Back from Break – The Omnibus Slog to Conference Committee Begins

The legislature returned to the Capitol last Tuesday after break, resuming their effort to advance the House and Senate budget plans into conference committees. This is a time-consuming process, requiring hours of debate each day on the House and Senate floors. We should see the formation of several conference committees later this week, and by next week all of the various budget conference committees should be established. We’re also keeping our ear to the ground regarding the passage of a 2023 bonding bill. It remains out of reach for the moment, and its passage is heavily dependent on a bipartisan tax bill coming together.

As of today, we’re five weeks out from the planned May 22 adjournment date for this session. Rumors are some legislators are pushing leadership to be done by Friday, May 12. Mothers would be so happy to have their families home from the Capitol that weekend, but most aren’t holding their breath on an early finish. Then again, the DFL trifecta has plowed through every process ‘norm’ this session, so wrapping it up early isn’t a total stretch.

Tax Bill

At noon today, we’ll see the House rollout an omnibus tax bill. Relief from sales taxes on construction materials is of potential interest to school districts. Local government aid for cities and counties is likely to be increased, but will they be on-going or just one-time infusions? And what will happen to social security income? Lastly, will the House DFL propose an income tax increase on family incomes over $1 million each year? The Senate will likely roll out their tax bill this week and most expect it to steer clear of any tax increases.

Education Finance & Policy

The various education budget plans have differences in both how much to increase the basic education formula and whether to link CPI into the future. The House has closely aligned their plan with the Governor’s, so 4&2 on the formula with something between 0-3 in the future. The House and Governor have many more areas of spending, generically referred to as ‘categorical’ funding. By contrast, the Senate, with a bipartisan institutional resistance to inflators on any program, is going bigger on the formula, 4&5 in the first biennium and letting future increases to the formula rest on the political will of the next group of legislators. The Senate plan has the largest amount of Special Education cross-subsidy aid, increasing the reimbursement program to 60% in the ‘tails’ budget or fiscal years 26-27.

There is plenty of room in the 4-year $5.5 billion education target to go bigger on the formula, at least 4&4, if not our request for 5&5, while adding the proposed CPI inflator in the tails, and buying down 45% or more of the special education cross-subsidy. Even with these investments, there would be more left over in the spending target than education typically sees in a productive biennium, leaving hundreds of millions for the other ‘categorical’ investments.

Categorical Funding

Beyond the big revenue drivers of formula and special education, there’s broad agreement to shore up VPK slots funded through the on-and-off school readiness plus dollars. There’s also broad agreement to create a new ‘student personnel’ revenue stream, aimed at helping schools hire new support staff. Funding for literacy programs, Grow-Your-Own teacher development initiatives, and dollars for ‘full-service community schools’ are in the mix in all three budget plans.

Another idea in the House bill is to create a special education due process revenue stream to pay special education teachers for their time on IEP paperwork. Another idea in the Senate bill would create a school library support revenue stream, aimed at increasing the number of licensed school media specialists and improving school library resources. The House is also proposing additional funding for Compensatory Aid, and we’re still dissecting it to better understand its distributional impact.

Unemployment Insurance & Bargaining Expansion

School districts will need every penny of the new spending target to meet the mandated demands the DFL trifecta leadership appears locked into passing, including a plan to expand Unemployment Insurance to hourly staff who aren’t offered similar positions over the summer months. The Governor initially proposed direct payments to schools in his budget plan to pay the estimated $135 million per year cost of this expanded benefit. However, as the session progressed, the House and Senate budget plans dropped direct payments and instead simply mandated that schools pay for this out of their general funds. Additionally, the budget plans prohibit school boards from using the unemployment levy, as the legislature doesn’t want to be accused of increasing property taxes.

Other mandated employee benefits are found in the Paid Family & Medical Leave and the Earned Safe & Sick legislation, both of which would also come off the top of education dollars and increased employee contributions. Labor leaders contend the $5.5 billion spending plan will easily cover these costs, but district officials have noted existing steps and lanes or “roll-up” costs from current contracts and assumptions of salary and wage cost of living adjustments have yet to be factored into the mix, let alone health insurance premium increases.

Perhaps most concerning to school district officials is legislation that would require the ‘terms and conditions’ of local bargaining to include class sizes, student to staff ratios and student testing requirements. New staffing resulting from these bargaining changes, while perhaps needed to address educator fatigue, could drive district budgets close to the edge, if not over.

With all that’s possible, it’s an exciting time at the Capitol. While we see truly historic levels of funding on the table, anxiety levels are high as education leaders try to balance the many competing interests. And, this doesn’t even factor in desired changes to TRA.

If you would like to read through the House and Senate omnibus education bill, be sure to look at the second engrossment of each one, found at these links: