Proposed budget cut proposals made by the state Legislative Fiscal Division
June 10, 2010, the Montana Legislative Fiscal Division presented a list of 17 proposed budget cuts to the Montana School Boards Association Delegate Assembly in Helena.
Here is the list, acquired from the MTSBA meeting budget cut proposal notes:
1. Eliminate HB 124 block grants to K-12 funds other than the general fund.
Savings to the state: A $8.4 million biennial impact; "Eliminating the block grants to these funds will likely result in an increase in property taxes, although not in all cases. For instance, the portion distributed to the flexibility fund will likely not result in a property tax increase." 20-9-630 MCA would need to be amended.
The impact on school districts: The total impact is similar to the state impact. House Bill 124 block grants are treated as nonlevy revenue under law and to the extent that the revenue from HB 124 block grants dries up, school district property taxes increase by a like amount.
2. Eliminate HB 124 block grants to K-12 district general funds.
Savings to the state: $24 million per year; $44 million in block grants, increase of $20 million in GTB; increase of local property taxes by $24 million; 20-9-630 MCA would need to be amended.
The impact on school districts: The total impact is as described by the LFD for this budget cut proposal.
3. Lower direct state aid to K-12 from 44.7 percent to 30 percent.
Savings to the state: $62 million per year; local property taxes would rise by the same amount; "The district court's recent dismissal of the adequacy suit mentioned favorably the state's share in funding school districts. Reducing the state's share of school district funding may risk another adequacy suit." 20-9-306 MCA would need to be amended.
The impact on school districts: The total impact is as described by the LFD for this budget cut proposal. Reducing the state's share would directly contradict Judge Jeffrey Sherlock's last ruling in Columbia Falls v. State.
4. Reduce basic and per-ANB entitlements to K-12 by 10 percent.
The savings to the state: $62 million per year; lower district general fund budgets, most districts would require increased property taxes to regain prior year's budget, "although in most cases this would require a vote;" other factors: "The district court's recent dismissal of the adequacy suit mentioned favorably the state's share in funding school districts. Reducing the state's share of school district funding may risk another adequacy suit." 20-9-306 MCA would need to be amended.
The impact on school districts: The state savings are only part of the story, as the state funds only roughly 62 percent of general fund budgets with the rest coming from taxes. Statewide total general fund budgets in fiscal year 2010 are approximately $946 million, with $865 million of that total funded by the basic and per-ANB entitlements. As such, the total projected general fund budgets cuts that would be required under this proposal would be somewhere around $86.5 million annually. This cut, in turn, would be roughly equivalent to eliminating full time kindergarten and all new general fund entitlements added as part of the state's remedy is Columbia Falls v. State. This directly contradicts to findings of the aforementioned law suit.
5. Eliminate district general fund HB 124 block grants to the extent of oil and gas revenue.
Savings to the state: $10.8 million biennial impact; "Districts with oil and gas revenue in excess of the amount of HB 124 block grants money do not require these block grants to fund their budgets." This option partially duplicates the other HB 124 block grant options in education.
Impact on school districts: The $10.8 million biennial impact would result in budget cuts in districts that use oil and gas revenue to fund their budgets and budget amendments. The impact of this cut would fall disproportionately on a narrow range of school districts in the state that have and use oil and gas revenues to fund their budgets.
6. Eliminate deposit of riverbed rents in facility account; put in guarantee account.
Savings to the state: more than $20 million impact; starting in fiscal year 2012, law requires riverbed rent paid by Avista and PPL be deposited in the school facility and technology account; 77-4-208 MCA would need to be amended.
Impact on school districts: The impact is prospective but significant. The state touted its facility account and process as satisfying its obligations for addressing facilities under Sherlock's order in Columbia Falls v. State. With this funding source gone, there will be insufficient revenues available for the state to address its acknowledged $360 million backlog in deferred maintenance in schools statewide. School districts have submitted proposals for more than $70 million in deferred maintenance for a program funded at only $12 million.
7. Eliminate district flex fund and transfer balance to state.
Savings to the state: $41.7 million; "Districts have been rapidly filling up their flex funds without using them and the ending fund balances have grown rapidly." Eliminating the flex fund and redirecting the balances to the state general fund would result in a OTO infusion of cash. 20-9-542, 543,544, MCA would need to be amended.
Impact on school districts: Prospective but significant. Referred to anecdotally as the rainy day account, the flex fund holds moneys intended for building renovation and repair. All plans based on funding in this fund would be put on hold if those funds were taken by the state.
MTSBA recommends school districts with balances in their flexibility funds spend the money now, rather than lose it.
8. Eliminate full-time kindergarten; restore half-day kindergarten.
Savings to the state: $36.8 million impact; There are 5,400 students in full-time kindergarten and 580 teachers are employed. "The district court's recent dismissal of the adequacy suit mentioned favorably the state's funding of full-day kindergarten. Eliminating this feature may risk another adequacy suit." 20-9-311 MCA would need to be amended.
Impact on school districts: The state funds roughly 62 percent of general fund budgets with the rest coming from local taxes. The projected total cuts required to general fund budgets would be around $30 million per year.
The MTSBA feels full-time kindergarten is the linchpin of its defense in terms of addressing the needs of at-risk students. MTSBA feels that this would put Montana back in the position of having no means to address the achievement gap or at-risk issues in state schools.
9. Eliminate special education maintenance of effort.
Savings to the state: More than $2 million; "This action may result in loss of a like amount of federal special education funds."
Impact on school districts: The total impact on general fund budgets would be roughly $5 million, or double what the state cuts.
10. Continue the elimination of the at-risk payment.
Savings to the state: $10 million; "The 2009 legislature eliminated 410 million in general fund support for the at-risk component of the school funding formula due to the $34.2 million increase in Title 1 funds, as both funding sources support similar programs. The legislature requested the general fund for the school funding component to be considered by the 2011 legislature. While these appropriations will not be part of the base budget, the LFD included it in the Big Picture report in March due to its ongoing nature and the likelihood the legislature will be asked to continue funding."
Impact on school districts: As stated. The MTSBA feels that the permanent elimination of at-risk funding would leave the state with no defense regarding how its formula addresses the needs of at-risk children.
11. Reduce high school basic entitlement to $200,000 beginning in fiscal year 2012.
Savings to the state: $10.8 million. High school basic entitlement will be $253,468 in fiscal year 2011 and beyond; the new basic entitlement would be based on supplying high schools with a minimum of five teachers at a cost of $40,000 a piece. "The district court's recent dismissal of the adequacy suit mentioned favorably the state's funding levels. Reducing high school basic entitlement risks another adequacy suit."
Impact on school districts: The state funds 62 percent of general fund budgets. The total school district general fund budget impact would be approximately $17.4 million.
12. Require high schools to consolidate under conditions.
Savings to the state: $3.4 million. "Requiring high schools that have less than 40 students and that are within 20 miles of another high school to consolidate would save the basic entitlement."
Impact to school districts: The funds 62 percent of general fund budgets. The total school district general fund budget impact would be approximately $5.5 million. The MTSBA feels that forced consolidation would be unconstitutional and would likely be tested in court. Additionally, forced consolidation would likely result in increased costs for transportation, including unreasonably long trips to school for children living in rural areas.
13. Distribute excess oil and gas revenues to school districts' general funds to state.
Savings to the state: $16.4 million; this option would require districts who receive more oil and gas revenue than is needed to fund the GTB and overbase area of their budgets to send any amount over this amount to the state general fund. "If districts chose to maintain their prior budgets, they would have to raise the money by asking their voters to approve property tax increases." 17-36-332 would need to be amended.
Impact on school districts: The $16.4 biennial impact would result in budget cuts in districts that use oil and gas revenue to fund their budgets and budget amendments. The impact of this cut would fall disproportionately on a narrow range of school districts in the state that have and use oil and gas revenues to fund their budgets.
14. Require school districts to send general fund balances above the minimum to state.
Savings to the state: $35 million; 10 percent district general fund reserves; "This proposal would require the district to send to the state any amount in excess of the 10 percent."
Impact on school districts: School districts occasionally have excess reserves that are allowed under current law. Examples include taxes received in the year from delinquent and protested taxes that have since been resolved. The impact of this proposal would fall disproportionately on districts with larger tax protests and would deprive school districts of their local tax base after years of protest already depleted and negatively impacted the school district's ability to generate sufficient revenues for its budget.
The MTSBA fees that this would change the dynamic on excess reserves and would, for example, require districts that get funds from a tax protest settlement to send those local revenues to the state. Since the other local taxpayers pick up the slack with increased levies during the pendency of a protest, this proposal would result in an indirect increase in local taxes for everyone else in the district.
15. Eliminate HB 124 block grant growth.
Savings to the state: Nearly $2 million; annual .76 percent increase in the county transportation and school district block grant would be eliminated; the reduction could result in increased property taxes to support services provided by local districts; 20-9-630 and 632 would need to be amended.
Impact on school districts: As described.
16. Eliminate present law adjustment for inflation.
Savings to the state: More than $57 million; local districts would need to consider whether to reduce the district's general fund or request property tax increases to offset the difference; by statute the superintendent includes annual inflation adjustments for basic and per-ANB entitlements.
Impact on school districts: The state funds 62 percent of general fund budgets. School districts already facing cuts because of the way the budget was put together last session would have to cut further with no inflationary increase in funding for the next two years.
The MTSBA feels the inclusion of present law inflationary adjustment was one of the key factors referenced by Judge Sherlock in finding the state had complied with its responsibilities for adequate funding in Columbia Falls v. State. The dismantling of this key portion of the state's remedy would likely lead to renewed school finance litigation.
17. Eliminate OTO 2 percent inflationary increase.
Savings to state: More than $22 million; OTO funding of the 2 percent in the first year; LFD included funding the Big Picture.
Impact on school districts: The state funds 62 percent of general fund budgets. School districts would have to cut their funding by approximately $34 million over the coming biennium ($17 million per year) to make up for this reduction.
MTSBA feels that if the state withdraws the support it promises in the last session, it casts a new light on its efforts in terms of meeting the court's order in Columbia Falls v. State. If this and other related proposals are implemented, the state will have left itself completely exposed to further litigation over the adequacy of funding for Montana's public schools.