Saturday, January 15, 2011

House and Senate Bills Promise Compensation Freezes for Public Education

Some time ago, I wrote a post calling for a two year reprieve for public education. Two of those ideas coincide with bills introduced in the House and Senate. (See,"Eight Legislative Ideas to Provide a Two-Year Reprieve to Public Education"). Senate File 56 proposes one of those ideas, a two year compensation freeze for public and charter schools. It has been introduced in the Senate by Senators Thompson (Assistant Majority Leader); Olson (President Pro Tem); Hann (Assistant Majority Leader); Gazelka ; and Hall . The Bill would bar school districts from implementing compensation increased through the end of the next biennium.

The core text reads as follows;
From the effective date of this section through June 30, 2013, a school district or charter school must not increase the 2.24 rate of salary or wages for any employee. This section prohibits any increase including, but not limited to, across-the-board increases; cost-of-living adjustments; increases based on longevity; increases as a result of step and lane changes; increases in the form of lump-sum payments; increases in employer contributions to deferred compensation plans; or any other pay grade adjustments of any kind. For purposes of this section, salary or wages does not include employer contributions toward the cost of medical or dental insurance premiums, provided that employee contributions to the costs of medical or dental insurance premiums are not decreased.
The Bill contains a variety of complex provisions designed to accomplish the intended objective, which is to implement a comprehensive "hard freeze" for public school employees. You can see a full text of the Bill by clicking here.

A second proposal is contained in House Bill 92, with a lengthy list of co-sponsors, ( Downey ; Benson, M. ; Banaian ; Bills ; Beard ; Kiel ; Shimanski ; Petersen, B. ; Kieffer ; Kelly ; Anderson, S. ; Myhra ; Crawford ; Leidiger ; Fabian ; Kiffmeyer ; Barrett). House Bill 92, if passed, would repeal the bargaining penalty deadline. This penalty has cost our district a total of 1/2 million dollars in the last two bienniums, because the District has refused to agree to pay compensation which would require massive employee layoffs.

Together, these proposals would provide a major element of the relief needed for two years of breathing space on the cost side for school districts across the state, a reprieve from the persistent downward financial spiral that has gripped school districts, in which every two years, districts feel forced to agree to compensation increase that they cannot afford. The other form of relief that school districts will need to bring their budgets into balance, is for the legislature to fund the increased mandate costs that are coming from the State itself. The two most significant of these State imposed cost increases would be increases in special education mandated deficits and the substantial increases in the teachers' retirement contributions which the legislature imposed on school districts.

While the sponsors of these bills are currently in the majority party, I would hope that the minority party and the Dayton administration would join in the effort to bring fiscal stability to public education. Returning financial sustainability to public education requires adequate revenues, true, but it also requires the ability to keep costs and revenues in balance. Under the system as it exists today, that balance no longer exists, because of deep structural problems with the way in which schools are funded, the way in which mandates are distributed without compensating funds, and the way in which compensation is set . We need a time-out so that all parties concerned can step back and arrive at a new and sustainable system.

The cost relief provided by this proposed legislation will not completely solve the financial crisis confronting public education. But it would represent a giant first step. In a previous post, I explained the need for a two year reprieve by pointing to the experience of the Anoka School District. As I explained in that post

In 2007, Anoka-Hennipen took a referendum to the voters seeking $30-$50 million per year in new taxes. The voters approved question 1, providing $29 million a year for five years. It also passed question 2, providing for $15 million per year. According to campaign proponents, the two levies together would provide funds necessary to prevent precedent-setting cuts: School closings, hundreds of teachers laid off, and hundreds of dollars added to activities fees.
But in 2009, Anoka-Hennipen found itself $10 million short in funding just a year after receiving that levy support. It solved this problem by taking $3 million out of its budget reserves and making $7 million in budget reductions. To produce the 7 million dollars in “savings” last year, Anoka-Hennipen had to cut 73 licensed positions and 42 non-licensed positions. Taking money out of reserves is a temporary solution. When you take money out of reserves, you are maintaining programs at a level that are unsustainable. You must eventually make that up with $3 million in additional cuts. That means, even if the State were to “hold education harmless,” whatever that means, A-H has another $3 million in cuts to make, even if it provides no compensation increases whatsoever. Thus shortly after passing a levy to prevent crippling cuts, A-H started making the very crippling cuts it had hoped to avoid.
A-H’s fiscal problems can be traced to two major problems, an unaffordable settlement, and massive increases in its special education cross subsidy. Last year, although the State provided no formula increase for the biennium, and imposed major cuts in special education on Districts like A-H, Anoka-Hennipen settled its contracts with increases that were measured as having “total package cost” increase of 4 percent for the biennium. This 4 percent represents an understatement of the amount of the increase, because for several years now, the MSBA has intentionally understated the percentage increase in bargaining settlements, so as to make school boards appear more frugal than they really are.
But I also pointed out that the rising teacher compensation costs is not the only problem faced by school districts. State special education funding requirements are also blowing a hole in public school budgets. According to the MDE, in the last reporting period, Anoka Hennipen’s Adjusted Special Education Cross subsidy was $28 million, or $614 per pupil. Two years before, the Anoka Hennipen cross subsidy was $427 per pupil, or $22 million. There was a 50 percent increase in the deficit over a two year period, and the current state budgeting plans for further substantial increases in that deficit. Minneapolis' deficit has skyrocketed to $985 per student in the last reporting period. If the State had fully funded A-H’s Special education expenditures, A-H could have avoided all $7 million of the cuts it made, kept its $3 million in its fund balance, and added $18 million back to its fund balance. Of the $7 million in cuts that A-H made last year, all but one million could have been eliminated if the State had merely held A-H harmless from the increase in special education cross subsidy that has occurred in the last two years.

To fix the public school financial crisis, then, the legislature must do more than impose a two-year freeze. It must take action to close the funding gap in special education. I have argued that it should freeze special education spending statewide, again to give public education a two year reprieve, and at the same time provide revenues to reduce the current state mandated deficit. The two actions together, stopping the growth in special education costs, and funding the existing deficit with additional revenues, would bring the first period of financial stability to public education in a long time.

The changes proposed in this new legislation will not solve the financial problems of public education permanently. They do not address the fact that health expenditures are growing at an unsustainable rate. They do not address the fact that we must provide adequate compensation to our staff over the long run. They do not address the need for compensation reform that really works for teachers, nor do they address deficiencies in the way we evaluate. But they do give us a time to take a break from the compensation wars, and work on a permanent fix.

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