[Local-Maine-Schools] letter sent to Maine Legislators

Mon Dec 31 17:58:34 UTC 2007

December 31, 2007

To: The Honorable Members of the 123^rd Legislature
From: Judy Sproule, Trenton School Committee, RPC member

Regarding: School District Consolidation Law

My purpose in writing is to explain why it is necessary that the new 
school district consolidation law be repealed.

    * The law does not provide net cost savings to municipalities.
    * The law will produce massive property tax increases. The
      legislature owes Maine citizens the courtesy of getting the real
      facts as to how many millions of dollars this will be.
    * LD 1932  does not solve the problem of "unintended financial
      barriers".

-          It does not eliminate cost-shifting, but only shifts the 
responsibility for its allocation, and ultimately the blame, from the 
DoE to the Regional Planning Committees (RPC).

-          It reinstates the minimum state allocation only for units 
that received it in FY2007-8 or FY 2008-9 prior to the operational date 
of the Regional School Unit (RSU).  It does not provide any compensation 
to the units that will meet the criteria set for minimum state 
allocation subsequent to FY 2008-9. Furthermore, it does not provide 
compensation to units that currently receive the /regular/ state subsidy 
but will be required to forfeit it when they join an RSU that is a 
minimum receiver.

-          It does not address the increase in local costs due to the 
merging of employment contracts.

    * There are simply too may flaws to address by legislative
      amendment. More flaws become apparent every day and indications
      are they will continue to surface as more questions are asked.

I have invested well over a thousand hours working on this issue on 
behalf of my community, and it is my opinion that current school 
district consolidation law is too flawed to withstand adjustment without 
adversely affecting the education and future of our children and 
inducing economic and cultural harm to our state's citizens. I believe 
that nothing short of complete repeal and a fresh start can accomplish 
the goals of economic efficiencies intended by this law.

 It is an unusual request to ask the legislature to repeal a law which 
was only enacted seven months ago, but it is equally unusual for a law 
encompassing such sweeping change to have been based on so little 
research or planning. Irreparable damage will occur if RSU's become 
operational. At this point the adverse effects are minimal in 
comparison, other than the time it has taken away from our children's 
educational needs. If the 123^rd Legislature can accept the 
responsibility to repeal this law, you will be heroes for being able to 
admit a mistake and Maine citizens will work with you to find the cost 
savings in education you need to help balance future budgets. It is also 
crucial that we return as quickly as possible to focus on the real issue 
of excellence in education.

*Evaluation of current status of the law:*
 Please read Geoff Herman's article in Maine Townsman:  
http://www.memun.org/public/publications/townsman/2007/goeth.htm. This 
article outlines many of the law's discrepancies, omissions, and flaws.

*Cost Savings:*
The $36.5 million shortfall in revenue was deappropriated in the budget 
bill. The enactment of legislation to mandate the reconfiguring of 
school districts under new laws of governance is totally unrelated to 
this $36.5 million cost savings. This "one size fits all" legislation 
puts tremendous financial burdens on school districts due to cost 
shifting and the cost of merging employment contracts.

*Increased Costs for Taxpayers - Cost Shifting:*
Cost shifting is the result of creating new quasi-governmental units by 
combining towns into RSU's. There is a two-step formula by which the sum 
of the individual schools' total EPS amounts are first allocated based 
on number of students, and then the additional local share above EPS is 
allocated based on relative property valuation. The end result is a 
shift in costs among the member units, relative to what they are 
currently paying in property taxes, which can be in the hundreds of 
thousands of dollars (see the appendix for examples).

LD 1932, if passed, would allow units to negotiate their own cost 
sharing formula. This does not eliminate cost-shifting, but merely 
passes along the responsibility to the RPC for establishing the formula 
for winners and losers. Instead of eliminating cost-shifting we now have 
blame-shifting. Do the DoE and the Legislature really think they are 
absolved from complicity in cost-shifting if these appointed committees 
of citizens lose in the negotiations and their towns' property taxes 
increase? The only way to achieve equity is for each unit to be 
responsible for its own total costs, but there is no provision for this 
either under current law or LD 1932.

*Increased Costs for Taxpayers - Cost of Merging Employment Contracts:*
Our teachers do deserve higher pay and benefits, and we would like to 
see that realized. However, the fact remains that our towns are simply 
not going to vote for a plan that establishes significant new expenses 
without showing any additional benefit to education. >From the 
taxpayers' perspective it looks like their hard earned income is going 
into the pockets of other individuals who are not going to be doing 
their job any differently. The result is more costs and more cost-shifting.

Here are some estimates for increased personnel costs in Hancock County:

School Unit

Additional Cost for Salaries and Benefits

RSU 7

Ellsworth/Eastbrook/Hancock/Lamoine/Mariaville/Otis/Surry/ Trenton/Waltham

$710,029

RSU 8

Southwest Harbor/Mt Desert/Bar Harbor/Tremont/Frenchboro/Swan's 
Island/Cranberry Isles

$0*

RSU 9

Bucksport/Orland/Prospect/Verona

$204,848

RSU 10

Sedgwick/Penobscot/Deer Isle-Stonington /Brooksville/ Brooklin/Blue 
Hill/Castine

$358,039

TOTAL

$1,272,916

/RSU 8/

/*Already has unified pay scale, but if Lamoine and Trenton were to join 
would increase/

/$575,629/

$1.27 million in additional property taxes to cover new expenses for 
personnel will have to be raised in Hancock County alone. The total 
incremental cost to /all/ of the state's taxpayers should be calculated 
before anyone cavalierly disregards this issue. There does not appear to 
be any resolution of this financial barrier to consolidation within the 
confines of the mandated RSU structure. It must be kept in mind that 
personnel costs are the largest part of school budgets, probably 
averaging around 75%. These costs, in general, increase from year to 
year at roughly the rate of cost-of-living increases.
*
Increased Costs for Taxpayers -- Other Flaws in LD 1932*
Aside from not providing relief from cost-shifting, LD 1932 fails to 
address the loss of minimum subsidy for all receivers. It applies only 
to units that receive the minimum subsidy in FY2007-08 or FY2008-09. 
Units which are not currently minimum receivers, but who will fall into 
that category in the future beyond FY2008-09 will get nothing. 
Furthermore, LD 1932 does not address the situation where a unit 
currently receiving the state subsidy joins an RSU that is a minimum 
receiver and therefore the unit is forced to forfeit its regular state 
subsidy.

*Lack of Financial Support for Decision Making:*
Despite the law's requirements that the DoE provide models and assist in 
the collection and presentation of data, there is inadequate support 
from the DoE for RPC's to make sound, responsible decisions regarding 
their financial futures. In the corporate world mergers are not 
considered without legal and financial counsel, extensive fact finding, 
and pro forma detail. The Securities and Exchange Commission determines 
requirements for financial information and disclosure. In regulated 
industries, consumers have the protection of state commissions to 
request information and approve any merger or sale. If Federal and State 
legislatures can provide these protections for companies and consumers, 
why do we have to accept anything less with respect to our education 
system? RPC merger teams consist of Maine citizens, municipal officers, 
and school board representatives who have collectively spent thousands 
of unpaid hours on this project, as well as school administrators with 
another full time job to do. Very few of these people have the requisite 
legal or financial experience. They are further handicapped by the 
constraints of a hastily constructed and admittedly flawed law and a 
severe lack of information.  

The DoE financial models, which were produced only after the law was 
passed and implemented, are woefully inadequate in terms of what school 
units and municipalities require in order to make sound decisions. It is 
not even clear what was the intent of this template as it merely 
produced numbers for a proposed RSU based on a "sum of the parts" of 
individual members' total EPS allocations for this current year. It 
fails to provide a pro forma statement for the RSU's because 1) it does 
not utilize the method that will be used to determine EPS once the RSU 
is in operation and 2) it ignores the mandated cuts of 50% system 
administration and 5% each for transportation, special education, and 
operation and maintenance.

What it did accomplish, unbeknownst to its creators, is to alert school 
units to the cost-shifting as well as the loss of minimum subsidy that 
are now acknowledged to exist as unintended consequences of the law. 
However, school units still do not have an accurate financial picture of 
what consolidation will look like.

The DoE has provided a second template to illustrate cost sharing 
formulae possible with LD 1932, but this evidences a further lack of 
understanding of the basic financial ramifications imposed by this law 
and its purported fix. Taken on its own, it simply does not alleviate 
the cost-shifting to any significant degree. In addition, it ignores the 
fact that cost shifting actually occurs in two steps (see the appendix 
for examples based on proposed RSU's that illustrate this).

One reason RPC's are unable to assess finances is the non-transparency 
of the EPS funding formula. While this funding formula supposedly 
relates to per pupil cost, its computation is mysterious and when the 
DoE divulges its allocations to school units there are often big 
surprises. It is difficult enough in a normal year to build a school 
budget not knowing what the state share might be. It is utterly 
impossible for an RPC to attempt to guess at this factor which is now 
affected by mandated cuts that, with one exception, have not been 
defined in dollars. As a side note, the new law moves the notification 
date for EPS from February 1 to March 31 for the first two years. As 
many town meetings occur in March, they will not be able to determine 
the school budget at their annual meetings and will incur the cost and 
inconvenience of having to hold a second, special meeting.

*Governance:*
The formation of new regional school units requires the various member 
towns coming together for the first time to subordinate their municipal 
authority to population-based representation in a new quasi-governmental 
entity. This mandated form of governance is the basis for creating the 
financial hardships outlined above. If you look carefully at the non-SAD 
school districts that are now in discussion to form RSU's where cost 
shifting is a financial barrier, you will observe that the members share 
few common characteristics. Trying to combine municipalities with 
dramatically uneven student populations, total populations, property 
valuations, and school budget expenditures is at the base of 
cost-shifting, and as long as these inequities are present, no formula 
can extinguish them. If LD 1932 passes and RPC's get to the point of 
looking at these relationships more closely, the increase in cost of 
merged contracts raises even more complications as to who should pay for 
what. In many cases, it will be far cheaper to pay the penalty than 
conform to the law.

*The 55% Fallacy:*
Many of us are well aware that while a 2003 vote by citizen initiative 
requires the state to fund 55% of the cost of education, the state is in 
fact not able to afford this. If the Governor, Commissioner of 
Education, and Members of the Legislature could admit this fact and ask 
its citizens to assist in redefining the state's financial 
responsibility, I believe a solution can be found. There are still many 
folks who are under the impression that the state gives every school 55% 
of its budget and do not realize it is the /total /statewide cost that 
is subsidized by 55%. Please look at 
http://www.maine.gov/education/data/subsidy/subs08.html. The far right 
column shows each school's state share and you will be amazed to see the 
huge disparities in the state's share of communities' education costs.

The 55% requirement drives a lot of shadowy manipulations from the 
machinations regarding EPS to the withholding of state money versus 
schools' federal allotments. This would be a good time to reinstate an 
open, honest, and fair system of funding.*
*

*Caveat Emptor:*
In the spring of 2007 the DoE hired a public relations person to manage 
their press coverage. School district consolidated was to be sold, not 
bought. When you read articles that depict the triumph of seeing school 
districts complying with the law you must realize that so far the 
requirements have only been to submit simple, non-binding checklist type 
forms. While our law-abiding public has been willing to pay lip-service 
to these filing dates, the general temperament is what you would expect 
from prisoners hoping they will get a life sentence and not the death 
penalty. There is even a desperate hope that this is all a bad dream and 
we can wake up to find it gone.

*Conclusion:*
The intended cost savings do not exist for municipalities. Cost-shifting 
and the increase in cost for salaries and benefits will result in huge 
property tax increases as a result of this legislation or now if the 
/non-action/ of this legislature does not repeal this law. LD 1932 does 
not remove "unintended financial barriers". Other flaws are so numerous 
that those who have studied them agree that there are certain to be even 
more flaws that have not yet been identified. Picture trying to cover a 
wide-mesh fish net with band-aids because you need to use it to bail out 
your sinking boat.

Finally, even if the legislature chooses to let school consolidation law 
stand, with or without amendment, there is no guarantee of compliance. 
/If/ RPC's are willing to do more work, /if /they are willing to submit 
a detailed plan, and /if/ the Commissioner approves the plans, then 
there is a very big /if/ when it comes time for the towns to vote. 
Another fact gathering request of this legislature might be to assess 
the likelihood of voter acceptance.* *

Undoubtedly Maine's citizens can all agree on the point that we need to 
be diligent in striving for economic efficiencies in all state programs, 
and we need to confirm this goal and work to that end. In /Charting 
Maine's Future/, The Brookings Institution points out: "With Yankee 
ingenuity and the town meeting each part of its mystique, the most 
important among all of Maine's advantages in the coming years will be 
its knack for community-spirited problem solving." We should be 
capitalizing on this resource to build efficiencies in our educational 
system that have a direct goal of enhancing educational excellence, not 
exhausting our resources - our elected officials and our volunteers -- 
by forcing them to react to a crisis established by misguided 
legislature mandated from the top down, for which they will pay with 
significant increases in their property taxes.

There is a positive side to this debacle: many of us have met and 
exchanged ideas with others whom we would not otherwise have had the 
opportunities. The future is promising if these people with the local 
knowledge and commitment are given a chance to work together 
unencumbered by the current legislation.*
*

*Appendix:
*The following is excerpted from my testimony on December 12, 2007 to 
the Joint Committee on Education and Cultural Affairs in opposition to 
LD 1932. While the examples relate to the RPC's I have worked on, I 
would be willing to calculate for your consideration comparisons for any 
RPC if provided with the raw data.*
*

*Cost-Shifting and LD 1932 adjustments:*

The highlighted column shows the cost-shifting produced by the original 
formula in the law, which is an application of a two-step formula based 
first on percent of students and then on relative valuation.

The language of LD 1932 and the accompanying template allow the RSU to 
replace the second step, formerly based on valuation, with any 
combination of pupil count and valuation. As you see below, the range of 
possibilities between and including 100% of either factor, pupil count 
or valuation, still produce substantial cost shifting for the members. 
In this example, application of the law as it now stands results in 
approximately $776,000 being shifted, and the suggested options under LD 
1932 result in a range of approximately $711,000 - $903,000 being 
shifted.  *
*

*RSU based on Union 92
*

*Cost-Shifting*

The negative numbers in red are less cost, or a financial benefit to 
that municipality; the positive numbers are additional cost.

*Muncipality*

100%

Pupil Count

75P:25V

at 50:50

Add'l Local

Share (orig. formula)

25P:75V

100% Valuation

Eastbrook

($88,232)

($96,643)

($105,054)

($112,956)

($113,465)

($121,876)

Hancock

$390,792

$357,006

$323,220

$303,593

$289,434

$255,649

Lamoine

$217,994

$206,118

$194,243

$206,318

$182,368

$170,493

Mariaville

$29,086

$14,882

$679

($17,528)

($13,525)

($27,728)

Otis

$113,717

$133,464

$153,211

$170,024

$172,958

$192,706

Surry

($343,222)

($277,063)

($210,904)

($203,225)

($144,745)

($78,587)

Trenton

($471,087)

($473,964)

($476,840)

($442,746)

($479,716)

($482,592)

Waltham

$150,954

$136,199

$121,445

$96,520

$106,690

$91,936

Total $ Shifted

$902,541

$847,670

$792,798

776,455

$751,451

$710,783

* *

* 1st Step Shift in Total EPS*

The negative numbers in red represent a penalty to the associated 
municipality.

*Muncipality*

Current Total EPS

New Regional EPS

Change in EPS

Eastbrook

$516,544

$539,803

$23,259

Hancock

$2,523,201

$2,732,491

$209,290

Lamoine

$1,754,332

$1,844,327

$89,994

Mariaville

$653,573

$685,215

$31,642

Otis

$662,861

$706,138

$43,277

Surry

$1,858,317

$1,623,593

($234,723)

Trenton

$2,079,309

$1,897,679

($181,630)

Waltham

$413,161

$432,052

$18,891

Total

$10,461,297

$10,461,297

$0

* *

* RSU based on Union 92 plus Ellsworth
*

In order to present this scenario in terms comparable to the preceding 
one, these numbers do /not/ include the additional $710,029 cost of 
merging employment contracts as well as other adjustments that may result.*
*

*Cost-Shifting***

This example illustrates the effect of adding just one member with very 
different characteristics. The total shift is now approximately 
$1,300,000, crediting a windfall gain of over $900,000 to that one unit 
at the expense of the other members. In this case, the minimum shift 
occurs under the current law's formula, and application of the LD 1932 
template only increases it further.

The negative numbers in red are less cost, or a financial benefit to 
that municipality; the positive numbers are additional cost.

*Muncipality*

100% of Pupils

75P:25V

at 50:50

Add'l Local Share (orig. formula)

25P:75V

100% of Valuation

Ellsworth

($720,187)

($795,412)

($870,636)

($917,468)

($945,861)

($1,021,085)

Eastbrook

($51,778)

($58,725)

($65,672)

($73,374)

($72,618)

($79,565)

Hancock

$579,932

$556,084

$532,236

$517,814

$508,388

$484,540

Lamoine

$343,801

$341,772

$339,742

$360,545

$337,713

$335,683

Mariaville

$76,317

$62,957

$49,598

$29,959

$36,239

$22,880

Otis

$162,338

$192,838

$223,338

$250,454

$253,838

$284,339

Surry

($232,033)

($135,180)

($38,327)

($16,594)

$58,526

$155,378

Trenton

($339,845)

($329,900)

($319,956)

($272,414)

($310,011)

($300,067)

Waltham

$181,457

$165,567

$149,677

$121,078

$133,787

$117,896

Total $ Shifted

($1,343,843)

($1,319,218)

($1,294,591)

($1,279,850)

($1,328,491)

($1,400,717)

* 
 1st Step Shift in Total EPS*

The negative numbers in red represent a penalty to the associated 
municipality.**

* *

*Muncipality*

Current Total EPS

New Regional EPS

Change in EPS

Ellsworth

8,899,863

8,691,225

($208,638)

Eastbrook

516,544

549,857

$33,313

Hancock

2,523,201

2,788,007

$264,806

Lamoine

1,754,332

1,879,969

$125,636

Mariaville

653,573

698,938

$45,365

Otis

662,861

720,235

$57,374

Surry

1,858,317

1,655,379

($202,937)

Trenton

2,079,309

1,936,116

($143,193)

Waltham

413,161

441,434

$28,274

Total

19,361,160

19,361,160

($0)

* *

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