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HF 1’s symbolism is great — but give us real funding reform, school advocates say

Accelerating the funding-shift payback would do nothing to fix the inequitable morass that sparked the shifting and borrowing in the first place.

House Speaker Paul Thissen proposed accelerating the school payback within the first few hours of the 2013 Legislature, but fixing school funding in Minnesota will require fundamental reforms.
MinnPost photo by James Nord

Remember the adage about reaping what you sow? Good. Now, does your elected representative?

Its chances may be as iffy as any other piece of legislation, but the first bill of the legislative session carries some symbolic import in terms of declaring something is a priority. It might, then, have been a mistake on the part of the new DFL leadership to use House File 1 to propose accelerating the repayment of the money the state owes schools.

Why? Because it will not give schools so much as one new penny, will use up some $550 million in revenue that might otherwise pay for things in desperate short supply, such as teachers and manageable class sizes, and is likely to become irrelevant in about six weeks, when the payback might occur automatically.

Advocates say they are delighted that education is at the top of the majority’s agenda, and they don’t want to pooh-pooh good intentions, but could we please move on to their wish list? A list that’s heavy on structural fixes that would restore the predictable revenue stream whose evaporation made the shift a necessary ill?

Ventura changes

Here we pause, for a wee history lesson will do more to illustrate their point than a wheelbarrow full of quotes. Back in the days when journalists were Jackals and Jesse Ventura was governor, Minnesota had, in simplified terms, a statewide general education levy that taxed property owners at a uniform rate.

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It wasn’t equal, but it was a darn sight fairer. Districts still passed levies and in a few places the money was used to fund a shinier, more attractive school system, but mostly referenda paid for big-ticket items like buildings.

With the assistance of Capitol Republicans, Ventura did away with general ed levy, which he thought to replace with a sales tax. Wealthy property owners saw their millage drop while the new funding source  — surprise! — never materialized.

The first ramification: Because lawmakers would have to come up with school funding from the general fund, the fate of Minnesota schools was immediately tied to the health of the state economy — a far less stable source and a shrinking pie.

Because it takes quite a while to calculate the exact amounts the state owes various districts, Minnesota had long paid districts 90 percent of their costs in the year in question and settled the rest of the tab the next year.

More and more held back

Cost-cutting ensued. And as the Ventura years gave way to the Tim Pawlenty years, the governor and his partisans began balancing the budget by holding back larger and larger percentages of the money owed to schools. The uncertainty, educators complained, was as painful as the need for stopgap funding.

When he came into office, Dayton vowed to fix this by fixing the chaotic funding issue but was thwarted by a record shortfall and a determined GOP-controlled Legislature. The holdback rose to 60/40 and the resulting din and cry rose to the point where the concept of the “shift” became a household one.

Public-opinion polls suggested that the newly educated electorate largely blamed the GOP, whose leaders last year attempted damage control in the form of a bill to accelerate the payback of the shift. “Deadbeat Democrats,” then House Education Finance Committee Chair Pat Garofalo, R-Farmington, said, were “making excuses for not paying back the money they borrowed from schools.”  

Bad policy, countered then-House Minority Leader, Paul Thissen, DFL-Minneapolis. Education advocates backed him — for some very practical reasons. First, with the exception of a particular kind of pain being experienced by the charter sector, the accelerated payback would do them almost no good.

Low-interest borrowing

That’s because the costs of borrowing are incurred up front and the pain of losing anticipated money clustered in the first year of the biennium. Again with the exception of the charter sector, for which the shift was devastating, districts can borrow at public-sector interest rates — rock-bottom all the time and more so given today’s historically low interest rates.

Plus, Minnesota law dictates that when predicted revenues rise, the first new dollars go to pay back the shift. The economic tide was already rising, albeit slowly.

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Dayton vetoed the payback bill the GOP leadership passed — politically risky given that voter ire over the shutdown still was running so high that most people understood that the shift had something to do with their kids’ overstuffed classrooms and disappearing teachers, if not exactly what.

Fast forward to the opening hours of the 2013 Legislature, in which newly elected Speaker Thissen proposed accelerating the payback, which few seem to have realized is nearing being paid back. After the November 2012 state revenue forecast predicted a $1.3 billion surplus, the shift fell to 82.5/17.5.

The next revenue forecast is due at the end of February, and policymakers believe it may again predict a surplus — maybe even enough of one to make up the remaining 8 percentage points and restore the shift to its traditional ratio.

Sustainable statewide levy needed

And to repeat: Accelerating the payback would do nothing to fix the inequitable and tangled school-funding morass that sparked the shifting and borrowing in the first place. A return to reliance on a sustainable statewide general education levy would.

Under a proposal crafted by a state task force quietly crunching numbers over the last 18 months, Minnesota property owners would pay a uniform level of property taxes for schools with “zero levy impact.” In a few places rates will go up, but by a maximum of 8 percent. Lots of places will see reductions.

As for the $550 million educators would prefer lawmakers not use to pay back the shift, the wish list is long indeed — but that money would go a long way toward fulfilling it. Schools could hire staff, lower class sizes and shore up children’s mental-health services and integration programming. A structural fix to the way special education is funded would allow them to use hundreds of dollars per pupil for their intended purpose.

Of course lawmakers have heard this from education lobbyists. So there is a chance that the symbolism attached to the first bill of the session is indeed symbolic — just in a more political sense than usual.

What if HF1 wends its way slowly through the Capitol sub-basements where bills live or die, buying the newly re-elected DFL leadership enough time for the shift to go away on its own and to get on with the far less sexy task of righting the revenue stream? Even Machiavelli might approve.