Monday, April 23, 2012

Burnsville Takes Budget Shortfalls out of the Hides of Kids

Yesterday's Minneapolis Tribune carries an Editorial challenging the Burnsville school district for considering a plan to reduce its $140 million dollar budget by about $5 million by reducing the number of school days of instruction.  Here's how the plan apparently would work.   There would be no school every other Monday, cutting the number of school days significantly.   So far, this is a variant of the proposal adopted by a number of rural school districts facing financial crisis, in which they cut back to a four day school week, and add compensating time to the remaining four school days each week.   Burnsville would skip only every other Monday, reducing the number of days when families would have to find day care for younger children, and figure out how to manage their older, hopefully more responsible, children.

The district would then increase the amount of time for each remaining school day by 35 minutes.   Assuming that all of these additional minutes result in additional instructional time, the added 35 minutes would compensate for most of the lost days, but not all of them.   If my arithmetic is correct, adding 35 Minutes to 9 days every two weeks results in 315 minutes gained, but losing a Monday every two weeks, results in a loss of 480 minutes every two weeks, assuming an 8 hour school day.   Now the net loss in instructional time can't be calculated without knowing how much of the day is spent in actual instruction.   But the potential for this swap in schedule is that there would be a net loss of  160 minutes, plus or minus, every two weeks.   Again, if my arithmetic is correct, the added time, compensated for by the lost days, results in a net reduction of about 5 traditional school days.  If anybody finds a problem with my arithmetic here, let me know.

What does the District get in return?   The District has a number of  Mondays now available to conduct professional staff development, without hiring substitutes.  The cost of hiring substitutes is shifted on to the parents, to some extent, who must now pay for day care, or take some time off from work to stay home with their kids.   The district would save about $800,000.  The plan represents a continuing pattern in Minnesota public education, in which school districts cover their increased payroll costs on the backs of children.   I'm not criticizing Burnsville, really.   They are doing what most everyone else is doing across the country.  

What is the cause of Burnsville's fiscal crisis?   That depends upon your point of view.  Between the 2005-2006 school year and the 2010-2011 school year, the average teacher salary in Burnsville has risen from about $52,000 to about $60,000, exclusive of benefit costs.  That's an increase of about 13 percent, or about 2 and one half percent per year.  (Individual teachers pay increases are going up more or less than that amount, because average teacher pay costs represent a netting of salary increases, offset by the impact of replacement of retiring teachers by teachers coming at starting steps and lanes.)   The Minnesota funding formula rose about 11 percent during that time period, but some of that increase would have been offset by significant special education losses inflicted by state policy.  So the effective net increase in Burnsville's funding is less than 11 percent.  The District is increasing educator's compensation at a rate faster than state revenues, and as long as it does that,  it must find creative ways to make up the difference.

Now some of you are going to chime in and use this as an excuse to attack teachers, administrators and their unions.   If the unions didn't demand pay increases greater than available funding, you will say, then Burnsville wouldn't be looking at these cuts.   And some of you are going to chime in and say that's wrong, that the State's fiscal problems shouldn't be solved "on the backs of educators."    And others are going to argue that school boards are at fault, because they should just hold the line somehow.   But in my view, the underlying cause of  our dysfunctional school finance system is a complete abdication of responsibility for creating a system that works by the legislator and the Governor of the State of Minnesota.  Democrats and Republicans have conspired to create this dysfunctional system, which annually provides funding less than the increase in labor and other costs.  

The Democrats steadfastly protect the absolute right of labor to push up labor costs faster than school districts can afford.   They have cleverly shifted the blame for this upon school boards and republicans, but the system that has been created at the state level, and that is where the responsibility lies.   The Republicans steadfastly insist that taxpayers be held largely protected from this problem, and assure that any excess costs are not covered by revenues, but rather come out of the hide of children and parents.   The two together have created a system which is so broken that the participants don't even remember what it might be like to participate in a stable properly functioning education finance system.  

In my recent posts on a constitutional school finance system, I've argued that the legislature and governor have an obligation to correlate the cost of the current system of public education to reality, and to provide adequate funding to keep it afloat.   My argument isn't that teachers should be paid more, and it isn't that they are paid too much.   My argument is that it is high time that the legislators and the governor take responsibility for figuring out what educators should be paid, taking responsibility for that decision, and implementing it in a way that doesn't pay for it out of the hides of children.   If the state wants to legislate based on the idea that teachers don't deserve more, then it needs to implement a system that makes it possible to stop providing unaffordable increases.   If the state wants to legislate based on the idea that teachers do deserve more, then it is high time,  really, that the state takes responsibility for that position, and ponies up the money to pay the necessary increases.

In the meantime, if we keep up with the current approach....pay increases on the backs of kids and parents...this Burnsville gimmick is just going to be the first in a long series of destructive, wrong-headed, irresponsible tricks that taken together represent the destruction of our system of public education in Minnesota.

Links
Jvonkorff on Education McCleary v. State, Part I
Jvonkorff on Education McCleary v. State, Part II
Jvonkorff on Education McCleary v. State, Part III
Jvonkorff on Education McCleary v. State, Part IV
Summary of Decision Network for Excellence
Washington Supreme Court Blog 
JvonKorff on Education, The Rose Decision 
Minnesota's School Finance System is Unconstitutional, Part I
Minnesota's School Finance System is Unconstitutional, Part II
Minnesota's School Finance System is Unconstitutional, Part III
Minnesota's School Finance System is Unconstitutional, Part IV

Sunday, April 8, 2012

Special Education Update: Cross Subsidy Growth Cuts into General Fund Formula Increase

Yesterday, I began a discussion of the impact of the deficit in special education revenues as compared to total special education expenditures in Minnesota.  I pointed out that the total cost of special education in Minnesota has risen from $937 million in 1999 to $1.827 billion in 2011, essentially a doubling in 12 years time.    During that time, state and federal revenue provided to Minnesota school districts has increased from $584 million to $1.231 billion.  The total state shortfall between expenditures and revenues has thus grown from $353 million to $596 million. 

I presented a table showing the growth in special education cross subsidy for selected school districts.   Today, I want to emphasize that this growth in special education cross subsidy per student has a deleterious impact on the general fund revenue increases to school districts.  Commonly, when legislators tout their support for public education, they are inclined to tell us about the increase in the general education formula.  Now from 2004 to 2011, there were actually four years in which there was no general funding formula at all.   And so, school districts actually experienced a net loss in funding, when you net out the increase in cross subsidy against the funding formula.   But in those years that school districts do receive an increase in the general fund formula, the increasing cross subsidy subtracts substantially from the formula increase.

Now the cross subsidy represents the unreimbursed cost of special education divided by all students (not just special education students).   The cross subsidy comes out of the formula funding for all students, and so really, the net formula increase must be determined by subtracting the increase in cross subsidy from the general formula increase.

During the period 2004-2011, the general education formula increased 11 percent, whereas almost all of the selected school districts experienced substantially greater percentage increase in cross subsidy.  The formula increased from $4601 to $5124, an increase of $523 in that seven year time period.   But many school districts lost $300 to $400 as a result of increased cross subsidy.   After subtracting the net cross subsidy loss, for example, St. Louis Park experience an effective formula increase of only $115 dollars.   In other words, over that seven year period, St. Louis Park's effective total seven year formula increase, (after deducting the losses from special education cross subsidy increase,) was only 2 percent.  White Bear Lake's effective net formula increase was only $108.  St. Cloud's was $232 or a seven year total net formula increase of about 4.5% in seven years.  In short, these districts are receiving formula increases, (after deduction of cross subsidy), that is in the neighborhood of 1/2 percent per year or less, far below the rate of inflation.

Selected Districts Cross  Subsidy
Net formula Inc

2004 2011 Increase
St. Cloud 742 $569 $801 141% $291
St. Louis Park 283 $540 $655 121% $408
Minneapolis $529 $905 171% $147
Moorhead $522 $682 131% $363
St. Paul $490 $837 171% $176
White Bear Lake $462 $877 190% $108
Anoka $446 $697 156% $272
No St. Paul $431 $743 172% $211
Duluth $422 $801 190% $144
Sartell $392 $428 109% $487
Sauk Rapids $390 $389 100% $524
Rochester $351 $518 148% $356
Forest Lake $344 $532 155% $335
St  Michael $308 $399 129% $432
Cambridge-I $265 $368 139% $420

$431 $642 148% $312





Formula $4,601 $5,124 111%

Saturday, April 7, 2012

Special Education Update

Recently, the St. Cloud  Daily Times reported on  a study commissioned by our school district on our special education programs.  The report looked at the delivery of services, at cost of service, and compared what we are doing to other similar school districts.  The reason that the School Board commissioned a special education study is that special education is a very significant part of our district's budget, and because like all other school districts in Minnesota, we are compelled by the state to operate the program at a significant deficit.   Over the next months, our district will be examining the recommendations in this report and will be discussing how to address those recommendations.

In this post, I want to share some background information about trends in special education finance in Minnesota with some information as well about how our school district fits into those trends.

The total cost of special education in Minnesota has risen from $937 million in 1999 to $1.827 billion in 2011, essentially a doubling in 12 years time.    During that time, state and federal revenue provided to Minnesota school districts has increased from $584 million to $1.231 billion.  The total state shortfall between expenditures and revenues has thus grown from $353 million to $596 million.  The disparity in recent years has fluctuated partly because the legislature provided temporary relief from the rapid increase in deficit in 2007, and partly because of temporary special education relief in federal stimulus legislation.   By 2015, special education expenditures are expected to exceed $2 billion, while total revenues are projected to rise only to $1.38 billion.  By that time, the shortfall per biennium will have grown to substantially over $1 billion. 

This special education deficit is not equally distributed among school districts.  Different school districts have substantially different special education student percentages, reflecting differences in poverty, racial and ethnic makeup, differences in identification practices, location of hospital and youth treatment centers within districts, and proportion of students in private and charter schools.   Minnesota does not fund school districts based on the number of students with disabilities and degree of difficulty.  The funding formula begins by assuming that all school districts have the same proportion of students with disabilities, funding the district based on the number of students regardless of disability.  It then seeks to accommodate differences in cost by providing excess cost assistance, but that excess cost assistance is significantly less than the true excess cost for most districts.  The excess cost assistance provided has historically been appropriated based on a flat dollar amount, which is then prorated amongst districts with a claim on the excess aid.  As a result, school district have been receiving a smaller and smaller percentage of the excess cost aid to which they would otherwise be entitled.

The shortfall in revenues is generally reported based on total net cross subsidy divided by the number of all students in the district.    This cross subsidy per student is a measure of how many dollars must be pulled out of the regular student aid for each student (non-disabled and disabled) to fund the district’s special education shortfall. 

Before 2003, the State had been maintaining the total shortfall in special education funding at around $350 million.   The State has never sought to actually fund total special education expenditures.  No governor has ever proposed a budget that fully funds the state mandated expenditures, nor has either house of the legislature done so.  But, at the beginning of the Pawlenty administration the governor’s budget began to propose budgets which significantly increased the special education deficit, while at the same time, the Minnesota Department of Education began to increase its efforts to push districts to spend more.  Following 2003, the total shortfall in funding and the typical cross subsidies began to rise significantly.   In 2007, the legislature passed some temporary relief from projected increases, but still district special education shortfalls and cross subsidies have continued to rise.

The attached table shows selected larger school districts representative of the range in cross subsidy per student.  In 2004, our own St. Cloud school district had the highest special education cross subsidy of any of the state’s school districts of substantial size.  Its cross subsidy was $569 per student.  With just under 10,000 students, that meant that the school district was carrying a total special education deficit of $5 plus million dollars.  Historically, without a special education discretionary levy, the district, like many others, essentially covered the shortfall with an operating referendum of about the same amount, about 5.5 million dollars. Other representative school districts had cross subsidies ranging from $250 per student on up into the mid $500 range.

With the rising shortfall in special education funding, St. Cloud sought to find ways to limit its special education deficit by freezing its expenditures in most years.  Despite these efforts, however, our special education deficit rose to $801 per student, an increase of 41 percent.   The District’s operating referendum was no longer sufficient to cover the cross subsidy.    However, many other districts cross subsidies rose at a more rapid rate, and by 2011, St. Cloud no longer exhibited the highest cross subsidy of the significantly sized school districts, having been surpassed by Columbia Heights, Richfield, Minneapolis, Osseo, White Bear Lake, Robbinsdale, Burnsville, St. Paul, and Duluth.   These trends result from several hard facts.  The first is that state and federal maintenance of effort requirements have historically made it very difficult for any school district to actually decrease what it spends on special education.  The second is that state excess cost revenues have been gradually "pro-rated" so that even districts that attempt to cap expenditures can find themselves with larger and larger deficits.  I'll write more about issues in special education finance in future posts.

The table below shows that the growth in special education cross subsidy for many districts has a deleterious impact on a district's regular education formula increase.  During the period 2004-2011, the general education formula increased 11 percent, whereas almost all of the selected school districts experienced substantially greater percentage increase in cross subsidy.  The formula increased from $4601 to $5124, an increase of $523 in that seven year time period.   But many school districts lost $300 to $400 as a result of increased cross subsidy.   After subtracting the net cross subsidy loss, for example, St. Louis Park experience an effective formula increase of only $115 dollars.   In other words, over that seven year period, St. Louis Park's effective total seven year formula increase, after deducting the losses from special education cross subsidy increase, was only 2 percent.  White Bear Lake's effective net formula increase was only $108.  St. Cloud's was $232 or a seven year total net formula increase of about 4.5%.  In short, these districts are receiving formula increases, after deduction of cross subsidy that is in the neighborhood of 1/2 percent per year or less. 


Selected Districts Cross  Subsidy

2004 2011  Increase
St. Cloud 742 $569 $801 141%
St. Louis Park 283 $540 $655 121%
Minneapolis $529 $905 171%
Moorhead $522 $682 131%
St. Paul $490 $837 171%
White Bear Lake $462 $877 190%
Anoka $446 $697 156%
No St. Paul $431 $743 172%
Duluth $422 $801 190%
Sartell $392 $428 109%
Sauk Rapids $390 $389 100%
Rochester $351 $518 148%
Forest Lake $344 $532 155%
St  Michael $308 $399 129%
Cambridge-I $265 $368 139%

$431 $642 148%