May 1, 2009 NHSBA Legislative Bulletin

The State Budget and Potential Local Impact

Much has been made over the fact that state aid for an adequate education is fully funded at over $950 million (inclusive of the statewide education property tax) for each year of the biennium. However, the current budget as adopted by the House, and provided for in HB 1 (budget bill), HB 2 (trailer bill), and HB 25 (capital budget bill), leaves significant concerns for local districts regarding the downshifting of state costs to local taxpayers.

-   Building Aid: Currently not funded. 75% of local districts receive some amount of these annual payments in support of facilities. $91 million is needed for the biennium (approx. $45 million and $46 million for fiscal years 2010 and 2011). Even if the original $83 million requested by the Governor is restored, funding would be approximately 5% short, similar to the current year shortfall.
-   Catastrophic Aid: $64 million is currently budgeted ($32 million and $33 million respectively) compared to a projected need of approximately $88 million ($41.9 million and $46.1 million), leaving districts to make up a 20+% shortfall in this reimbursement program for high-cost special education pupils.
-   Tuition & Transportation Aid: Almost $15 million is currently budgeted ($7.33 million and $7.55 respectively) compared to a projected need of approximately $17.5 million ($8.34 million and $9.17 respectively), leaving districts to make up a $2.5 million shortfall.
-   Retirement: The employer contribution rate for teachers is scheduled to increase 20% on July 1, 2009, increasing from 8.93% to 10.70%. The current state share of this total rate is 35%, but the House budget reduced the state share for teachers, police and fire from 35% to 30% next year and then further down to 25% for 2011. Each 5% drop downshifts about $9 million to local political subdivisions, with $5 million for teachers in school districts. The impact on school budgets is $5 million for FY 2010 and $10 million for FY 2011, a $15 million downshift in state costs to local school district budgets.
However, in a controversial move, the House budget also increases the contribution rates for retirement system members for the coming biennium (employees and teachers, from 5.0 to 7.0%; permanent police and fire from 9.3 to 11.0%). Monies from the temporary increase would be used to reduce employer contributions for fiscal years 2010 and 2011. The state share is scheduled to return to 35% beginning in FY 2012, as well as employee rates dropping back to 5% and 9.3% respectively.

ACTION ITEM
Please contact your senator and explain the impact of downshifting costs to the local level. Budgets have been adopted based on expectations of state aid, not only Adequacy grants, but also all state aid programs. Historically, Cat Aid was underfunded in two recent fiscal years: fy 2004 at 92% and fy 2005 at 69%. Since then, 100% of entitlements were funded, but we are now facing a shortfall in current year funding. The shortfall this year, as well as anticipated pro-ration next year, forces unexpected impacts on local budgets. Building aid has historically been fully funded; even when unanticipated shortfalls occurred, the legislature made up the difference in supplemental appropriations. These grants to communities are the basis of a partnership that is created when school districts adopt local construction projects and bond the expense. The state commitment is an important part of this process and is often needed to get the necessary super-majority approval. Loss of this commitment would have a profound impact at the local level.

On top of all this is the disturbing potential for the state to back away from its commitment to local public employers regarding a shared stake in the state retirement system. 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. 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.
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Accountability for an Adequate Education - SB 180
The House Education Committee has adopted a recommended change to this bill. The proposed amendment, to be voted on by the House next Wednesday, slightly slows the implementation process by allowing certain targeted goals to be accomplished "by the end of the year." Also recommended is a process for legislative oversight and approval. The revised timeline is as follows:
May-June, 2009: Task Force established, with an Interim Report and recommendations due April 1, 2010.
June 30, 2010: Schools demonstrate providing opportunity for Adequate Education by input method, narrative reports.
Nov. 1, 2010: Task Force Report on Performance Based Accountability System, with recommendations for legislation.
July 1, 2011: Initial implementation of Performance Based Accountability System with results by end of school year.
Nov. 1, 2011: Task Force submits any further recommendations based on evaluation and review of Performance System.
Jan. 1, 2012: Commissioner to report to the Legislative Oversight Committee, and biennially thereafter.
June 30, 2012: Both Input Based and Performance Based Reports for each school due by end of this school year.
Sept. 1, 2012: Dept. Education initiates annual school visitations to audit Input Based school accountability reports.
Oct. 1, 2012: Dept. Education submits report on school results for the Performance Based Accountability System.
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Retirement and "Spiking"
HB 641, which modifies the calculation of the retirement system employer assessment for excess benefits (125% Rule) and phases in the required payments over 4 years, passed the House in late March and is scheduled for a public hearing before the Senate Executive Departments and Administration Committee next Tuesday at 3:20 pm, in LOB 101.

SB 108, establishing a committee to study the imposition of assessments to retirement system employers for excess benefits paid to retirees, has a proposed amendment recommended by the House Executive Departments and Administration Committee. The duties of the committee now include a study of earnable compensation and other relevant issues concerning the NH Retirement System. A Committee report is due November 1, 2010. A House vote is scheduled for next Wednesday.
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Requesting a Change of School for a Child - HB 143
HB 143 is a response to the issue of parental placement of a child in a non-resident public school, especially when such child requires special education services. The Senate Education Committee is reviewing this proposal that requires both a resident district and the non-resident district to enter into a formal agreement that allocates program and financial responsibilities for each entity prior to the enrollment of the child.
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Parental Consent for Psychological Evaluation - HB 509
HB 509 is also under review by the Senate Education Committee. This proposal amends current law to require written parental consent prior to any psychological examination. Such requirement already exists in statute (RSA 200:34), but when a parent/guardian is unresponsive, "then said child may be examined" by school personnel.
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Renovation and Replacement of School Buildings - SB 59
The House Education Committee heard extensive public testimony on this bill that requires school districts to "investigate all feasible options" when deciding to renovate or replace a building. SB 59 also requires school boards to seek input from the public, local planning boards and elected officials, as well as police, fire and public works personnel. Building projects will also be required to conform to community master plans and local zoning regulations. Extensive debate focused on the extent of school board independence in this process. A committee recommendation on the bill is expected next week.
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