State Budget Update
After lengthy, prolonged and a few late-night sessions, the Senate Finance Committee came to closure on a budget proposal for recommendation to the full Senate, which will vote on the proposal next week.  The recommendations are contained in both HB 1 (the budget) and HB 2 (the "trailer bill" that implements many details of recommendations).  Bleak outlooks and expensive cuts for school districts at the beginning of the process were turned around at the very end, when several key state aids were restored to the budget, notably school building aid.  The Good News and Bad News of the Senate Finance Committee recommendations are as follows:
 
Good News:
Building Aid: Restored to the budget and fully funded at $91 million for the biennium.  Funded from the General Fund and not the Capital Budget, $87.7 million was put in the operating budget, along with $3.5 million that was already there, to fully fund this program.  All senators on the committee worked hard to restore this important state aid and partnership with local districts in the funding of school facilities.
 
Catastrophic Aid: Despite early proposals to make further cuts to this program, the Senate Finance Committee is recommending funding in the budget at the House levels of $32 million in 2010 and $33 million in 2011.  This $65 million funding level for the biennium represents approximately a 75% pro-ration for this program that reimburses school districts for expenditures incurred on high-cost special education students.
 
Adequacy Aid: This state aid program remains fully funded for the next two years.  ARRA Stimulus money will be used to help fund the higher level of state aid.  $80 million will be used each year of the biennium for a total of $160 million from the State Fiscal Stabilization Fund.  Adequacy is currently funded at approximately $890 million, increasing to approximately $955 next year.  After allowance for the $363 million raised from the statewide education property tax, state funds raised $527 million to fund Adequacy this year.  Next year, after utilizing $80 million of Stimulus money, state funds will only account for $512 million.  This highlights our concern that remains with the potential impact in 2 years when such Stimulus funding is not available to supplement state funds.
 
Bad News:
Catastrophic Aid: Yes, the proposed further cut of $20 million was not recommended, but the funding levels for this state aid ($32 million in 2010 and $33 million in 2011) remains below needed amounts of $41.9 and $46.1 million for 2010 and 2011 respectively, leaving this reimbursement program significantly underfunded.
 
Retirement: The Senate Finance Committee recommendation is to delete the increase in employee contributions that would have helped offset increases in employer contributions that result from the state reducing its share of Teacher and Group II contributions from 35% down to 30% in 2010 and 25% in 2011.  Each 5% drop in the state share downshifts $9 million to local budgets, approximately $5 million on school budgets and $4 million on municipal budgets.  The total impact is thus $9 million in 2010 ($5 million on schools), and another $18 million in 2011 ($10 million on schools).  In addition, the state is proposing to write off a $16.9 million liability it owes the NHRS medical subsidy account that is funded by public employers, including school districts.  Finally, the state proposes to not pay ANY share of retirement contributions for extra pay or special duty, primarily impacting Group II employees, and municipalities will now charge 100% of that cost whenever such extra duty service is contracted.  This will likely impact school districts that hire police or fire to cover any school district event.
 
Deputy Commissioner of Education: The proposal is to save six months of salary by un-funding this position for the first six months of FY 2010, assuming the new commissioner will take six months to fill the position when Deputy Commissioner Mary Heath retires at the end of June.  NHSBA remains concerned that on-going requirements of this position, as well as specific new requirements associated with SB 180 that establishes an accountability system to ensure the opportunity for an adequate education, require a full-time person ready to assume responsibilities right away along with the new commissioner.
 
Charter Schools: The Senate Finance Committee proposal is to save another $5.8 million in Adequate Education funding by limiting the total number of eligible charter school students receiving per pupil grants of $5,450 ($3,450 universal cost plus $2,000 fiscal capacity disparity aid).  The House limited the number of total charter school pupils to 1,353 in 2010 and 1,519 in 2011; the proposal is to lower these counts to 850 in 2010 and 950 in 2011.  At that level, the projected expenditure of $4.6 million in 2010 would still exceed the 2009 funding of $2.4 million.

Capital Budget Update
The Senate Capital Budget Committee made its proposal for revisions to HB 25, the bill making appropriations for capital improvements through bonding.  The new version continues to support the funding of two regional Vocational Centers (Governor Wentworth and Littleton), and includes a placeholder of $1 for Building Aid.  This is primarily seen as a way to leave options on the table if/when negotiations occur between the House and Senate on how to fund this important aid.

ACTION ITEM
Senate action on the budget is scheduled for next Wednesday.  Extensive debate is likely to occur over the sources of revenue, notably gambling.  The Senate proposal rejects House revenues from a capital gains tax, legacy estate tax and a tax on gambling winnings.  It implements video slots at 3 racetracks and 2 north-country locations.  Whatever passes in the Senate will surely be different from the House version, and a Committee of Conference will be created to work on a compromise that can win approval by both bodies.
 
School board members should continue to talk with their senator and local representatives, and explain the impact of downshifting costs to the local level.  Fully funding Cat Aid is important; it reimburses expenditures already incurred for those students with significantly high costs (80% reimbursement for expenditures above 3.5 times the state average cost).  New Stimulus IDEA money cannot be used to replace this loss in aid; Cat aid is a revenue source that comes off the district assessment when property tax rates are set in the fall.  Shortfalls in this revenue source simply increase the resulting tax rate.  The importance of Building Aid in the budget should also be stressed.  The state commitment is an important part of the local bond approval process and loss of these funds would have a profound impact at the local level.  Board members are also encouraged to remind their legislators that with respect to district payment of retirement contributions, the State promised to pay 35% of the employer share for teachers, police and firefighters.  House Legal Counsel, David Frydman, has noted, "political subdivisions are protected by Article 28-A from the State reneging on payment of state's 35% share of retirement contributions on behalf of teachers, police and firefighters.  Since it was the arrangement that the State provided when municipalities joined NHRS, it would be an unfunded mandate if the State were to cease payments."

Senate Action
As anticipated in last week's Bulletin, the Senate approved HB 688, separating the charter school statute from the open enrollment statute and removing the requirement for an initial district meeting vote prior to submitting a locally developed plan to the school board (a public hearing is required instead).  The Senate returned to the Senate Education Committee several bills for further review and work next fall.  The three bills that will remain within the committee are: HB 143, implementing a procedure to be followed when parents choose to request placement of their child in a school other than their district of residence; HB 154, requiring school board policies on truancy to include provisions which define administratively excused absences and identify a system of intervention steps designed to reduce the number of habitual truants. The policy shall also designate an employee in each school as the person responsible for truancy issues: and HB 509, requiring parental consent for psychological evaluations.  NHSBA will continue to monitor these bills and work with the Committee during its deliberations.

Economic Stimulus Update
Board members are reminded that the NH Department of Education Recovery web site contains information on school district allocations for IDEA and Title I, as well as applications, instructions and information on Frequently Asked Questions
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