 This is Senate Finance and we are going to do a short presentation today. Senator Hardy has put together a flow chart for what she thinks the decision points are and what our points, our decisions are, I'm still working to make, get a handle around something as massive as this waiting structure. I asked Brad James to put together a demonstration for us of towns, no names, but towns that could be winners and losers in this because of the way that the weights interact if we go with weights or the way things are calculated. So we can see, I think there's a, you know, and then we also have to take a look at bottom line impact on the Ed fund, and we don't know because it's human behavior but we can make some assumptions we've been doing this for a while. So Senator Hardy and can faith, can you put up the flow chart that's on our website, but it might be helpful or Senator Hardy can you share it with us. I can try I've never actually shared my screen. Maybe they can do that then she's got a copy it will just take us a minute or two. I'm happy to do that. Just give me a minute. Yep. Okay faith will get that up for us. Oh, can you see it. There it is. So Senator Hardy, do you want to walk us through what you think this is. I saw it yesterday so. Sorry, I was, I was actually attempting to share my screen as faith was doing it I almost figured it out too. Could you maybe zoom in a little bit. Okay. There you go. Okay. And this is also on our website under my name. A couple people had asked for a flow chart and I love flow charts and I know the chair loves flow charts, but I, it was a lot harder technologically to make a flow chart that I thought. I almost had my son do it for me because he could probably have done it in 10 minutes but like moving the arrows around but anyway this is what I came up with so it's a sort of flow ish chart. But hopefully it will explain the, the decision points that this committee needs to make with the, the portion of the ed financing pupil waiting stuff that we need to do. So if you look to the, to the left hand side of the flow chart. The first decision point is in the bright red and that is the decision about whether we adopt an expanded set of pupil weights, or if we adopt a new set of cost equity payments. And I can go into what those, what that means. But that is the first decision that we have to make. And that will then enable us to make the other decisions so Brad James came in and explained to us the interaction effect between weights and how weights work versus how the cost equity payment or categorical aid grants might work in our funding formula. So that was a good basis and then tomorrow professor Colby is coming in and focusing just on this question of, of pupil weights versus the cost equity payments. So I don't have other people come in, but that's the first decision we need to make. And then the second decision, and just to be clear, there could be some variation of, you know, a combination of the two of those, but that those are the basic to just options that we need to decide from first. I see Senator Bray's hands up. Okay, Senator Bray. Thank you, Madam Chair. So, Senator Hardy, I'm just wanting to make sure I when I look at this I get what's implied. Whether we choose adopt a set of expanded pupil weights or adopt a set of new cost equity payments. The second column, all those choices are still available to us and need to be decided, but it's not as though choosing one or the other in the first set precludes choosing any or all of the second column. So that's when I'm trying to figure out when I yeah let me explain that because it doesn't it's not exactly like that and I'm sorry that's this is why I was having a hard time trying to figure out how to put it all on a flow chart. So we make the decision about those first two options. The second column at the top just look at the stuff above the blue all the first kind of set of things. The second column are the four categories in which we would be deciding whether to adopt pupil weights or cost equity payments. And those are for students in poverty. So the grade range of students, whether high school and middle school enrollment source size of school that's small. Those are the small schools under 100 kids or 100 to 250 kids, and then the population density. And faith it might be so that so just one second actually we, those are the four categories for which we would either have weights or cost equity payments. And we could adopt some kind of combination of weights for some of them or cost equity payments for another, but the cleanest is one or the other and just in thinking about it right now. So we do that second, and then the third group of decisions we would make is the transition mechanisms how do we roll in whatever changes we decide to make over a five year period or whatever your period, and and how do we sort of implement it. And then the evaluation is in pink so the things that are in red are the priority decisions that we have to make the pink decisions come off of those priority decisions. So, how do we measure poverty, using the snap benefit or the free and reduced lunch or universal income form, how do we transition into a new mechanism, and then how do we evaluate it once we're done with it. So those are the primary decisions we have to make. There's not really decisions to be made for the yellow items those are pretty straightforward. Below that are the Education Committee things that they're working on and that they will eventually come to us but first they need to make a recommendation on English language learners. Small schools and merger support grants and then potentially tuition setting in early college but those were not as big of a deal. So that's why this enrollment one is in light blue up there because it's sort of related to the work that the Education Committee is doing. So those are, that's a secondary decision based on the Education Committee. And the final thing is that Education Homestead Tax Proposal or S212 that we looked at last Friday. And that has a provision about a Education Tax Advisory Committee, and that's why that one is green up there. So those are taxation issues that we would need to deal with or could deal with. The primary decision is weights versus cost equity payments and faith if you could scroll to the next page. This might help explain it a little bit better. So this table is an expanded version of a table that you have seen before in the presentation that Representative Cornhiser and I did for this committee and the Education Committee. These are the categories for which there are proposed weights in the original pupil weighting factors report that was prepared by Professor Colby and her team. And so it will give you an idea of what those four categories I was talking about. So the current weight is for poverty. For example, if you look at poverty, the current weight is 0.25. The proposed weight is 1.03. And the cost equity payment is $10,480. So those are the amounts we're looking at for each of them. English language learners is on this chart. But again, the recommendation of the task force was to do a categorical aid and that is being considered whether or not they do that or do something different, as opposed to something different is being considered by the Education Committee. The weights that are listed here are based on, if you look down in the notes, they're based on a recalculation of the weights done by Professor Colby and her team using school level data, additive operations. So right now we have a mix of adding and multiplying weights. The proposal would be to just add them using a base of zero instead of some based on zero and some based on one. Right now we have a mix and then using the free and reduced lunch poverty measure. So that's what the weights are based on. The cost equity payments are based on all of those same things. But they were calculated at a later date once we asked Professor Colby to do that. And they came out in her January 11th memo. So that's sort of looking at the weights. So we need to decide essentially between column, what is it 1234 or column five or some kind of combination. The school weighting task force went into a lot of detail about what what weights to propose whether there were school level weights or school district level weights, whether they were additive or multiplicative what they included whether or not we used all three levels of population density or not whether or not we use both the small schools categories or not. And my recommendation to keep it simple as we went into huge amounts of depth on those conversations as Senator Brock will attest to to and I think for to keep it simpler to start with these weights and these cost equity payments and decide whether or not we want to adopt one or the other would be the the path of least resistance. And then, if you scroll down again, faith. I was asked to put together a pros and cons chart for weights and cost equity payments. And this was in the presentation that representative cornheiser and I did for this committee and education committee. There certainly are nuances to all of these things. And, you know, one can argue both sides of it, for sure, but I, I, you know, we did our best to try to come up with pros and cons of the weights versus the cost equity payment. Just so you can sort of have a refresher on it for tomorrow when we hear from Professor Colby. The weights are what we have now and what is being proposed as an expanded set of weights. So one of the benefits of the weights is that they're the current system the current familiar framework that all of us who understand the system understand weights and the education community, namely our school superintendents and our business managers, etc. and and obviously we everybody who's doing the system understands the weights right now and how they work more or less, not fully but more or less. They're dynamic to differentials in budgets. They basically maintain local control, and they adjust for inflation more easily so those are the pros. The cons is it doesn't guarantee that school districts are going to use that the tax capacity that they gain from additional weights for spending on pupils or for spending on the area of need. They would choose to use that extra tax capacity to reduce their taxes and not spend anything additional on students or areas of need. Again, it's local control it's a double sided coring or a two edge sword or however you want to say it. It's a both a benefit and not a benefit in this case because of what we're trying to do is direct resources to an area of need using weights doesn't necessarily do that. The larger weights offset the impact of the smaller weights that's the interactive effect that that Brad was showing us the when he was in here last time. That's just because a district qualifies for a weight if there's another district that qualifies for a larger weight, or if some districts get the weights and some don't, they will offset each other. So even a district with only a few students in poverty versus more students in poverty would have that impact of that weight negated, or if a larger weight would in negate the impact of a smaller weight and Brad was showing that to us in that sort of simple version he gave but it becomes much more apparent when you see the printouts and and kind of things you don't expect to happen happen. And the equalize people can calculations which are the weights lead to equalize pupils which are used to to determine tax rates. Those are confusing to voters people don't understand what equalize pupils are because they think well my district has 100 kids in this district. Why is it saying that we have 112 equalize pupils that makes no sense. It's confusing to voters and frankly it's confusing to a lot of legislators and other people to how equalize pupils work. They need regular recalibration, the weights were calibrated at a point in time, and really the recommendations that they be recalculated recalibrated every three to five years. So it's sort of not a one and done thing it needs continual updating. And as with both of these options that may increase education spending depending on the choices that districts make at the local level. The cost equity payments have some of the same pros and cons and some differences. The cost equity payments deliver direct funding to the school district in in that they they send a check to the school district and say this is the money you get for the number of students in poverty you have or the number of students you have in a small school it's a direct payment to a school district and therefore it's not subject to local budgeting decisions so the district is more more likely to spend it on the area of need. It does maintain the ability for districts to spend additional funding as desired in that they could still spend it on something different that unless we decide to attach strings to the or requirements to the cost equity payments, but the way that the school districts envisioned that they would be much more flexible payments, but they would be given to school districts with the with the understanding that they were supposed to be used on improving educational opportunities for students in need. It simplifies the formula by eliminating equalized pupils. I said that they're confusing. In this case if we made everything a cost equity payment we would do away completely with equalized pupils. And we would have we would just be using average daily membership or ADM, which is more or less the actual head count of students in a school building on a certain day. There are a little bit of tweaking for state place students, but it's a much simpler thing to understand than equalized pupils. So in there in that sense and because the payments are directed improves accountability and transparency. These people know what the money is for and for why the cons are it causes more extreme tax and education spending impacts on school districts so Senator Cummings list of winners and losers they they're bigger winners and bigger losers when you do the tax equity tax the cost equity payments. The unknown unknowns it's new so it would be a new system that everybody would still be getting used to and we probably wouldn't know the full implications of it until a few years into it. That's true for the weights to but because it's more of a new system and current it's based on the current system it's it's easier to predict. It's not sensitive to differential budget needs or marginal costs, meaning that the amounts are average costs they're based on average costs so every district will get the average cost if they happen to need a little bit more or a little bit less. The payments don't take that into consideration. It also needs regular recalibration or inflation adjustments because it to they are based on fixed amounts in this fixed time. And again it may increase the overall cost of spending just like the weights and it may do it a little bit more depending on the decisions of local school districts. I linked to the slides from the presentation that Representative Kornheiser and I did as well as the task force report this there's a longer analysis and discussion of these pros and cons in section five of the task force report, which is pages nine through 18 if you're if you haven't read it yet I definitely recommend reading it before tomorrow. And then the final page. If you want to scroll through pay thank you. Someone asked me to just make a list of the page numbers in the report that covers the certain topics. So that's what this is. The first one is the pupil weights versus cost equity payments that sections five pages nine through 18 the link on here will take you to the report and then there's a table of contents that is hyperlinked that will take you to sections. But there's the list of the things that will be covering in this committee if you want to just read those pages. So, I don't know if that answered your question Senator break, but I was trying to, you know that the way the set the set of weights are those four categories that the students in poverty grade range enrollment and population density. So, those are decision points not. I don't think we would be making the decision of, well we don't want to have a wait for grade range, but that those are the areas where would have the, the set of weights or the set of cost equity payments. Okay. I'm going to move us along because we're going to do this tomorrow. Any questions specific to understanding the flow chart Senator McDonald. I believe I understand the flow chart and thank you for the very detailed explanation. The question I'm likely to ask myself is, has to do with. Does the money that sent to the schools actually show up and serve the kids that it's designed to serve. My inclination would be to ask Senator Hardy, which of those two choices does the committee believe is most likely to end up in service of the children for whom the money is being a lot of whether it's one method or the other. Because that's part of the unwritten testimony that we've heard, I think was that I'm there was a suggestion that folks didn't testify before the committee to say, we're darn sure every penny that comes in here for these children will be used for these children. And sometimes people called in later, privately to say, you know my district might might be eager to take the money and, and simply lower property taxes with it and not use it. So that's, if I understood how that was best. What choices to make I would understand. Okay, in, in interest of time, because we're going to go over this tomorrow. I believe the committee's recommendation was that we use a hybrid. So, just to be clear, that was yours, Senator Hardy, the task force recommendation was, these are the two options, and we didn't, there wasn't a majority, going with one or the other so we presented two options, and we felt like they were both viable options and had pros and cons Correct me if I'm wrong, Senator Brock so, but that's what the official recommendation of the task force and what the eight of us voted on was to say, both of these are viable, they both have pros and cons. So, one of the concerns with the weights to just sort of answer a little bit of what Senator McDonald was getting at one of the concerns is that, because we are very, very strong local control state, where the all the decisions about spending are made at the local level. If we the weights just adjust tax capacity, and then the school district decides how to use that tax capacity. In some cases they may use it to increase their budget and spend more in the area of need. In some cases they may use it as a decide to do a tax reduction, and decide to do that or a combination of the two. And the tax, the cost equity payments are more likely to result in spending directly, but not guaranteed. The best guaranteed to ensure that funding is spent directly on an area of need is a categorical aid grant and that is why we recommended that for ell because that was the area where we felt like there that was the most essential that the resources be targeted to a certain area of need that is easily identified. But yeah, I don't want to start there yet because that's in the education committee, but that hopefully answers center center McDonald's question. Okay, I'm going to have to move us along because we've got a tight schedule later. I lost my train of thought here. Senator Hardy is there a bill. There is not a bill. We would have to do one as a committee bill. We have to notify joint. Yeah, I have no I have notified ledge counsel just to have a placeholder for it to make sure I don't know if it officially has to come from you but I, I've talked to anybody who wants to answer a bill I just wanted to know if there is a bill and where it is. There's not, there's not a bill it would have to be a committee bill. So I, I notified Jen ledge counsel that a committee bill would have to be drafted for this. And that would should probably start an education I would think since whatever they do is headed this way but maybe not okay as long as we've done that. Okay, Sandra Bray. Yeah, just because I've been dealing with committee bills and timing constraints. So there's no way to get committee bill introduced by the 31st, but it just would go to rules and be released, you know, so it's, there's still a clear enough pathway, but it won't involve the 31st deadline, just you hear about it and go wait, how do we possibly make the 31st. Okay, no, I'm very concerned that we aren't going to make crossover so the 31st is off and I told Sandra Hardy the other day I don't see how we can possibly do the whole rewriting the in the property tax income tax, the whole tax set up and get that done along with waiting a couple other things by crossover, we can continue that discussion and work it through but and I guess right now we're still waiting for Deb Brighton and her printouts to so we know what could be the consequences to some taxpayers which might make us decide to move or not move but I don't I if we can we will but I'm there they're just a lot of heavy lifts in this one. So I'm going to move us on. Because Catherine Benham is here. And Catherine welcome. Again, in trying to just look at revenues and future revenues. Here. What's I said alligator draw they seem to understand there's a graph or the picture that goes out. That's coming on Friday. This is the day we're today we're doing the big picture ed fund, or that's coming Thursday or Friday later in the week the Alligator. This is one education fund. Yeah. Oh okay it's a state revenues and expenses over long term I have this is the education. Oh, I will. Whenever you're ready to will just switch the title till Friday, or Thursday I can't remember faithful no. Okay. So whatever. Well this is this and this follows on with Senator Hardy's discussion about the education fund that that was probably know that actually makes more. Yeah, more and so very, I guess what I wanted to talk about today was just the big picture reminding you all of the education fund and the self balancing feature and what pieces move as you move different as different things change and so this is very big picture and I'm going to this document is posted and I will share it also. Can you see this. Okay, so this is I'm going to not spend a lot of time on this page but I think you all know this page is the education fund, where you have all the sources right here, and the appropriations down here, and the balance of how it allocates the revenue and the surplus What I wanted to do is take you back to a very big picture of the education fund and I have condensed the lines various lines of the education fund into just a few and again this is hypothetical it's sort of close to recent years but this is not tied to a specific year. In this basic example, we've got 600 million coming from the homestead property tax 170 in the property tax credit 750 in the non homestead property tax and then I had lumped all of the other revenues. In one line, which includes sales, purchasing use meals rooms lottery you have all of those other lines just into one lump sum for a total of sources of 18 1.8 billion million billion, sorry, do with the be. And then on the appropriations. There's the education payment, and then the other and the other is special transportation tech ed pensions it's just everything else. And again, that equals 1.8 billion and I would remind you that again this is a hypothetical because never in a real year does the revenue exactly equal the spending so it's. But this is the concept of how things bounce out. And in the first example, if you have all of the towns increase their spending which is the blue box. And nothing else has changed. What changes are the property taxes both the homestead and the non homestead property taxes will change so again, as people choose to spend more or less. That's where you see things move if the other revenues are not moving. And I'm, let me just take a step back that the context for this is you all are going to be looking at printouts lots of printouts as you go through your discussions. And you need to keep in mind some of these big picture concepts about what happens and what moves and changes or doesn't change as decisions are made. The next example is other revenues if they decrease. So for example if the sales tax decrease, or the purchase and use decreased or meals and rooms if there's less money in the education fund. And the spending hasn't changed there's been no assumption about the spending. What happens in this case if revenues decrease is that because of the self balancing nature property taxes will go up. And, and that is what makes sure that the revenues equal the spending for for school budgets in the big picture scheme of things. And then the final example is that there's more other aid more categorical aid but there's no change in spending. And so, the, the other line here, the 330 million has gone to 400 million. And if the total budget hasn't changed it's just you're providing more aid through categorical aid for example, transportation or small schools or whatever it is tech ed. And the spending hasn't changed. There's actually no real change in the revenue thing it's just it how the aid has gone to town, and this is making a big assumption that it's all proportional town by town. But it's just to let, let you know if you're the spending total spending isn't changing total taxes are not changing either and it's a, it's a hard thing to, when you get into the town by town pronounce to separate all these different pieces so that's why I'm walking through this big picture. Does that make sense to everybody is there, are there any questions, questions. And Senator McDonald, can you take over for about five minutes. While we walk through this. And I've got to take a call so committee any questions and Senator McDonald I'm going to leave it to you. Are you there mark. I'm here. So I will be back in a couple minutes and mark you're in charge. Questions for the witness. I don't have a full screen so we have to speak up. I, what I might do next is walk through just some district examples, and I. So it's the same example but on a district level. So once again you have this district a and district B, and here is how it plays out in their district, and they're slightly different one, they have different makeup of property wealth and kids, and and spending. And so one and let me just say this I'm assuming that all towns increase your spending not just this one but if, if all of them increase including this individual one town. Their taxes, both their homestead and non homestead will go up. And likewise for town district B where they have an increase in their spending, assuming it affects the whole education when everybody's impacted. Again property taxes go up. In a situation where other revenues decrease where there's a change in other revenues into the Education Fund. So if not change your spending at all but they both of them have the property taxes go up to help fill the lost revenue on the Education Fund. And then, finally, the more other aid if they get more other aid and again I just want to emphasize that this is a big picture example this is assuming all towns are impacted equally. If they get more aid. There's actually no change for them it's just the aid is coming to them in a different form instead of coming through the education payment it's coming through the education payment aid or whatever aid it is you've given them. And for both of them so there's no, there's nothing in great shade is that there have been no other changes in them. Except for how the aid is coming to them. Does that make sense to everybody and I don't know Senator Hardy if that you wanted to say anything about how cost equity plays into this or if a district were to get a cost equity payment. They could adjust their other spending if they wanted to. In order to account for that cost equity payment. It would not necessarily impact their bottom line it would be. They would get it as a cost equity payment instead of part of their general education spending. So as as Miss Benham says it's it's all it all equals out in the sort of generic examples but in most school districts as well. Any questions about. If not madam chair welcome back. I just had one final thing to say which is this is a very big simplification and towns are not impacted uniformly so when you get to these town by town print out some and and the whether you use waiting or cost equity. You are also sometimes are going to be have more tax capacity some are going to have less and so there will be those changes as well for but overall you may not have a change in total property taxes raised you may have a change where it's being raised within the state and that's one of those nuances you need to keep in mind as you go through those town by town printouts that you will have coming your way. Okay. But if schools have been getting, we've told the big losers losing $10 million and one of the printouts. I can't see that there's a way that a school can absorb even over five years of $10 million hit. Unless, you know, they were getting it for poor children and now they don't have that many poor children. There's there's got to be some impact with a change this large. I mean have we ever done a change this large. I would say act 60 was, yeah, a big enormous transition for the school districts and I have, but that didn't change the waiting right. It changed the tax capacity. Yeah. Remember there were some town shark tank I do remember that. So they were towns who I think the worst the lowest one was 5 cent tax rate. And then the highest one was 250 I can't remember it was a big they were real extreme so those towns on. Yeah. There was nothing. And did tax. Yeah. And so you know it's interesting because I we've been trying to I for some reason on my and I think somebody looked at what happened to districts after act 60 what happened with the spending and I haven't been able to dig up the real report. That would be helpful. I know one of my schools cut out violin orchestra, but I don't think they I think theirs was a 28 cent tax. And I don't, they never got it down that low again. So that would be interesting how did schools react to the last time. We did a major change the cause major shifts and funding to some schools. And just have an idea so that next year when the time the budgets come out. We aren't in shock that we have some idea about what we might see. Senator Hardy. Thank you madam chair. The, I think the point that it's impacting tax capacity is a really important one because it's not impacting their budget directly. It's impacting their tax capacity so how much they're able to raise in order to support their budget on a certain tax rate, right, so that they would potentially have if their tax capacity drops a lot they might have to raise their rate to spend the same amount. Yes, and that's why it's really important that once we make a decision on the direction we're going, then we talk about transition mechanisms because I believe with x 60, the towns that saw the big drop in tax rates. It happened all at once but the towns that saw the big increase it was phased in. That's what I remember hearing in testimony. Is that right Catherine. All right, there may have been a two year phase in for the, because it was the transition also happens to be that you all get out in April, and budgets already set so there's a limit to what you can do in that first year so may have been when we talk about it now I'm thinking it may have been a two year phase in for the people who are coming down, but the people who are going up will clearly phased and I'm much more clear about that piece of it because there was a limit to how much tax rate could increase. The other big change that we made with act 46 that also had very big change you know could had some big changes in some districts. That was also phased in an over five years. So that is another sort of example of how we can do a phase in that wouldn't happen all at once and it wouldn't certainly happen for next school year because districts have a lot of them have already passed their budgets for next year so anything we did would start in the following school year at the earliest. Okay, Senator McDonald also there in act 60 there was a major slug of new money, which helped both phase in and mitigated many of the losers that would have, which was been quite stark without that slug of money. So we do have a surplus so if we're going to slug anything this is probably a good year to do it. Because we do have excess revenue. There's been several proposals for how to spend it, but this would definitely be one way to do it. And see if we can phase this in. Okay, any other questions for Catherine. All right. Thank you. Thank you. I'm still waiting to see if I'm going to get any questions. I'm not.