House Education Committee - NOT MEETING

The House Education Committee has concluded its business for the 2010 legislative session and will not be meeting again. I wish to thank all of the members, staff, and interns for their tremendous work including thoughtful research, lively discussions, and probing questions. I look forward to hopefully working with you again next year!

HB 2731, long overdue High School reform

HB 2731 is the High School Reform bill unofficially called "Move on when Ready". This bill seeks to solve the myriad of problems that occur when you offer your high school graduation exam (AIMS) during sophomore year and most students pass it the first time. These problems include slacking junior and senior year, low matriculation to college, and extensive college remediation. It passed out of Senate Ed Committee last week on a 5-2 vote. Folks supporting the bill included Michael Bidwell (GPEC), Jim Zaharis and Tom Franz (GPL), Lattie Coor and Sybil Francis (CFA), the AIA, Rufus Glasper (MCCCD), dozens of school Superintendents including Vicki Ballentine, Cal Baker, Michael Cowan and Tim Hamm, , ASA, ASBA, the Arizona Chamber of Commerce, Intel, Deb Duvall, Chuck Essigs and Sam Polito. You can read more at the Expect More website or at the Center for the Future of Arizona website.

Great Homework Website

I was at a dropout prevention task force meeting in DC this weekend and they talked about the website Cramster. This is a cool homework assistance website.

The Danger of Half Truths

With the release of an initial budget today, the mathematical manipulations and distortions begin. It actually began two weeks ago when Superintendent Tom Horne said the cuts would only be 2% and most districts were simply panicking by laying off so many teachers. He has since backed way off his original 2%, saying on Horizon the number could actually be closer to 6%. Then today we had folks e-mailing that charters are being cut significantly less than districts; and finally, there was the article from one legislator saying the cuts were only 1.3%. Unfortunately, all of these statements are true in one sense, but false in another, especially when considered at the individual district or charter school level.

Is there a district in Arizona receiving a net 1.3% cut in general fund revenue after the addition of Title 1 and IDEA stimulus money? There probably is. Unfortunately, general fund revenue is only one source of school funding. This same district most likely has a cut in prop 301 funding, casino gaming revenue, declining enrollment, excess utilities and increased health insurance costs that push it way past 1.3%. This is what is dangerous about Tom Horne's statement and the statement made by a state lawmaker earlier today.

What about Charter schools vs. District cuts? Special provisions have been made for districts with fewer than 600 students (they were exempted from cuts in the 2009 fix and it is being proposed that they only receive 50% of the cuts in 2010) At the same time, almost all charter schools are below 600 students because there are advantages in statute to being a "small school." Charter school cuts come in the form of a per pupil cut, rather than a percentage. The House budget proposes a charter school cut of $60 per pupil. This is in addition to the per pupil cut of $40 in January. When small district cuts and charter school cuts are compared side by side, and taking into account the 2009 cuts, then the reductions are very similar for both. However, as was done by a school board member today, if someone takes the cut being proposed for a large district and compares it to a small charter school, especially a district that has excess utilities, bonds and overrides, then there is a definite difference.

At the same time, it is not a completely accurate statement to say that charter schools receive less funding than districts. When talking about all charters and districts in aggregate, then it is true that districts receive more per pupil funding than charters. However, when looked at by individual district vs. the local charter school(s) in their community, then this is not always true. For example, there are rural school districts who do not have Career Ladder, Excess Utilities, Teacher Experience Index, bonds, overrides, etc. In a growing number of these communities, the charter schools actually receive more per pupil funding than the local district (as an aside, this is not true for most of Maricopa County).

Whenever you hear a comparative statistic, consider the source! People are focusing so much on the "half truths" of Arizona education funding that we completely miss the boat on comprehensive education finance reform and long-term planning. I hope that as ABEC lays out their plans this fall, that we are able to focus on what's best for all children, regardless of where their parents send them to school.

Update on the State Budget

It looks like this week the House and Senate will finally have a detailed budget out for review, debate and negotiation. The last several weeks have been spent gathering information from state agencies and learning details and timelines for stimulus funding.

In addition, leadership is working with the reality that a large tax increase is probably not on the table. To pass a tax increase requires a 2/3 vote. Members of both the Republican and Democrat parties have voiced public opposition to a large tax hike, putting in doubt whether there are 20 Senators and 40 Representatives who would vote for it.

This means the only short-term solutions are cuts, sweeps, reform and borrowing. Longer-term solutions such as comprehensive tax reform and comprehensive education finance reform (as blogged about earlier) will be worked on over the summer to be voted on next session.

Once again, before talking specific details of the education budget, remember that the budget could morph greatly as negotiations take place to get 31 House, 16 Senate, and 1 Governor vote(s). The comments below are where the budget is today.

With regards to education funding, the House and Senate are fairly close to each other with regards to the size of the lump sum cut. There will most likely be a 3% - 4% cut from soft capital. This equates to approximately $150 - $200 million. The original idea was to reduce the base level by this amount but it ended up negatively impacting overrides so soft capital will be reduced instead.

There are other cuts proposed but they affect only certain districts. For example, there is still a proposal to phase out Career Ladder at 28 districts over 11 years. In addition, the funding for Arizona's virtual learning programs (called TAPBI) will be reduced by a certain %; however, the good news is that all districts can now have a TAPBI program and more virtual schools will be allowed statewide.

There is still elimination of the early learners program (the state paying for two years of kindergarten); however, what concerns me in this area is that certain Senators have proposed not funding this year's early learners for kindergarten next year. This means you are going to tell several dozen charter schools and a handful of districts that they have to allow these kids to take kindergarten, but they will receive no funding? And what about the child who transfers to a completely new district or charter school for kindergarten? Do they have to provide kindergarten at no cost?

Continuing on, small school districts (<600 students) will only have 1/2 of the cuts that larger districts receive and charter schools are looking at about a $75 per pupil reduction for 2010.

With regards to ending fund balances of school districts being swept, certain legislators are discovering there is no such thing as "free cash" available for the taking. Any cash swept this year would most likely be made up next year by a local levy. This means those folks pushing to take $300 - $400 million of school balances are actually pushing for a large property tax hike next year. There are a dozen reasons why this is a bad idea, but three of the biggest are these:
1) Those districts who planned for the future (i.e. the end of excess utilities funding, lower sales tax collections, etc.) are the very districts now being punished. Great way to reward competence.
2) Investment banking firms who place bonds for Arizona districts are able to negotiate lower interest rates when there is a positive cash balance, as opposed to a zero, or negative cash balance, as has been proposed.
3) Sweeping ending balances is the most inequitable way of solving a budget crisis. Lots of districts have no ending cash balance, or a negative balance. This will drive up property taxes for some and not for others.

Besides the numbers for education, the bigger debate will be around policy changes accompanying the budget (see the earlier blog on budget BRBs). Will districts be allowed to have 15% overrides? Will bonding be allowed for soft capital? One thing is for sure, both House and Senate leadership want to allow as much flexibility with remaining dollars as possible. For example, any remaining soft capital can be used for M & O expenses.

At the end of the day, there is still about a $400 million hole that cannot be filled easily. The majority of members will not allow any higher cuts to education, which is a relief to me, so other ideas will have to be put forth. Ideas being discussed are rollovers, securitization of the lottery, sale/leaseback of buildings, deeper cuts, etc. These ideas each come with their own set of negative consequences so the next few weeks should prove interesting as members stake out their "die-on-the-hill" issues. One thing is for sure, the chances of this negotiation process taking another month or two is very high.

The Future of School Finance - One Perspective

If it is not obvious by now, our current school finance system is not working. The swings in sales and income tax collections, the inconsistent returns on state trust land, the inequities from overrides and bonds, as well as a dozen other things, all contribute to a funding model that is not meeting our needs. It is inconceivable to think we can reduce education funding (both from the general fund and other revenue sources) and think there will not be long-term consequences.

Many people foresaw the perfect storm in school budget cuts coming for 2010, but getting finance reform through the legislature has proven to be very difficult (no thanks to term limits and clean elections). Back in 2004-2005, Rep. Tom Boone proposed major changes to Excess Utilities funding and overrides; however, after months of work, his bill failed to garner sufficient votes.

At the same time, the Arizona Business and Education Coalition (http://www.azbec.org/) was in the process of drafting a framework for comprehensive school finance reform. They have since finished their framework and have been holding town halls across the State getting feedback.

Last week, Speaker Kirk Adams and I met with ABEC to discuss the next step. Utilizing their expertise on the subject, we asked ABEC to help us prepare detailed school finance reform to be introduced next session. With the help of Senator John Huppenthal, Chair of the Senate Education Committee, we intend to make every effort to pass legislation that adequately funds education, provides accountability, and provides incentives for academic achievement.

Visit ABEC's website often to keep up to date on the process.

What Should Small Schools Expect?

During the 2009 budget fix in January of this year, small school districts (those defined as fewer than 600 students) were held harmless from the cuts. For the 2010 budget, it is being proposed that small school districts only receive 1/2 of the lump sum cuts being proposed. There are several reasons for this but the main reason is that small districts lack economies of scale with which to handle any cuts.

The 50% exemption will not apply to charter schools as their funding formula is different from districts. It has been proposed that they receive a reduction in funding per pupil instead, somewhere in the range of $75 per student.

As with all budget items discussed on this blog, it is important to remember two things. First, it is truly our desire to not have to make any cuts. The majority of legislators have children or grandchildren in public schools. The choices we make affect them too. Only because the deficit is so large is education even being considered for cuts. All state agencies and programs will take some level of cuts. Our goal is to minimize the impact and avoid long-term damage.

Second, please remember that any budget item has to be voted on by the Senate and House and then signed by the Governor. We are doing our best to share with you what we think will happen but we make no absolute guarantees.