Wither Goest School Reorganization?

(from Maine Townsman, December 2007)
By Geoff Herman, Director, State and Federal Relations, MMA

The controversial school reorganization law was adopted by the Legislature as “emergency” legislation on June 6, 2007. It has subsequently fallen on the state like a bag of rocks swinging randomly through a rookery, bypassing some parts of the state but thrashing about in rural and suburban Maine, leaving in its wake confusion if not consternation among hundreds of hard working, well meaning people on the reorganization planning committees.

Two dozen people at a cocktail party would have 24 different interpretations of the law, most of which would be unflattering. From the quality-of-legislation point of view, the school reorganization law gets low marks where it:

• Establishes ambiguous requirements and ambiguous authorities. The ambiguity results in significant misunderstandings at the local level and the ceding of broad interpretive powers to the Department of Education and its “facilitators”. The law is like the image found in the image at the beginning of this article; it tends to look very different depending on your perspective;

• Exhibits extraordinary bluff-and-bluster. Certain “mandates” are actually advisory in effect, required “plans” morph into “progress reports”, deadlines come and go without real consequence, planning committees are told to ignore statutory provisions because they are subject to change; and

• Will likely cause negative financial consequences for property taxpayers. These negative consequences are only partially set-off by claims of administrative savings scheduled to materialize years down the road. Those four areas of negative property tax consequences are:

1. Fixed statutory cost sharing formulas that would make some towns pay more for education than they currently do, and some pay less (but as described below, this provision is subject to emergency legislative action);

2. $37 million of reductions in state subsidy for education next year (relative to pre-existing law);

3. Financial penalties for non-compliant school systems (one of which can only be approximated); and

4. Upward pressure on consolidated labor contracts. 

The obvious question is where all of this is headed.

The December 1 planning deadline.  According to the school reorganization law, the Reorganization Planning Committees for all the consolidating school systems were required to submit their 12-point plans to the affected school systems, which were required in turn to submit them to the Department of Education by December 1. Although a lot of paper has been filed, it is apparent that few if any of the submitted “plans” are anywhere near complete. The aggressive schedule the Legislature tried to mandate in order to quickly implement school consolidation is giving way to the complexity of the task and rough local reaction to the negative financial impacts that would have fallen on some communities in nearly every consolidation effort as a result of the mandatory cost sharing formula and minimum mill rate mandates the Administration and Legislature elected to infuse into the school reorganization law.

Citizen initiative. A citizen petition is underway to repeal the school consolidation law and re-enact the underlying school law that was repealed in the process. To move the repeal process forward in 2008, the initiators will need to file their petitions with the Secretary of State by January 28th. People watching that effort think the petitioners may have trouble collecting the requisite number of signatures by that deadline, but that wouldn’t necessarily end the effort. Signatures can continue to be collected throughout 2008.

Legislative rank and file. Over 60 bills were submitted by legislators this session to amend the consolidation law in a wide variety of ways. Legislative leaders, using a special authority given to them for the second (or “short”) legislative sessions, quashed all of the school consolidation bills, apparently in favor of letting the Education Committee craft its own corrective legislation.

Administration’s approach. The Department of Education, under separate authority, has already submitted a bill designed to remove three financial barriers to consolidation. This bill is LD 1932, An Act to Amend the Laws Regarding School Funding. It is not clear why these barriers were not removed before the school consolidation law was enacted. Ironically, two of the three barriers that the Department is now saying should be taken down were actually constructed as part of the school reorganization law. 

The first change in LD 1932 would be to return to the local level the development of the cost-sharing formulas that allocate each town’s costs among the municipalities participating in a newly organized school district. This represents an abrupt about-face on the part of the Baldacci administration. Before 2004, school district cost sharing was entirely locally controlled. In 2004, a bill was enacted that established the cost sharing formula in statute for each participating municipality’s “required local share”. That law assessed to each town its prorated share of the school district’s Essential Programs and Services (EPS) allocation. Three years later, the 2007 school reorganization law took the final step by fixing the entire cost sharing formula for every school district, both for those local costs within the EPS budget and for all over-EPS expenditures.

Now the administration is proposing to undo in 2008 what it caused to be established in 2007.  Reverting to the earlier system, all of a sudden and in the middle of system reorganization where no pre-existing cost sharing systems are in place, will prove to be another difficult task for the Reorganization Planning Committees, and much easier said than done.

The second change would be to remove the minimum 2 mill tax effort requirement that was also established in the 2007 school reorganization law. Sixteen low receiving school systems have such large value-to-student ratios that their corresponding mill rate effort for education is relatively low. The Legislature decided those systems should be required to levy at least 2 mills of tax effort for education (in full value) if they consolidate. Not surprisingly, the rational choice for those school systems is to not consolidate. Thus, a proposal to repeal that idea.

Finally, the Department’s bill would construct the cost sharing formula in such a way that when a so-called “minimum subsidy” or “low receiving” school system joins up with school systems that are not minimum receivers, the low receiving school system would not lose the benefits of the minimum subsidy it currently receives. Those minimum subsidy revenues, which under the current reorganization law would become available to support general school subsidy throughout the state, is retained under the Department’s bill as minimum subsidy benefits that are specially routed to those particular municipalities within the newly formed larger school districts as part of the school system’s cost sharing system. 

The Department’s bill was given a hearing by the Education Committee on December 12th . The three hour public hearing saw nine people testify in favor of the bill (two legislators, a superintendent, a town manager, and five RPC members) and 13 testify in opposition (7 legislators, 3 superintendents/principals, 1 selectman, and 2 RPC members).

The thrust of the supportive testimony was that the various financial barriers were, indeed, barriers to consolidation, and without opening up the law to locally developed cost sharing and being sensitive to the impacts on the low receiving school systems, school system consolidation was going to be widely rejected by the voters. Supporters came from Southport, Kennebunk, Lincolnville, and Freeport.

The thrust of the opposition testimony was that the bill did little to address all the problems associated with the school consolidation law, it did not make sense to address the problems with the underlying law in a piecemeal fashion, there were other significant barriers to consolidation that were not being addressed in the bill (such as the financial impacts of consolidated labor contracts), the elimination of the 2 mill minimum effort will also lead to rejected consolidation plans, and the whole school consolidation legislation should be repealed. 

One positive element of all the testimony was an acknowledgement expressed by supporters and opponents alike of the frustrating and difficult work the reorganization process is presenting to the people on the Reorganization Planning Committees, and a genuine appreciation for their efforts.

Despite the opposition testimony, LD 1932 was reported “ought to pass” by the Education Committee on December 13th. Before the Committee vote, LD 1932 was amended to delay the mandated school budget validation process for all school systems until 2009.

Remaining issues. The school reorganization law is far from completely fixed merely by opening up the cost sharing formulas to local control. The remaining issues that need to be addressed, ambiguities that need to be resolved, open gaps that need to be bridged, and poorly drafted statutory provisions that need to be amended are too numerous to individually identify in this article. They are more efficiently lumped into categories.

Budget validation. One of the areas of the school reorganization law that needs to be repaired is the section of the law mandating certain school budget adoption procedures and budget validation referenda. Here’s a short list of the problems with that part of the law that need to be corrected.

1. The law mandates the issuance of absentee ballots and the posting of the referendum warrant before the mandatory wording of either the ballots or the warrant – specialized wording required by the new law – can be known.

2. The law requires the issuance of ballots to absentee voters regarding the final budget adoption vote at least a week before the ballots may be submitted by those voters, setting up the unprecedented circumstance of the town clerks having to reject voters’ ballots a week before election day.

3. The maximum 10-day window between the open meeting budget vote and the validating referendum vote is worded in such a confusing manner, legal experts disagree about how it should be applied.

4. If the school budget is not adopted by July 1, the school may continue to operate on a continuing-resolution budget but the municipalities that finance the school cannot commit their taxes. Maine’s largest urban communities, particularly, could be forced to shut down fairly quickly in that circumstance.

5. The budget validation process crudely preempts the procedures established by charter for the municipalities with a council form of government. It is certain that the school reorganization law trumps the local charters to some degree, but it is entirely unclear to what extent those charters were overridden by the state law. Most of those municipalities have delegated all legislative power to a town or city council by charter, and some of those municipalities use multi-step procedures to adopt their school budget, with the first step at the council level and the second step at the town meeting level. It is generally unhelpful for the school reorganization law to simply say without any guidance that those municipalities must use a budget validation process designed for town meeting-style, non-council systems.

6. The law mandates that school boards and administrators can move up to 5% of any cost center in their budget to any other cost center, regardless of the voters’ interest in greater control over budget management.

7. Numerous other technical glitches or clarifications regarding the required warrant documents (e.g., does the RPC plan need to be posted?), displays of material in the polling place (can documents be placed in the voting booth?), etc.

Other “emergency” issues.  If the amendments to the law delaying the budget validation process are not enacted, then “emergency” legislation will be needed because the school systems will need the corrected law in place long before the legislative session ends, and emergency legislation becomes effective immediately. The budget validation issues, however, do not represent the only “emergency” legislation that needs to be enacted. Here’s a sampling of other issues that need to be immediately addressed.

• As soon as the voters approve the creation of a new Regional School Unit (RSU), the election of the board of directors of that RSU will need to be organized so that the new school board can be created, the superintendent can be hired, and the RSU’s first-year budget can be developed. The 2007 school consolidation law establishes the existence of the new RSU as of the first day of the RSU’s financial year, which in most cases will be July 1, 2009. The RSU, however, will need the statutory authority to implement the election of the new school board long before then.

• The required wording of the ballot to approve the school consolidation plan is laid out in the law in two separate places, and each is worded differently. The first rendition that appears in the law is only mildly biased toward a ‘yes’ vote. The second rendition is very biased toward a ‘yes’ vote. Although municipal officials are taught to leave the advocacy to the public hearings and not word ballot questions in a way to lead voters to a certain decision, the Legislature’s mandated ballot language in this case is highly-directed.  In any event, the municipalities deserve a resolution to the ambiguous ballot language.

• Of the several penalties that will be applied to non-compliant school systems, one can only be approximated. The structure of the penalty is to require the non-compliant school system to levy a mill rate effort to support education that is based on the state’s obligation to pay 53.86% of the cost of K-12 education (based on the EPS model) rather than 55%. Therefore, to know what that particular penalty will be for the first penalty year (FY 2010), you would need to know the full EPS value for the year 2010 and the full 2009 state valuation.  None of that will be known when people are voting on whether to approve the creation of consolidated school systems. It is inherently unfair to require people to make a decision without being very clear and precise about both the favorable and unfavorable financial impacts. There is nothing either magic or rational about the “53.86%” penalty. If there needs to be a penalty of this nature, it would be much clearer to express it in terms of a specifically increased mill rate effort (e.g., 0.2 mills).

Longer-term issues. There are longer-term issues that also need to be addressed as the school consolidation process rolls itself out. These changes do not have to be enacted as “emergency” law, but they are issues that need to be addressed nonetheless. How will the school systems that are truly orphaned by the process be treated over time? How will the “savings” the state experiences by applying financial penalties against the noncompliant school systems be used be used in the school funding process?  What happens to Community School Districts that choose not to consolidate, where the new school law purports to only recognize RSUs and municipal school systems after July 1, 2009? Why are the costs of the mandatory school budget referendums borne by the municipalities and not considered to be part of the school budgets?

Maine’s rank-and-file legislators submitted 63 bills seeking to change the 2007 school consolidation law. If that level of concern sets any example, the school reorganization “fixes” on the minds of Maine’s legislators will likely make up a very long list, indeed, and the bill addressing the longer-term issues will likely taken the entire legislative session to develop.