Volume 36, No. 10
March 26, 2010
Fairy Godmothers & Magic Pumpkins
Needed for Education Budget
Filling in a $400 million hole expected in next year’s budget requires fervent belief that a patchwork of fix-its will work. The House Education Finance Appropriations Committee Wednesday adopted H.274, a $5.48 billion substitute “we believe” education budget. Chairman Richard Lindsey pointed to a 20 percent loss of Education Trust Fund revenue, 18.5 percent proration in the last 2 years, and already a loss of 2,000 teachers statewide from last year’s budget.
The committee priority is to save jobs, but state schools Superintendent Dr. Joe Morton made clear that this only translates to state-funded teaching units. An additional $198 million is added to the Foundation Program to ensure that divisors do not change from the current year in order to keep state-funded teaching units. But most items are budgeted at the current year prorated level (7.5 percent reduction from original appropriations). Local units and personnel budgeted under Other Current Expense (OCE) may still lose jobs.
The budget is built upon a hopeful scenario for additional revenue, nearly all of which goes to K-12 and comes from a variety of sources:
* The committee budget assumes 1.175 percent projected growth to meet its funding. The figure takes the average between Gov. Riley’s 2.35% and the Legislative Fiscal Office’s zero growth projections. Local school boards urge the more conservative budget with zero growth, which in itself would be an accomplishment. Failing to reach projected growth automatically throws 2011 into proration.
*$66 million PSCA bond issue if Congress fails to pass a jobs funding bill for education (federal passage prospects are dim). The bond issue would be split over two years for fleet renewal to free up those dollars.
*The K-12 share of the split increased: K-12 at 69.7 percent; Higher Ed at 26.4 percent; and Other Items at 3.9 percent.
*$34 million from a legal settlement the state expects to receive
*$30 million from revenues predicted when additional auditors are added to scrutinize corporate tax returns
*$10 million from IRS rule change addressing tax preparer fraud
It’s crisis mode now, but 2012 will be devastating. The loss of ARRA federal funds plus the anticipated slow recovery of the economy already has lawmakers frantic about a potential $850 million hole in the 2012 education budget. As painful as crafting 2011 seems, the committee projected doom and gloom for 2012 with no relief in sight.
Employee Health Costs Hit Home;
Cuts in Days Denied For Now
After many years of the state absorbing exorbitant increases in health care costs, the committee recognized the practice could no longer continue. By level-funding PEEHIP, the PEEHIP board of directors will have to find a way to absorb up to a $248 million increase in costs. The board will have a variety of tools, but an increase for employees in co-pays and premiums and/or a reduction of benefits are likely scenarios. Currently, individual employees pay $2 each month for single coverage, and $154 each month for family coverage. With high unemployment and uninsured numbers in Alabama, lawmakers believe the change is appropriate. Rep. Robert Bentley called the cost of benefits, nearly $1 billion of the $5.48 billion education budget, the 800-pound gorilla in the room that must be addressed.
The potential increased cost to personnel created a major obstacle when budget savvy legislators tried to amend the budget to allow, in the event of proration only, a reduction of personnel contract days for those school boards with less than one month reserve. Recognizing that already close to 59 local school systems are borrowing to pay salaries and expenses or have obtained a line of credit, Rep. Jeff McLaughlin offered that amendment with strong support from Rep. Jeremy Oden. The Legislative Fiscal Office (LFO) shut down the amendment possibility with an opinion that separate legislation would be needed to avoid legislating from the budget. Chairman Richard Lindsey allowed lively discussion but made clear he would not consider the amendment based on the LFO opinion.
School leaders sincerely thank Rep. McLaughlin and Rep. Oden for their commitment to local boards and trying to provide relief should the 2011 budget be prorated.
AASB Director Sally Howell explained that local boards need a safety net. She asked committee members to consider the “what if” questions. If there is no growth, negative growth or any piece of anticipated revenue fails, it is automatic proration, and local boards will have no resources to pay salaries or expenses. A repetitive cycle of borrowing would throw local boards into a payday loan scenario to keep salaries and expenses current.
No Classroom Supplies - Again
There is no funding for the second year in a row for textbooks, technology, library enhancement or common purchases. The only instructional supplies funded are consumable workbooks for K-3 at $15.88 per teacher unit. Masking-taped textbooks that are out of date will have to serve another year’s duty if no funding is found. Outdated technology, aging library resources and the lack of basic paper and school supplies push the funding crisis directly upon our youngest students. Have we done the best we can do with our budget? Can we justify each line item compared to the lack of classroom supplies at our public schools? The state programs, Alabama Reading Initiative, Alabama Math, Science & Technology Initiative and ACCESS (long distance learning) are each funded at the prorated current year level.
The budget, budget spreadsheet and additional materials are available at http://www.alabamaschoolboards.org/Lobbying.htm.
Please continue having conversations with your lawmakers about your local school systems’ challenges and budget scenarios.
“If the Legislature is off by one percent, which some state officials shockingly deem insignificant, the shortfall amounts to three contract days in the school year,” says AASB Executive Director Sally Howell. The full House is expected to consider the budget substitute Tuesday.
Certain Convicted Teachers to Lose Certification
And Pay Upon Conviction
Few could have imagined such a law needed to be written, but the current tenure and fair dismissal laws have critical flaws. The Senate unanimously passed and sent to the governor H.37, sponsored by Rep. Chad Fincher, to ensure that a teacher’s certification is revoked upon conviction of major felonies or sex crimes involving children. It is recognition that the tenure and fair dismissal process has significant flaws and a first step to addressing the most flagrant abuse. The bill is a small step. The problem goes much, much deeper.
Even with this legislation, a local school board will have to pay salary and benefits to employees awaiting a long trial process until conviction. The standard of proof to convict a criminal and revoke liberty to incarcerate an individual is much higher than a local school board must use to determine if an employee should be terminated. Local boards previously could terminate an employee after a hearing and immediately cut pay and benefits. The current law process undercuts that ability, and local schools are losing millions of dollars paying salaries and benefits to terminated employees through drawn out appeals processes. Employees have every incentive to appeal simply for extended pay and benefits while students complete the school year with substitute teachers. H.37 brought the problem to light but only provides a solution at the back end, upon conviction.
S.429 and S.430 identify and correct the internal loophole created by the 2004 change in tenure and fair dismissal laws. The simple fix, sponsored by Sen. Hank Sanders, is in limbo only because of electoral politics and AEA’s opposition. Until local school boards regain authority to dismiss and stop the pay and benefits of poorly performing, absent or badly behaving employees, public education suffers and faith in Alabama’s public schools will erode.
Creative Strategies to Help Budget Survive
Several bills are pending to help the education budget eek out next year. They include:
H.724: would allow local school boards the authority to use unencumbered Public School Fund dollars for operating expenses in 2011 only. The key here is if a local board has any unencumbered PSF funds to leverage.
H.743/S.559: would authorize a $66.5 million PSCA bond issue. The dollars would flow to fleet renewal to free up other revenues and will be issues only in the event Congress fails to authorize education jobs funding relief.
H.714: would address funding shortfalls by reducing the school year days and recognize the only true significant cost-savings in public education involves personnel. Personnel costs can comprise up to 80 percent of a school system budget.
Unfortunately, H.714 was pulled from the House Education Appropriation agenda Wednesday. Local school boards urge lawmakers to revive the effort. H.714 would allow the Legislature to realign state-level personnel funding with available resources during the fiscal year after the state budget has been implemented. The bill authorizes the Legislature in a “financial emergency” to fund fewer employee contract days through the Foundation Program. This language is a significant change because it would grant permanent flexibility to align resources to reflect a “real” budget rather than a temporary fix to economic fluctuations.
S. 292: would allow the accrued liability rates for the Employees’ Retirement System (ERS) and the Teachers’ Retirement System (TRS) to be computed over a maximum period of 30 years rather than the current 20-year maximum period. The bill would reduce the cost of employer contributions for the TRS by some $54.1 million. The savings would be realized in FY2011, and yearly contributions could be less by taking advantage of a 30-year versus 20-year formula.
Alternative Method for Units
S.26/H.43: would permit an alternative method to calculate teacher units in cases of emergencies. Currently, the 20-day period following Labor Day is used. Should the H1N1 virus or other natural disaster disrupt that calendar, schools would suffer without this flexibility at a cost of $4,500 per student.
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Local school boards work with legislative leaders to accomplish the public’s highest priority -- educating our children.
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