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School fund showdown

By Staff | Oct 28, 2016

Whether Measure 2 would be good or bad for North Dakota schools is the focus of a statewide debate to be settled by voters Nov. 8.

Measure 2 would change the way money in the Foundation Aid Stabilization Fund can be spent. Voters established the fund in 1994 to serve as a safety net for school funding during budget shortfalls. Measure 2 would allow legislators to spend money from the fund for education-related purposes other than foundation aid stabilization as long as they leave money in the fund equivalent to 15 percent of the amount the state is spending on kindergarten through high school education.

Groups such as the N.D. Council of Education Leaders, Farmers Union and Greater North Dakota Chamber have joined with North Dakota United, a union of teachers and other public workers, to support the measure, while the North Dakota School Board Association has taken a stand against it.

ND United supports the measure because it will help the Legislature maintain funding for K-12 education so schools won’t be forced to cut courses or teaching positions, said the group’s president, Nick Archuleta. If the state reduces its support for schools, districts will have to raise property taxes or cut programs and teachers. Only 14 school districts are below the tax cap to even be able to raise taxes, he said.

“They would have the one option and that’s to cut course offerings, fire teachers and make their community, frankly, a less appealing place to live and work,” Archuleta said.

Jon Martinson, executive director for the School Boards Association, considers Measure 2 a threat to school funding.

“This money voted on by the people is a savings account. If this measure is passed, the account gets raided,” he said. “The Legislature could spend the fund for ‘education-related’ expenses. That’s not defined. It would make a difference if it was for K-12 expenses.”

Jim Rostad, president of the Minot School Board and N.D. School Board Association, said his main concern with the measure is the open-ended nature of “education-related purposes.”

“That’s concerning because that can be interpreted so many ways,” he said. “I am not totally against accessing some of it. It’s just that I really think that fund was intended for K-12 education, and I think that’s where it should remain.”

Archuleta said proponents are relying on legislative leaders who have offered assurances that if Measure 2 passes, they will push through companion legislation defining educational purposes as direct spending on K-12 education.

House Majority Leader Al Carlson, R-Fargo, and Senate Majority Leader Rich Wardner, R-Dickinson, confirmed they plan to introduce legislation to limit spending from the fund to K-12 education.

“We need to keep K-12 whole,” Wardner said. “The $116 million that we used to keep K-12 whole this biennium, going forward, it’s not there. We have to make it up from other sources in the next biennium.”

The Foundation Aid Stabilization Fund could be one of those sources for the $116 million, he said, adding that the Legislature will need to find another $100 million beyond that amount to keep up with growing enrollments.

Martinson called it flawed logic to think that legislators would short K-12 education if they can’t use the Foundation Aid Stabilization Fund. Given the state’s commitment to K-12 education, legislators will find other money, he said, and shouldn’t get a checkbook to the Foundation Aid Stabilization Fund to create new, ongoing expenses.

Last session’s Senate Bill 2039 allocated up to $200,000 to each a school construction fund and endowment fund for student scholarships for higher education if Measure 2 passes. Wardner said the 2017 Legislature will revisit that legislation, but there is a desire is to move school construction revolving loans into the foundation aid stabilization fund. The fund’s holdings are at $573.8 million and are anticipated to be about $600 million at the end of the biennium next June.

Given the decline in oil activity, it is possible that money coming into the fund from 10 percent of the oil extraction tax will not always completely replenish the fund if the maximum amount is taken out. The fund took in about $150 million in the past year, after growing significantly during the boom years. Measure 2 prevents education-related withdrawals from taking the fund below the 15 percent of the amount being spent on K-12 education. Proponents and opponents have pegged that 15 percent at between $300 million and $350 million.

There’s no way to know that $350 million will be adequate, Martinson said. If there was a need for the state to make more across-the-board budget cuts going forward, the $350 million might not be enough, he said.

The fund has been used twice to protect foundation aid payments from budget cuts – $5.5 million in 2002 and $116.1 million in 2016.

Archuleta said the fund was created to ensure K-12 education has a steady funding stream.

“We believe we are holding true to it,” he said. “If this whole fund would be taken down, it wouldn’t be an emergency fund. That’s not what we are in favor of. We are not interested in squandering it.”

The Greater North Dakota Chamber’s board of directors indicated passage of Measure 2 is essential to ensure K-12 education will receive the funding necessary in a challenging economic environment.

“Our children are our future and our talent pipeline,” said Andy Peterson, GNDC president, in a prepared statement. “K-12 education remains key to providing qualified workers for North Dakota employers and our demand for skilled workers continues to increase. If we allow for K-12 funding to diminish, our hopes to recruit and retain highly skilled workers could diminish. Highly skilled and educated workforce is a critical element for North Dakota business innovation and success.”

Mike McNeff, superintendent of Rugby Public School District No. 5, said the passage of Measure 2 will be important to further define education-related purposes for the excess dollars within the fund.

“2016 has been a challenging economic year within the state of North Dakota. Many state agencies received cuts due to the revenue shortfall. Thanks to the foresight of state leaders, public education was protected from cuts due to mechanisms like the Foundation Aid Stabilization Fund,” he said. “If the state is unable to continue to provide current levels of financial support, this may result in local districts providing additional support. Based on projections, it seems that maintaining 15 percent within the fund should meet the needs if there are future revenue shortfalls.”

Jill Schramm is a staff writer for the Minot Daily News. Tribune Reporter Carissa Mavec contributed to this report.

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