by Chuck Bennett, Director of Government Relations

Budget advice is always helpful.

Get up about 3 a.m. and turn on the TV and you’ll get all kinds of it. Buy this, invest in that, don’t miss this opportunity – the airwaves are full of it.

Add to the list of advisors, Gov. Ted Kulongoski. The Governor, armed with the ultimate crystal ball – state revenue forecasts – is advising districts to approach this year’s budget process with a real eye on the next biennium’s likely shortfalls.  Probably good advice as far as it goes.

Right behind the Governor’s suggestion that districts hold back money come letters from legislators with a different take on spending – put simply it’s, “spend.” You can boil it down to simply – “We didn’t give you the money from state taxes to have you put it in the bank.” Unsaid is that many districts are in bargaining and there are strong constituencies that want everything on the table.

As you might guess these clashing messages pretty much leave the field open to interpretation – yours. But then that’s the way it was before these two branches of government began circulating their points of view and proffering budget advice to 200-plus districts and ESDs that begin serious budget writing in the next few weeks. The good news for school kids in Oregon is that decisions regarding local budget priorities, including reserves, remain at the local level.

What is worrisome is to recall just a couple of years ago when legislators prowling for cash came across the line item in local school budgets that showed some districts were actually maintaining cash reserves (an uncommon concept in Salem where “rainy day fund” commonly refers to the amount of cash it takes to buy an umbrella during a cloud burst). It was during those discussions that some wag, elected or otherwise, proposed that school districts were sitting on a boat load of cash that could be tapped by declaring the reserves “local revenue” under the formula. Like any bad idea that gets legs in Salem, this one just sits at the starting blocks waiting for the starter’s shot. This one is probably the most worrisome idea we’ve seen over the past several years because it has all the allure of one of those TV ads I mentioned at the top of this column. You know the ones – “I’m a millionaire and I did it with no money down.”  You can almost hear the balloon bursting.

Bottom line? Glad you asked – and even if you didn’t let me share. And by the way, I know this is gratuitous but then so is the advice you’re getting from everyone else. Ignore messages from Salem that don’t include a check attached. Fortunately, we continue to have a local government budgetary policy that places the real responsibility for decisions firmly in the hands of locally elected and appointed officials.

Oregon’s business taxes are lowest in the nation
On another front, there has been substantial discussion after the January 26 vote on Measures 66 and 67 and the impact those measures will have on local economic development throughout Oregon. There aren’t many chambers of commerce where school officials won’t hear a litany of doom and gloom scenarios arising from the successful vote to keep schools open, classroom sizes manageable and teachers and other school employees at work.

Jeff Mapes reported in this morning’s Oregonian that a report from the Council on State Taxation, a national business group, shows Oregon is tied with two other states in having the lowest total business taxes as a percentage of gross state product in the U.S. The main reason for Oregon’s low tax status is the lack of a sales tax.

"All I say is, kings is kings, and you got to make allowances. Take them all around, they're a mighty ornery lot. It's the way they're raised." - Adventures of Huckleberry Finn

by Chuck Bennett, Director of Government Relations
It took 25 days and in the end the Oregon Legislature closed itself – and the February 2010 supplemental session – down debating whether it should meet more often. The closing two days were ended when the gavel went down on a proposal going to Oregon voters asking if legislators should meet annually rather than once every two years.

“What?” you ask. Yes, the legislature has been meeting annually for the past few years in premeditated special sessions. The measure to voters would institutionalize that practice and set limits on the number of days the lawmakers could meet.  The whole thing melted down as Senators held firm on a 180 total days over two years split into a 135 and 45 day meetings and House members countered with a 165-35 split. The final version going to the voters sort of split the difference with an odd numbered year session of 160 days and 35 days in election years.

The whole dispute had the eerie feeling of trying to match the number of school days that could have been paid for if the legislature hadn’t met its promise to fund schools this biennium at $6 billion.

The funding issue dominated COSA’s efforts throughout the session. We had regular meetings with House and Senate leadership to clarify several points involving the allocation of the funds for schools promised in the current budget. The allocation was being jeopardized by the continuing downward trend in state revenue forecasts. Last session the legislature had appropriated $5.8 billion to the State School Fund with another $200 million available this June depending on economic conditions in the state. In the end the legislature made several changes to the funding sources and allocation method to release $200 million that was being held in reserve for schools. The legislature did this to give districts assurances during this budget cycle that the $6 billion funding level will be met.

The second school-related issue making headlines during the session was the fate of ESDs. The perennial issue of whether 20 ESDs is just enough or too many was raised.  The Governor’s Reset Committee reported it is in the midst of studying regional service delivery models and how best to meet the needs of students and school districts statewide. Several options were described including elimination of the existing ESD boundaries in favor of large regional service programs specializing in a variety of services. Issues of concern included loss of local control, potential loss of local property tax revenues now accruing to the existing ESDs, status of employee contracts, status of existing facilities, and a host of other issues.

Specific legislation dealing with ESDs included a bill that would allow school districts the option of participating in their local ESD. The bill, which came late in the Session, contained several flaws unrelated to the opt-out provision and did not move out of committee. In the end the ESDs were cut $10 million in State School Funds, about the same share they would have received from the $200 million that was guaranteed in the revised budget bill mentioned above.

Also passed was a bill eliminating laws against teachers wearing religious garb to work. It was a lengthy and fairly heated debate but ultimately it was agreed that the prohibition needed to be lifted and that students were protected from be proselytized by other limitations on religious content in classrooms.

The legislature also passed a bill requiring defibrillators on school campuses by 2015.

Otherwise, most legislation dealing with education mandates, laws or funding issues failed including the anticipated referral of the kicker law to voters. This failure was widely criticized and legislators, who argued that the bruising Measures 66 &67 campaign had left voters unwilling to take on another heated tax related campaign, promised to take it up in the 2011 Session.

So, here's how the leaders analyze the Session just completed:

“I think we passed a broader range of more substantial bills creating jobs and helping struggling families than I would have predicted a month ago,” reported House Speaker Dave Hunt.

And from the other side of the aisle, “The only employment that is growing is state government employment. And the only increase in spending, biennium after biennium, at the pace it is is state government spending,” responded House Republican Leader Bruce Hanna.

by Kent Hunsaker, Executive Director

As you know, since the January election, COSA and our education partners have been working to convince legislators to appropriate $6.0 billion in the current supplemental session, instead of waiting for the May revenue forecast and possible trigger.

We did this for a number of reasons, but mainly to enable districts to have greater confidence as they begin their 2010-11 budget planning processes.

Legislative leadership today told us that the legislature will, on Monday, allocate the $200 million needed to bring K-12 funding to $6.0 billion, as promised, for the 2009-11 biennium.

This is good news for school districts, and we appreciate the legislature’s commitment to schools and students in this difficult economic time.  But the news isn’t as good for ESDs, because legislative leadership has decided that ESDs won’t receive their typical 4.75% share ($9.5 million) of the $200 million.

We told legislative leaders that we were concerned about the potential impacts on ESD services that support schools and students.  Legislative leaders said, however, that it was a “done deal” and pointed out that school districts can choose to purchase ESD services with the money they receive.  They also told us that in order to get the required three-fifths majority needed to allocate the $200 million, this ESD-related action was necessary.

The reason the three-fifths majority is needed is that the legislature is tapping the 2010-11 Education Stability Fund, as well as the Rainy Day Fund and the Education Stability Fund in 2009-10, to achieve the $200 million.  Using monies from those funds requires the three-fifths vote.

This change means that school districts will receive about $14 more per ADMw in 2010-11 than previously estimated at the $6 billion level.  At the same time, this means that most ESDs will receive slightly less per student in 2010-11 than they did in 2009-10.  ESDs with a $1 million floor are not affected.  (A document with details of the impact on each ESD is available here.)
The above numbers are initial estimates.  We will be working with ODE to get exact dollar allocations for 2010-11 for school districts and ESDs as soon as the legislation is passed.

by Kent Hunsaker, Executive Director

This morning the state’s revenue forecast was updated. Below is a summary:

• Total General Fund Revenue dropped by $182.8 Million
• Lottery Resources dropped by $9.9 Million
• Overall Revenues dropped by $192.8 Million
• These revenue losses also included an additional cost for the Business Energy Credits of $75 million, however, on Friday the House voted to reduce this cost by $55 million. This action will lower the overall revenue loss to $137.8 million.

This forecast continues the trend of lower economic forecasts for the state. When I heard the forecast, I thought it meant that our funding for 2009-11 would be restricted to $5.86B under the method of calculation we had been told about. However, after meeting with Speaker Hunt and Paul Warner today, there are two factors that will impact our funding for the biennium.

The first is a change in the calculation of the trigger for the extra $200 million for education. After the forecast today, I have been told by Paul Warner that the “new” method of calculating the trigger would result in $123 million additional going to education rather than about $60 million. That would bring the total funding for education to $5.923B, if this revenue forecast holds through May. It is also historically important to note that the May revenue forecast is almost always higher than previous forecasts.

The second is a desire by leadership to fund education at $6.0B and to do it in this special session and not wait for the May forecast. The only barrier we experiencing in our advocacy for $6.0B is the belief from legislative leaders that this level of allocation will not prevent significant reductions in services to kids from what districts are now funding. In other words, there is support from leadership for finding a way to get to $6.0B, but they are not likely to do it if districts will cut services to kids (higher class sizes, fewer teachers, fewer school days, etc).

So, we will be developing a brief survey of school districts with a very short turnaround time to gauge what will happen if the Legislature approves funding for schools at $6.0B in this special session. Obviously, we are hoping to hear that this level of funding will allow the present level of services to continue and that in some cases where districts have budgeted at fairly low levels, services to kids will increase. However, we know there are special circumstances in districts that may influence their ability to maintain the level of services for 2009-10 in 2010-11 – examples would be a significant change in student enrollment, significant change in education foundation support or requirements of employee contracts.

I have had a bunch of calls today asking me what is a safe number to base your budget on after the revenue forecast today. My answer has been $5.9B. However, I think we have a real chance to get this Legislature to $6.0B in the next several weeks and we will be working hard to do exactly that.