State Budget Update - HB 1 and HB 2
As the week started, House and Senate leadership named their Committee of Conference representatives.  Senate members are Senators Lou D'Allesandro, Margaret Hassan, Harold Janeway, Kathleen Sgambati and John Gallus.  House members are Representatives Marjorie Smith, Sharon Nordgren, Daniel Eaton, Susan Almy and Neal Kurk.  Attention this week focused on differences in expenditures and appropriations in HB 1 for various state agencies: revenue issues, especially gambling and new taxes, and details of implementation that are contained in the "trailer bill" (HB 2) are scheduled for next week.
 
Conferees continued to work on clarifying the differences between the House and Senate versions of the budget.  Significant time was devoted to reviewing total appropriations among the state's various funds, including the General Fund that represents 28% of the total money ($3.2 billion for the biennium - Federal funds, at $3.7 billion account for another 32%).  Funding of state education aid programs was not a major issue, as conferees quickly agreed to include full funding of Building Aid ($44.94 and $46.26 million for 2010 and 2011), as well as the initial levels of funding recommended by Governor Lynch for Catastrophic Special Education ($32.07 and $32.93 million compared to entitlements of $41.9 and $46.1 for 2010 and 2011 respectively), Tuition and Transportation ($7.33 and $7.55 million compared to entitlements of $8.34 and $9.17 million respectively), $3.6 million in kindergarten construction, $1.75 million for each year in dropout prevention and $485,000 in 2010 and $500,000 in 2011 for Local Education Improvement.  Final agreement has yet to be reached on Adequacy Aid.  While agreement exists on "fully funding" adequacy, questions remain concerning the treatment of charter schools, specifically the on-line Virtual Learning Academy.  Deputy Attorney General and Director of NH's Office of Economic Stimulus, Orville 'Bud' Fitch, testified before the Conference Committee and advised against the Senate proposal to control costs by capping the maximum number of students.  He advised that such an approach might put at risk the use of $160 million ARRA State Fiscal Stabilization Fund money due to federal requirements for the use of these monies.  Since the Adequacy formula funds districts and charter schools on a per pupil basis, the rapid and significant increase in the Virtual Learning Academy Charter School (VLACS) enrollments present a funding dilemma for the legislature.  Commissioner Dr. Virginia Barry and Deputy Commissioner Mary Heath offered a proposal, based on consultation with the charter school, to control costs while allowing the continuation of the charter school's programs that are of benefit statewide.  Based on the charter school statute allowing charter schools to set maximum enrollments, VLACS agreed to an enrollment maximum of 500FTE pupils in 2010 and 580 in 2011.  In addition, it was proposed that the Department of Education convene a study committee to review virtual school legislation and make recommendations for possible legislative changes to the Charter School Legislative Oversight Committee.  The Conference Committee has not yet taken final action, as several members remain concerned with the state paying "more than once" for any student enrolled in the on-line charter school.  This issue has yet to be determined and thus the total Adequacy funding level remains to be resolved.  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, assuming $80 million of Stimulus money for each year, state funds will only account for $512 million.  This highlights our concern with the potential impact in 2 years when Stimulus funding is not available to supplement state funds.
 
There has yet to be discussion concerning retirement and the state's share of local employer contribution rates.  The budget proposal adopted by the Senate reduces the state payment on behalf of local political subdivisions from the current $55.5 million down to $53.78 in 2010 and $46.84 in 2011.  These funding levels reflect proposals to lower the state share from the current 35% 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.  If adopted, these changes will require the certification of new retirement rates to be effective this July, increasing the local share to offset the reduction in state payments.  The impact on teacher rates could shift approximately one-half of a percent to local districts on the RATE in 2010 and a full percent in 2011.  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.
 
NEXT STEPS
Committee of Conference deliberations are currently scheduled for today as well as next Monday, Tuesday and Wednesday.  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 current and proposed new taxes and the lottery

ACTION ITEM
Continue to share with your senator and local representatives 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 are important.  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."
______________________________
Accountability for an Adequate Education - SB 180
The Senate concurred with the House amendment to this bill that establishes an accountability system to ensure schools are providing the opportunity for an adequate education.  Beginning next year (2009-2010), schools will be required to demonstrate, by the end of the year, that they provide the opportunity for an adequate education by an "input methodology": narrative reports of self-assessments based on the school standards established in rules (ED 306).  Narrative explanations, certified by the school principal and district superintendent, must be submitted to the Commissioner of Education, who shall review the self-assessments and verify that the standards are being met.  Beginning with the 2012-2013 school year, the Department will conduct annual site visits to 10% of the state's schools to assess the validity of these narrative reports.
 
A Task Force is established to develop a performance-based school accountability system.  It will be chaired by the Commissioner of Education, who shall appoint 9-13 members who are either department personnel, school district representatives, educational experts, parents or guardians, or other individuals or groups with information or expertise of benefit to the task force's duties.  The task force will define the system to be used, identifying performance criteria, goals and the basis for determining whether the opportunity for an adequate education exists.  The task force may consider one or more of the following criteria: performance on state tests, percentage of pupils in advanced placement courses, attendance rates, cumulative drop-out rates, environment indicators such as safe schools data, subsequent programs/careers of graduates, expulsion and suspension rates, percentages of highly qualified teachers, and teacher as well as administrative turnover rates.  An interim report is due April 1, 2010, and subsequent to legislative review, the Department of Education will undertake a process to verify and test the system using actual school data.  By November 1, 2010, the Department will submit a final report, including recommendations for future legislation and legislative adoption of the performance-based system to be implemented for the 2012-13 school year.  Beginning October 1, 2012, the Department of Education will annually prepare a detailed report documenting the results of each school on the performance-based school accountability system, identifying all schools that can demonstrate they are providing the opportunity for an adequate education.
 
The bill also implements a Corrective and Technical Assistance process to be implemented by the department for schools that do not demonstrate that they are providing the opportunity for an adequate education.  In the first year of failing to meet requirements, an action plan must be submitted explaining a strategy to achieve compliance and showing how the budget reflects the plan.  If in a second consecutive year, the action plan must include descriptions of mentoring or coaching, ongoing technical assistance and a liaison from the department, and an accounting of how education funds are being expended.  If in the third consecutive year, the commissioner shall assess how the school is expending its education funds and may order that funds be redirected for use in a different manner.
 
The bill now goes to the Governor for his signature to become law.
_____________________________________________________________________________