May 7, 2010 NHSBA Legislative Bulletin

State Budget Update

The House Finance Committee has formally voted 13-12 to recommend budget reductions contained in SB 450. Cuts in the Dept. Education were reduced from almost $10 million to approximately $6 million. Of this total, cuts in direct state aid to local school districts represent approximately $4.8 million and simply downshift the burden to local taxpayers to make up the loss in revenue that was anticipated during the budget process and school district meetings. Cat aid is cut by $3,946,405, reducing next year's reimbursement to approximately 79% of entitlements. Other state aid cuts include $607,993 in Tuit & Transp; $128,065 in Dropout Prev; $39,903 in Local Ed Improvement; $23,942 in Statewide Spec Educ; $9,178 in Career Tech Student Orgs. Additional proposed education cuts include $65,000 to eliminate the Parent as Teacher program; a $15,961 reduction in school nutrition reimbursements for breakfast; a $102,920 reduction in support of adult education programs; and a $240,420 reduction in expenditures for state assessments.
The proposal also includes a one-year further reduction of the state share of teacher, police and fire retirement contribution rates. For FY 2011, the state share would drop another 5%, down to 20%, downshifting another $9.4 million to locals. An effort to temporarily increase employee rates for one year, helping to offset increases forced on school and municipal budgets, failed on a 13-12 vote.
SB 450 now goes to the full House for a vote next Wednesday. Lengthy floor debate and competing amendments are expected.

ACTION ITEM
Please contact your local senator and representatives to make sure they understand the impact of the timing of these cuts. The FY 2011 proposed cuts impact next year' budgets, most of which were adopted at March annual meetings and based on higher levels of anticipated state revenue. The FY 2011 cut of $4 million in Catastrophic Aid is of special concern since Cat Aid is currently only reimbursing approximately 85% of the eligible expenditures that were made last year. The proposed FY 2011 reduction would reimburse an estimated 79% of current year entitlements. These current year expenses cannot be modified or reduced: they are based on required programs that meet the educational needs of these students. Since districts were not aware of these lower estimates of aid during the budget process, such cuts will have far-reaching impact on other areas of local budgets as well as increasing local property tax rates next fall.
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Pooled Rick Management Programs
Two separate efforts were presented in the legislature attempting to force pooled-risk programs to deplete reserves and reimburse participating school and municipal political subdivisions. A proposed amendment by Rep. Eaton to SB 450 in House Finance was narrowly defeated by a 13-11 vote. HB 1393, originally relative to NH investment trusts and currently in the Senate Commerce, Labor and Consumer Protection Committee, has a proposed amendment seeking to cap reserves of such organizations (Local Government Center Health Trust, PRIMEX, SchoolCare). As proposed, the bill sets an arbitrary cap of 5% of estimated annual claims as the maximum reserve allowed. Current cash reserves of risk management pools are set by boards consisting of local municipal and school representatives and based on standard actuarial formulas. Target reserves of these organizations are lower than private industry and lower than the target set by the Blue Cross Blue Shield National Association. The goal of pooled risk programs is to provide high-quality insurance at a cost effective price, as well as stability in the rates. These services have been provided by the state's pooled risk organizations, and the proposed arbitrary caps on reserves put those services at risk. Financial instability would likely result and possibly force these providers to purchase reinsurance, costing money and requiring further rate increases.

ACTION ITEM
Please contact your local senator and representatives and urge their opposition to these proposals. It is not understood why the Secretary of State, one week before House and Senate deadlines, suddenly feels compelled to oversee pooled risk management programs and place arbitrary caps on their reserves. If such regulation/oversight is needed, it should be within the insurance department, yet the NH Insurance Dept. has expressed no such concern. As noted in comments made by SAU 48 Superintendent and LGC Board of Directors Chair Mark Halloran, in opposition to this legislative effort, "Our reserves are based on standard actuarial formulas. We have set a target ratio in the formula that is lower than private industry, and that therefore requires a smaller reserve. Establishing reserve levels by legislative action is risky. In fact, the various models offered by the House and Senate would likely create a situation in which we would be constantly insolvent and we would lose the confidence of our members and technically be in receivership. We are sure this is not the intent of the sponsors, but the consequences need to be carefully examined."
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Labor Bill Requiring Notice to Education Support Staff and Non-certified Employees
HB 1411, requiring notice to educational support personnel and non-certified school district employees and opposed by NHSBA, is scheduled for a vote in the Senate next week. This bill requires the superintendent to notify, in writing, all qualified education support personnel and non-certified school district employees, who have completed their probationary employment period, of the intent to continue or not to continue that employment into the next school year. Based on NEA testimony indicating that such notice was simply to provide employees with "intent" of the district, Senator Bragdon has offered language to clarify that such notice is not a binding commitment of the district.

ACTION ITEM
Please contact the Senate Education Committee and your local senator to voice your opposition to this important bill. There has been no demonstrated problem indicating the need for this bill. Many districts currently provide notice based on a collective bargaining agreement, local policy or an employee handbook. The bill is not clear whether part-time employees are included as well as full-time employees. The bill provides for the notification to include "special circumstances as may be defined by the employer", but what happens if "circumstances" change after the notice but prior to the school year (budget, cuts in state/federal funding sources, enrollment and corresponding staffing needs)? The proposed requirement significantly reduces the flexibility that a school district needs to meet ever changing and fluctuating needs. At a minimum, Senator Bragdon's clarification should be incorporated into the bill.

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Adequacy Aid Update
SB 465, relative to the adequacy aid formula, was amended and then adopted by the House on a 199-141 vote. The House version does not contain any collar/hold harmless extension, nor provision that would prevent approximately 40 communities from paying approximately $15.7 million in 'excess' statewide property tax payments (donor towns). The bill allows those districts anticipating less adequacy aid in FY 2012 compared to what is received in FY 2011 to carry forward an unreserved fund balance in fiscal years 2010 and 2011. These funds would then be used to offset the FY 2012 tax rate. The bill includes provision for a committee to study the sustainability of the existing state programs for funding K-12 education, including adequate education grants, fiscal capacity disparity aid, and catastrophic aid.
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House and Senate Action This Week
In addition, the following bills were also acted upon:
[OTP means Ought to Pass - OTP/A means Ought to Pass as Amended - ITL means Inexpedient to Legislate]
HB 1324, establishing a definition of a geographically isolated small school and a procedure for such schools to petition the department of education for approval of an alternative staffing plan: TABLED.
HB 1469, relative to instructional days and hours, and a specific NHSBA resolution brought forward by the Governor Wentworth school board. The bill simply seeks to remove the requirement for Commissioner of Education approval when a calendar complies with Dept. Educ. rules: TABLED.