Education Cost-Sharing
by Douglas Rooks, Freelance Writer
(from Maine Townsman, December 2000)

Municipal officials are well aware of the impact of the state school subsidy system. Over the past decade, budget shortfalls, legislative delays, formula changes and valuation shifts have played havoc with local budgets.

Now, a vital component in the system - cost-sharing within regional districts - has become a hot-button issue around the state. Municipalities that feel unfairly burdened seek relief by changing an often long-standing formula, and meet stiff resistance from those who would have to pay more. Besides the ill-will that attempts to change the formula creates, the Department of Education is concerned that such disputes could lead to the breakup of school administrative districts - the bedrock method Maine has for regional school management in a state dominated by small towns and local control.

As it has for more than four decades, the Department strongly favors regional administration when local communities can agree. With its low birth rate and low in-migration, Maine faces a prolonged period of declining school enrollment, according to Commissioner Duke Albanese - making regional districts even more important to keeping costs down. "This isn't about closing schools. It's about creating a better way to make sure our dollars go farther, and that each child gets the best education," Albanese said.

It was a fiery dispute in a York County district last year that focused the Legislature's attention on cost-sharing. North Berwick, which comprises SAD 60 along with Berwick and Lebanon, filed a bill which would have required any change in its cost-sharing formula, now split 50-50 between valuation and per pupil charges, to be approved by each of the three towns, rather than by majority vote of the district.
North Berwick, home to major manufacturers such as Pratt & Whitney and Hussey Manufacturing, has by far the highest valuation in the district but the smallest number of students. Unlike many districts, enrollment in this New Hampshire border area has increased steadily, but not evenly across member towns. Since the district was formed by private and special legislation in 1967, Lebanon has added about 300 students, Berwick 500, but North Berwick only 85. (1990 population figures are Lebanon, 4,263; Berwick, 5,995; and North Berwick, 3,793).

Lebanon and Berwick are predominantly bedroom communities with little commercial tax base, and their tax rates are much higher than North Berwick's. And the enrollment gains mean that their school costs have increased, too. But the actual proportion of spending by each community "has actually remained quite stable since the district was formed," said North Berwick Town Manager Dwayne Morin.

The appearance before the Legislature was an attempt to forestall a move by Lebanon and Berwick to shift more of the tax burden to North Berwick. As it stands now, a majority vote of the cost-sharing review committee and a voter referendum encompassing the entire three-town district can change the formula regardless of North Berwick's position. "We don't have the votes," Morin said. "All we can do is appeal to the sympathy of the other towns."

Things got off to a bad start when North Berwick officials discovered that Lebanon had been discussing a formula change with Berwick for several years, but without informing North Berwick. The timing seemed curious, since the district had just voted to build a new $34 million high school for 1,500 students - the largest public school in the state. The new school is located in North Berwick. At this year's town meeting there, a huge turnout voted overwhelmingly to hire a consultant to study withdrawing from SAD 60 if the district pushed ahead and changed the formula.

If costs were apportioned only on valuation, as they are in most SADs, North Berwick would pay $1 million more a year. Even with a formula based 75 percent on valuation, the town would see its assessment rise $500,000, Morin said. If North Berwick were to withdraw, it would be by far the largest town to leave a regional district since the first SAD was created in 1958.

Morin also points out that, even under the 50-50 split, per pupil costs are still higher in North Berwick than the other two towns - $3,555, against $2,373 in Lebanon and $2,242 in Berwick.

The Legislature killed the North Berwick bill, but it charged the Board of Education with coming up with recommendations to stem the discontent over SAD finances, and, if possible, to avoid future controversies.

That job fell to Jim Rier, who just completed three years as chairman of the State Board of Education. He has headed four state commissions on education questions, and emerged with a reputation as a patient conciliator and an imaginative thinker (see sidebar.) But he's the first to admit that there are no magic bullets to deal with SAD cost-sharing, which is a classic zero-sum game: for any town to pay less, the others must pay more.

"It's in the SADs where the valuations are so different from one town to the next that we have the problem," Rier said. While, in theory, most selectmen and board members recognize that districts with lower valuations get greater amounts of state aid, that recognition can break down when neighbors are poring over each other's budgets and tax rates.

Rier does see a big need for getting out more accurate and complete information to anyone who's interested in cost-sharing and possible changes. The information may be posted in the school profiles on the state website. "Typically, this starts with someone calling the Department of Education and asking questions about a particular aspect of the situation." They may then leap to conclusions without the benefit of the broader picture. "We have to see that all the information is being looked at together," he said. By focusing only on one key variable - whether the tax rate, per pupil spending, or valuation - "any town can convince itself that it's being unfairly treated. And once that happens, it's difficult to get people to sit down and be reasonable," he said.

To get a feeling for the polarities of the issue, and the difficulty of deciding what a "fair" formula is, SAD 27 in far northern Maine provides an arresting contrast with SAD 60. For years, Eagle Lake and Winterville Plantation have been attempting to change the formula, now based only on valuation. Last year, in fact, marked their third attempt to convince Fort Kent, which has most of the students and most of the voters, to go to a 50-50 formula, according to Eagle Lake Town Manager Jim Nadeau. Proposals to change the formula had failed in 1981 and 1995.

"This time we decided to do it differently," Nadeau said. "We sat down with all the other towns, held public forums, and explained what we wanted, and why." The tax rate has been going up steadily in Eagle Lake, by as much as one to three mills a year, despite declining enrollment. "We feel we have to have some relief." He points to the current disparity in per pupil costs - $1,500 in St. Francis, $1,600 in Fort Kent, $2,800 in Winterville and $3,100 in Eagle Lake.

But the latest effort was no more successful, with Fort Kent easily out-voting the other towns to preserve the existing formula. Eagle Lake and Winterville have petitioned the state to withdraw from SAD 27, and have recently filed a lawsuit against the Department of Education to force it to act.

In SAD 60, low valuation towns are intent on changing the formula to make it rely less on per pupil assessments and more on property values. In SAD 27, the high valuation towns are pursuing withdrawal because they could not convince the other towns to create a formula more like SAD 60's. Creating a statewide standard aimed at fairness for both these situations would challenge even the wisdom of Solomon.

Despite the current turmoil, Maine's SAD and CSD structures have been quite stable over the years. Most of the 73 SADs were formed from 1958-65, when cost apportionment was based solely on valuation, analogous to the way the state treated single-municipality districts under the school formula. Starting in 1966, new SADs were given the option of splitting costs between valuation and enrollment, and most of those formed since that date have used a split formula, ranging from 80 percent valuation to as little as 45 percent.

Despite the new option, most of the SADs that started with straight valuation formulas have kept them, whatever the feelings of individual towns. Only five districts have ever changed the formula, most recently Waldoboro-based SAD 40, which went from straight valuation to a 50-50 split following complaints from Friendship, the town with the highest valuation. Of the 73 SADs, 56 use only valuation in determining costs, though eight of these are single-town SADs, where no apportionment would be possible. SAD 15 - Gray and New Gloucester - recently studied changing its valuation-only formula, but decided against it. But this does not mean that everyone is happy, observed one school board member.

The CSDs are looser administrative structures, usually involving a single school controlled jointly even while each member town maintains its own school district, and usually its own elementary schools. Reflecting the limited nature of their cooperation, nine of the 14 CSDs apportion costs solely by number of pupils, though three CSDs use only valuation in apportioning expenses.

Without new incentives, regionalization seems to have reached its limits in Maine. The last new regional district, SAD 77, based in East Machias, was formed in 1969. While there was a flurry of CSD creation in the early 1970s, only two have been formed since 1975.

The Rier commission is trying to steer clear of the current controversies while trying to prevent future ones. "I can't see anything in our recommendations that would have an impact on SAD 60, or any other discussion that's already under way," Rier said. "I would say they're too far down the road for us to get involved."

Rier does believe that a more formalized process, including requiring the services of a mediator, could make a big difference. The eight-member School Cost-Sharing Committee he chairs, composed of town and school officials, a corporate CFO, and the Deputy Education Commissioner, is still wrestling with how a mediator would work. "Some want the mediator to make a firm public recommendation at the end about what should be done," Rier said. "I see this more as a facilitator, someone who can ask good questions and help guide people to the right result."

Mediation is one subject on which various parties seem to agree. "I think it could have made a big difference here," said SAD 60 Superintendent Bill Bourbon, who's uncomfortably presiding over the current dispute. "I can remember times when we'd spend months deadlocked over an employee contract, and a mediator would come in, show us some points we hadn't seen before, and in three hours we'd have a deal."
While in one sense, the state would like to make it easier to change cost formulas as a buffer against an increasing number of withdrawal petitions, Rier doesn't see that as the commission's job. In fact, if districts are willing to use the new cost-sharing criteria the commission is suggesting, each town in a district would have to approve further formula changes rather than the entire district acting as a single legislative body. This would be a protection against towns "ganging up on another one" - what North Berwick believes its neighbors are doing.

For districts willing to try some new techniques, the committee has a few to recommend. An agreement for the state's newest regional school system, the Five Town CSD in the Camden-Rockport area, features an unusual agreement between an existing SAD (Camden-Rockport) and three rural towns, Hope, Appleton and Lincolnville. While the cost-sharing formula is a 50-50 mix, it also includes a hold-harmless provision for the three smaller towns, recognizing that, on their own, neither Rockport nor Camden would receive any meaningful state aid, while the other towns would. In the agreement, the three towns are given a subsidy credit for what they would have received individually from the state, with the amount deducted from their overall assessment. While it seems complicated, the formula is actually simple to calculate. "It wouldn't work in every district," Rier said, "but it may help some reach agreement."

The committee is also expected to recommend phasing in significant cost changes resulting from enrollment and valuation shifts that disrupt budgeting in member towns. One SAD - 17 in Oxford County - is phasing in a formula change over five years. And the committee would permit towns forming or amending an agreement to specify periodic review of the formula.

The committee believes these relatively small changes in the current law, and the procedural changes, including mediation that would precede any bid to change the formula, are as far as it can go. Final recommendations of the committee should be submitted to the Legislature by the end of the year.

Rier says there is concern that formula changes will occur, or not occur, simply because of the voting strength of various towns - thus the recommendation that towns choosing to use the new criteria agree that each town must approve further changes. He doesn't think this will necessarily lead to stalemate: "When you know at the beginning that you've all got to agree, sometimes it's easier to reach a consensus."

Such a consensus may be hard to find in SAD 60 as the struggle over the formula continues. "The building of the new high school should be a time for rejoicing," said Dwayne Morin, the North Berwick town manager. Superintendent Bourbon, who's worked in SAD 60 most of his career, said, "This has been a great district for so many years. We're praying and hoping we can keep it together."

Cost Sharing Formulas (sidebar)
SADs - 100% Valuation:
1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 19, 20, 21, 23, 24, 25, 26, 27, 28, 29, 31, 33, 34, 35, 36, 37, 38, 39, 41, 42, 44, 45, 46, 47, 48, 49, 51, 52, 53, 54, 55, 56, 58, 59, 61, 62, 63, 64, 65, 70, 76
SADs - Valuation/Pupil Mix
22, 17, 43, 32, 68, 71, 67, 72, 18, 30, 40, 50, 57, 60, 75, 77, 74.
CSDs - 100% Pupils
3, 4, 10, 11, 12, 13, 14, 15, 17
CSDs - Valuation/Pupil Mix
Knox-Waldo, Hancock
CSDs - 100% Valuation
8, 9, 18

Taking on the tough assignments (sidebar)
It was the summer of 1995 and Jim Rier, who'd served 14 years on the Machias school board, was talking to Gov. Angus King about special education costs. "I told him how the lack of federal and state funding was affecting our school budget, taking things away from other students," Rier said.

Something he said must have struck home, for not long afterward, Rier got a call from former Education Commissioner Wayne Mowatt, who asked if he'd be willing to serve on the State Board of Education. Within two years, he was chairing the board, and has taken on no less than four study commission assignments that has put him in the middle of school policymaking.

"Jim is as fine a Mainer as I've ever seen," said Mowatt's successor, Duke Albanese. "He's willing to take on the tough assignments and put in countless hours at night meetings all over the state . . . yet he's always there when you need him." Albanese said Rier listens well, and is extraordinarily patient in dealing with criticism and opposition.
Rier's most visible task was to come up with the proposal and guidelines for the new school renovation program that, for the first time, has funneled substantial state money not just to new construction, but to overhauling and improving existing school buildings. To date, $144 million in state and local funding has been committed to renovations, along with a major new capital infusion for new construction totaling $200 million.
Last year, Rier chaired a committee on school governance that led to reforms in the local budget adoption process, although many of its recommendations have yet to be implemented. The current study of cost-sharing in regional districts is an outgrowth of the governance committee. Rier suggested a closer look at cost-sharing, and also got the job of doing it.

Rier admits that his volunteering for state education amounts to at least full-time work. He sold his car dealership, Cranberry Motors, last year, and is working on selling the real estate as well.

"My wife tells me I've got to find a real job," he quipped. He has found time to serve as a director of Bangor Hydro-Electric, where he gets to participate in such simpler matters as coping with deregulation and the proposed sale of the company to Nova Scotia Power.

If he has any regrets about taking on so many assignments for the King administration, he shows no sign of it: "I don't count the hours I love the work."