North Dakota Commission on Education Improvement
Commission Meeting Minutes
April 5, 2006
Leidal Education Center - West Fargo
The third meeting of the North Dakota Commission on Education Improvement was called to order at 10 a.m. by the commission's chair, Lt. Gov. Jack Dalrymple.
Commission members in attendance included Jack Dalrymple, Warren Larson, Paul Stremick, Martin Schock, Jon Martinson, Mark Lemer, Doug Johnson, Tim Flakoll, Wayne Sanstead, David O'Connell, Rae Ann Kelsch and David Monson. Gloria Lokken attended as a designee for Joe Westby.
There were no additions or deletions to the minutes. Sen. Tim Flakoll made a motion to approve the minutes and Wayne Sanstead seconded the motion. The motion was carried and the minutes were approved.
The commission discussed ideas for the August meeting. Warren Larson mentioned that Devils Lake had extended an invitation to hold a meeting in that community. The group decided they would like to continue holding meetings at different locations around the state. A meeting date of August 2 was proposed, with possible locations of Devils Lake, Dickinson or Grand Forks.
Mark Lemer presented his report as facilitator for the subcommittee reviewing the basic funding formula and equalization payments. Lemer reported that at the subcommittee's meeting, held March 22, 2006, in Valley City, subcommittee members discussed the following topics:
- Subcommittee members discussed what should be included in the $60 million education funding increase proposed by Gov. Hoeven, and also how that money should be allocated. The proposed agreement between the State and the plaintiff school districts indicates that the increase will come from state dollars only. The subcommittee addressed the question of whether or not tuition apportionment distributions should be included in the additional funding and agreed that any ordinary increase in the appropriation for tuition apportionment should be counted, but that any "windfall" increases that could potentially be generated by adjusting the revenue allocation methodology should not. At the subcommittee meeting, Paul Stremick stated that he felt this would be acceptable to the plaintiff school districts.
- Subcommittee members agreed that a typical increase in state funding per biennium has been around $30-$35 million. The additional $25-$30 million that will be proposed in the Governor's Executive Budget Recommendation can be used to address funding inequities. The $30-$35 million added to the basic formula is intended to offset any decreases in a district's funding that may occur as the formula changes, excluding losses resulting from declining enrollments.
- It was the consensus of the subcommittee that an attempt be made to blend all current appropriations into the basic funding formula, except transportation. These would include foundation aid, tuition apportionment, teacher compensation, special education, and career and technical education. Subcommittee members agreed not to include transportation because of vast differences in transportation systems and because transportation is not an actual education program. The subcommittee stressed the need to continue increasing teacher compensation, including provisions regarding new dollars and minimum teacher salaries.
- The issue of Average Daily Membership (ADM) versus fall enrollment in computing funding allocations for school districts was discussed by subcommittee members. The current system guarantees that a school district will be paid for at least the number of students that were educated during the prior school year. It also allows growing districts the opportunity to be paid on fall enrollment, if that number results in a larger payment. In order to simplify the current reimbursement system, subcommittee members proposed that payments be based on prior year ADM only, and in the case of a growing district, they may request an additional set dollar amount if they are significantly impacted by new students. This amount would be re-captured as a prior year adjustment in the following year.
- Regarding a system of equalization payments to replace previous efforts toward funding equity, the subcommittee decided that the fairest approach would be to establish three peer group categories for equalization payments according to school size. The same categories that are being proposed for the weighting factors would be used, namely schools less than 185 ADM, schools between 186 and 900 ADM, and schools over 900 ADM.
- Subcommittee members agreed to move forward with a plan that would adjust the taxable valuations of school districts by imputing an equivalent taxable valuation for in lieu of tax payments. This would eliminate the need to deduct these amounts from the equalization payments. The maximum equalization payment received by a school district would not exceed the amount that would be generated by multiplying the district's taxable valuation by its local general fund property tax levy, up to 185 mills.
- According to subcommittee members, only revenue that is received from tuition, oil payments and coal payments would be imputed into the taxable valuation used in the formula. Impact Aid would eventually be factored into the computation once the federal threshold is reached. These amounts would be factors in the formula, rather than deducts from the equalization payment.
- The subcommittee agreed that any hold harmless provision that is considered must only address losses due to formula changes, not declining enrollment, and that hold harmless provisions would be considered only if the overall formula change appears to be negatively impacting certain schools.
- There was a consensus among subcommittee members that the state continue to use a pupil-based funding system. For those schools negatively impacted by a pupil-based system due to very small and declining enrollments, it was suggested that the small-but-isolated school provisions be examined to address this concern.
At the conclusion of Mark Lemer's subcommittee report, Lt. Gov. Jack Dalrymple reiterated that as the commission moves forward, it has to look at the aggregate of the work, not the individual issues. He added that the state will have to provide substantially more money for K-12 education and at the same time produce significant progress toward funding equity. The key is that no school districts move backwards as a result of changes to the funding formula; all schools must move forward, albeit to varying degrees.
Lt. Gov. Jack Dalrymple presented the Attorney General's opinion regarding tuition apportionment and whether or not the North Dakota Constitution limits any funding distribution recommendations the commission might make to the Governor and Legislature. Lt. Gov. Dalrymple presented a summary prepared by Duane Houdek, legal counsel to the Governor, regarding his research and conversation with Attorney General Wayne Stenehjem. Ultimately, the current constitutional language does not mandate a method of distribution of the common schools trust fund, but rather leaves the method of distribution to be determined by the Legislature, as long as it is used for the maintenance of the common schools.
Warren Larson provided his report on behalf of the subcommittee discussing weighting factors, sparsity factor, and career and technical education. He reported that at the subcommittee's two meetings, held March 14, 2006, and March 24, 2006, in Bismarck, the following topics were discussed:
- Subcommittee members discussed how initial weighting factors would be based on a more accurate representation of cost in each school district size category and that categories needed to be consolidated to create more appropriate peer groupings. The goal would be to provide a single factor for each school district that is comparable to the current system, yet allows flexibility for changes in per pupil costs in the future.
- The subcommittee reached a consensus that the new formula for applying weighting factors should be based on a three-tier system, representing small-, medium- and large-sized schools, and incorporating all district types, including high school (PK-12), elementary (PK-8) and rural elementary. Tier 1 would include schools with 185 students or fewer, Tier 2 would include schools with 186-900 students, and Tier 3 would include schools with more than 900 students. The weighting factors would be based on the median of the average cost per pupil for school districts in each of the three tiers.
- At the subcommittee meeting on March 24, Jerry Coleman and Girish Budhwar with the Department of Public Instruction provided several scenarios for the group, allowing them to see the impact of school district size on the weighting factors. Subcommittee members determined the tiers and the breaks, but have not yet determined actual weighting factors. They also discussed ways to address those schools on the fringe of the various tiers, so they are not negatively impacted.
- Subcommittee members discussed a sparsity factor and how it would be applied to the proposed funding formula to provide more equity to isolated school districts. Jerry Coleman mentioned that South Dakota had an effective sparsity funding formula in place and recommended that the group review South Dakota's plan and identify criteria that might be applicable to North Dakota. Jerry Coleman and Girish Budhwar were asked to review South Dakota's plan and bring their ideas to the next subcommittee meeting. Subcommittee members suggested looking at K-8 districts, as well as K-12.
- At the March 24 subcommittee meeting, Wayne Kutzer provided an overview of North Dakota's Career and Technical Education program. Subcommittee members discussed the benefits of the program and how it can be more effectively applied to the proposed education funding plan, as well as Joint Powers Agreements. One issue raised was that career and technical education centers are primarily located in the eastern part of the state, leaving a perception that no centers are located west of Jamestown. The subcommittee discussed the idea of creating one center in the western part of the state to cover that area, and focused on opportunities with Joint Powers Agreements sharing career and technical education programs, training, teachers and resources.
- Subcommittee members also discussed an impending shortage of career and technical education teachers and that this issue needs to be addressed proactively rather than reactively. Joint Powers Agreements, distance learning and ITV were discussed as ways to bring career and technical education programs to more school districts in lieu of fewer teachers and declining populations.
- The subcommittee agreed that all kids need access to the services available through the state's Career and Technical Education program, and that any proposed changes need to enhance the current system, rather than dismantle it.
Warren Larson reported that the subcommittee focusing on special education and English language learners did not meet in March and probably would not meet until May or June. The subcommittee is waiting on information currently being compiled by a consultant working on behalf of the Department of Public Instruction before moving forward.
Jon Martinson provided his report as facilitator for the subcommittee reviewing Joint Powers Agreements, capital improvements and transportation.
- A request was made by members of the subcommittee for JPAs to provide more detailed, quantifiable data in terms of their activities and progress. They discussed how JPAs have a role to play in the area of providing educational adequacy.
- Subcommittee members referenced Section 31 of the 2005 Session Law (Report to Legislative Council - Educational Associations Governed by Joint Powers Agreements). As part of a general discussion, Rep. Rae Ann Kelsch commented that JPAs need to show they are improving or increasing the items identified in that section.
- Regarding capital improvements, subcommittee members noted the lack of an identifiable threshold for an "adequate facility" and talked about whether or not the state has an obligation to fund a facility. It was mentioned that other state courts have ruled that facilities are included in providing an adequate education for all students.
- Subcommittee members discussed how small, property-poor districts can obtain funds to repair existing facilities and build new ones given their small tax base. Some suggestions included developing a grant program to underwrite repairs or construction for districts that meet the criteria and a fund where districts could get a low-interest loan, perhaps through the Bank of North Dakota.
- The subcommittee also discussed how equity in education pertains to things such as science labs. Students throughout the state should not be disadvantaged because they live in a rural community. Students, regardless of where they live in North Dakota, should be prepared to walk into a college science lab, be comfortable with the setting, be familiar with the equipment, and be able to succeed. Improvements in science labs can be made if districts come together and share resources. The state could provide an incentive for those districts by offering low-interest loans, grants for improvements or funding for portable labs that can be shared among districts. Rep. Rae Ann Kelsch offered to contact the Education Commission of the States to see if they have additional information on this topic that can be shared at the next subcommittee meeting.
- Subcommittee members discussed whether or not to include transportation funds in the basic funding formula. The consensus of the subcommittee was to leave transportation funds separate from the funding formula, and instead, possibly distribute as block grants. The concern was that if transportation funding is included in the formula, dollars may not get distributed to specifically cover transportation delivery services. Increasing energy costs need to be factored into the discussion, as well. Rep. Rae Ann Kelsch offered to contact the Education Commission of the States and provide additional information on this topic at the next subcommittee meeting.
The commission broke for lunch at 12:10 p.m. and reconvened at 1:05 with the subcommittees meeting again to follow up on information discussed during the morning session and to determine next steps for April and May. The main formula and equalization payments subcommittee met separately, and the other three subcommittees met as one group.
At 2 p.m., the full commission met again to review and discuss action items resulting from the subcommittee meetings. Mark Lemer, representing the main formula and equalization payments subcommittee, presented that his group revisited components of the funding formula, specifically in lieu of tax payments and mill levy deducts. He mentioned that some districts are concerned that a change in the formula will negatively impact them. The subcommittee reiterated that they will work to ensure that no districts move backwards as a result of the formula changes.
Warren Larson, presenting on behalf of the weighting factors, sparsity factor, and career and technical education subcommittee, reported that members discussed how to more effectively cover the middle tier - defined as schools with 186-900 students - so they are protected from sudden weighting factor changes due to shifts in enrollment. They also discussed in more detail how the state's Career and Technical Education program can be expanded to help small schools obtain access to viable programs, services and teachers.
Jon Martinson reported that the subcommittee focusing on JPAs, capital improvements and transportation discussed the possibility of school districts coming together to build new facilities, with the state providing funding as an incentive for schools that decide to combine their resources. The subcommittee reviewed a possible plan whereby schools that combine could receive increasing incentives depending upon the number of districts, the number of students and the number of square miles that are combined in the new facility. It was pointed out that not only schools that are willing to come together in building a new facility should be eligible for capital construction incentives, but also schools that are disadvantaged with a low tax base, where DPI approves the need for such a facility. It was also pointed out that all schools, even wealthy schools, should be eligible for some minimal assistance with capital improvements where the need has been approved.
Jon Martinson continued his report by stating that subcommittee members were in agreement that funding for capital improvements should not be included in the additional $60 million proposed by Gov. Hoeven, but certainly needs to be addressed when considering equity and adequacy for all students. The subcommittee concurred that off-budget funding sources such as bonds or Bank of North Dakota loans should be investigated.
At 2:30 p.m., several members of the public, as well as representatives from school districts and interested organizations provided comments during a public input period.
The weighting factors, sparsity factor, and career and technical education subcommittee will meet April 20 at 9 a.m. at the North Dakota School Boards Association office in Bismarck. The JPAs, capital improvements and transportation subcommittee will meet April 20 at 12:30 p.m. at the North Dakota School Boards Association office in Bismarck. The main formula and equalization payments subcommittee will not meet in April, but instead Mark Lemer and Paul Stremick will begin examining the effects of various formula changes.
The commission's next meeting will be held Wednesday, May 3, beginning at 10 a.m. at the Williston Middle School, located at 501 14th Street West in Williston.
The commission was adjourned at 3:30 p.m.
