School Budget Process: Proposed changes improve accountability
(from Maine Townsman, December 1999)
by Geoffrey Herman, Director of State & Federal Relations, MMA

With the help of two legislators, Representative Joe Brooks (Winterport) and Representative Richard Nass (Acton), MMA caused two legislative initiatives to be introduced to the first session of the 119th Legislature a year ago. The two bills were intended to address some persistent problems municipal officials have identified with the process of developing and adopting the school budget. The municipal-school friction flares up in school systems of every stripe, but the problems can be especially virulent on the school district (SAD or CSD) level.

One of these bills (LD 1776) would have created a simple, uniform school budget format that would break the proposed school budget down into several "line item" or "cost center" categories. The goal was to replace the school budget articles that Maine law foists on the school legislative bodies; articles which speak to such obscurities as "the local share of the foundation allocation" but have nothing meaningful to do with the school budget itself.

The other bill (LD 1346) would have discontinued the provision in current law that allows the SAD Board of Directors to call an open district meeting to adopt the school budget whenever the budget runs into trouble at referendum. The law that allows the SAD directors to revert to an open meeting, contrary to the express will of the voters, is perceived as an in-your-face affront to the voters and injects a dangerous poison into the district meeting process.

Neither legislative initiative was adopted in the first legislative session. The Education Committee killed LD 1776 outright and carried over LD 1346 into the second legislative session. At the same time, the Education Committee asked the State Board of Education to put together a working group to study the underlying issues that are at the root of the municipal-school frictions that crop up so persistently within the school district setting, and beyond.

Jim Rier, the chairperson of the State Board of Education, assembled a group of nine for that purpose – the School Governance Committee. The Committee members and their affiliations are listed in a side bar to this article.

The School Governance Committee met five times over the fall, and will get together once more after Christmas to put its final touches on a comprehensive set of recommendations that are designed to substantially improve the quantity and quality of communication that should occur as school budgets are being developed and adopted. The recommendations are also designed to restore responsibility, functionality, and integrity to both the open district meetings and the school budget referendums.

A PROCESS OF DIALOGUE AND EXCHANGE

The flow chart on page 19 visually describes the "dialogue and exchange" process that the School Governance Committee has modeled and would like to see implemented in all school administrative units, both the district and non-district systems. According to the model, a formal discussion between municipal and school officials would be held in the fall, approximately eight months before the actual vote on the school budget. At that meeting, an attempt would be made to fit the big pieces of the municipal and school revenue and expense puzzle together.

The goals of this meeting in the fall would be to:

• Encourage dialogue between town and school officials;

• Develop a mutual understanding of the fiscal conditions of the municipality and its ability to provide municipal services, education programs, and meet the capital improvement needs of both the town and the school system; and

• Collaborate in creating the most effective means to share those conditions and needs with the public and encourage public input.

The objectives of the meeting would be to:

• Review recent history of municipal mill rates;

• Review municipal valuation and its impact on future resources;

• Discuss any substantial revenue sharing changes, including municipal revenue sharing and General Purpose Aid to Education (GPA);

• Review any substantial changes being considered in school program offerings or requirements;

• Review school enrollments and any potential impact; and

• Review major capital improvement needs for both the municipality and the school, including the current indebtedness for capital improvements and a projection of future debt service that may be required for additional capital construction.

The Committee’s model also calls for a second, follow-up discussion in the spring, two to three months before the school budget is taken to a vote. These meetings would involve a similar sharing of more detailed information among the municipal and school officials and the general public before the budget becomes finally developed by the school board. In its deliberations over this model the Committee indicated that although both the fall and the spring discussion should attempt to involve the general public, the springtime discussion should include an enhanced public outreach. As the real numbers in the budget begin to come together, the focus on the fiscal capacity of the community to support the developing budget should begin to intensify.

The Committee fully recognized that one problem with mere models is they are just as likely to collect dust on the shelf as be put to good use. On that score, the Committee’s recommendation is that all school units should adopt a policy that implements a comprehensive school budget approval procedure that contains the essential elements of the model. If adopted as a policy, there is better chance that the procedure will be carried out on an ongoing basis and not fall into disuse as the elected and administrative school and municipal leaders change.

BUDGET FORMAT AND VOTING PROCEDURE ALTERNATIVE

Under state law, the starting point system to adopt a school district budget is the gross allocation budget format considered and adopted in open meeting. If voters want a line item budget or a referendum vote, they have to petition for these alternatives. The alternative referendum process includes the provision that the school board can revert to an open district meeting if the budget fails at referendum. The alternative budget format allows for any cost-center format that the voters may adopt, as long as the statutorily required articles are included.

Against this background, the second substantial element of the Committee’s package of recommendations contains two components – an alternative school budget format and an alternative voting procedure. The Committee’s recommendation is that this package of budget format and voting procedure be written into the laws governing school districts, both SADs and CSDs, as the alternative system from now on, with any alternative system currently in place completely grandfathered.

No district would be required to do anything differently than at present, either with respect to budget format or voting procedure. On the other hand, if either the school board or the voters in a school district want to change the budget format or the voting procedures, the option available would be the new alternative crafted by the Committee. This alternative package developed by the Committee is designed to improve communication to the voters during the budget adoption process and draw upon the most important characteristics of both the open district meeting (information exchange and adjustment capacity) and the referendum vote (improved turnout, convenience of voting and integrity of process).

Alternative Budget Format

Under current law, all school budgets presented to the legislative body for adoption must include at least three articles. The actual wording of these articles is specified by statute. Unfortunately, the import of those three articles (foundation allocation, debt service allocation, additional local funds) has nothing to do with the budget except the matching of local and state revenue, and their wording is awkward and difficult to follow. Taken together, the three statutorily required articles raise and appropriate from the local taxpayers and state government a gross sum of money to operate the school system.

State law expressly allows the voters in any school district to adopt an "alternative budget format", which is a statutory euphemism for a "line item" or "cost center" budget format. As opposed to a gross allocation budget, a cost center or line item budget breaks down the appropriation into specific sums according to specific functional categories.

The voters in municipal school systems do not need statutory authority to adopt alternative school budget formats. As long as the statutory articles are somehow appended to the locally-crafted budget format, home rule provides that authority already.

In order for a school district to move from the statutorily-required gross budget format to a cost center format, there has to be a willing school board or the voters in the school district have to petition the board for the right to vote on an alternative school budget format. Of the 73 SADs in Maine, 31 have adopted the cost center format. The voters in two additional SADs have petitioned for the cost center format this year. Many municipal school systems have also moved toward a cost center format, which is natural enough given that the municipal budget at town meeting is always adopted according to line item.

Because the district school boards are generally unwilling to adopt a cost center format on their own, these line-item proposals are typically developed in the heat of a petitioning process. There is a tremendous variety of "alternative formats" now in use, and many of them were crafted around whatever the controversial element of the school budget was at the time of the petition.

The School Governance Committee is in consensus that the budget articles required by statute are uninformative at best. In an effort to design a budget document that actually provides meaningful information to the voters and helps break the budget down into manageable amounts, the Committee crafted a model cost-center budget which is laid out in the center spread of this issue of the TOWNSMAN.

The model format, which would be used as the warrant document for the open district meeting, includes six "expenditure" articles: instruction, instructional support, leadership (formerly known as "administration"), operations, transportation, and "other commitments". Along with each of the expenditure articles there is a descriptive paragraph that explains what functions in the school are included in the article, and the total appropriation for each line is subdivided into several smaller categories that show the level of funding that would be allocated to each function. On the revenue side, the model format includes the traditional statutory articles (with plain-English translations) and a summary article that authorizes the total amount of spending. The model budget format also includes a "local data summary" that describes both the dollar and percentage changes from the previous year with respect to the total district budget, the state’s GPA contribution, and the local share.

The Committee is also recommending an automatic authority for the school board to transfer up to 5% of unexpended balance from one cost center to another in recognition of the contingencies the schools might encounter. Such a transfer would not increase the authorized budget, but it would allow for a reasonable amount of flexibility for school boards to transfer between cost centers.

In addition to the improved communication to the voter, the model budget format has other advantages as well. The more a budget format of this kind is implemented on the local level, the more consistent the data gathered at the Department of Education and the greater ability to measure and evaluate the costs of education, generally and according to certain categories, among the school administrative units. There is also an apparent confluence between this type of budget structure and the efforts that are being made to rethink the school funding formula along the lines of the essential programs and services that all school units should be providing.

As mentioned above, it is not the Committee’s intention to impose this budget format on any district system. It would simply be laid out in statute as the alternative format. School districts that have already developed their own line item formats would be allowed to continue with those formats. For those districts that do not use a cost center format currently, either the school board on its own initiative or the voters by petition and referendum vote could adopt this budget format. For municipal school systems, the format would be laid out in statute as a resource for any non-district school administrative unit or municipal legislative body that wanted, in computer parlance, to click onto it.

Alternative Voting Process

To the extent the Committee’s alternative budget format addresses the goal of LD 1776, the Committee’s recommendation in the area of alternative voting process in the district setting addresses the goal of LD 1346.

Under current law, the SAD directors are authorized to call an open district meeting to adopt a school budget as soon as the budget, or any part of the budget, fails at referendum. It is widely perceived that it is much easier to pass a budget at open district meeting even when the budget has been soundly defeated at referendum because at open meeting the turnout is typically much lower, the meeting place can be a long way from home, the quality of the meeting moderators is uneven, many voters can’t withstand the rigor of a long, open meeting continuing late into the night, the school employees and supporters can be intimidating, and the voters who have concerns with elements of the school budget dislike being branded as "anti-education", which is a result they often complain about. In distinction, the referendum process affords the voters much greater convenience of voting as well as anonymity, both of which are apparently very important to many school district voters in this state.

Accordingly, when the voters defeat a school budget at referendum, sometimes both repeatedly and soundly, only to have the same essential budget adopted at an open meeting, the integrity of the open meeting process is immediately called into question, as is the law that allows the school board to overturn the method of voting adopted by the voters themselves.

At the same time, the open meeting process is clearly the best way for information about the budget to be exchanged and it is the most efficient way for the budget to be adjusted by the voters. At an open meeting, the budget that is proposed by the school board can be increased or decreased, and if the budget is presented according to cost center categories, each category can be adjusted by the voters according to what they learn about the budget at the meeting. Adjusting a budget that is defeated by the voters at referendum is a much cruder process. It can be guesswork. School boards complain about not knowing what the voters really want in that circumstance. Is the overall budget too rich? Is one element of the budget too lean? At public hearing are we hearing from the majority or just a vocal minority? Is the voters’ rejection of the budget a reflection of a deeper dissatisfaction that is not related to budget issues at all?

At first blush the School Governance Committee was given the Sophie’s choice of picking one voting process over the other. The Committee’s recommendation, however, distills the most important elements of the open meeting process and the referendum process and then blends them together in a hybrid process that preserves the integrity of each.

The proposal as developed by the Committee would work as follows.

Once the alternative system is adopted, the SAD or CSD budget would be first taken up at an open district meeting. The voting procedures at the district meeting would not be changed; that is, the various lines of the budget could be adopted as proposed, or increased or decreased by the voters either through open voting or written ballot voting.

With respect to the written ballot opportunity, existing school district law would be clarified or underscored to make sure that district meeting moderators would clearly inform the assembly at the beginning of the meeting how the written ballot process on any article could be implemented. Current law compels a written ballot process at the open meeting if 10% or more of the voters assembled elect to decide a question by written ballot. Despite that law, the moderators at district meetings allow different thresholds to be established, such as the requirement for a majority vote of the assembly to compel a written ballot. The Committee’s intent is to establish a single, uniform process and make sure it is clearly explained to the voters.

The second stage in the process – a referendum follow-up vote – would kick in if the school board decided to adopt the process (which history suggests is not likely) or if the voters of the SAD or CSD implement the process through the petition process that is currently available just to SAD voters.

The follow-up referendum vote would simply be an up-or-down vote to see if the voters approved or disapproved of the budget adopted at the open district meeting. The referendum vote would not focus on specific elements of the school budget but, rather, on the adopted school budget in its entirety.

Although the District would be able to schedule the referendum vote well in advance and pre-print the simple yes-or-no ballot, the follow-up referendum vote would be held very shortly after the open district meeting, within three business days. The referendum ballot would ask the voters nothing more than whether they approve or disapprove of the school budget adopted at the open district meeting. Printed information would be made available at the voting place that lists the proposed appropriation for each article on the warrant along with the actual appropriation for each article that was adopted at the district meeting. The ballot itself, however, would ask for a simple yes-or-no decision on the entire budget. At local option, as is apparently allowed in Connecticut which is a state that employs a similar follow-up referendum process, the ballot document can ask one supplemental question, which is whether the voters consider the budget to be too high or too low.

If the follow-up referendum vote rejects the budget adopted at open meeting, the budget would go back to the school board and then back to an open district meeting and then back to a follow-up referendum vote until a budget is finally adopted. If the ratification-by-referendum process is adopted, the referendum vote would always be the last word.

To detail one final element of the Committee’s comprehensive package, under current law, once a district has adopted the referendum process (which is always done by petition) the referendum process becomes effectively permanent. The school board is allowed by law to put forward a referendum question to repeal the referendum process after three years of use, but that is rarely done because the school boards find that such a move stirs up old passions that are better left undisturbed.

In the Committee’s package of recommendations, however, the referendum ratification process would automatically repeal or "sunset" after three years of use, and if the voters wanted to continue with the referendum process, they would have to re-petition for another three-year stint.

It is perhaps this element which best expresses the element of faith the School Governance Committee has in the package of recommendations it has developed. As the proposed system is designed, a valuable communication model is introduced and the best parts of the district meeting and the best parts of the referendum process are preserved. The dialogue and exchange process will inform and prepare the community for the decisions it has to make. The open meeting will become the forum to negotiate the school budget that is acceptable to the community. The referendum ratification process, if implemented by district voters, will provide voters with all the convenience and anonymity they may require so that the true decision of the community is realized.

SUMMARY

The School Governance Committee clearly recognizes that its package of recommendations will include elements that some participants on all sides of the school budgeting debate will disagree with. Some of the people on the school side of the discussion are not in favor of a system whereby the referendum voters have the final say. Others have some trouble with the precise structure of the expenditure articles on the cost center format. Some of the municipal participants want to allow the referendum process to focus on individual lines in the budget. Other municipal participants are concerned about having to exchange the cost center formats they worked hard to develop for the model cost center format, should they wish to adopt the new alternative. Having to re-petition for the right to referendum on a periodic basis might bother others.

The hope, however, is that on balance a strong majority of the participants will recognize the benefits the proposed system offers and support the proposed reform. By trusting the voters and treating their interests with respect, an atmosphere can be created where true dialogue can take place. As the Committee’s proposal is finalized and presented to the Education Committee in the early weeks of the second legislative session, it will be easy for the people who may want to kill the proposal to be successful. Status quo is self sustaining, change needs to be nurtured. It will take leadership to see the Committee’s work through to enactment.

SIDEBAR:

Membership of School Governance Committee

Jim Rier, Chair

Chair, State Board of Education

Elinor Multer

State Board of Education

Judy Lucarelli, Deputy Commissioner

Department of Education

Gerald Clockedile, Superintendent

School Union #7, Saco/Dayton

Jack McKee, School Board

SAD #58 (Kingfield)

Steve Crouse

Maine Education Association

Richard Pfirman, Business Rep.

Dexter, ME

Gary McNeil

Selectman, Town of Baldwin

Mike Roy

Town Manager, Oakland