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Legislature Adjourns on Many Sour Notes
Senate Fails to Address Sufficient FundingThe legislature adjourned February 14 at noon. It definitely did not ask school employees to be its Valentine! The Governor assured a press conference that he will call a special session of the legislature to deal with health care. The Senate dissolved into bickering, refusing to deal with many important issues. In the last few minutes of the session, Senator Cynthia Nava gained the floor on a point of personal privilege and severely criticized the Senate leadership for allowing the House Bill 241 to die without a hearing in either the Finance Committee or full Senate. We will have a full summary of the actions of this generally disappointing legislative session in a week or so. For now, some highlights, or lowlights, follow.
Legislature Grinds to a Halt as Governor Kills Pork Bill and Continues Showdown with Legislature
The Governor signed House Bill 2, the Budget Bill late on February 12. He vetoed the Legislature's major pork bill, House Bill 43, though they quickly sent him an identical bill (he has 20 days to make decisions about a veto or line-item vetoes). The 332-page capital outlay package included 1,959 projects totaling more than $348 million. This bill and potential vetoes will be the Governor's leverage as he calls legislators to special session to deal with health care. Although, he likely will not include any education issues in his call, retiree health care bills could be introduced under the broad category of "health care."
Inadequate Budget Bill Now Law
Governor Richardson line-item vetoed $16 dollars from House Bill 2. Most of the cuts did not effect public schools. However, he did cut a $3 million increase in the K3 plus program passed last year, leaving it at level funding for next school year.
The Budget Bill passed the Senate by a wide margin, little changed from the version that passed the House. The House concurred with the Senate version without need to go to a conference committee. Actually $2.4 million was cut from school funding when lawmakers decided that they had been overestimating the amount school districts needed to pay their share of increased retirement costs.
The salaries for all public employees, including school employees were reduced from the levels recommended by the House Education Committee in the final version of the budget that passed the House and Senate. The 3% salary increase originally included for teachers and other instructional personnel dropped to 2% and the addition 2% for classified employees dropped to an additional 1%. The last hurdle for the bill was the Governor's signature. This budget is essentially status quo, with little or no real improvement in program funds or salaries. It makes no real progress toward meeting the constitutional requirement of sufficient funding. Teacher and instructional personnel salaries should increase another half percent with the $14 million funding provided for one more instructional day for students.Public education got $125.4 million new recurring revenues or about a third of $360 million new recurring dollars available for appropriation. The public school portion of the total State budget in 2008-2009 will be about 44%, continuing a downward trend from 51.6% high in the 1986-87 school year.
Best Hope for "Something Good" from Disappointing Legislative Session Dies in Senate Finance
Article XII, Section one of the New Mexico Constitution states, "A uniform system of free public schools sufficient for the education of, and open to, all the children of school age in the state shall be established and maintained." For the first time in New Mexico's recent history an empirical study determined the costs of ensuring that all students in the state of New Mexico have access to the programs and resources necessary to have the sufficient education as required by the State Constitution. While House Bill 241 did not provide an appropriation, it did commit the legislature to a goal of providing the approximately $350 million to meet full sufficiency and therefore fulfill its constitutional mandate.
House Bill 241, Representative Mimi Stewart’s Public School Funding Formula bill, passed the House with a wide margin on February 7. It passed with one dissenting vote (Senator Mark Botiano's) in its first hearing in the Senate Education Committee. The bill laid out the foundation for a new formula projecting the sufficient per-student cost calculation for school districts and charters schools. It contained cost factors tied to: poverty, English language learners, special education, mobility, percent of district enrollment by set grades, and the weighted index of staff qualifications. It identified the sufficient per-student cost multiplier and guidance about how to complete the sufficient per-student cost calculation. Methodologies were identified for factoring in growth; new school demographics; special education; implementation of intervention strategies related to lowering special education identification rates; annual updates of cost factors; and annual adjustment of the base per-student cost based on appropriations.
HB 241 would have amended the Public School Code to provide a new funding formula for public schools that incorporates four measures of student need—poverty, English language learners, special education and mobility—while recognizing costs associated with school district size and school size. Increased funding for schools is based on the concept of educational sufficiency . If passed, districts will eventually have received an additional increase of about 15% in funding for instructional programs.
The compromise language amended into the HB 241 in the House Appropriations and Finance Committee basically stated that the new formula would not be used until a verifiable revenue stream that fully funds the changes is in place. Since the new formula would have radically changed the distribution of public school funding, it was important that the new money be place before the redistribution took place. That compromise would have at least will put the legislature on record with a stated goal of meeting its constitutional mandate. However, even that compromise was not enough to get the measure a hearing from the Senate Finance Committee. The measure was stuck in the that Committee until the legislative closed. Finance Committee Chair John Arthur Smith refused all entreaties from constituents and education advocates to let the bill have a fair hearing in the Senate.
A million dollars and months in the lives of hundreds of New Mexicans who participated in the funding formula study and its accompanying public hearings went down the drain because one powerful Senator refused to allow the people's business to be conducted on the floor of the Senate.
Bad News: Constitutional Amendment to Use More Money from the Land Grant Permanent Fund Dies on House Calendar
HJR 8 , Land Grant Fund Education Distribution, sponsored by Representative Mimi Stewart would have provided some $68 million dollars for education in 2010, growing to $196 million by 2018. This would provide about half of the funds needed to move to sufficiency under House Bill 241. Under the HJR 8 the voters would, by constitutional amendment (similar to constitutional amendment in 2003), decide whether our not to increase the share of the revenues generated under the Land Grant Permanent Fund. The amount of money would move from the current temporary 5.8% to 6.5% until 2019, then drop back to 5%. Even with this increased draw from the fund, it is estimated to double in value during that time period. (Currently the fund distributes 5.8 percent for fiscal years through 2012. The distribution rate then would drop to 5.5 percent for fiscal years 2013-2016, after which it would decrease to five percent.)
This bill was not be heard because we could not assure that 36 Representatives would support it.
Good News: Bad Tax Policy that was a Raid on the Public Treasury Dies in Committee
Senate Bill 462, sponsored by Senator James Taylor, was a back-door voucher bill that created a new personal and corporate income tax credit for contributions to
scholarship granting organizations called the “Equal Opportunity Scholarship Tax Credit.” This measure died awaiting a hearing in the Senate Finance CommitteeIn NEA-NM's opinion, credit against income tax is considered a tax expenditure in that, while it is not a direct payment from the state to the taxpayer, the taxpayer reduces the amount of tax paid to the state. Thus this measure violates the establishment clause of the US Constitution and several provisions of the New Mexico Constitution. As an expenditure of tax dollars it is a violation of Article IV, Section 31 of the New Mexico Constitution, which prohibits a direct educational appropriation to any person, corporation, association, institution or community not under the direct control of the state. Additionally, the measure also violates Article XII, Section 3 of the New Mexico Constitution because it prohibits the use of public money for the support "of any sectarian, denominational or private school…"
The vehicle for providing tax deductions could be abused by a school. A private school could set up a 501(c) 3 charitable organization for the purpose of collecting contributions and giving out scholarships or grants and give a $1,000 worth of scholarships to the child or children of a parent who contributed $1,000. In other words, a structure like this example would have the effect of passing $500 of the tuition on to the state. People for the American Way (PFAW), a Washington DC advocacy organization, has reported that Arizona’s tuition credit, which is similar to the one proposed by Senators, is operating in this manner.
Other arguments against this effort:
On January 29, 1999, the New Mexico Attorney General Opinion 99-01 opined that “A
school voucher program involving the use of public money to provide parents of private
school children with tuition assistance raises serious and substantial state constitutional
questions, most significantly under Article XII, Section 3, which proscribes the use of
public money for the support of private schools, and the anti-donation clause of Article
IX, Section 14.”
In November 27, 2006, the U.S. Supreme Court refused to hear a challenge (by a writ of certiorari) to an April 2006 decision of the Maine Supreme Judicial Court that upheld a Maine law that prohibited the use of public funds to send students to private religious
schools.Good News/Bad News: Retirees Not Penalized, but Retiree Health Care Not Fixed
Senate Action:
According to a recent study, the state's retiree health care system is $4 billion short of what it needs to provide coverage for its current and future retirees over the next 30 years. The system is projected to hit red ink in the next decade, even with premium increases and higher co-payments for certain benefits that went into effect this month for the 42,000 current retirees covered by the fund. Senate Bill 67, sponsored by Senator John Arthur Smith sought to shore up the funding for the system. However, it did so in a way that hurt many current and future retirees as well as requiring both current active employees and employers to pay a higher percentage of salary into the system.A recent interim legislative committee indicated that the retiree health care fund needs an additional $200 million a year in revenue to be considered fully funded. However, this is true only if the retiree health care system is considered a pre-retirement benefit for current active employees, rather than simply a benefit system for retirees. In this case, our view is that this system of self insurance is similar to the Public School Insurance Authority and simply needs to balance its books each year and does not have an unfunded actuarial liability.
The legislation considered would have requiere the employers— the state, counties, cities and school districts— starting July 1 to pay an additional three-tenths of 1 percent of every employee's annual salary toward the retiree fund. Every employee contributing to the fund would pay an additional 15-hundredths of 1 percent of their annual salary under the Senate bill. That would inject an additional $19 million a year into the fund, according to a recent task force report.
In addition to the employer/employee contribution increases, counties and cities would have been required to pay more into the Retiree Health Care Fund than they do now, the Senate legislation says. All the new revenue raised would go toward funding health care for future retirees. That is because the system currently is a pay-as-you-go plan, meaning the contributions and premiums that go into the fund only go toward paying benefits to current retirees and their spouses, with little or nothing left each year to invest for future retiree benefits. We still question whether or not this is necessary.The plan would have reduced the subsidy paid by the system for retirees beginning in fiscal year 2009. This would drastically raise the premiums of retirees under age 60 as: under 50 years of age, no subsidy;
age 50 to 54, 25% subsidy;
age 55 to 59, 40% subsidy; and,
age 60 and over, 50% for the retiree and 25% for spouses and dependents
The result for an average retiree, not in Medicare, would have been:Current cost SB67 Cost
Under age 50 366.36 894.11
50 – 54 366.36 670.59
55 - 59 366.36 613.61
60 - 64 366.36 575.63
65+ 244.83 372.95
This bill died awaiting its second committee hearing.
House Action:
House Bill 183, sponsored by Representative Lucky Varela was identical to Senate Bill 67. However this bill got a very different reception in the House Taxation and Revenue Committee on January 23. Representative Lucky Varela was much more amenable to working with public employees and retirees to come up with a compromise than the sponsor of the Senate version. The committee tabled the measure and appointed a subcommittee including some committee members and representatives of the education community to try to create a compromise to bring back to the committee.
The subcommittee met on January 24 and proposed several possible compromises. One promising proposal was to remove the age tiering section of the bill and replace it with a trigger mechanism that would institute age tiering if the Retiree Health Card Authority Board was unable to improve its fiscal standing through other methods, such as gradually lowering the percentage of subsidy for all retirees and doing a better job of cost containment. This bill remained tabled in the House Taxation and Revenue Committee .
Even though neither of these bills passed the legislature, the Retiree Health Care System remains in funding trouble and must be addressed over the next few months.
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