March 6, 2009 NHSBA Legislative Bulletin

Legislative Bulletin
March 6, 2009

A Brief Summary of Education Issues at the State House
Legislative activity resumed this week following last week's break.

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State Budget Work

The House Finance Committee continued its deliberations on the budget. As reported in the last Bulletin, much attention was focused on the state's direct financial aid to districts in categorical state aid programs and the possibility that prorated aid distributions may be necessary at budget levels recommended by the Governor. Another budget concern is retirement, and House Finance has a work session on the Retirement budget scheduled for March 9. Attentions will likely focus on the Governor's request to lower the state's share of local government retirement obligations. Current law stipulates that, "in the case of teachers, any employer, other than the state, shall pay 65 percent of such total contributions, and 35 percent thereof shall be paid by the state." The Governor's Budget proposes reducing the state share to 30%. In FY 2008, the total state share of teacher contribution requirements was $30.2 million for school districts and SAUs. If the state's share had been 30%, the total would have been $25.8 million, or a loss of $4.3 million to school districts. Teacher contribution rates next July increase 20%, from 8.93% to 10.70%. The state share at 35% is 3.74%. If the reduced state share were applied, it would drop to 3.21%. Simulating these new rates on FY 2008 data suggests a decline in the state commitment of over $6 million statewide for teachers. Cities and towns will bear the burden of comparable declines in state support on police and fire rates. Such proposals only downshift the state's financial problems to be resolved by local property taxpayers. It further raises the question of the original intent for NHRS to be a shared and pooled venture, more stable and lucrative based on the combined membership of local subdivision public employers. Increased benefits and costs only serve to provide incentives for individual plans and encourage exploration of options to withdraw from NHRS, (such as HB 673 below).

A simulation for all school districts, using 2008 fiscal year data to estimate the impact of reducing the state share from 35% to 30%, is available on the NHSBA web site at Estimated Impact of Reduction in State Share of Retirement Contributions.

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Withdrawal of Political Subdivisions from the NHRS- HB 673

HB 673, relative to withdrawal of political subdivisions from the New Hampshire retirement system, had a public hearing before the House Executive Departments and Administration Committee, The bill allows political subdivisions in the retirement system to withdraw all employees or all non-vested employees from the retirement system and changes the procedure for withdrawal of participation.

School districts, and other political sub-division employers, have no direct voice in the policy of the retirement system because the State is the plan sponsor and the legislature makes the rules. State law requires that members of the NHRS Board be familiar with finance or business management, but 8 of the 14 members are employee representatives, and political subdivisions only received their single representative voice just over one year ago. The retirement system was created with the understanding that a joint pooled system would benefit both employees and employers, and the promise made to political sub-divisions was that the State would be a partner and pay 35% of the employer share for teachers, police and firefighters. Increased costs associated with benefits and medical subsidies, as well as resistance to substantive change, prompts the need for this enabling legislation that will provide a withdrawal option for political subdivision employers. While offering a local control option, the bill protects all vested employees and requires any withdrawing employer to pay any unfunded accrued liability.

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Constitutional Amendment Proposed in Senate - CACR 11

Another Constitutional Amendment proposal was heard in the Senate Education Committee. CACR 11 is sponsored by eight Republican Senators and proposes that, "the general court shall have the authority and responsibility to reasonably define the content of an adequate public education and to distribute state funds for public education in the manner that it reasonably determines to alleviate local disparities." Such language simply undermines the principles and meanings of the Court's decisions in both Claremont and Londonderry. The proposed language lowers the Court's standard of review such that almost any funding allocation could be deemed "reasonable". It would not hold the State to any standard for a level of support as a partner in funding an adequate education.
ACTION ITEM
Please contact the Senate Education Committee and express your opposition to this proposal and the potential losses in state aid to school districts. Last year, NHSBA adopted a specific resolution addressing this issue:
The NHSBA opposes any constitutional amendment that vacates the spirit and intent of the Claremont and Londonderry lawsuits and attempts in any way to limit or redirect funding in a manner that is contrary to the New Hampshire Supreme Court's ruling and present interpretation of the New Hampshire Constitution.

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House Education Committee Update
The House Education Committee met in Executive Session and made the following recommendations on several bills (ITL means Inexpedient to Legislate, OTP/A means Ought to Pass as Amended, Retained means keep in committee for further study): HCR 7, in support of teen dating violence education, OTP/A: HB 123, requiring a financial literacy component within the high school economics course, ITL: HB 136-FN, relative to withdrawing from a cooperative school district, ITL: HB 143, relative to procedures for requesting a change of school for a child, OTP/A: HB 154, relative to truancy, OTP/A: HB 332, establishing a commission to study school discipline, OTP/A: HB 367, relative to procedures for evaluation of home schooled students, ITL: HB 368, relative to annual goals in a home education program, Retained: HB 509, requiring parental consent for psychological evaluations by school districts, OTP/A: HB 560, relative to the use of state education funds for extended learning opportunities for certain pupils, Retained: and HB 615, relative to withdrawal from a school administrative unit, Retained

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Economic Stimulus Update
The American Recovery & Reinvestment Act of 2009 was enacted on February 17th and contains provisions for significant investments in education. Overall, the economic stimulus bill provides New Hampshire with close to $290 million in funds to be overseen by our Department of Education. Specific investments include $31 million in Title I Grants to LEAs, $3.2 million in Educational Technology State Grants, $47.4 million in IDEA Part B Grants, $1.6 million in IDEA Part B Preschool Grants, and $1.9 million in Vocational Rehabilitation State Grants.

Another key component is the State Fiscal Stabilization Fund that allocates $200,787,230 for New Hampshire. These monies are distributed to the Governor, who must divide the funds according to the following criteria: 81.8% to support elementary, secondary, postsecondary and early childhood education programs and services; 18.2% to support public safety and other government services, including education, and for modernization and repair of public school and higher education facilities at the state's discretion. NH's Department of Education has indicated that approximately $37 million in Stabilization Funds could be used for school renovation projects, but an application and prioritization process must be implemented and coordinated with the Governor's office. Assuming the administration makes money available for school projects, new construction would not be eligible, only work for renovation and repair, such as replacing roofs or heating/ventilation systems, modifications for compliance with fire, health, safety codes or Americans with Disabilities Act, etc. Further details and guidelines are anticipated within the next two weeks, and more specificity on funding levels is expected by the end of the month.

Questions remain regarding issues associated with "Maintenance of Effort", and supplementing vs. supplanting current funds. In order to receive grants from the State Stabilization Fund, states
must agree to maintain their respective funding for education at FY 2006 levels or greater. However, waiver procedures exist, and the statute also states that funds may be used "through the State's primary elementary and secondary funding formulae" that are needed "to allow existing State formulae increases to support elementary and secondary education for fiscal years 2010 and 2011 to be implemented and allow funding for phasing in State equity and adequacy adjustments, if such increases were enacted pursuant to State law prior to October 1, 2008." Such language may well apply to the $123 million increase in Adequacy Aid that takes effect next year.

The current uncertainty is especially difficult as we work through school district meetings. We know that major funding portions of the Stimulus Bill, such as Title I and IDEA distributions, will likely flow through established formulas and continue to be dedicated for established services. New monies from the Stabilization Fund that may become available in the next few months may be considered additional revenues requiring legislative body approval for expenditure. SB 39, already passed in the Senate, gives school districts the authority to call special meetings for considering an appropriate response to the Stimulus Bill. The bill is currently in the Municipal and County Government Committee of the House.

More information continues to surface almost daily concerning both protocol and funding for the Stimulus Bill. Governor Lynch created an Office of Economic Stimulus and appointed State Deputy Attorney General Orville "Bud" Fitch as Director. The office is charged with assisting the Governor and state agencies in the management and expenditure of federal stimulus funds. NHSBA will continue to monitor the situation and work to keep school boards informed.
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For the complete text of any bill, go to the general court web site and enter the bill number, e.g. HB114, SB38 or CACR2 (no spaces!), and make sure the Session Year is 2009.

For more information on specific legislation, please call Dean Michener, NHSBA Director of Governmental Affairs at 603-228-2061, or email: deanm@nhsba.org.