• POSSIBLE BUDGET SHORTFALL
• HOUSE PLANNING SCHOOL REFORM BILL
• SENATE EDUCATION ALLOWS COLLEGES OUT OF RETIREMENT PLAN

Possible Budget Shortfall
This week we were greeted with more bad news when we found out that the state budget director tossed out the possibility of a billion dollar deficit figure for Fiscal Year (FY) 2010.  Additionally, many school districts are inquiring about the possibility of a proration for the current fiscal year.

Budget officials are projecting a shortfall of between $100- $200 million in the School Aid Fund heading into the January Revenue Estimating Conference.  This number could be offset by as much as $100 million due to year end surpluses from fiscal year 2007-08.  Fiscal agencies are still waiting to gather further numbers on sales tax revenue, pupil count and non-homestead taxable value before making a final determination. 

Will there be a proration?  While it is still too early to speculate with specificity, we can assume a possible proration of between $0– $75 per student. 

Can this be prevented?   Some legislative leaders are holding out for the possibility of additional federal assistance money to the states. The thought is that these funds could free up additional GF/GP dollars allowing for those funds to be shifted to the SAF.  The problem is that this would require a significant amount of lobbying on the behalf of School Districts for limited resources and the GF/GP budget appears to be in more distress than the School Aid fund at this time.

Would we have to wait until after the January revenue conference to get a proration notice?  No, all that is necessary to issue a proration is a letter from the State Treasurer to the Governor.  Technically, the Governor could issue a notice when she makes proposed Departmental Budget cuts in December.

Will there be more bad news? Understand that it could get a lot worse.  As the economy continues to slide, as property values continue to decrease and as the jobless rate continues to increase, future adjustments can and will be made for the current fiscal year.  We are not out of the woods just yet.  And as more prospective information comes in about Fiscal Year 2009-10 it may be worse than anticipated.

Fiscal leaders across the state are waiting for the Michigan Economic forecast to be released at the 56th Annual Economic Outlook Conference on November 21st 2008.  This is hosted by the Research Seminar in Quantitative Economics at the University of Michigan.  These are the same economists who testify at the Revenue Estimating Conference in January, so this information will be extremely relevant in forecasting future revenue.  MASA will get that information to you as soon as it becomes available.

House Planning School Reform Bill
After a discussion on the state's current activities for failing schools, and the holes in those efforts last Thursday in the House Education Committee, the introduction to legislation to lead to structural changes in, or closure of, those schools will occur sometime this week (HB 6705).  This legislation could be on a fast track for lame duck session.

Rep. Tim Melton (D-Auburn Hills), chair of the House Education Committee, said after Thursday's committee meeting that he is working on legislation that would give the schools with the worst student achievement in the state more flexibility to change how they operate, and a deadline to make significant improvement.  Mr. Melton said during the meeting that the package would also have more definitive timelines for schools to show improvement or be shut down.   "I believe we have a moral obligation as a state to end the continued failing of these schools," he said.   "At some point we do have to draw a line."

Several experts told the committee that a central theme among schools that have been able to improve performance is to provide training and support for the principal, but then also to give that principal authority over the budget and staffing at the school, including hiring teachers.

MASA has been in discussions with Chairman Melton and will continue to meet this week.  More information to follow in the coming days.

Senate Education Allows Colleges Out of Retirement Plan
Community colleges would have the option of developing their own retirement plans rather than participating in the Michigan Public School Employees Retirement System under legislation reported last week from the Senate Education Committee.

As reported, the bill SB 1450 would allow colleges to move all employees hired after January 1, 2010 to a new pension system.   But new employees moving from a school district or a college that was part of the system would be able to continue their membership in the state pension system if they are hired by the new college within 60 days of leaving that prior employer.

The administration and school groups have opposed the measure for fear that it will put additional pressure on those remaining in the system to cover unfunded liabilities.