K-12 education budget shifts costs to the future

July 21, 2011

The compromise reached between Governor Dayton and the Legislature on the K-12 education was a lynchpin to secure an overall budget agreement and end the state shutdown. The bill increases funding for K-12 education by $190 million in FY 2012-13, or one percent, mostly by increasing funding for the basic education formula. However, the bill also delays more than $2 billion in payments to school districts and includes some important policy changes.

The most significant element of the K-12 education budget is the decision to delay $2.2 billion in payments to school districts, reducing spending in the FY 2012-13 biennium by shifting those costs into the future. The agreement continues to delay $1.4 billion in aid payments that were shifted during the 2010 Legislative Session, and adds $772 million in new shifts. Normally, the state pays school districts 90 percent of their annual aid in one fiscal year, and a 10 percent settling-up payment in the following fiscal year. The bill changes that formula to a 60/40 split.

The bill does not include a plan for repaying that $2.2 billion debt to school districts. However, under current law, the shift will automatically start to be “bought back” when the state begins to see budget surpluses. The first $908 million of future surpluses will go to refill the state’s cash flow account and budget reserve. Only then are we likely to begin to reverse the payment shifts to school districts.

The delay in these payments creates cash flow problems for many school districts, forcing them to use reserves or rely on short-term borrowing. As a way of helping defray borrowing costs, the K-12 education bill increases the basic education formula by $50 per pupil in each year of the next biennium, an increase of $118 million in FY 2012-13.

The K-12 education bill also includes some other new investments:

  • The state sets a goal for every child to read at or above grade level by the end of third grade. To help achieve that goal, a new literacy incentive program for school districts is established, with the level of aid based on the number of students achieving reading proficiency and demonstrating improvement. There is also additional funding for the Minnesota Reading Corps, a statewide initiative that focuses on improving literacy among children up to third grade.
  • The bill includes an early childhood scholarship program to help children from low-income families to attend preschool.
  • The bill recognizes individuals who graduate early from high school by creating a scholarship program for those who go on to higher education and a cash grant award for those who enter military service. 

Not all areas of education fare as well:

  • Growth in funding for adult basic education (ABE) aid is reduced from a three percent increase to two percent in FY 2012-13. ABE helps individuals enter and advance in the workforce by providing high school equivalency degrees, workplace literacy training, and English language and citizenship classes.
  • Integration aid, which goes to districts with high concentrations of children of color to promote integration in and between school districts, is phased out in the bill. A task force is created to make recommendations for how to reuse those resources.
  • There is a five percent cut to the Department of Education and the Perpich Center for Arts Education.
  • Charter school start-up grants and metropolitan magnet school grants are eliminated.

Special education, which had been cut by $48 million in FY 2012-13 in the Legislature’s budget, is not cut in the final bill.

There are several policy changes included in the K-12 education bill:

  • The requirement that districts spend two percent of revenue for staff development is suspended and districts no longer have to set aside a portion of the Safe Schools Levy to pay for school counselors and other professionals.
  • There is a new evaluation process for principals, teachers and probationary teachers. And “inefficiency in teaching or in managing a school” is added as grounds for terminating a teacher.
  • School boards are allowed to create “full-service school zones” for schools in high-crime neighborhoods, providing education, health, human services and parent support in a collaborative manner.  
  • The bill eliminates the January 15 deadline for collective bargaining agreements to be settled. School districts that did not have a contract in place by that date faced a reduction in state aid. 

The final agreement drops a number of high-profile proposals backed by either Governor Dayton or the Legislature. Not included in the bill is the elimination of teacher tenure, developing an A-F school grading system, a prohibition on strikes under some circumstances, additional funding for all-day kindergarten, implementing an early childhood quality rating and improvement system, and creating an Achievement Gap Innovation Fund.

Minnesotans value a high-quality education system. We know that a well-educated workforce is a critical building block for the economic success of our children, and our state. Unfortunately, the payment shifts policymakers have turned to in the last two legislative sessions are an unsustainable way of funding this important priority. We need to raise adequate revenues to pay for critical services like education.

-Scott Russell

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