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Select Committee on School Facilities

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Select Committee on School Facilities Draft Only Approval Pending of SUMMARY P ROCEEDINGS SELECT COMMITTEE ON SCHOOL FINANCE RECALIBRATION COMM ITTEE M EETING I NFORMATION June 29-30, 2015 Buffalo Bill Center of the West Cody, Wyoming COMM ITTEE M EM BERS PRESENT Senator Hank Coe, Co-Chairman Representative David Northrup, Co-Chairman Senator Phil Nicholas Senator Tony Ross Senator Chris Rothfuss Senator Jeff Wasserburger Representative Rosie Berger Representative Cathy Connolly Representative Steve Harshman Representative Albert Sommers LEGISLATIVE SERVICE OFFICE STAFF Tania Hytrek, School Finance Manager Matt Willmarth, School Finance Analyst Matt Sackett, Research Manager John Roth, Staff Attorney ADDI TIO N AL LEGISLATORS PRESENT Senator Stephan Pappas Senator Bill Landen Representative Michael Madden Representative Garry Piiparinen Please refer to Appendix 1 to review the Committee Sign-in Sheet for a list of other individuals who attended the meeting. The Committee Meeting Summary of Proceedings (meeting minutes) is prepared by the Legislative Service Office (LSO) and is the official record of the proceedings of a legislative committee meeting. This document does not represent a transcript of the meeting; it is a digest of the meeting and provides a record of official actions taken by the Committee. All meeting materials and handouts provided to the Committee by the Legislative Service Office, public officials, lobbyists, and the public are on file at the Legislative Service Office and are part of the official record of the meeting. An index of these materials is provided at the end of this document and these materials are on file at the Legislative Service Office. For more information or to review meeting materials, please contact the Legislative Service Office at (307) 777-7881 or by e-mail at [email protected]. The Summary of Proceedings for each legislative committee meeting can be found on the Wyoming Legislature’s website at www.wyoleg.gov. PAGE 2 OF 13 EXECUTIVE SUMMARY The Select Committee on School Finance Recalibration (Committee) met for two days at the Buffalo Bill Center of the West in Cody, Wyoming to receive information regarding K-12 education funding and projections for future revenues for state education accounts. In addition, the Committee received information related to the 2015 recalibration of the education resource block grant model, including the salary and regional cost adjustment elements. The Committee also discussed a schedule for presentation of the remaining elements over the course of the upcoming interim. CALL TO ORDER (JUNE 29, 2015) Cochairman Coe called the meeting to order at 8:40 a.m. The following sections summarize the Committee proceedings by topic. Please refer to Appendix 2 to review the Committee Meeting Agenda. APPROVAL OF MINUTES Minutes from the May 21 and 22, 2015 meeting were approved without revision. REVIEW OF K-12 FUNDING Matt Willmarth, School Finance Analyst for the Legislative Service Office (LSO), spoke to the Committee about the seven accounts that support educational operations and maintenance and construction of facilities for Wyoming’s K-12 public education. See Appendices 3 and 4. Mr. Willmarth discussed each account’s history, purpose and balance. He described the lands allocated to Wyoming by the federal Act of Admission, including lands allocated to the State as school lands. He stated the revenues flowing into the Permanent Land Fund (PLF) may be realized from the sale or lease of the lands, the production or sale of minerals or any depleatable resource from the land and are held by the State for the exclusive benefit of public K-12 education. Mr. Willmarth listed the multiple accounts within the PLF and further discussed the operation of the Common School Account (CSA) within the PLF. He stated the income from the CSA flows into the Common School Land Income Account (CSLIA), which then flows into the School Foundation Program Account (SFP) and is utilized to fund public K-12 operational expenses. Mr. Willmarth also briefed the Committee on the spending policy amounts as amended by the 2015 Legislature for these accounts. He described the operation of the School Foundation Program Reserve Account, as established by the Legislature during the 2014 Budget Session, noting the funds initially deposited into the account were from the Strategic Investments and Projects Account and the General Fund and that the funds will continue to increase in accordance with the spending policy amount and the income realized from the CSLIA. Mr. Willmarth moved on to discussion of the Common School Permanent Land Fund Spending Policy Reserve Account (CSPLF RA) as created by statute and the spending policy amounts as amended during the 2015 General Session related to the operation of this account. He further described the SFP and the appropriations from this account to the Foundation Program for the operation of public schools in Wyoming. Mr. Willmarth discussed the operation of the Wyoming education resource block grant funding model (Model) and described the process for determining a school’s “guarantee”. He explained the difference between an entitlement district (receiving payment from the State) and a recapture district (requiring payment from the district to the State for redistribution). He described the multiple revenue sources for the SFP, including the state school tax (12 mill statewide levy), federal mineral royalties, school district recapture payments, CSLIA income and automobile taxes. Mr. Willmarth emphasized the dependence of the SFP on revenue realized from the mineral industry. He discussed the assessed valuations projected by the January 2015 CREG and the substantial decline that is forecasted, approximately 28.4% less for 2015 than the assessed values for oil and gas in 2014 and 23.6% less for 2016. Mr. Willmarth stated the reduction in commodity prices beginning in late 2014 will reduce assessed values, resulting in a decline in the revenue for SFP account SELECT COMMITTEE ON SCHOOL FINANCE RECALIBRATION Summary of Proceedings WYOMING LEGISLATIVE SERVICE OFFICE • 213 State Capitol • Cheyenne, Wyoming 82002 TELEPHONE (307) 777-7881 • FAX 307-777-5466 • E-MAIL [email protected] • WEB SITE www.wyoleg.gov PAGE 3 OF 13 and the funds contributed by local taxes for the operation of public schools in Wyoming. He briefed the Committee on the historical balances of the SFP and the correlating appropriations for the operation of K- 12 public schools in Wyoming. Mr. Willmarth moved on to discussion of revenues and accounts related to the capital construction and maintenance of K-12 public education facilities. He described the School Capital Construction Account (SCCA) and the historical appropriations from the account. Mr. Willmarth stated funds transferred from the SFP and federal coal lease bonus payments make up the majority of the funds available in the SCCA. He also noted the lack of successful federal coal lease sales since January of 2012 will significantly impact the balance of the account and funds available for expenditure for public K-12 capital construction. Mr. Willmarth concluded his presentation with discussion of projected education revenues and expenses for future biennia. He listed the assumptions he made in performing the analysis, including that the Model continues to operate under current law and without any modifications made in relation to the current recalibration efforts. Mr. Willmarth also assumed enrollment would continue to increase by 1% each year and there would be no external cost adjustment to the Model beyond those adopted in the 2015 General Session. He also accommodated a 4% increase in special education and transportation costs, based on prior year trend data and utilized the January 2015 CREG estimates. Mr. Willmarth stated realized capital gains for 2015, to date, are not considered in the analysis and he assumed there would be no transfers from the PLF holding Account into the CSA corpus. He discussed significant potential shortfalls for the SPA and SCCA, which may not be fully made up by balances in the PLF Holding Account for the 2017- 18 and 2019-20 biennia. See Appendix 3, Attachment C. The Committee discussed the task of recalibration of the Model in light of the revenue projections. Members discussed the various mechanisms that could be considered to increase revenues in light of the potential deficit. The Committee also discussed recalibration and consideration of elements not within the cost-based recommendations, including those elements currently funded by the Legislative Model. Members commented on the importance of considering the potential revenues that will be available in undertaking recalibration and in consideration of elements that will increase spending. REGIONAL COST ADJUSTMENT Dr. Lori Taylor, Associate Professor for the Bush School of Government and Public Service and Adjunct Associate Professor, Department of Economics, Texas A&M University, briefed the Committee on the regional cost adjustment (RCA) element of the Model. See Appendix 5. Dr. Taylor stated the purpose of the RCA is to equalize the purchasing power of school districts to recruit and retain equivalent school personnel. She explained three strategies that can be utilized to operationalize a RCA, including a cost-of- living index, a hedonic wage index, also known as a teacher cost index, and a comparable wage index. Dr. Taylor discussed utilizing the cost-of-living index strategy for purposes of a RCA, noting a cost-of- living index reflects the costs of purchasing a “market basket” of goods and services in each location. She stated such an index is constructed by utilizing a weighted average of the prices for food, housing, apparel, transportation, medical services and various other consumer elements. Dr. Taylor explained the advantages of utilizing this approach for a RCA, including that it is straight-forward and easy to explain and is clearly outside of the control of school districts. She also listed the disadvantages of a cost-of- living index, including that it overstates the cost of hiring in locations with attractive local amenities, requires regional data on prices and is biased if weights do not reflect local purchasing patterns for teachers.
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