SAD 48 Budget: Six referenda and one open meeting needed

(from Maine Townsman, April 2004)
By Lee Burnett, Freelance Writer

    It's easy to dismiss the protracted budget impasse in the Newport area school district as no more relevant to the rest of Maine than a freak spring snowstorm.   But it might be a mistake. The controversy grew out of conditions that are festering elsewhere — a growing property tax burden, an outmoded (and opaque) budget process, tension between school and municipal officials, muddled state law, and an aging population more concerned with the cost than the quality of schools.           

       The impasse is finally over.  On the seventh try in ten months, voters in SAD 48 approved a budget for the school year that began last September. The school district includes the towns of Newport, Corinna, St. Albans, Plymouth, Hartland  and Palmyra. The $16.9 million budget was the same one defeated last month and essentially unchanged from last September. The difference is that the most recent vote was done at a town meeting. All the other votes were done by secret ballot referendum.

Cost

       It may take a while to recover from a year of dysfunction. The controversy did nothing to solve the district’s broken budget process, although it did prompt the formation of an ad hoc committee to develop better dialogue with voters. The district still has deferred maintenance to catch up on, and stacks of unpaid bills to clear. A nasty atmosphere — typified by the hate mail that teacher Sherry Gould received — needs to be dealt with. And there is still some fallout to reckon with. The neighboring towns of Dixmont and Etna, which traditionally send their older students to Nokomis Regional High School (along with $450,000 in annual tuition payments), appear to be rethinking things. Of the 28 incoming eighth graders, 11 of them have applied to go elsewhere, according to the Morning Sentinel.

       To a casual observer with just a passing familiarity with the controversy, an obvious question comes to mind. Why did the SAD 48 School Board wait so long to hold an open (town-meeting-style) district meeting?

       “We probably could have gone to a town (open) meeting a while ago and resolved it,” admitted Ron Fowle, School Board Chairman.

       The board’s strategy of re-selling the same defeated budget — which critics blasted as intransigence — stemmed from two general factors. The board was convinced further spending cuts would do serious harm to education and it was equally convinced that most people agreed with them and it was just a matter of getting the information out, said Fowle.

       School Superintendent William Braun said the board’s reluctance to go to an open meeting stemmed from voters’ preference — expressed repeatedly throughout the past year — for a referendum, which is more confidential and attracts greater voter participation than an open meeting. “I don’t think anyone’s afraid of town meeting format,” said Braun. “It would be misleading as heck to say that.”

Cheapest in state          

       This sad saga developed in one of the most impoverished school districts in Maine. This was not a showdown over laptops, all-day kindergarten, or another elective class at the high school. It was over the cost of a very basic education. Of the 270 school districts in Maine, only four spend less per student than SAD 48, according to rankings compiled by Maine’s Department of Education. The $4,445 spent on each student in SAD 48 is about 20 percent lower than the state average. What that buys are teacher salaries that start $1,822 below the state average, overcrowded classes at all levels, no guidance counselors at the elementary level, and a cafeteria at Nokomis High School that also serves as the school auditorium.

       Here’s how the spending level is reflected in the classes of Efrain Rojas, one of two Spanish language teachers at the high school: “Most teachers try to have 15 or 20 in their class, especially Spanish. We started the year with 25. That’s way too high. Our text was published in 1990. Some books are literally falling apart, but we don’t have the money to replace them.”

       Even some critics of the school management concede that the district is not extravagant.

       “SAD 48 is not a flagrant spender when compared to the state,” said Jim Ricker, town manager in Newport. “I don’t know if education can be delivered at a cheaper rate.”

       The low level of spending reflects a lower than average effort on the part of taxpayers compounded by a thin tax base.  One accepted measure of taxpayer effort is the portion of the tax rate that supports education. In SAD 48, the education mill rate is $10.97 per thousand dollars of valuation, according to Maine Department of Education figures. The state average is $11.62 per thousand. That slightly-below-average-taxpayer effort is worsened by a weak tax base. There are no ski areas, shopping malls, big factories or resorts to tax, just houses, some stores and a lot of woods. One accepted measure of a tax base is the amount of taxable property supporting each student. Wealthy communities like Bar Harbor, York, and Boothbay Harbor have more than $1 million worth of property behind each student. The state average is about $460,000. In SAD 48, each student is backed by just $221,532 of property. In other words, the modest tax rates in SAD 48 communities raise far less money than modest tax rates in wealthy communities.

       The factor that partially compensates for the district’s modest wealth is state funding, which flows to needy communities to help even out spending disparities around the state. The state contributed $9.6 million towards last year’s budget, a 58 percent share far exceeds the average of about 42 percent.

       The largess from the state has proved to be a doubled edged sword in the current budget debate.  SAD 48 was doing okay during the mid to late 1990s when state revenues steadily grew. In the six-year period through last year, the state share of the budget grew from $6.4 million to $9.5 million — nearly a 50 percent increase. But when state funding plateaued this year, it created a crisis for SAD 48.

       Flat state funding has little effect on “low-receiver” school districts, but it has a disproportionate impact on the “high receiver” districts like SAD 48. SAD 48 was forced to push all its rising costs — from pencil inflation, bigger oil bills and higher teachers’ salaries — entirely onto the weak backs of local taxpayers. “When school costs go up 4 percent and if two-thirds of your funding (from the state) is flat, you have to raise the budget 12 percent locally,” explained State Rep. Peter Mills, R-Cornville. “This crunch precipitated what happened.”

       The crunch coincided with property revaluations in a few of the district’s communities, causing some property tax bills to jump even higher.

       “If I had to point a finger, I’d say state funding,” said Superintendent William Braun. “When you’re trying to meet Learning Results and No Child Left Behind and still be fiscally responsible, it’s pretty difficult when you’re spending at a rate $1,000 below the state average.”

       “The state subsidies have not kept up with the level they were at in the late 1980s,” said Hadley Smith of Palmyra. A retired federal employee who worked as an economist in developing countries, Smith is a leader of the taxpayers’ group Committee for Reasonable Taxation. “Over the past 12 years, the local share of the school budget has gone from $2 million to $5.7 million. That’s the biggest thing taxpayers feel. Our taxes have gone up well over double. ... The people who are being hurt the most are the retired elderly and seniors.”

       Since last year, the school board has eliminated 17 positions, after-school busing, freshman basketball, all B-level sports at the junior high. Even if all that is restored, the district will still have class sizes 50 percent higher than recommended and no elementary guidance positions.

       “It wasn’t easy getting down to that even before the budget went out the first time,” said Braun.

 Not much to go on

       What started out about money gradually evolved into a showdown over accountability and control.

       SAD 48’s budget process, like many in the state, can be confusing and intimidating to lay people. Voters confront such obscure formulations as “the local share of the foundation allocation,” a phrase that makes sense only to those steeped in the arcane details of the state’s school funding formula, but which persists because it’s been written into state law. State law has recently been amended to give local school districts the option of adopting a more user-friendly process, but hardly any district has adopted the new alternative format. SAD 48 still sticks with the same six-article format in use for the past 40 years: foundation article and local share, debt service, additional local assessment, adult education, overall bottom line and acceptance of grants.

       “It’s the same format as when the district was formed in 1965,” said Braun.

       Notwithstanding the minimalist format, Braun insists the district provides plenty of information to voters before they enter the polling booth.

       “We also have an itemized budget — some 400 lines — that indicates where the dollars go,” he said. “It’s all public information.”

       Few outside the administration would agree that the public is awash in information.

       For the longest time, the school district’s cash flow picture was a mystery. “One of the things townspeople have been asking for all along is some kind of printout — where did the money go,” said Al Worden, selectman in Newport. He’s a former long-time teacher in the district and a minister. As a selectman, he says he receives a weekly printout of “what we’ve spent and how much we have left”. When he asked for the same information from the school department, “up until recently they told us ‘we don’t know what it is. We don’t do our books.’ How in the world do you put together a budget if you don’t know the books for the current year?”

       In February, the district provided a spending breakdown, but it was for spending that had occurred four months earlier. “They started to provide it in January and February, but they gave us stuff from last October.

       “It’s just a game with them,” he said. He says he has little patience for a failure to provide routine financial information.  “The board doesn’t even know this information. There are so many unanswered questions.”

       Like 30 other school districts in Maine, SAD 48 approves budgets by referendum vote rather than at town-meeting style, open meeting. Referendums have much higher voter participation rates because it takes much less time to cast a ballot in the privacy of a polling booth than to sit through a meeting and hash things out. Referendums are also less susceptible to political pressure by a well-organized minority. The drawback to a referendum is there is no opportunity to amend a proposal and no way to determine voter intention by the results.  When a budget is defeated, guesswork usually follows.

       “Was the budget too high, too low, or not explained enough?” explains Superintendent William Braun.

       Again and again, through successive budget defeats, the school administration concluded the problem was not in their budgets, but in the voters’ understanding of them. The board cut 17.5 positions before the first budget was even voted on and cut $200,000 more after the first two defeats, but has presented essentially the same budget four times since September.

       “The information was just not getting out,” asserted Ron Fowle, a U.S. Postal Service employee and SAD 48 School Board chairman. Fowle saw successive defeats as a protest against the state, a view that squared with the board’s view that the state was ultimately to blame for putting the district in such a bind.

       “I don’t think the process failed. I think it works well. The issue was a lot of people simply felt their taxes were too high. A lot said they were not against education. With some it was the budget; with others it was a way to voice frustration.”

       The board believed it was their duty to defend against mediocrity.

       “We felt it is our job to provide a quality education. By cutting any more meant cutting programs,” said Fowle. “Education today is about developing a well-rounded person. Just sticking to reading, writing and ‘rithmetic is not good enough.”

       Fowle said the defeats were drawing the voters and the administration closer. But others saw the board’s refusal to cut spending as intransigence.

       “If they keep slapping us in the face and give us the same budget three or four times, this is going to continue,” predicted Barbara Marshall back in March. She is grandmother of three school-age children, a member of the SAD 48 School Board and a member of Committee for Reasonable Taxation.

Muddled state law

       In the mid-winter depths of the showdown, a Bangor lawyer uncovered a provision of state law that turned the tables on the school board. His discovery has implications for every school district that goes into a new fiscal year without an approved budget.

       In spite of repeated budget defeats, SAD 48 was collecting payments from member municipalities right through the winter as if their proposed budget had passed. This unusual spending authority drew the attention of Attorney Edmond Bearor, who represents the town of Newport and who had followed the controversy through the newspapers. He decided to conduct a little legal research and discovered that the practice is in fact rooted in an explicit provision of school finance law. They key language is italicized:

       “If a budget for the operating of the district is not approved prior to July 1st, the latest budget as submitted by the board of directors is automatically considered the budget for operational expenses for the ensuing year until a final budget is approved ...”

       This provision allowed the school board to, in effect, ignore successive defeats and continue operating at spending levels not yet authorized by voters.

       But Bearor dug a little further. In a separate section of state law spelling out the process for assessing school taxes, Bearor discovered a little noticed but contradictory provision. They key language is italicized:

       “In accordance with the budget approved by the voters at an annual budget meeting and in substantially the same form as the warrant of the Treasurer of State for taxes, the board of directors shall issue its warrants to the assessors of each member municipality requiring them to assess upon the taxable estates within the municipality an amount which is that municipality’s share of the district costs.”

       In other words, one provision of state law allows the school administration to bill member towns according to the last budget proposed while another provision of state law requires the administration to assess taxes according to the last budget approved by voters. The Town of Newport seized on Bearor’s discovery and began issuing tax payments at last year’s lower amounts. Newport’s lead was soon followed by Palmyra and Corinna. Cumulatively, the three towns had witheld a total of $270,590 through early April.

       “There has to be more accountability,” said James Ricker, Newport’s town manager. “For years and years towns were told to pay bills as they were submitted even if they were not ratified by voters and they continued to pay the billed amount. If other towns in the state learn they have suffered under the same interpretation of the law [as we have], things will change. ... I think this is just the beginning.”

       The Attorney General’s office was asked, but declined, to take a position on the contradictory provisions. In the meantime, SAD 48 limped through the year so far by speeding up the award of $280,000 in federal grants and tuition payments from neighboring towns. “There’s a stack of purchase orders on my desk - supplies, books, materials - that is 12 inches high. They all have to get paid,” said Superintendent Braun.

Elder clout 

       There’s another factor at play in the SAD 48: The growing clout of retirees. It’s the flip side of declining student enrollments that are emptying classrooms across the state. The Committee for Reasonable Taxation — which is allied with the Maine Taxpayers Action Network pushing a statewide property tax cap — draws its strength and its message from older residents. Smith tells a story about a widow who went back to work after her husband died and even so ended up selling her house because she could not afford to pay “another $200 in taxes.”

       “People are being hurt - the retired and seniors,” Smith said.

       Confirming the clout of older residents, Superintendent Braun even complained to a local newspaper reporter that not enough residents born since the 1970s are coming out to vote.

       The growing clout of retirees is a disturbing trend to Yellow Light Breen, the former spokesperson for Maine Department of Education who grew up in St. Albans and attended Nokomis High School.

       “If this (budget dispute) is a poster child for anything, it’s the growing power of retirees,” said Breen. The aging of the population is not unique to Maine, he notes. “As a smaller and smaller portion of the population have a direct stake in the schools, the ability to mobilize support around the school budget will decline.”

       Breen goes on to suggest ways of transforming anger into support.

       “If I were a school superintendent, one of the things I would be doing is taking every possible step to make schools the seniors’ center of activity — create a greater sense of buying in. The colleges now have senior colleges geared toward older people. Schools could do the same - indoor exercise programs, meetings for groups. Some schools are very open, some are not. You’re going to have to develop ways of reaching out to a broader segment of the population.”                        

Future

       Clearing away the legal logjam involving school spending authority is a priority, according to general agreement. But it may defy easy solution, forcing legislators to choose between taxpayers and schools, says Rier.

       Says School Board Chairman Fowle:  “It does need to be squared away. The very people who could do that refuse to pass down a decision (AG’s office). I’m in hopes the legislature takes this matter up in a new bill. That’s something as locals we can’t do.”

       In the meantime, the State Board of Education has developed a model school budget process that is advertised as the last word in transparency, accountability and citizen involvement. A handful of school districts have adopted it since the option was created by the Maine Legislature in 2000, according to Jim Rier, the former state board chairman who helped develop the model. The model calls for early and sustained public involvement in preparing a school budget, plainer budget language, a more straightforward budget format, the generation of specific financial information, and finally a two-step voter approval process. Instead of choosing between a referendum and an open meeting approval, the model calls for a dual system. A proposed budget is first submitted to an open meeting for debate and amendment and three days later submitted to a wider referendum vote. If a budget is defeated at referendum it goes back to the open meeting and again to referendum three days later. Jim Rier made a presentation on the model process to the SAD 48 School Board back in the fall

       Rier says the model was developed to prevent the kind of impasse experienced by SAD 48 and he says the Board seemed “rather interested” in the model.

       Not that interested, according to Superintendent Braun.  “No one seemed to buy into it. They didn’t feel it would provide any more information. The committee seemed to like the referendum model,” he said.

       Instead, the board has formed an ad hoc committee to improve budget communication and budget presentations. Representation on the committee is divided equally among towns, school board members, municipal officials and members of the public.

       Smooth sailing may ultimately hinge on property tax relief at the state level, according to

       Rep. Mills.  “They’re so highly leveraged with state money. They are victims of the volatility of the state tax code. ... If you think last year’s budget was bad, hang on. I can’t guarantee we’ll do any better. If tax reform passes, then okay. But I’ve told them to be prepared. I’m doing all I can.”