February 29, 2008

House education budget will decrease state funding

Local input essential if high profile issue issue is to be resolved satisfactorily

The House proposal on education funding is the most important policy issue in this year's budget.

The consequences are long-term, affecting both the quality of education and local finances. If adopted, the state's financial commitment to public education will steadily and increasingly erode over time. As Del. Lacey Putney, chairman of House Appropriations Committee, said today, "Medicaid and education are the two largest general fund programs in the budget. The state can't control Medicaid, but state spending for public education can be controlled."

Below is an explanation of the House amendment. Please read it. If you have questions, contact us. But, most importantly, please tell your delegates and senators to reject the House proposal.

The House budget proposes to change the process for the rebenchmarking or updating of the costs of providing education. These changes will have a long-lasting, negative effect on state funding for K-12 education. The full effects will not be felt until the next biennium (2010-2012). A primary fact to remember is that rebenchmarking simply reflects policies and personnel already in place. It represents NO changes in educational offerings. Finally, changing rebenchmarking does not change the cost of education; it only changes the cost that the state recognizes. In the case of the House proposal, the state would recognize fewer costs. Particularly in future years, local governments would be left to make up the difference.

The proposals are included in House budget in Item 140 #52h.

For 2008-2010, the changes will:

Peg the state salaries for support personnel to 2004 salaries, adjusted only by the salary increases granted by the General Assembly in the 2006-2008 budget. This means that the state would not recognize local salary increases in rebenchmarking. Local salary increases generally exceed those granted by the state. This change results in a savings to the state of $78.8 million for the biennium; the money is redirected to a supplemental school construction grants program (see number 5 below). Spreadsheet showing effect of the salary changes. These numbers were produced by the Department of Education. The breakdown of how much each division would receive under the school construction fund is included in Item 140 #52h.

Increase the portion of federal revenues that can be deducted prior to determining state funding. School divisions with above-average per-pupil federal aid (based on need factors) will see a bigger deduction. This will disproportionately hurt school divisions with larger numbers of low-income students, the divisions that are most in need of state assistance. This results in a savings to the state of $11.2 million in FY09 and $11 million in FY10. DOE spreadsheet showing impact per division.

Change the method by which inflation is recognized in rebenchmarking. Currently, inflation is based on prevailing costs. The state recognizes 100 percent of the first 5 percent of inflation, and 35 percent of the inflation above that. The House proposes to use the Consumer Price Index for the inflation factor, and to cap inflation at 5 percent. The state would recognize 50 percent of inflation between 3 and 5 percent. This results in a state savings of about $10 million a year.

Provide the state share of funding for a 2 percent salary increase for SOQ funded positions, effective Dec. 1, 2008. Annualized, this is the state share of funding equal to a 1.17 percent increase. A match based on the composite index is required.

Appropriate $35.3 million in FY09 and $37.2 million in FY10 in a supplemental school construction fund. Localities affected by BRAC would have to use the money for facilities related to the influx of students resulting from BRAC. A match based on the composite index is required.

For the 2010-12 biennium, the House would apply the same methodology for computing teacher salaries as is proposed for support salaries in the upcoming biennium. The base year for salaries in 2010-2012 would be 2006 salaries. These would then be adjusted by the salary increases granted by the state in 2007-2010. The Joint Legislative Audit and Review Commission has determined that were this methodology to be used for computing teacher salaries in 2008-2012, state rebenchmarking costs would be reduced by $227.4 million a year.

Local officials need to carefully consider the long-term consequences of the House budget proposal. For the upcoming biennium, the House actually puts slightly more state money into K-12 education than the Senate budget (see attachment). There is no reason to think that this would be the case in 2010-2012, as House members have stated publicly that they want rebenchmarking changed in order to be able to control the cost of education. It is highly doubtful that in 2010-2012 that the state would use the more than $227 million in savings from rebenchmarking for education. Therefore, even if your school division gets more money in the next biennium for education, it is likely that in future bienniums state funding would decrease.

The long-term effect of the proposal is to decrease state support for education. The end result is pushing an even greater share of education costs onto local governments, and ultimately to local real estate taxpayers.