Prepared Text for Board Meeting –
Marc A. Schare
A few months back, I spoke about the probability of the transitional aid guarantee not being continued in the next state budget. Today, ODE submitted their final budget recommendations to the governor and the state legislature and the news is not great for fans of the guarantee. I’ll offer three data points.
First, we have the State Board of Education’s final budget recommendation. Their budget request cuts funding for the transitional aid guarantee line item from its current level of 385 Million Dollars to 232 Million Dollars in FY2010 and 153 Million Dollars in FY2011. The budget document narrative states:
“This guarantee currently ensures that districts (including joint vocational schools) receive no less than the amount of total foundation aid they received in the previous year. This budget recommends that transitional aid (adjusted for the removal of community school students) be continued at 95% of prior year funding for school districts”
According to ODE, the
proposed budget includes additional supplements for basic aid, parity aid and
other categoricals so they believe that will allow
districts to wean
themselves off of the guarantee, but it is unlikely that this
will happen in
The news is not all bad. It should be noted that the notion of children
attending community schools being invisible to the public school district of
residence is incorporated in this budget and should be extremely favorable to
Second, we have the preliminary report from the finance committee of the State Board of Education. Component 1D of this report specifically targets the transitional aid guarantee as something that must be eliminated. Quoting from the report:
“The Subcommittee believes that protection mechanisms are often a necessary feature of an education funding system. However, when such mechanisms provide long-term assistance to a district without any clear “exit strategy” that would put the district in a position of no longer needing such support – either by growing out of the need for a guarantee or by adjusting expenditures so as to exist at a lower expenditure level -- they become difficult to justify. The protection mechanisms that are attached to major policy changes – for instance, electric utility deregulation and the elimination of tangible personal property taxation – are time limited and are ultimately phased out. Districts are arguably given time to deal with the ramifications of these policy changes. These types of predictable, long-term phase outs should be preserved for big picture policy changes.
At the level of guarantees within the foundation formula, however, it is neither affordable from the state’s perspective nor desirable from the perspective of the long-term viability of districts to perpetually make guarantee payments in cases where the likelihood of growing beyond the guarantee mechanism is small. “
Third, there is arguably a
realization in the state that the guarantee is causing a reverse robin hood effect where wealthy districts are receiving more
state foundation money than they should – at the expense of other districts. It
is difficult to make an objective case that
Folks, short of a big neon sign in the lobby flashing-TRANSITIONAL AID GUARANTEE REDUCTION AHEAD, I cannot imagine stronger warnings. The reduction in aid is hardly tramatic – 5% next year and 10% the year after (a total of perhaps $750K), but the direction of ODE with regard to the guarantee is obvious. We can ignore the warnings and wait until the budgetary hurricane strikes or we can prepare. I hope we choose the latter.