State Budget Update - HB 1 and HB 2
The State Senate worked late into the night Wednesday to finish its work and adopt a budget proposal to be returned to the House for its consideration.  The Finance Committee recommendations, outlined in last week's Bulletin, were largely adopted.  Key education components of the budget are as follows:
State Aid                                     2010                                        2011

Adequacy Aid                       $954,160,143                          $954,548,133
-includes charter school adequacy payments, fiscal capacity disparity aid and hardship grants.  $80 million of stimulus money is used each year to meet the funding requirements.  While charter school adequacy is included and is greater than prior year's funding, enrollments are capped at 850 in 2010 and 950 in 2011; the House budget capped these enrollments at 1,353 and 1,519 respectively, requiring another $5.8 million in funding.  At the Senate level, total funding for charter schools almost doubles, increasing from approximately $2.4 million to $4.6 million.
Special Note: Adequacy is currently funded at approximately $890 million, increasing to $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 Stimulus funding is not available to supplement state funds.

Building Aid                            $44,943,448                            $46,260,234
-full funding of this important state aid program that impacts over 75% of local districts was restored by the Senate to the operating budget.

Catastrophic Aid                    $32,067,454                            $32,930,117
-this funding level, less than the current year $34.3 million distribution, agrees with the Governor's proposal and the House version, and funds Cat Aid at approximately 75% in 2010 and possibly lower in 2011.

Tuition & Transportation         $7,329,018                              $7,555,689
-this is lower than the current 2009 distribution of $8 million.

Dropout Prevention                $1,750,000                              $1,750,000
-this program is level funded, despite hoped-for increases to accommodate programs for the new compulsory attendance law through age 18 that becomes effective this July.

Local Ed Improvement            $485,000                                 $500,000
-increases over the current $500,000 allocation were hoped for to address district needs as increasing numbers of schools become labeled as Schools in Need of Improvement.
 
Statewide Special Education   $291,000                                 $300,000

Kindergarten Construction       $3,600,000                              $0

Reading Recovery                    $1                                            $1
-current funding at $400,000 was deleted to save general fund money, hoping to find federal sources of revenue to fund this successful program.

Retirement: State Share          $53,784,857                            $46,837,853
-current funding at $55,554,921 represents total (teacher/police/fire) state share in retirement contributions on behalf of local public employers at 35%.  The state share is proposed to drop to 30% in 2010 and down to 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 of 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.
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Capital Budget Update - HB 25
The Senate unanimously adopted a $114 million capital budget in its amendment to HB 25, the bill making appropriations for capital improvements through bonding.  The Senate 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 during committee of conference negotiations between the House and Senate on how to fund this important state aid.

NEXT STEPS
The House non-concurred with the Senate version of the budget and has requested a Committee of Conference.  At this time, conferee deliberations have yet to be scheduled but will begin soon.  Committee of Conference reports must be filed by Thursday, June 18 and receive legislative consideration in both bodies by Thursday, June 25.  Extensive debate is likely to occur over the sources of revenue, notably gambling, as well as the amounts of anticipated revenue from certain taxes and the lottery.

ACTION ITEM
Now is the time to call your senator and local representatives to stress the importance of not downshifting state costs and obligations to local budgets.  Maintaining full funding of Building Aid, and avoiding further cuts in Cat Aid and other financial aid programs will be important goals.  Remember that Cat Aid 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.  Legislators should also be reminded that the state's refusal to fund their full share of retirement obligations breaks a long-standing promise and specifically represents a 28-a constitutional violation.  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."  Current House Rule # 44(d) states: "No committee shall report with a positive recommendation any bill or resolution which would, if enacted, be a violation of Part I, Article 28-a of the NH Constitution."
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Accountability for an Adequate Education - SB 180
The House gave its final approval to this bill on a 230-144 roll call vote.  This bill establishes an accountability system to ensure schools are providing the opportunity for an adequate education: both an input-based system and a performance-based system are created, including a process for legislative oversight and approval.  Key elements of the bill are as follows:

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.
 
The bill must now return to the Senate for concurrence.  This additional responsibility for the Department of Education highlights the concern with the state budget that has removed 6 months funding for the position of Deputy Commissioner.  Mary Heath will retire at the end of this month, and the new Commissioner, Dr. Virginia Barry, should be able to actively seek a deputy and fill the position as soon as possible.
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