The Senate of the State of New Hampshire 107 North Main Street, Room 302, Concord, N.H. 03301-4951
KATHLEEN G. SGAMBATI Office 271-2111 District 4 TTY/TDD 1-800-735-2964
MEMORANDUM TO: The Honorable John H. Lynch, Governor The Honorable Sylvia B. Larsen, President of the Senate The Honorable Terie Norelli, Speaker of the House Michael York, State Librarian
FROM: Senator Kathleen Sgambati, Co-Chair Representative Randy Foose, Co-Chair
DATE: January 16, 2009
RE: Submission of Final Report New Hampshire Senate Bill 539, Chapter 173:14, Laws of 2008
Pursuant to SB539, Chapter 173:14, Laws of 2008, and on behalf of our fellow Study Committee Members, enclosed, please find the Final Report of the Joint Legislative Committee on Fiscal Capacity, Transition Aid and Diseconomies of Scale.
Should you have any questions or comments regarding this report, please do not hesitate to contact me.
Senator Kathleen Sgambati Co-Chair
KS/mcl
Enclosures Cc: Senate Clerk House Clerk New Hampshire State Library Report of the Joint Legislative Committee on Fiscal Capacity, Transition Aid and Diseconomies of Scale (Senate Bill 539)
To: GoveMor John H. Lynch Senate President Sylvia B. Larsen House ,SpedIcer Terie Norelli
From: Senator Kathy Sgambati, Co-Chair Representative Randy Foose, Co-Chair
Date: January 16, 2009
In addition to establishing the cost for an adequate education and providing for the distribution of fiscal capacity disparity aid, Senate Bill 539 established the Joint Legislative Committee on Fiscal Capacity, Transition Aid and Diseconomies of Scale.
The charge of the Committee was to "study the need for providing fiscal capacity and transition aid to municipalities, as well as additional aid to address the lack of economies of scale for some small schools / districts."
The members of the Committee included: Senator Kathy Sgambati, Co-Chair Representative Randy Foose, Co-Chair Senator Deborah Reynolds Representative Norman Major Senator Lou D'Allesandro Representative Neal Kurk Senator Molly Kelly Representative Emma Rous Senator Bob Odell Representative Susan Almy Senator Martha Fuller Clark Representative Judith Reever
The short time frame for the Committee's review of its complex assignment dictated that only a limited review of the underlying questions would be possible.
The Committee met on three occasions and held a public hearing on October 21, 2008. The Committee heard from a variety of legislators, education professionals, and municipalities as part of its work.
A summary of key discussion items and outcomes from each meeting follows.
October 2, 2008 By committee agreement, Senator Sgambati and Representative Foose were named co-chairs of this Committee.
The Committee members discussed the scope of their inquiry. There was consensus that the purpose of this group was not to revisit the costing formula for delivering an adequate education. This Committee was charged specifically with examining the need and criteria for distributing fiscal capacity disparity aid and implementing transition aid. The charge also included a review
1 of the unique "diseconomy" of scale issues that face small, isolated schools in very rural parts of the state.
The Committee heard from Senator Estabrook who was the primary architect of the Fiscal Capacity Disparity Aid (FCDA) funding plan adopted in SB 539. She explained that FCDA was included to supplement adequacy funds because the poorest communities in New Hampshire have a significant need for state financial assistance with education costs beyond the constitutionally required adequacy funds. Senator Estabrook answered preliminary questions about the inputs and rationale for the current distribution of FCDA as adopted. She emphasized the difficulty of separating adequacy funds from fiscal disparity funds now that SB 539 has passed because both funding streams are integrated in the transition plan as adopted.
Several Senate members of the Committee echoed caution about revisiting the fiscal capacity and transition plans because they are intertwined with the distribution of adequacy funds during the transition years FY 2010 and 2011. Some House members expressed a desire to have a more detailed understanding about what alternate ways of distributing FCDA were ruled out or could be considered in the future.
Given all the work that had been done in 2007 and 2008 on developing costing formulae and methodologies, and in light of the short timeframe for the work of this Committee, the Committee agreed to limit the scope of its inquiry to the following:
1) Should there be additional data or factors considered in the distribution of FCDA in future years (beyond 2010-2011 biennium)?
2) Should there be any changes to the components of the transition plan (often referred to as "the collar")?
3) Should there be any additional resources or special consideration of the needs of small isolated schools?
The Committee agreed to schedule a public hearing for October 21st to take testimony on the above questions.
October 21, 2008 Public Hearing On the issue of Fiscal Capacity Disparity Aid the Committee heard testimony from Dean Michener (NH School Boards Association), Pat Remick (The Coalition Communities) and Representative Kenneth Gould (Deny).
Mr. Michener expressed concern that there would be any further changes to the education funding plan adopted in SB 539. He urged the Committee to avoid further redistribution of the same amount of aid, highlighting that adapting to unexpected and unpredictable changes has a negative effect on districts, schools and students.
2 Pat Remick questioned whether Median Family Income (MFI) was a reliable indicator of fiscal capacity in a community and urged consideration of Median Household Income (MHI) as an alternative. She cited previous work done for the Coalition Communities by Dr. Daphne Kenyon which concluded that MHI was a more accurate reflector of modern households because it includes unmarried partners and other types of non-marital living arrangements.
Representative Gould expressed the financial hardship felt by the community of Derry which is losing over $7 million in FY2012. This amounts to almost 10% of that community's education budget. He hopes this Committee will re-examine ways to distribute adequacy or fiscal capacity aid that will not result in such a sizable loss.
On the issue of Transition Aid, the only testimony provided was from Pat Remick. Ms. Remick raised a concern on behalf of 5 of the former "donor" communities (Portsmouth, Alton, Grantham, Hampton and Hanover). Prior to SB 539, these 5 communities had not received state education grants but they are all now scheduled to receive adequacy grants in FY2012 under the SB 539 formula. Their concern is that because the 15% increase in funds which applies during the two-year transition period is based upon FY2009 state education grants, and because these 5 communities received no grants in FY2009, that they are not going to benefit from the transition component with additional funds in the interim. They asked the Committee to recommend to the full legislature funding some transition component for FY2010 and 2011 for communities in this situation. Written testimony elaborating this request is attached to this report.
The most input was offered on the topic of small, isolated schools and their diseconomies of scale. Mark Joyce and Jack Robinson (Superintendent of the Governor Wentworth School District) provided the Committee with an overview of the per-pupil cost differentiation from district-to-district across the state and they explained the significant factors that contribute to these variances. Transportation was used as an example of a major cost item that varies greatly from district-to-district. While consolidation and adoption of cooperative school districts can create efficiencies, they can also lead to increased transportation costs. Mr. Joyce also pointed out that there are actually some statutes that provide that certain services and programs must be offered in a student's home district and this limitation had made regionalization impossible, even where it could help achieve greater efficiencies.
Mike Schwartz from the Dept. of Education indicated that it has been very hard to standardize and analyze transportation costs because of different choices made at the district-level such as how much distance between bus stops?; what is the acceptable limit for time for students to spend on a bus ride?; what portion of transportation cost is for extra-curricular travel or sports teams?. The wide variety of answers to such questions has made it impossible for the Department of Education to fully and objectively produce comparative cost analyses. Written submissions from Mr. Joyce and Mr. Robinson are attached to this report.
October 21, 2008 Committee Meeting Immediately following the public hearing, the Committee met to determine what next steps to pursue in its inquiry.
3 There was very little support for revisiting the FCDA formula in the upcoming biennium although Committee members did request that staff prepare a spreadsheet comparing the use of Median Family Income (MFI) with Median Household Income (MHI). They also requested that further information about the existing criteria be prepared in writing to be reviewed at the next meeting.
The Committee members were most intrigued and interested in further exploring the issues/costs of small schools. Senator D'Allesandro expressed concern about distinguishing between schools that are small by choice and those who are small based on geographic isolation. Members agreed that only help for the latter group should be explored. Representative Rous and Representative Foose explained that the adequacy costing commission considered but specifically opted against providing additional aid for very small schools. The present committee recognized that there are complex questions about how to define and identify what constitutes a "small and isolated" school and how to calculate any additional funds that might be provided to such schools. At the request of the Committee members, Representative Rous agreed to further investigate possible initiatives in this area for discussion at the next meeting.
November 20, 2008
The Committee reviewed several of the outstanding questions that were raised after the October 21St public hearing. Jennifer Frizzell, Senate Policy Director, prepared a memo for Committee members explaining the background and details of the Fiscal Capacity Disparity Aid adopted in SB 539. She presented the information in the memo and answered questions from Committee members. Representatives Major and Almy offered concern that the census data upon which this formula is based on 1999 data from the 2000 census. But members were informed that given the decennial nature of the census that this was the most recent available for this purpose. Representative Kurk was troubled that the cut offs for FCDA were harsh and provided for "all or nothing" eligibility for communities with no smoothing.
The Committee discussed and deliberated whether there were alternate criteria that should be recommended for legislation to change the FCDA. Most of the Committee members recognized the political difficulty of altering this aid program and there was very little support or rationale for changing the program in the upcoming biennium. Though the Committee will not recommend legislative change, they will encourage the Finance and Education Committees in future years to revisit the issue of best available data to predict fiscal capacity and to reconsider whether FCDA should be distributed on a "slope" rather than in "steps" to avoid significant cut offs.
The Committee reviewed the list of ideas and information (dated 10/21/08) that had been generated by Representative Rous of the issue of small, geographically isolated schools. After some discussion about whether the issue needed to be studied further or whether it was ripe for legislative action the group agreed that some initiative should be advanced in the upcoming legislative session.
4 Senator Sgambati agreed to prepare a draft report which summarizes this Committee's work and embraces these conclusions and the legislative recommendation. When complete she will circulate it and ask that any comments or proposed edits be coordinated directly through her or Senate staff.
Conclusions / Recommendations After consideration of the legislative history of Senate Bill 539, the public and staff testimony offered, and the substantial experience and expertise of the members of this Committee, the Committee offers the following conclusions:
1) The Fiscal Capacity Disparity Aid as adopted in SB 539 should not be altered for the FY 2010-2011 biennium. Thereafter, at such time as the population and income data from the 2010 US Census is available for analysis at the town-by-town level, this legislature should revisit what elements are most current and correlative indicators of a community's fiscal capacity and adjust any FCDA distribution criteria based on such findings.
2) The 2-year Transition Aid plan as adopted in SB 539 provides a rational mechanism to phase in the increases and decreases in anticipated funding for schools and communities. The Committee does not recommend any changes or adjustments to this portion of the legislation. While the committee recognizes that the unintended impact of the transition formula results in 5 communities not receiving a grant during the transition period, the Committee found the formula provides a rational mechanism for the transition and creating a different transition formula for these 5 communities would not be equitable to all others impacted by the existing formula. Furthermore, the committee notes that 2 of these 5 communities are provided additional funds under the second, hold-harmless prong of the transition formula.
In addition, the Committee makes the following recommendation for legislation:
1) Legislation should be developed which further examines the needs of small, geographically isolated schools. Such legislation should addresses issues such as transportation, specialized and support services, and the possibility of regionalizing some collaborative programs or further consolidating school administrative functions. Providing incentives for smaller districts to consolidate to achieve greater economic efficiency should be a part of this legislative effort.
In summary, the committee affirmed the previous legislative action and agreed that the current formulae for disparity aid and plan for transition should stand. Further examination should wait until such time as the state has had actual experience with these mechanisms and when more current census data is available, The issue of small schools should move forward through legislative action and the details of identifying what constitutes a small and isolated school as well as whether and how much additional funding is appropriate should be refined by the education policy committees in the House and Senate. The Committee agreed that these actions would take place in the normal course of legislative business and there is no need to continue the work of this committee beyond the completion of this report.
5 The following members of the Committee concurred with the adoption of this report:
Senator Kathy Sgambati, Co-Chair Representative Randy Foose, Co-Chair Senator Deborah Reynolds Representative Norman Major Senator Lou D'Allesandro Representative Neal Kurk Senator Molly Kelly Representative Emma Rous Senator Martha Fuller Clark Representative Susan Almy Representative Judith Reever
6 NEW HAMPSHIRE SCHOOL ADMINISTRATORS ASSOCIATION
CHAMPIONS FOR CHILDREN