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With budget deal schools will feel the pain — but it could have been worse

Gov. Mark Dayton
MinnPost/James Nord
Gov. Mark Dayton

When the bare bones of the shutdown-ending budget deal between Gov. Mark Dayton and GOP legislative leaders was announced Friday, educators from Alexandria to Zumbrota could be heard making a collective gagging sound.

Seriously, they were heard thinking, as if one, Dayton? We finally get a governor who, rather than boasting that he’s holding education harmless, understands that repeated shifts add up to a cut, and the end solution is … another shift?

But as details began to leak out of the Capitol meeting room where state officials were holed up late Friday hashing out the language that the long-suffering folks at the Office of the Revisor of Statutes would use to draft a bill, a few began to suspect that the governor did not, in fact, give away the whole store.

And Sunday night, as the Legislature’s GOP leaders appeared to be having trouble rallying the votes to pass the compromise measure in a special session — originally contemplated for today but now uncertain — it was hard not to wonder whether Dayton had walked out of the negotiations with far more in terms of education policy than his antagonists imagined.

“Basically, it would mean very little change for funding,” Scott Croonquist, executive director of the Association of Metropolitan School Districts, said of the proposal. “It would be an incredible shift, but very little else.”

Yes, in terms of figuring out how to fund schools adequately, the proposed deal kicks the can down the road. But the GOP’s agreement to leave policy items out of the compromise measure would kill a number of structural changes that would have caused even more immediate, long-term financial problems.

The pain: In addition to borrowing at the state level, the spine of the deal on the table would allow the state to hold back  40 percent of schools’ already bare-bones budgets until next year. This will force virtually every school system in the state to borrow in addition to cutting back.

Dayton did negotiate a $50-per-pupil hike in general education funds to offset the cost of servicing the debt, but at first glance school administrators weren’t mollified.

And, offset notwithstanding, the shift will be disastrous for many charter schools, which will not be able to borrow at rock-bottom government rates, by issuing bonds. Without affordable credit, good, gap-closing programs may simply up and close.

The glimmer of good news for schools: The term “policy,” as agreed to by House negotiators Friday, seems to apply to several GOP-led initiatives that would have overhauled the way finances are distributed to Minnesota schools, dealing a permanent, disproportionate blow to urban and poor school districts.

Special ed spending
Republicans wanted to cap special ed reimbursement, eliminate a state rule against segregation and the funds used to compensate districts for the costs of complying with it, as well as a law that tied increases in compensatory aid, the money districts get to deal with concentrations of poor kids, to the overall general fund.

Dealing with an ongoing structural deficit by shifting state aid payments to districts, which then need to borrow, creates a long-term problem. The policy items would not just have exacerbated this, but would have created a whole separate thicket of structural iniquities that school administrators would be struggling to deal with in just five weeks when the new school year starts.

Holding back a small amount of state aid has long been a basic education finance tool. The amount the state owes each district isn’t totally clear until long after the school year ends, so Minnesota historically paid 90 percent of what was owed in a given year in the year in question. The state was good for the other 10 percent and districts could dip into and replenish their reserve funds if they had a crunch in the meantime.

Somewhere along the line, cash-strapped politicians thought to hold back a little more — 15 percent at first, and then 20. As the amount grew, and compounded from year to year, never getting wholly paid back, it stopped seeming so sensible and fair.

During his last two years in office, former Gov. Tim Pawlenty balanced the budget by holding back 30 percent — pain that was compounded by last year’s $1.5 billion “unallotment.” As a result, a number of fiscally responsible districts began diverting money from niceties like instruction to pay interest on what is the government equivalent of a payday loan.

The bottom line, school superintendents said repeatedly to candidate Dayton, was that the shifts had become cuts, painful cuts. When he took office, Dayton reassured the administrators that he understood. Given the size of the budget deficit, he couldn’t make the back payments right now, but was committed to lowering the size of the delay back to 10 percent by the end of the biennium.

And so the announcement that not only has payday been postponed again, but the check may be for less than two-thirds of what’s supposedly owed was greeted Friday by equal parts indignation and resignation. They’ll only get two-thirds of what they need, at a minimum, but an IOU with no real due date is worse than no IOU at all.

“Shifts are not a populist issue,” said Minneapolis School Board member Carla Bates. “It’s the school board members, administrators and planners who understand how profoundly coercive shifts are.”

Ugly as the shift is, stick with this wonky post for a few more paragraphs and it may become clear that even without a cavalry to call, our even wonkier governor may have actually pulled a few fast ones on his legislative foes.

Which would explain why representatives Kurt Zellers (R-Maple Grove) and Amy Koch (R-Buffalo) looked so stricken at Thursday night’s announcement that they had agreed to their party’s own proposal for solving the budgetary impasse. The general public might have thought removing the “policy” items from the bills did away with bans on stem cell research and abortion, but perhaps they knew more was at stake.

Or perhaps they knew the policy changes would be apparent to the caucus members who were waffling on the deal late Sunday.

Another brief history lesson: Poor kids and minorities typically don’t get a lot of traction with politicians and so their schools too often get short shrift. The 1971 Minnesota Miracle was one attempt to deal with this. Other, less obvious ones involve the formulas by which state tuition dollars follow kids to individual schools.

The main way the state has compensated districts is by sending a base amount of general education fund dollars for every student. Because some kids come with more needs than others, and because concentrations of needy kids means other hurdles, districts get varying amounts of other funds compensating for the costs of everything from special ed to transportation.

Voters in wealthy communities tend to squeal real loud when the general fund goes down and, say, class sizes go up. But few people know what state compensatory aid is, much less what happens to a high-poverty district when it’s cut. Policymakers sought to deal with this by tying increases in compensatory aid, special ed funding and a few other reimbursement programs to increases (or cuts) in general aid.

During the last legislative session, these special funds took hit after hit, which would have meant a whole second layer of ongoing structural problems for urban and poor districts. Growth in special ed reimbursement was to be capped, compensatory aid “delinked” from the general education funding formula—a cut in practice—and integration aid eliminated completely. 

Integration aid
A quick note about integration aid before we move on: Currently, every district in the state is eligible for the aid, which reimburses the costs of complying with a state law outlawing racial segregation. The money typically pays for busing, magnet programs and other initiatives to encourage diversity in schools.

It’s no small chunk of change: Minneapolis’ share of integration revenue next year is an estimated $16 million to $18 million—in either case, more than half the top anticipated pre-shift shortfall of $30 million.

Because the formula was written in an era when suburbs were largely white, Minneapolis, St. Paul and Duluth receive more compensation per pupil than other districts. With segregation increasingly an issue in suburban districts, lawmakers have long admitted the program needed fixing, but DFLers have been reluctant to reform it for fear that it would be eliminated outright.

Which is precisely what happened during the last session: Under the GOP’s new education funding system, the net loss to urban districts just from the end of integration would have been around $380 million. Compounding this was a 2 percent cap on increases in special education reimbursement, which disproportionately affects large and urban districts.

Because urban and poor districts have to keep providing services—special ed is federally mandated and ignoring the achievement gap comes with financial penalties of its own—they must dip further into their general funds to do so, reducing their ability to spend on such basics as teachers.

“What’s left is the doughnut, and what’s gone is the hole,” explained Bates. “It leaves these whole categories of spending you can threaten politically. What that obfuscates is the true cost of education.”

To borrow one of those irritating family finance analogies politicians seem so fond of when they are trying to position something as fiscally responsible: The shift, then, is the equivalent of putting too much on a credit card while Mom or Dad is unemployed, but the changes the GOP wanted to make to the funding formula would be the equivalent of a pay cut for the parents of the least popular kids.

“When [lawmakers] go to vote for a raise in the general funds, well, all say aye,” said Minneapolis Public Schools lobbyist Jim Grathwol.  “But then when we go to have a special vote for all the low-income kids of color, that vote never goes so well.

“Poor kids generally aren’t as broad a political base,” he added.

In addition to the degree of insulation linking the revenue streams provides for urban and poor kids, Grathwol noted that the $50 per student increase in the general education fund negotiated by Dayton would, with the policy changes now off the table, actually trigger very small increases in the funding streams the GOP had sought to kill.

Too small, in Bates’ opinion. “Personally, I think integration and compensatory [aids] are small potatoes compared to the larger problems being put off at the state level,” she said. “The failure to raise revenue perpetuates the crisis for education in our state.”

If there is a silver lining, she added, it’s that the deal would mean another chance to discuss the policy changes next year. Her preference then would be to roll the politically vulnerable but critical costs into the general education formula and be done with it: “I just want us to talk about what does it cost to educate kids and what’s it going to take to get there.” 

Dayton, she concluded, probably was right to strike the deal: “The shutdown was just awful, just awful. Someone had to be the adult in the room.

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Comments (3)

  1. Submitted by Andrew Kearney on 07/18/2011 - 11:47 am.

    Great analysis- just a clarification. Special education caps or reductions are really cuts to general education. The simple idea is that special education is mandated and must be sustained at a level to satisfy the parents in each particular school community. The reason is parents of disabled students have veto power and ‘demand power’ backed up by a variety of expensive (to schools) legal tools. First grade, 8th grade geography, English 11, etc. are not mandated and so get cut when there is a cut to special ed. The Legislature and Governor both turned down a bill to begin to control these costs (HF1490 andSF1210). It doesn’t help that during the Pawlenty era the MDE special education section that handles these disputes was and is staffed by lawyers whose previous careers were representing special education parents.

  2. Submitted by Alec Timmerman on 07/18/2011 - 01:22 pm.

    It seems like the GOP thinks fair and just are the same as “equal”.

    To use the same, tired family analogy, if one kid in the family needs eye glasses, then all kids have to get eye glasses or no one does.

    Compensatory funds have concentration of poverty figured into the equation, so a poor kid in a class of 20 middle class kids may not get as much compensation as 20 poor kids in a class with one middle class kid.

    This infuriates the GOP because they feel somehow that their rich districts are being ripped off. However, it is patently obvious that you need a lot more resources per kid to help overcome concentrated poverty than less concentrated. In fact, a school with majority middle class is almost enough compensation in and of itself.

    Fair is giving kids what they need, when they need it. Fair is not the same thing as equal.

  3. Submitted by Ray Schoch on 07/18/2011 - 03:32 pm.

    There are circumstances where Alec Timmerman’s generalization in #2 regarding “fair” and “equal” may not be so accurate, but this isn’t one of them. In this case, he’s right on target – kids from poor families and homes need more of many things, and in order to succeed academically (Academic success IS the goal of education, isn’t it, even for a Republican?), they may need more individual attention, resources, time, effort from teachers, etc. None of that is, or should be, free, and since the whole society benefits from an educated populace, we all benefit from those dollars being spent somewhat more generously in districts with substantial numbers of poor and otherwise disadvantaged children. To do otherwise is to make a cruel joke of the stereotypical assertion that we provide “equal opportunity.”

    What I take from Beth’s analysis – and I’m out of town, so doing this from nearly 1,000 miles away – is reinforcement of my impression that Minnesota Republican legislators essentially want to repeal the 20th century. Much of what they’ve proposed, whether it’s constitutional amendments or legislative or educational proposals, seems to me to pit rural against urban, evangelical Christian against anything else, rich against poor, and reveals a level of intolerance that illuminates the fundamental dishonesty of last fall’s campaign sloganeering around “jobs, jobs, jobs,” or in this case, “holding education harmless.”

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