North Dakota Commission on Education Improvement
Commission Meeting Minutes
September 6, 2006
Grand Forks Education Center, 2400 47th Avenue South, Grand Forks, North Dakota
The eighth meeting of the North Dakota Commission on Education Improvement was called to order at 9:00 a.m. by the commission's chair, Lt. Gov. Jack Dalrymple.
Commission members in attendance included Lt. Gov. Jack Dalrymple, Warren Larson, Jack Maus, Martin Schock, Jon Martinson, Mark Lemer, Gloria Lokken, Doug Johnson, Paul Stremick, Sen. Tim Flakoll, Wayne Sanstead, Sen. David O'Connell, Rep. RaeAnn Kelsch and Rep. David Monson.
Sen. Tim Flakoll suggested that clarification be made to the August 9 meeting minutes regarding a reference to the draft report being posted to Commission members' Web sites. The language was amended to say "other" Web sites, rather than specifically, Commission members' Web sites. Sen. Flakoll also suggested that the minutes provide more detail regarding discussion generated during public input. Rep. RaeAnn Kelsch made a motion to approve the August minutes as amended. Wayne Sanstead seconded the motion. The August minutes were approved as amended.
Commission members discussed a timetable for next steps involving the finalization of the proposed draft report. The next Commission meeting was scheduled for October 11 at 9 a.m. in Bismarck. Lt. Gov. Dalrymple said that an Interim Education Committee meeting was scheduled for October 24 and that the Commission's proposed report would be presented to Committee members at that time. Any necessary changes to the report could be implemented following the October 24 meeting.
Anita Thomas is currently working on drafting legislation. A working meeting to review the bill draft took place prior to the September 6 meeting and progress is being made. The next step is to identify legislators to sponsor and introduce the legislation.
Commission members discussed proposed revisions to the draft.
Paul Stremick explained the addition of the definition for Imputed Taxable Valuation on the report's Terminology page. Imputed Taxable Valuation is the taxable valuation of real property plus the theoretical valuation created by dividing 75% of outside income, including tuition and mineral revenue, by the property tax rate of the district. Stremick added that this valuation method is similar to the imputed value of Supplemental Payments, except that Supplemental Payments are imputed at 100%.
Lt. Gov. Dalrymple said the Imputed Taxable Valuation is more fair to impacted school districts than a direct deduct. Rather than a dollar for dollar deduct, this method allows for their income to be imputed and combined with other districts, increasing the average and resulting in higher equity payments.
Commission members discussed the addition of a mill minimum offset, stating that any school district levying less than 170 General Fund mills should have its State Aid Payment reduced. Members added that school districts have to make a local effort to fund K-12 education. If districts choose to maintain a low mill levy, their equity payments will be reduced. Sen. Tim Flakoll suggested using a percentage of the state average rather than an actual number so that legislation isn't required every time the state average changes.
Lt. Gov. Dalrymple discussed how under an adequacy-based system, all school districts would need to move to a common mill levy. Such a move is a long way off, but the mill minimum offset begins to bring districts closer to that goal. With this approach, the mill levy deduct no longer comes into play; only the mills of each school district.
Sen. Tim Flakoll asked that language be clarified regarding the added challenges and costs involved in educating large numbers of transitory students. Paul Stremick added that school administrators requested that other cash income be imputed at 75% rather than 100% because of the additional needs required by students in transition. Sen. Flakoll continued that he would like to see numbers that back up the number of students who are transitioning in and out of schools.
Mark Lemer explained the addition of the High Valuation Offset to replace the mill levy deduct and create an effective range. Districts below the state average will be brought up through equity payments. Districts above the state average but below 150% of the state average will have no change. Districts with an imputed taxable valuation per student more than 150% of the state average will have an offset.
The High Valuation Offset states that school districts that have an Imputed Taxable Valuation per student in excess of 150% of the statewide average will have their base payments adjusted by an amount equal to the district's total excess valuation times 185 mills. Paul Stremick added that the addition of minimum and maximum caps were the result of feedback from administrators. A 2% minimum and a 7% maximum is proposed, with equity districts capped at 7% plus their equity payment. Under this plan, no district goes backward because all districts receive an increase of at least 2%.
Mark Lemer reviewed the Total State Aid Payment and how the minimum and maximum payments to school districts would be calculated on Weighted Pupil Units. Lt. Gov. Dalrymple discussed how the minimum increase should be calculated and suggested that the Commission look at how many schools are close to being off the minimum increase and on the formula. The question was raised regarding what would happen to schools in year two of the biennium.
Paul Stremick commented that if the goal is to get all s school districts on the formula, it will need to be accomplished gradually. He added that it is the intent to get all districts on the formula, and that a maximum increase is needed to help bring this about sooner.
Lt. Gov. Dalrymple asked about the actual costs for the second year of the biennium. How much will it cost to transition from year one to year two, and how much of that cost might be covered by declining enrollment savings.
Lt. Gov. Dalrymple expressed his gratitude and appreciation on behalf of the Commission to Jerry Coleman and the Department of Public Instruction staff for the extra work they were doing in support of the Commission and its efforts.
Regarding the baseline state funds appropriated for K-12 education programs, Mark Lemer suggested that the Commission make an official request to the Department of Public Instruction to provide the Commission with more detailed numbers regarding special education contract funding and present those numbers at the October 11 meeting. The Commission's proposal would recommend funding the top 1% of the most costly special education contracts and the Department of Public Instruction numbers are necessary to determine whether or not the proposal is within the range. Wayne Sanstead said that his department would do so.
For the new main funding formula illustration, Mark Lemer recommended that in keys 3, 5 and 6, a distinction needs to be made between ADM and Weighted ADM. He also suggested that keys 5-16 use Weighted ADM because when an ADM is combined with weights, it equals a Weighted ADM. Lemer also recommended that the language for required legislation for the new main funding formula state that the requirement for completing the teacher compensation claim form and the requirement for a school census be eliminated.
Paul Stremick discussed how the Supplemental Payment Plan would be replaced with an Equity Payment Plan and that the plan would offset the loss of revenues suffered by any school district whose imputed taxable valuation per student is below 90% of the statewide average imputed valuation per student. The imputed valuation is higher than the regular valuation, so the plan earns all qualifying school districts a higher payment. Stremick added that all schools receiving equity payments are levying at 185 mills. School districts that are levying below 185 mills will have their equity payments reduced.
Mark Lemer said that a property-poor school district should not use the equity payment to reduce its local mill levy. The additional funding is to be used in the classroom, not for property tax relief. Lt. Gov. Dalrymple added that the offset in the equity payment for schools below 185 mills will act as a disincentive to the use of equity payments to reduce the mill levy.
Commission members discussed how an extra step has been added to the equity payment formula to address certain property poor school districts. Districts with little or no property valuation are not able to access the equity payment, so an assumed minimum valuation provides all school districts with at least 50% of the statewide average. This minimum equity payment will help bring certain low valuation districts into the formula and allow the opportunity for future increases.
Sen. Tim Flakoll suggested that the language defining the equity payment calculations clarify the sources of cash revenue that are included, namely tuition and mineral incomes.
Commission members had no additional recommendations for the special education section, except the need for specific dollar amounts regarding special education contract funding to determine accuracy of proposal.
Mark Lemer added that $400,000 of the amount appropriated for special education per student payments would continue to be earmarked for Gifted and Talented programs. Currently, these programs are not included in statutory law, but are earmarked in the appropriation.
Sen. Tim Flakoll recommended that the Commission propose a deferred maintenance plan to help cover capital improvement costs for school districts. Under his proposal, if state revenues exceed projections by $30,000,000 or more at the beginning of the 2008 or 2009 fiscal year, $10,000,000 would be appropriated and distributed to school districts for deferred maintenance. Each school district would receive $20,000 and the remainder would be paid out on an ADM basis. This would be a one-time payment with no future obligations. The $10,000,000 would not be included in the additional $60,000,000 proposed by the Governor for K-12 funding; rather it would be part of the ending fund balance.
Lt. Gov. Dalrymple saw merit in the deferred maintenance plan, but didn't see how adequacy and equity would be addressed with a one-time payment.
Commission members had no additional comments regarding the Career and Technical Education proposals and the two pilot programs recommended for the state. Joint Powers Agreements will be funded $2,000,000 of hard dollars and $1,000,000 contingency dollars for a total of $3,000,000.
Regarding the section that covers moving toward an adequacy-based funding system, Commission members discussed how this information deals only with what an adequacy-based funding system might look like moving forward. Such a system would not be completed in the short-term, but the Legislature could assign the Commission to analyze various options.
Warren Larson said that the state needs to define an adequate education and what each student leaving high school needs to know. He suggested working with administrators and teachers to determine specific requirements for students. Lt. Gov. Dalrymple asked Larson to chair that effort on behalf of the Commission.
Wayne Sanstead brought up the P16 final meeting in September and its efforts to address adequacy. Lt. Gov. Dalrymple will attend the September 13 meeting to update the group on the status of the Commission's work. Commission members indicated their support in working with P16.
The Total State Aid Payment and minimum and maximum enrollment growth rates were discussed again by Commission members. Lt. Gov. Dalrymple asked if a maximum of 7% plus equity payment was more fair than unlimited plus equity payment. Mark Lemer responded that the benefit was targeting additional funds to the more needy districts. Commission members discussed how to handle funding for the second year, when the payment would not be as significant, including some kind of second-year inflator or hold harmless. Sen. Tim Flakoll said he would like to hear from audience members to get their opinions/suggestions on dealing with funding for the second year.
Rep. David Monson said that it would be helpful to see numbers for the second year to determine if such increase would be adequate. He suggested a 2% increase in the second year to account for declining enrollment, either adding more dollars in the second year or holding dollars back from the first year. Monson added that many superintendents would prefer to receive funding in the first year and then budget for the second year. If they have notice, they can budget.
Gloria Lokken said that schools are used to working on a two-year cycle. Warren Larson added that per student payments would need to be increased to make it through the second year.
The Commission broke for lunch at 11:57 a.m. and reconvened at 1:05 p.m.
The public was invited to come forward to share their comments and suggestions with the Commission.
Dan Huffman with Fargo Public Schools suggested an increase of 2%-5% for the second year. He suggested that the state establish a timeline detailing when all school districts should be on the formula and then work backwards from there. He also said that prior year deducts should be taken out of the true base dollars.
Richard Ray, superintendent of Manvel Public Schools, expressed his concern about K-8 schools not having their high school students included in their local ADM for computing taxable valuation per student. He said that the ADM needs to follow the school district paying the bill to send its students to other high schools.
Mark Sanford, superintendent of Grand Forks Public Schools, addressed the Commission about special education being an equity issue for programming and funding. He stated that Grand Forks has had to cover the cost of unfunded mandates for special education because state and federal governments aren't covering their share of the mandate. He recommended that the federal government should be responsible for 40% of the costs, the state 40%, and the local share would be 20%.
Lt. Gov. Dalrymple asked Sanford whether or not consistent patterns would exist for other school districts. Sanford responded that the size of the district would have an impact, but that numbers are low for all districts. He added that the Commission is basing its work on averages which, in his opinion, don't always apply. Sanford summarized by saying that schools need special education funding because such programs are mandated. Lt. Gov. Dalrymple added that the Commission would like to work on an alternative to see if there is another option for handling special education funding.
Viola LaFontaine, superintendent of the Belcourt School District, expressed her concerns about eliminating English Language Learner (ELL) levels 3 and 4 from the funding formula. She said such an elimination would have a negative impact on multi-cultured students, especially Native American students. According to LaFontaine, the elimination of levels 3 and4 would impact 75% of students who qualify for ELL programs.
Sen. Tim Flakoll said that with the hold harmless provision included in the formula the dollars would still be available for ELL programs. Warren Larson stated the importance of addressing the needs of all at-risk students and that the Commission will continue to work to do more to assist this category of students, but for now, the hold harmless should cover ELL levels 3 and 4. LaFontaine stressed the importance of catching kids in preschool and kindergarten with at-risk tendencies. Mark Lemer added that kindergarten students are not required to attend school and suggested that the compulsory attendance age be changed from 7 to 6.
Mark Lemer said that regular education agency-placed student reimbursements are not included in the draft report and suggested that language be added stating that such programs would continue. Currently, these reimbursements are paid from Foundation Aid at 100%.
Sen. Tim Flakoll made a motion to adopt the deferred maintenance plan for capital improvements that he had presented earlier in the day. Rep. RaeAnn Kelsch seconded the motion. Sen. David O'Connell said that he could not support this plan because other facilities in the state were in need of maintenance, such as the International Peace Garden and the State Penitentiary. He also stated that this plan would place another wedge between large and small schools and that $20,000 plus ADM was not enough money to sufficiently fund maintenance projects.
Sen. Flakoll responded that this plan would not compete with other projects like the Peace Garden or the State Penitentiary because the funding would come from General Fund excess and only if such funds are available. Rep. David Monson added that the dollars would still need to be appropriated, but on a contingency basis.
Lt. Gov. Dalrymple said that the plan was a good idea, but questioned whether or not a special, one-time appropriation would address the mission of the Commission. He added that the Commission's first consideration was to address the Governor's order to recommend the use of $60 million for general education purposes, rather than capital improvements or construction.
A vote was taken and the motion for a deferred maintenance plan was carried.
Mark Lemer made a motion to adopt the report as amended by the Commission as a working draft moving forward. The motion was seconded by Rep. David Monson. Commission members approved and the motion was carried.
Commission members were asked to continue soliciting their respective organizations for feedback on the revised report. Warren Larson, Paul Stremick, Mark Lemer, Martin Schock and Doug Johnson would again hold regional meetings with administrators across the state to review the revised report and seek input. The revised report would be posted to the Governor's website and other websites.
Lt. Gov. Dalrymple said that at the October 11 meeting, a vote could potentially be taken on the proposed report. If anything is revised that day, the Commission may need to meet again to address and vote on revisions.
Rep. RaeAnn Kelsch made a motion to adjourn the meeting and Sen. David O'Connell seconded the motion. The motion carried and the meeting was adjourned at 2:15 p.m.
