State Budget Update - HB 1 and HB 2
The conference committee recommended budget was adopted on close votes in both the Senate and House (2 vote margin in the Senate and less than 20 vote margin in the House).  A summary of the major education components, briefly highlighted in last week's Bulletin, follows:

The Adequate Education Funding formula remains fully funded at $957 million.  While this represents a significant resource that is relied upon by districts, it is important to note that $160 million of ARRA Stimulus money is funding this state aid program ($80 million each year).  Adequacy is currently funded at approximately $890 million.  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 allowance for the statewide property tax and utilizing $80 million of Stimulus money, state funds will only account for $514 million.  This highlights our concern with the potential impact in 2 years when Stimulus funding is not available and the cost of adequacy again increases.

Charter schools will receive adequate education grants of $5,450 per pupil ($3,450 universal aid plus $2,000 fiscal capacity disparity aid) with no caps on enrollments.  However, a Memorandum of Understanding agreed to with the Virtual Learning Academy Charter School (VLACS) will limit state funding of VLACS students to 500 fte students in 2010 and 580 in 2011.  Concern over increasing enrollments at VLACS, and what their actual cost per pupil is, prompted two additional provisions:
(1) A nine-member task force is established to study the state funding for VLACS and review what the cost is to the state for students who are dual-enrolled at their local resident school, and what potential savings may be associated with these students.  In addition, determine VLACS cost/pupil to provide courses and review what is necessary to provide continued support to VLACS in a manner that eliminates dual payment by the state and is fair and equitable to school districts.  A report is due by December 15, 2009; and
(2) The Commissioner of Education, and the Director of the Office of Economic Stimulus, are directed to consult with federal authorities and determine the degree to which the state may amend existing state laws, regulations and policies with regard to controlling the growth of enrollment in public charter schools without affecting state eligibility for federal Stimulus funds.  A report is due by December 15, 2009.

Building Aid is fully funded at $91 million for the biennium and represents the state's continued commitment to promises made concerning the state share of annual principal payments.  However, this funding is achieved by bonding the full amount ($44.9 million in 2010 and $46.2 in 2011) as well as $40 million for the current FY '09 allocation.  Proceeds from the Rooms & Meals Tax will be used for the state's bonding payments.  School board members should note that significant legislative concern remains over how building aid is funded, and that the state has no control over its obligations.  A proposed 2-year moratorium on building aid was defeated during conference committee deliberations, but a legislative committee is established to study the goals, procedures and operations of the state's building aid program, the sources of revenue and amounts of state funding, as well as eligibility criteria.  An interim report is due by December 15, 2009 with a final report by November 1, 2010.  School districts will need to monitor the work of this committee and be aware of any proposed changes that might be recommended for future legislation.

Catastrophic Special Education Aid is significantly under-funded, reduced to $30.6 million in 2010 and $31.4 in 2011.  This means the reimbursement aid program for severely handicapped children will be prorated at approximately 73% in 2010 and less than 70% in 2011.

Appropriations for other state categorical aid programs remained relatively level-funded.  Tuition and Transportation Aid is budgeted for $7.33 and $7.55 million compared to projected entitlements of $8.34 and $9.17 million respectively.  Dropout Prevention is budgeted for $1.75 million in each year.  These are both funding areas where hoped-for additional funding, based on expectations made when the compulsory attendance age-18 bill was passed, was not realized.  Local Education Improvement is budgeted for $485,000 in 2010 and $500,000 in 2011.  In addition, $3.6 million is budgeted for kindergarten construction.

The Deputy Commissioner of Education position was only funded for one-half year in 2010.  This will impact decisions of our new Commissioner, Dr. Virginia Barry, and may delay the hiring of a Deputy until January 2010.

State Contributions for Teacher Retirement Rates have been cut.  The state's share of local employer contribution rates drops the state share to 30% in 2010 and 25% in 2011.  In addition, the budget eliminates a $16.9 million liability it owes the NHRS medical subsidy account that is funded by public employers, including school districts.  The drop in state funding for teachers (as well as police and fire), and the elimination of the state amount owed NHRS, requires the certification of new retirement rates to be effective this July.  The impact will be an increase in the local share of the teacher rate to offset the reduction in state payments, as well as an increase in the employee rate due to the lost $16.9 million state OPEB liability.

Based on NHRS estimates during budget deliberations, the new rates shift approximately 0.60% onto the local teacher rate in 2010, and approximately 1.21% onto the local teacher rate in 2011.  There will likely be an approximately .07% increase in the employee rate.  It is anticipated that employers will receive information from NHRS next week.

ESTIMATED NEW CONTRIBUTIONS
Group I Category                                                2010            2011
Employees           Employer Contribution            9.16%            9.16%

Teachers              Employer Contribution            7.49%            8.02%
                             State Contribution                  3.21%            2.68%
                             TOTAL                                  10.70%           10.70%


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Retirement "Spiking" - HB 641 and SB 108
The House and Senate both adopted the conference committee reports on these two bills.
HB 641, relative to the determination of employer assessments for excess benefits paid by employers in the retirement system.  The bill requires the New Hampshire Retirement System (NHRS) to develop a specific methodology for individuals retiring after July 1, 2010, that determines the amount of the employer assessment for excess benefits provided above base pay.  The retirement system will submit a report regarding the methodology no later than December 1, 2009.  In addition, every employer shall annually report the annual base pay of each member to the NHRS.

SB 108, establishing a committee to study the imposition of assessments to retirement system employers for excess benefits paid to retirees.  The bill creates a committee to study the law requiring the imposition of assessments to retirement system employers for excess benefits paid to retirees, including earnable compensation of members.  The committee shall explore alternatives to the spiking assessment formula and to the so-called load factor assessed to retirement system employers.  An interim report is due November 1, 2009, and a final report on or before November 1, 2010.
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