belief we'll have a more adequate and equitable funding system.

Lawsuits? In the past couple of weeks, I've heard more and more from various (and unrelated quarters) that it may be time to consider a lawsuit against the State of Minnesota on the grounds that it is not meeting its constitutional duty to provide a "general and uniform, thorough and efficient" system of public education. Clearly, we've been on a funding yo-yo for the past decade, with four of the ten years witnessing frozen education funding formulas. Even in the years when we've seen an increase, the level of increases has not been enough to prevent program cuts or stem the continuing growth in the subsidization of special education expenses from school district general funds.

In another wrinkle, Minnesota's education funding system is also getting more inequitable. From documents we have put together, the gap between districts at the 5th and 95th percentile, in both raw dollar and percentage terms, have been steadily climbing (with a slight dip mid-decade) since 2001.

We all realize that lawsuits are quite an undertaking and it is instructive to look at what is currently happening in other states in the area of school funding litigation. One especially interesting case study is that of Colorado. In 2005, a group called Children's Voices sued the state of Colorado on behalf of 14 school districts. Both the district court and the Colorado state court of appeals ruled that the plaintiffs did not have standing to sue the state. In October, 2009, the Colorado State Supreme Court on a razor-thin 4-3 vote ruled that the plaintiffs do have standing and that the lawsuit will now be returned to district court to be heard.

Florida is another state that recently has seen the emergence of a lawsuit. Fund Education Now and Citizens for Strong Schools have joined several sets of parents in filing suit against the State of Florida in mid-November. This is on top of a lawsuit filed by the American Civil Liberties Union two weeks earlier. Florida currently ranks 50th out of 50 states in several education funding categories and a number of the states' districts have alarmingly high drop-out rates.

Needless to say, if Minnesota school districts decide to head down the litigation trail, there will be ample action in other states to both map strategy and judge prospects for success.

Links:

Colorado:

Children's Voices: http://http://www.childrens-voices.org/default.asp?PAGE=35

Great Education Colorado: http://http://www.greateducation.org/

Florida:

Fund Education Now: http://http://www.fundeducationnow.org/weekly-alerts/what-is-the-power-of-the-florida-constitution/

Citizens for Strong Schools: http://http://www.yesforalachuaschools.org/

Permanent School Fund Hearing. The Promoting School Trust Lands Subcommittee, chaired by Representative Denise Dittrich (DFL-Champlin), met this afternoon in the State Office Building. For those of you who need a refresher course, Representative Dittrich sponsored legislation during the 2008 session that changed the way that revenue generated by interest from the Permanent School Fund endowment is factored into the state's education funding system and how these lands are managed.

The public lands that comprise the generate the income for the endowment largely spring from a couple of sources, particularly the lands designated in each township for education purposes that date back to Minnesota's statehood. A number of these properties have already been sold, with the revenue going into the fund, but approximately 2.5 million acres still contribute to the fund. Most of the revenue now comes from leases and mineral exploration and mining rights.

The primary problem Representative Dittrich has sought to address in her original legislation and her subsequent involvement with the issue is how to generate greater revenue from this state-managed property. The Minnesota Department of Natural Resources currently manages these parcels and the general impression is that they are very conservative in the approach they use to promote these properties for revenue-raising purposes. Representative Dittrich's subcommittee has looked at how similar public properties are managed in other states and is trying to find a method by which greater revenue could be garnered through more aggressive promotion and investment. Utah is being studied as an example of how more aggressive management of state-owned property can generate considerably more revenue for school districts.

Given the condition of the state budget and the likelihood that we will see tight budgets for the next few years, any new revenue will be welcomed. Hopefully, Representative Dittrich's efforts will bear fruit. What she is asking the state's education community to do is become more aware of this issue and urge decision-makers to support a more aggressive approach to the promotion of these properties.

Charter School Issues Back in the News. Yesterday's StarTribune ran an interesting story on charter schools yesterday largely centered on the use of charter school lease aid to purchase bonds to construct buildings for charter schools. Loose regulation of these practices have resulted in the use of high-risk junk bonds and the questionable fees charged to charter schools by the companies helping them construct these buildings. Because charter schools cannot own property, they are in effect backed into these agreements because they have limited alternatives in seeking long-term facilities for their programs.

This and several other issues will be studied starting next week in hearings chaired by Senator Kathy Saltzman (DFL-Woodbury). The first hearing will be held on Monday, December 7, at 1:00 PM in Room 112 of the State Capitol.

Link to Charter School Story: http://http://www.startribune.com/politics/state/78286802.html?elr=KArksUUUoDEy3LGDiO7aiU

In the World of Hurt Department. The revenue projection is in and it is not good news. As I reported yesterday, whispers on the street had the revenue shortfall at about $1 billion and it came in about $200 million above that at $1.203 billion.

The primary reason for the revenue shortfall is the precipitous drop-off in income tax collections since the end of the 2009 legislative session. Income tax collections are $827 below the amount estimated in June which accounts for nearly 70% of the revenue shortfall. The bulk of the remaining shortfall comes in the form of less in terms of sales tax collections and capital gains taxes.

Falling wage levels--resulting from both unemployment and underemployment--are at the base of the problem with income tax collections. State Economist Tom Stinson believes that the economy has turned the corner and is performing increasingly well, but that even though Minnesota's economic performance overall was better than what was estimated in February 0f 2009, that performance did not translate into more jobs and/or higher wages.

All of this makes the 2010 session one that is going to be extremely painful. It's my opinion that if the shortfall had been half of this amount, the session would have been relatively short, as a number of relatively small adjustments could have been made to limp things through to the 2011 session. It would have been painful and tough, but it at least looked doable. At $1.2 billion, it no longer looks that way.

The forecast throws a monkey wrench into plans for a large bonding bill. The state's debt service is currently at 3.7% of total budget, well above the 3.0% guideline currently being used to estimate how much long-term debt the state should undertake. There is still sentiment to put together a large bonding bill, but it will be interesting to see if the Governor and Legislature can agree on both the magnitude and nature of such a bill.

As bad as the 2010 session looks, it's the 2011 session that's going to have legislators (and gubernatorial candidates) shaking their heads. Page 8 (the next to last page) in the Minnesota Managment and Budget document entitled "News Conference Handout" shows the painful prospects that lie ahead. The $5.4 billion projected shortfall is bad enough, but one look at the details shows that a gimmick-free, pre-unallotment, inflation-included budget shortfall would surpass $8 billion.

The $5.4 billion number does include the buyback of the aid payment shift to school districts from 73%/27% to 90%/10%, but does not include the nearly $1 billion in unallotment to the state's General Assistance Medical Care budget, the approximately $500 million in early recognition of property taxes, and $1.2 billion in inflation. It's hard to count the failure to fund inflation as a cut, but it would mean an erosion of purchasing power. Whether the Legisalture and the Governor can agree to include any or all of these changes as part of the permanent budget going forward to mitigate the size of the revenue shortfall for the coming biennium remains to be seen. I'll go out on a limb here and say the discussions are going to be political. It's also extremely important to remember that another federal stimulus package is highly unlikely.

State Economist Stinson did say that the economy is getting better and that while improved performance may not make the job appreciably easier for the remainder of this biennium, it may make things better for the 2012-2013 biennium. As he pointed out, however, higher economic performance resulting from the rebound are already built into those projections.

In other words, the day of reckoning is upon us to some extent. Senator Larry Pogemiller's (DFL-Minneapolis) comments in this morning's StarTribune clearly bear out that sentiment. The gimmicks are gone and we are now going to have to look at both the revenue and expenditure side of the state budget equation to come up with solutions that provide the services needed by the state's residents and also create greater stability in the system as a whole.

What does this mean for education? I don't really know and I don't think anyone does, at least at this point. I remarked today that we did dodge a bullet to a large extent last session, but we'll be dodging buckshot during the 2010 session. How much we get hit is anyone's guess, but it will be difficult not to at least be touched by more than a few pellets.

Links:

Managment and Budget Documents: http://http://www.doer.state.mn.us/forecast

MN Post Article #1: http://http://www.minnpost.com/stories/2009/12/02/13919/minnesota_faces_projected_12_billion_budget_shortfall

MN Post Article #2: http://http://www.minnpost.com/stories/2009/12/02/13936/as_budget_problems_mount_pawlenty_questioned_about_travel_outside_state

Star Tribune Article: http://http://www.startribune.com/politics/state/78317252.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUac8HEaDiaMDCinchO7DUs

Let the Blogging Begin. It's the first of December so it's high time I dust off the keyboard and get back to blogging. It's been a somewhat uneventful interim, which is basically a good thing. With the mounds of economic bad news we've been seeing nationally (let me re-phrase that to an "absence of economic good news"), Minnesota's fall revenue forecast is expected to be a bad one with a possible revenue shortfall for the remainder of the biennium year in the neighborhood of $1 billion. Part of that is lagging revenue (at last report expected to be in the range of $240 million) and part of it may come through increased state expenditures, especially in the area of health care and income maintenance payment increases that would result from increased unemployment.

Another thing to remember is that although the picture for the remainder of this fiscal year (and by extension, the biennium) will likely be bad enough, things are really going to look ugly for the next biennium. The aid payment shift and property tax recognition shift are not in law and if they are not placed into the law, the problem for next biennium grows by $1.7 billion. Again, this does not affect the aid entitlement, but it does affect districts' cash flow and that more than one-third of Minnesota school districts have dramatically increased their short-term borrowing to meet their cash needs. Needless to say, tough decisions lie ahead.

I will provide you with the links to the revenue forecast documents when they are made available tomorrow.

Legislative Kick-Off Meeting. A group of SEE members met for a very interesting and comprehensive organizational meeting for the legislative kick-off event that is scheduled for Thursday, February 18, 2010, at the Kelly Inn just west of the State Capitol building. Things are obviously heating up for school districts and the problems are especially keen for SEE districts. If you have ideas for what you would like this event to entail, don't hesitate to contact either Deb Griffiths or myself.

Who's the Man? Okay, quiz time. Who is that witty, devilishly handsome lobbyist/political analyst and bon vivant who has been predicting for months that Governor Tim Pawlenty would not seek re-election? I guess if you drop witty, devilishly handsome, and bon vivant from the question, it gives it away. Yes, it's me. I've been predicting that. But, of course, I went to the Howard Cosell school of prognostication. I predict a ton of things and I remind everyone of when I am right, which is what I am doing right at this moment. You won't hear about the other 99 predictions.

The only thing that really surprises me here is the timing of the announcement, but I believe the timing indicates a couple of things that are going to have a pronounced effect on business in and around the Capitol for the next 19 months.

He danced around the question of "What's next?" at the press conference, but I think we are going to at least see an exploratory run for President. How does what is going to happen in the remainder of the Governor's term promote a Presidential run?

The Governor's decision to un-allot as opposed to calling a special session is likely to be extremely controversial in Minnesota, but it could make him look like a conservative Hercules nationally by promoting himself as the guy who can say "Here is how you deal with a Democratic Legislature (read: Congress). Who cares what happens in 2011? Governor Pawlenty has not only a bully pulpit, but a bully "scythe." For the next seven-plus months, he can make all kinds of executive decisions reducing spending and, in the process, re-directing priorities. And every one of those decisions is going to be accompanied by a press release. The state is going to be a Petri dish of sorts, with all types of experiments (let's hope none actually grow mold) taking place.

I'm not going to call the Governor out here. He's the Governor. He was elected. I was not. That certainly gives him a lot more latitude than I am afforded as someone on the sidelines. I firmly believe, especially after the Governor pledged to sign all the spending bills while vetoing any type of revenue increase through general taxation, that the Governor showed his hand. It was his intention to force a confrontation with the DFL-led Legislature at the end of the session and either prevail by having them knuckle under to his "bond for cash" idea of bring things to an untractable position where he would pull out the "un-allotment" card. And that's where we're at.

There are obviously political differences (think so, Sherlock?) between the Legislature and the Governor, but I view this more as a mega-political battle over a launch strategy for the Governor than a battle over policy per se. Everyone watching closely knew that the Legislature and the Governor were on a collision course. Mix in some personal animosity and political ambitions, and "soup's on."

Another thing to remember is that a poll was released late in the session showing (at least on that particular set of days) that most Minnesotans did not want Governor Pawlenty to seek a third term. The best way to kill Presidential aspirations is to lose your previous race.

In summation, no surprise here for me. My advice to all comes from Bette Davis' line in the character of Margo Channing in All About Eve, "Fasten your seatbelts, it's going to be a bumpy night."

Some things to look for in the days/weeks/months ahead.

• The Franken/Coleman race will be over when the Governor says it's over, regardless of how the Supreme Court rules. As in the case of the un-allotment process, this may be unpopular in Minnesota, but I expect the Governor to try and earn some points playing "Horatio at the bridge."
• Lots of new program ideas, including some in education, that streamline the system and don't cost (and purport to save) money.
• About 300 people putting together exploratory efforts for a possible run for Governor (Okay, I jest and exaggerate. It will probably cap out at 100.
• Look for the Governor on all types of national media, although I doubt he will host the next MTV Movie Awards or do a guest shot on "The Hills."

Here are the media links for the Governor's press conference:

MPR: http://minnesota.publicradio.org/display/web/2009/06/02/pawlenty_announcement

StarTribune: http://www.startribune.com/politics/state/46726117.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aU1yDEmP:QMDCinchO7DU

Pioneer Press: http://www.twincities.com/ci_12501848?nclick_check=1

Session Wrap-Up and Analysis. Buckle up, folks. This might be a long one. It's less than 24 hours after the curtain came down on the 2009 Legislative regular (note that) session and I've had time to reflect and read through some of the other session analyses, so I am ready to go.

As I've said and written before, I often find myself thinking about legislative sessions the same way I think about baseball seasons. In baseball, I remember the season Pete Rose had a 44-game hitting streak, or the year the Twins went from worst to first, or the year my all-time baseball hero Hank Aaron hit his 715th HR (against the Dodgers' Al Downing for those of you hungry for another useless tidbit of information). In legislative terms, I think of 1981 and all of its special sessions. I think of the billion dollar tax cut of 1985. I think of 2001 and the Ventura administration's "big plan (which we still regret)."

So how does the 2009 Legislative Session stack up in baseball terms? After thinking about it, I think the apt comparison would be the 1994 baseball season, when the players went on strike on August 12 and as a result the World Series was cancelled. I'm not going to go as far as to say which governmental branch (Legislature or Executive) went on "strike," but like the baseball situation in 1994, neither side in the intellectual fray could find a way to bridge the gap and, as a result, there was no pay-off.

It's not that big a stretch to say this session was, if not doomed, certainly on the precipice of complication since its beginning. First, there was the unprecedented $4.6 (then $6.4) billion deficit. Second, there was the fallout from the 2008 election, which, as it energized the national Democratic forces and ideas, similarly emboldened the majority caucuses in both the House and Senate. Third, there was the residual effect of the election as most moderate Republicans, both nationally and in Minnesota (although the trend started in 2006), lost their elections to Democrats while Republicans in safely Republican districts returned, making the Republican caucuses (again both in Minnesota and nationally) more conservative. Add to this framework the federal stimulus package and all the confusion caused for state level policy makers in trying to make this welcome, but unwieldy, infusion of revenue and you could see why there were complications aplenty.

Much is going to be made of the personalities in the process in the next coming days, especially Senator Pogemiller (who was vilified and held responsible for the break-down by a couple of Republican Senators right after the session) and Governor Pawlenty (who, if he is not running for President is certainly making it look that way). Personalities are part of the system and always have been. The Governor has a right to run for President and Senator Pogemiller, as leader of his caucus, has a right to lead his caucus and stand for both his, and his caucus' principles. I guess what I'm trying to say is that different personalities and different viewpoints have always been part of the process. What made this year different is that so many factors came together that they created a (oh, I hate this hackneyed term) "perfect storm" in which the personality variables made things just that much more difficult.

I am going to finish off this chapter of my analysis with a factor that probably had more to do with the clumsy ending than anything else and that was the inability of the legislative majorities to work across their respective bodies to assemble a cohesive and singular message with which to combat the Governor. The Senate came out early with their package of huge cuts, tax increases, and no shifts or use of one-time money. This was a very noble gesture, but it was too extreme to be politically palatable. Once the Governor suggested the shift of education payments, the possibility of it became very likely. It's not good policy, but it is better than a base cut and it provides the state with a big chunk of money with which to solve the deficit.

The House actually went further than the Governor in terms of the shift, not so much to avoid cuts, but to retain the integrity of the one-time money in the health care access fund and to avoid the bonding-for-cash proposal put forward by the Governor. It was pointed out a lot during the session that both the Senate and the House cut more in terms of state spending than the Governor did in his budget proposal. The Governor did have a considerable portion of revenue expended with several tax-cutting proposals, raided the health care access fund, and, as stated above, proposed that the state bond against the revenue in the state coffers that emanated from the tobacco settlement. He actually put close to an additional $200 million in education spending, with most of his cuts coming to health and human services.

The verbal serve-and-volley that took place over the past month centered on what the Republicans called "misplaced priorities" and accused the DFLers of continuing to fund a bloated health and human services system at the expense of education. There is more to this than meets the eye. I believe it's important to recall the federal debate on S-CHIP (the federal health plan that provides coverage to children in lower and lower-middle class families) and how that relates to the larger picture when it comes to the design and delivery of health and human services programs.

One point of contention in the federal debate is that Republicans believe that if programs like S-CHIP begin to reach into the middle class, it will create a client base for the federal program and that will erode, at least in theory, the private sector role in health care. It's the same argument that plays into the Social Security debate. I believe Social Security benefits should be means-tested, but I also acknowledge that if the benefits are means-tested, some segments of the middle class who no longer qualify for the same benefit level my withdraw their support for the program. I've rambled, but this is a battle for the middle class, and (I'm riffing here) conservatives believe that once a government program finds its way into the middle class, it is extremely dfficult to eliminate, making overall government spending difficult to cut, making the delivery of tax cuts more challenging.

At any rate, it wasn't until the last couple of weeks that the Senate and House majorities began to work with each other in earnest. The Senate simply could not maintain its cut-intensive position, which left them, to some extent, on the outside looking in when it came to determine the actual content of the spending bills. In other words, what the Senate did was a useful exercise (I would say a very useful exercise), but the implausibility of it actually becoming law put a real dent in the Senate's ability to help dictate the final content on a number of bills. The big exception to this pattern was in the tax bill, where the Senate was a full partner in the construction of each of the tax bills that went to the Governor.

It's getting late, so I will sign off for now, but I plan on composing another entry tomorrow to talk about some other observations about the session.

We Are Now Adjourned. It was a rough last 47 minutes. The Senate and House got the last tax proposal to the Governor. It wasn't without a lot of verbal wrestling and parliamentary wrangling, but the bill prevailed. It's on its way to the Governor where it will meet an almost certain (I've got a better chance of being the next commencement speaker at Notre Dame than that bill has a chance of being signed) veto.

The mandatory teacher health insurance conference committee did not come up. Look for Education Minnesota to lobby the Governor all summer and fall to sign that bill. I don't know if it will make any difference or not.

So, unless there's a special session, I won't be haunting these halls on a daily basis until Thursday, February 4, 2010.

One More Try. The Tax Conference Committee has decided to send one more bill to the Governor with their position on how to remedy the $2.7 billion budget gap between projected revenue and projected budget commitments. The provisions of the latest iteration look a lot like has been sent to the Governor in the past

• 73%/27% E-12 Payment Shift.
• Early Recognition of Education Property Tax
• New Tax Rate on High Income Minnesotans
• Increased Excise Tax on Beer, Wine, and Spirits
• Tax on Excess Interest

As a sweetener to the Governor, the conference committee included the sales tax exemption on new capital equipment purposes.

Some are wondering why the Tax Conference Committee is bothering, but I suppose there is nothing wrong-headed about sending up one more proposal, although it is likely to meet with the same fate as the tax bill that was sent to the Governor ten days ago.

I'll report on what happens in 47 minutes.

Update. The conference committee on the pension bill, SF 191, just passed the House on a vote of 125-9.

About the only thing I'm waiting on now is to see whether or not the mandatory teacher health care pool will come up yet tonight.

No Deal Yet. With a mere 5 hours left in the 2009 legislative session, we are still without a global deal on the budget. It appears that the Legislature is, if not satisfied with the absence of a deal, resigned to the fact that the Governor is not going to support the permanent revenue increases they are proposing and if that's the case, they are willing to let the Governor use his statutory and constitutional authority to correct the budget gap.

A few other bills are coming through the process and there's no shortage of energy as we head toward the witching hour. SF 191, the school bullying/harrassment prevention bill, passed the Senate 46-8 including amendments approved in the House. Because the Senate accepted the House amendments, the bill will now go directly to the Governor.

SF 191, the omnibus pensions bill conference committee (now without any pension provisions relating to education) passed the Senate 54-8. Because this is a conference committee report, it will also have to be approved by the House. With only two-and-a-half hours left before adjournment, things may get pretty tight. The House is discussing the cultural and outdoor resources dedicated funding bill (distributing the revenue generated from the 3/8 dedicated sales tax approved my Minnesota voters last election) and that may take a little time.

There still doesn't appear to be any type of deal brewing. Speaker Anderson-Keliher is chairng the House floor session, so she's not negotiating with the Governor. Senator Pogemiller is in caucus with his DFL members, so he's not with the Governor negotiating. And I haven't seen the Governor.

Back later with a wrap-up.

We Are Coming to the End. No deal has been struck yet and there doesn't appear to be one if the offing. In other words, this is the end of the legislative session but not the end of the effects of the legislative session. Things have reached loggerheads as the intellecutal--on principles and/or schools of thought and not mental candle power--gap on the approaches to raise revenue as part of the final solution are simply too far apart to be bridged at this juncture. It has boiled down to the Governor's bonding-for-cash versus the Legislature's tax increase package and a reluctance on both sides to reach across that divide.

Both sides have their ammo at the ready, so it's time to play Marvin Gaye's "Let's Get it On" and see where the chips fall with the public. In the absence of an agreement, this is going to be played out in dribs and drabs with the occasional activity spike throughout the summer.

The effects for the E-12 system are pretty clear and although not as dire as a cut to the education funding base, the almost certain action by the Governor to delay payments and employ the early recognition of property taxes will take $1.8 billion, if not totally out of the system, out of school districts' cash flow and force both fund balance reductions and short-term borrowing. I came into the session expecting a shift, but I thought that 80%/20% was probably the limit. The likely effects of the Governor's delaying of payments will go beyond that. But, it is too early to tell. At any rate, it is going to be a harrowing summer for school business managers throughout the state as discerning cash-on-hand issues will be a moving target.

Teacher Health Insurance Pool Conference Committee is Through. The conference committee on SF 915--the annual mandatory teacher health insurance pool legislation--is finished and the contents are as were reported yesterday. School districts who are currently self-insured (or will be self-insured by July 1, 2009) can opt out the pool by agreement between the local employees' bargaining units and the school board. Everyone else is in the pool. The conference committee report will be hitting the floor of the Senate later this afternoon.

Changes in Pension Bill. The portion of the pension bill--SF 191--that both remedied the deficit in the Teachers Retirement Fund and provided enhanced benefits for teachers was struck from the bill by the House Rules Committee last night (or this morning depending on if you believe morning starts at midnight or when the sun comes up). This is a good news/bad news situation (depending on who you are, of course) as deficiencies in the fund will be left uncorrected, but school district contributions will not go up in the short term, which would have been difficult given the tight budgets that exist throughout the state.

Negotiations Continue. Senator Pogemiller announced just prior to the Senate recess that legislative leadership and the Governor are continuing to meet in hopes of striking a deal. We are less than 13 hours away from adjournment, but I've seen more done in less time around here. That being said, I believe both sides are willing to bear the risks of unallotment.

I'll be back later with more to report.

Things are Getting a Little Hot. The House of Representatives is going to attempt to override the Governor's $381 million line-item veto of the General Assistance Medical Care program. Both sides are giving speeches right now and it may be awhile before we get to the vote. I have to say that the speeches--on both sides of the issue--have been fairly impressive and, dare I say, moving.

Debate has wound down and the final vote was 87-47, three votes short of the number necessary to override the Governor's line-item veto.

It looks like override attempt day as the House has now decided to try and attempt HF 885, the vetoed tax bill that raised $1 billion in taxes instead of agreeing to the Governor's bonding for cash arrangment. So here we sit in the midst of the showdown we all pretty much knew was coming.

With this upcoming vote and the previous vote on the failed override of the line-item veto of the General Assistance Medical Care appropriation, the DFL is attempting to stake out its philosophical and political territory against what is certain to be an attack by the Administration and the House and Senate Republican minorities in the Legislature. It is going to be interesting to see how this turns out down the road, but these actions, taken with just a day left before the consitutionally-mandated adjournment at 11:59:59 tomorrow evening, make a deal look unlikely.

Update: After two-plus hours of really good debate--and I mean really good debate with both sides making their key points and differentiating themselves from their opposition--the House voted 85-49 on overriding Governor Pawlenty's veto of the tax bill--which raised taxes on high-income Minnesotans, beer and alcohol taxes, and fees on credit card companies--which is 5 votes short of the 90 votes needed to successfully override a Governor's veto.

Look forward to some big-time sparring tomorrow. Unless there is a breakthrough, it's going to be a real snark-fest with both sides taking pot shots and setting up the post-session blame-a-thon.

So Much for Separation of Church and State. It was church at 9:00 and state at 11:30 as I am back at the Capitol watching the teacher mandatory health insurance pool conference committee. The conference committee is working out the differences that exist between the bills.

Going in, there aren't a lot of big differences between the bill., The largest difference comes from a combination of amendments offered by Representative Phyllis Kahn (DFL-Minneapolis) in the House State Government Finance Division and Representative Kathy Brynaert (DFL-Mankato) on the House floor that would together allow districts who were either independently self-insured or part of a self-insurance pool by January 20, 2010, to opt out of the program by joint decision of the board and the teachers' local union I was a bit confused about the effects of the Brynaert amendment the other night in thinking that it allowed districts that were fully insured to opt out. That is not the case.

Teacher unions in districts that are self-insured as individual districts by July 1, 2009, can opt out of the program as the bill is part of the Senate bill.

The compromise that appears to have taken place is that districts that are individually self-insured will be able to opt out by joint decision between school boards and local unions. The deadline to be self-insured is July 1, 2009.

The final compromise has been informally agreed to and the conference committee is now breaking. They intend to come back later to look at the revised language in a bit and most likely will approve it. Here's hoping this thing is heading for a its annual veto.

In Other News. The Governor signed the E-12 funding bill, "reluctantly" in his words, without any line-item vetoes. His signing message was short and expressed disappointment that the conference committee did not include the $198 million in funding for QComp and Pay for Progress that he proposed in his budget and did not any of his reform initiatives, particularly the Teaching Transformation Act. His only other comment was directed toward the five-year exemption from requiring students to pass the 11th grade GRADS test in mathematics in order to receive a diploma.

Offers Circulating. Negotiations continue between the Legislature and the Governor, but if I were a betting man (and I am not), I'd say we leave here tomorrow night without an agreement. The Legislature has offered to cut more than they already have, but the sticking point remains the $1 billion in revenue generation that is keeping the sides apart. The Governor has clung to his plan to bond for cash while the Legislature wants a tax increase (either permanent or temporary) to bridge the gap.

As I stated yesterday, the stakes are high on both sides as the DFL-controlled Legislature is going to look as though it was unable to seal the deal, but the Governor is going to have to make some very painful cuts and he is going to own those decisions. We can rest assured that if there is no agreement, finger-pointing will replace hockey as the official state sport this summer.

Governor's Latest Offer. The Governor has come forth with an offer to close the remaining $2.78 billion gap between projected revenues and expenditures. The offer to the Legislative Commission on Planning and Fiscal Policy is as follows:

• Accept the House K-12 Shift of 73%/27%.--$1.75 Billion
• Reduce LGA and related items--$450 Million
• Other Items --$100 Million (Reduce Renters Credit, Taconite Aid, Political Contribution and other items)
• Further Health and Human Services Cuts--$250 Million
• Higher Education Cuts--$190 Million

While not being embraced wildly, there does appear to be some progress here. Note that there are no direct revenue increases in the Governor's offer, as he has replaced his approximately $1 billion in bonding-for-cash with cuts to services.

There are myriad issues with the proposal, many of which relate to how these proposed cuts would work with the federal stimulus package and whether or not the cuts to higher education would create a cut to E-12. University of Minnesota President Dr. Robert Bruiniks is now testifying on how the proposed $190 million in cuts could have an extremely adverse effect on the University's operations.

Dr. Bruiniks was followed by Dr. James McCormick, Chancellor of the Minnesota State Colleges & Universities system. His testimony echoed much of what Dr. Bruiniks said in that reserves are limited (and only one-time) and going back to the fiscal 2006 level of funding (the amount necessary to be maintained to not endanger eligibility for stabilization funds in the federal stimulus package) would cause massive additional layoffs (as a large number of layoffs has already taken place) and may push tuition higher. Not a pretty picture.

The commission's focus then returned to the health and human services cuts, both the line-item veto of $381 million in general assistance medical care and the additional cuts of $250 million in the Governor's latest offer. I have to say that Health and Human Services Commissioner Cal Ludeman did a great job being extremely straightforward what some of the effects of the proposed cuts would be. Not a single dodge during a series of tough questions.

Saturday Afternoon's (and Maybe Night's) All Right for Fighting. Nobody even remotely resembling Elton John is hanging around the Capitol today. I know that because I am here.

Both houses of the Legislature are clearing bills and conference committee reports off the docket and negotiations continue between the Legislature and the Governor in an effort to create a budget resolution package that has a bit (insert sarcam emoticon here) more clarity than simply surrendering to the unallotment process that would provide the Governor with wide discretion in matching available revenue to areas of expense.

As I touched on yesterday, unallotment is an extremely risky strategy for both sides. The Governor may initially get a popularity bump for looking like the responsible party. If the process can be made responsible and the Governor makes an honest effort to accept input, he may be able to maintain that popularity bump. But his popularity may well fall when people see what that responsibility means when the decisions are made. If the results of the Governor's decisions are unpopular, the Legislature gets a big advantage as they can depict the Governor as being heavy-handed during the negotiations in the regular session and intent on making decisions without accepting input.

At any rate, it's a process best avoided and we'll see if an agreement can be reached in the next 48 hours.

Update on Teacher Health Insurance Bill. SF 915 was returned to the Senate this morning and the Senate chose not to concur with the amendments placed on the bill in the House. As I reported last evening, Representative Kathy Brynaert (DFL-Mankato) placed an amendment on the bill that would allow districts where the board and teachers union agreed not to participate in the statewide pool to opt out of it. Education Minnesota opposes this amendment and would like to have it removed from the bill. That will be the goal of the Senate conferees if a conference committee is convened. There is talk that a conference committee will not be convened as given all the attention being paid to budget issues, it may stand a better chance of being approved if it lands on the Governor's desk first thing next year instead of the waning days of the 2009 session.

So, that's where we're at.

Statewide Teacher Health Insurance on the House Floor (or Zombie Alert!). Everybody's favorite bill, SF 915 (the mandatory statewide teacher health insurance bill) is now being discussed on the House floor. I need to apologize to the Shared Services initiative, which I described the other day as being akin to a series of zombie movies. Shared Services only looks like a zombie compared to this bill, which has risen after being defeated and/or vetoed again and again and again and again. All we need is Michael Jackson, complete with his white glove, the song "Thriller" playing in the background, and a pack of dancing zombies to make it official.


But here we are again, listening to the same arguments Representative Kathy Brynaert (DFL-Mankato) has an amendment on the floor right now making the program optional if the school board and bargaining unit agree to opt out of the mandatory pool, which would be greatly preferred to the mandatory plan. Debate is, as usual, quite spirited. The Brynaert amendment passed on a vote of 74-53, making the proposal optional at this point. The bill still has to go to the Senate, where attempts will be made to remove the Brynaert amendment, but at least at this point, the bill is less bad.


Representative Diane Loeffler (DFL-Minneapolis) now has offered an amendment that would lower the thresholds of the high deductible plans in the bill. That amendment failed on a voice vote.


Representative Phyllis Kahn (DFL-Minneapolis) has offered an amendment that would allow self-insured districts with more than seven bargaining units to opt out of the plan. The Kahn amendment failed on a vote of 43-85.


It's Representative Kurt Zellars' (R-Maple Grove) turn to offer an amendment. His amendment would require an actuarial study before the plan could take effect. After extended debate, the roll is being taken and the amendment failed on a vote of 51-77.


Representative Joe Hoppe (R-Chaska) offered an amendment which he withdrew after a point of order was raised by Representative Larry Hosch (DFL-St. Joseph), the chief author of SF 915.


Representative Steve Gottwalt (R-St. Cloud) is offering an amendment that requires that long-term care insurance be offered as part of the coverage package offered under the mandatory statewide insurance pool. In an odd set of arguments made during the debate, opponents of the amendment claimed that forcing long-term insurance to be part of the health care package was an infringement on the local bargaining process. Say what?!? Isn't this whole mandatory health care pool an infringement on the local bargaining process. At any rate, the amendment failed on a vote of 18-100. So much for logic.


Representative Hoppe offered two amendments, one, that would limit increases to no more than 25% over a two-year period, that was adopted on a voice vote and another, that would have added three state department commissioners as ex-officio members of the board that oversees the plan that was defeated.


Representative Tim Kelly (R-Red Wing) offered an unsuccessful amendment that would have made employers not liable for the obligations of the statewide health care plan.


Representative Connie Doepke (R-Wayzata), a former Wayzata school board member, is now offering an amendment that would truly make the plan optional by changing "must" to "may." In effect, this takes the Brynaert amendment one step further, as a school board could opt out of the program without approval of the local teacher union. This amendment failed on a vote of 51-79.


There are no more amendments, so here we are at third reading and the final vote on the 80-48. The bill now heads back to the Senate where the Senate will have to concur with the amendments placed on the bill in the House or move to send the bill to conference committee. The presence of the Brynaert amendment makes it likely that the bill will end up in conference committee.

Friday Afternoon Report. Not a whole lot new on the overall budget front. The Governor seems intent on allowing the Legislature to adjourn without an agreement on the revenue end of the budget equation. Instead of an agreement, the Governor appears to be comfortable taking the task on himself and balancing the budget through payment delays and unallotments. There may (or may not) be negotiations taking place as I write, but as was just pointed out to me, we've got a whole 72 hours left, so why hurry (Not trying to be a smarty-pants with that comment. I've seen more done in less time in this place, so neither side is panicking yet.)?

Pension Bill in Senate. The pension bill is up on the Senate floor right now and Senator Claire Robling (R-Jordan) just successfully had an amendment attached a bill that would eliminate the enhancement in teacher retirement benefits through both employer and employee contributions. The increase in employer contributions would go to fund the deficiency currently existing in the teacher pension funds and the employee contribution would go to enhancing benefits. Under the Robling amendment, the contribution rate for both employees and employers would be cut from 2% to 1% to fully fund the plan without benefit increases. It passed on a vote of 29-27 (on a "standing division," basically the same thing as a show of hands although those voting for one side or the other stand at their desks).

Now, in the monkey wrench department, a group of Senators who were in a conference committee and not informed of the floor vote on the amendment are pressing for a re-vote on the matter. Sounds simple, but the complaint was raised after the bill was given its 3rd reading, the procedural step that puts the bill on the docket for final passage. Usually, bills cannot be brought back before the body for purposes of amendment after third reading.

The legal eagles and rule interpreters are now debating whether or not the bill can be brought back before the body. Senator Pogemiller has moved to bring the bill back before the body, the Chair (currently Senator Dan Skogen) ruled that motion in order, and a roll call appealing the ruling of the chair moved by Senator David Senjem is now taking place. The ruling of the chair has been upheld on a vote of 43-20 and now a roll call is being taken on the Pogemiller motion. That motion has passed on a vote of 41-22. Senator Mary Olson (DFL-Bemidji) is now moving to reconsider the Robling amendment out of courtesy for those who were on unable to vote. That motion has passed on a 45-20 vote and the amendment is back before the body.

Debate on the Robling amendment is now proceeding and things are getting spicy. And now, the roll call. . . . . .and the amendment fails on a roll call vote of 31-34, meaning the higher contribution rates and enhanced benefits back into the bill.

Senator Rosen has now moved to strike the entire Article relating to teacher pensions, which would leave employer and employee contribution rates at the same level and leaving the teacher retirement plan underfunded in the process. The roll is being taken on the Rosen amendment and it is defeated on a vote of 23-38.

The bill has passed on a vote of 43-22. Make no mistake, the increase in the employer's share is going to take money out of classrooms.

That's all for now. I'll be back later if and when the Teacher Health Care bill hits the House floor.