Maine Coalition to Save Schools letter to Education Committee

Maine Coalition to Save Schools
P.O. Box 52, Stonington, ME 04681 367-2738
skipg@midmaine.com; jcsproule@roadrunner.com

May 1, 2009

To: Senator Alfond, Representative Sutherland, and members of the Joint Standing Committee on Education and Cultural Affairs

We appreciate all the efforts of the Committee in working to resolve a tangled web of law and consequences that afflict our schools, our students, and ultimately the future of our State. We are grateful for the hours you gave to the public hearing on April 1, which was the first opportunity for any of the stakeholders to report back to a legislative body.

There have been many allegations on multiple facets of this issue, and we would like to take this opportunity to set before you a summary of relevant objective facts and some of the questions they elicit.

  • The genesis of consolidation:
    See attached article “Researchers, bureaucrats, politicians left mark on law”. LD 1 spawned the citizen’s initiative requiring the state to fund 55% of education, and there is general consensus that it is neither attainable nor sustainable. Education will simply have to make due with fewer State dollars.

  • How education will cope with less State subsidy:
    The State’s financial situation is in far more dire straits today than it was two years ago. GPA will be reduced far beyond the $36.5 million enacted in the last biennial budget, and local school units will find the best way for each one to adjust for a loss of state funding.1 Some will have taxpayer support to increase the local share, some will reduce programs and eliminate staff, some will close schools. The fact is that the administration's goal of reducing the state's share of the cost of education has been achieved by economic reality in the form of reduced revenues, not through any control of administrative costs other than the threat of withholding subsidy from units that do not submit to a change in governance.

  • Why the consolidation law fails to produce cost savings:

    • There are unintended financial consequences: cost shifting, cost of unified employment contracts, cost of ramping up administration of larger districts, loss of eligibility for Federal funding programs, geographic and demographic characteristics that preclude finding efficiencies by consolidating.
    • The law makes reductions to the EPS formula: it cuts central-office administration by 50%, and special education, operations and maintenance, and transportation each by 5%. However, the formula only serves as a means for allocating State subsidy to the school systems. Upon receipt of the lump sum subsidy, it can be spent on anything. A reduction in subsidy can as easily result in the cutting of programs as a reduction in administration. It can also result in increased taxes to raise the local contribution. There is nothing in the law that creates a savings; it is technically a shift in spending from State to local, with the local option to ante up or cut whatever makes sense on the local level. Furthermore, part of the penalty for non-conformance is a reduction of another 50% to the EPS portion of system administration, and this is really an arbitrary means of assessing a penalty, because it can not result in any savings for administration.
    • It also seems appropriate at this time to dispel the fiction on administrative costs. While at least one school district, Scarborough, was held as the example for low per-pupil cost of system administration, it was only revealed later that what accounts for this is the fact that much of their school administration expense is carried in their municipal budget. Any town could do the same, but rural towns that may have at best an administrative assistant, and lack a larger town business office, are not able to play that shell game. Further investigation showed that different school districts account for their central office expenses in different ways. Some may include only the expenses related to the superintendent and business manager, and others might include curriculum and comprehensive special education services.
  • The goal was to consolidate 280 units into 80. After 22 months of field work and an amendment that delayed the deadline, the total number of districts is 220:

    • The net total reduction of central administration offices is 20 statewide.
    • 24 reorganizations have been approved by voters2. 28% of Maine’s students reside in these districts.
    • 53 districts are not required to reorganize. 55% of Maine’s students reside in these districts.
    • 143 districts do not conform to the law3. 17% of Maine’s students reside in these districts.
  • The financial impact of consolidation:

    • The net annualized savings projected from the 22 approved reorganization plans is $1,636,000 for the first three years vs. $36,500,000 by which the 123rd Legislature reduced GPA to education to offset predicted reorganization savings. This does not include the additional cost of unifying employment contracts for those units that will begin this process in year four.
    • The vote of 117 municipalities against consolidation appears to say that the price of the penalties is less than their cost of consolidating.
    • At least 137 districts are being penalized approximately $3,000,000, so 24 districts can save $1, 636,000.
    • Fourteen of the 24 new districts have lost state subsidy in their new configurations; for six of them the loss ranges from over $500,000 up to $754,060 (complete DoE spread sheet of subsidies is attached). Some of the decrease is due to increase in valuation and decrease in student population, but taxpayers will focus on their share of any increase.
      • Here is an example of the inadequacy of information available to RPC committees. Recall the financial templates provided by DoE in July 2007; they served the purpose of identifying the unforeseen consequences of cost-shifting, but did not accurately portray the real financial effects to a particular configuration of combined units. Some RPC’s did ask for pro forma ED-279’s, but DoE was unable to provide these. The April 2009 release of the ED-279 for fiscal year 2009-10 was the first time any of this information was available. This points to another huge flaw in another system and another topic, which is the EPS formula, but it is appropriate to point out here that for our school systems to be able to operate efficiently and effectively, there needs to be a funding method by which they can reasonably estimate State revenue. As it works now, the subsidy numbers effectively come out of a black box after most school systems are through the budget process. Furthermore, the annual swings in funding to any given unit preclude the ability to provide stable programming (the attached spread sheet of subsidies illustrates this variance).
  • Examples of financial hardship in recent headlines:
    • The subsidy for RSU 5 (Freeport, Pownal, Durham), is down by $560,210 (11.1%) of the member towns’ combined subsidy for the previous year. Due to an increase in valuation and the effect of the RSU cost-sharing formula, Pownal taxpayers are looking at an increase of $650 in taxes for every $100,000 assessment of a home.
    • RSU 24 (10 SAU’s in Hancock County with 2592 students) recently learned that its size will eliminate eligibility for Federal money in the range of hundreds of thousands of dollars.
  • Unquantifiable costs of consolidation:
    Reorganization still continues to deplete time and resources away from education, both for those districts that are out of compliance and for those that have reorganized. Some superintendents have admitted to spending 80% of their time on these issues, away from their primary responsibilities. In cases where school unions have split up, there has been a precipitous loss of management that adversely affects education.

  • Other issues:
    • The uncertainty of whether the law will either be repealed or amended, and how, is an impediment to conforming and non-conforming districts as to how they operate their schools. They need to be able to contract for the services; they need to address other cost saving measures.
    • There are a few towns for which reorganization makes sense. What will happen to them if the referendum succeeds and the law is repealed?
    • In the early days of consolidation discussion, much was made over the fact that Maine had 280 superintendents. The fact is that many of the individuals served more than one school unit. For example, for a school union consisting of six municipal school units, their superintendent was counted six times. In terms of number of bodies, there are about 144 superintendents including those who serve part-time. The other interesting point is that unions did not count as school units, while their member CSD’s, SAD’s, and municipalities are what comprised the 280 number. If unions had been counted, and according the possibility of consolidation functions as described for an AOS, there also would have been about 115 of these units, far less than the 220 accounted for today, or the 280 of two years ago.
  • The major flaws in and obstacles to fixing the consolidation law:
    • Penalties:
      • Towns that voted yes, whose partners voted down plan, are penalized:
        • Here is an example of the failure of a hastily wrought law to produce its intended results: The initial law contained language for the referendum ballot that stated “The financial penalties under the Maine Revised Statues, title 20-A, section 15696 to the existing school administrative units will no longer apply to the proposed regional school unit”. This language was removed by the 2008 amendment on the basis that it was too coercive and furthermore, it was inconsistently applied in different places in the law. Unfortunately, this was the only example of the original intent to not penalize towns that voted yes. Once the language was removed, what remained was the part of the law that stated that non-conforming units were to be penalized, with no mention of their voting action or its possible effect on mitigating penalties.
      • All other non-conforming units are penalized, for several reasons:

        • They did not try (five towns have not submitted a plan).
        • They tried but could not produce a saleable plan.
        • They tried but are subject to limitations beyond their control, e.g. geography, demographics.
    • Changing the penalties after the deadline:

If the penalty/mandate portion is removed, towns that voted under the threat of penalty need to be able to re-vote as the information guiding their vote has changed, but as the law stands this is not possible.

    • Penalty Beneficiaries:

Nothing indicates that the original intent of the law was to create financial rewards or incentives out of penalties. The law is silent on the method of distributing those funds withheld as penalties. Presumably the law would stand on its own merits, and there would be 100% compliance and therefore no need to administer penalties.

    • Withdrawal

      • There is no provision in the law to withdraw from an RSU.

        • Currently Etna, Dixmont, Pownal, and Steuben have or are in the process of holding a town vote to remove their schools from their RSU’s. The plans are not effective until July 1, but they are being told by various sources that they can not do this, even though the Statutes grant this right to municipalities.

        • Pownal is also trying to work out their financial dilemma by requesting a renegotiation of the cost-sharing formula, but it legally can not be altered for three years based on the terms of the plan.

      • The law also repealed the statutes that allow withdrawal from existing school administrative units, which forces all member towns to join the same system. Towns have been discouraged from attempting to withdraw from SAD’s, but two have made recent news:

        • Steuben is the sole member of 13-town RSU 24 that is located in Washington County. >From the beginning they wanted to join a system within their county, and have just voted to withdraw from the RSU they were pulled into which is in Hancock County.
        • Frankfort has hired counsel to prepare legislation for a private and special act to allow them to withdraw from their existing school administrative district.
    • General craftsmanship:
      The list of proposed LD’s addresses some of these, with more likely to follow.

    • Economics:
      Current net savings are $1,636,000 and will be offset by cost of unifying employment contracts. There is no real quantification of cost savings beyond the first few years, which admittedly would be difficult to do with any accuracy.

  • Does the consolidation law need to stand?
    The previous law, including the statutes that would be reinstated if the law is repealed, contains everything necessary to give legal structure to all current school units. Unlike the new consolidation law, it is time-tested and proven to work without flaws.

  • Consequences of the legislature repealing the law:

    • What happens to the 24 new reorganized districts?
      • Repealing the law essentially penalizes these few units that succeeded in complying with it. While some of these new districts made it clear that their compliance was only because of the threat of penalty, some districts do want to maintain their new configuration.
        • The legislature needs to enact a bill to allow the new, reorganized districts to continue to exist under the previous law that would be reinstated. It should specify that RSU’s can operate as SAD’s, and AOS’s can operate as school unions with an inter-local agreement under municipal law.
    • Would repeal preclude any additional reorganization from taking place?
      • Our guess is that if the law were repealed, few additional ones would follow the consolidation route, but there is nothing in the old law to prevent them from doing so.
      • It bears pointing out that under the incentives of the Sinclair Act, many districts found it made sense to consolidate. In the intervening years factors may have changed to make additional mergers attractive, and some examples may be found within the group of 24 reorganized districts. Out of the 143 non-conforming districts, consolidation as envisioned by this law does not fit, and given the choice it is unlikely to produce significant additional mergers.
    • If repeal removes the distraction of consolidation, all school districts can focus on real cost-savings measures, as well as returning to full-time education.
      • In Washington County, several towns that voted down their plans chose to accept the penalties and move on, and have joined together under one superintendent, although they do not meet the criteria of the law.
  • Consequences of the legislature not repealing the law:

    • As long as the consolidation law stands, there is tremendous uncertainty for both the 24 reorganized districts and the 143 non-complying ones. The remaining 53 districts not required to consolidate are unaffected by any outcome.

  •  Consequences of the a public referendum
    • If the law is not repealed at the November referendum, the 143 non-complying districts will still be in limbo until legislation takes place in the second session, perhaps as many as six months later. There is no assurance that even then the law can be properly rectified.
    •  If the law is repealed at the November referendum, the 24 complying districts will be without legal structure or authority to maintain their contractual obligations and operate their schools.
  •  A case for legislative action on repeal this session:
    • Bring an end to the chaos and uncertainty surrounding all the districts that are affected by the law.
    • If the legislature repeals the law this session, it can also enact remedies for the 24 reorganized districts, as well as other appropriate measures aimed at real cost savings.

Respectfully submitted,

Skip Greenlaw, Stonington
Judy Sproule, Trenton

1The Governor announced today, May 1, cuts to the biennial budget that would leave $887 million for GPA in 2012 when the Federal stimulus money runs out. This represents 45% of the cost of education as defined by Essential Programs and Services, and represents a $69 million reduction from this current fiscal year’s GPA of $956 million .

2Includes RSU 1 (Bath, West Bath, Woolwich, Phippsburg, Arrowsic (Union 47) reorg. by LD 910;

MSAD 67 (Chester, Lincoln, Mattawamkeag) reorg. plan defeated by neighbors but approved to proceed on own.  However, neither unit would be affected by repeal of the law.

3Includes six still in progress that could be reduced to three if all receive voter approval.

Source of data:
Dept. of Education: http://maine.gov/education/reorg/plansandresponses.html
mdischools.net: http://mdischools.net/RSUs-central-office-reductions.htm