Bill Would Remove Financial Barriers to Consolidation

Allows local cost-sharing agreements and removes disincentives

November 28, 2007

AUGUSTA – A bill proposed by the Maine Department of Education and released today removes unintended financial barriers in the school district reorganization law. The bill addresses three funding issues that have been identified as obstacles to some consolidation efforts.

“My administration has been working with school administrative units to add flexibility to help them achieve the requirements of the law,” said Gov. John Baldacci, who worked with Education Commissioner Susan A. Gendron to amend the school funding law. “The intent of the law is to encourage consolidation, not discourage it. In three specific ways, some districts would be penalized for doing the right thing. These changes should remove unintended barriers to consolidation.”

Jim Rier, Director of Finance and Operations for the Department, said Commissioner Gendron has indicated for several months that she would propose the changes and many units have moved forward in their discussions based on that expectation.

“They’ve asked for more tools and flexibility and this gives it to them,” Rier said. “In many regions around the state, communities have been moving forward and doing excellent work to plan for consolidation, even though they knew some of the units would take a financial hit while their neighbors might gain. Now we can tell them ‘you can fix that.’ In other places, where cost shifts have stood in the way of units coming together, they can move forward.”

Nearly every reorganization effort will benefit from the proposed changes. The bill, LD 1932, An Act To Amend the Laws Regarding School Funding, would:

Allow local cost-sharing agreements among school administrative units forming a regional school unit. In regions where consolidation might shift costs (above the state-determined Essential Programs and Services allocation) from one unit to another, the units will now be able to design their own cost-sharing agreement to compensate for the shift. The proposed changes would allow those units to base their agreement on property valuation, the number of pupils, a combination of those, or any other factors they may choose. Allowing local cost-sharing agreements could benefit almost every reorganization effort, though in many cases the cost-shifting is minimal: - In Falmouth and SAD 51 (Cumberland, North Yarmouth), the units have been moving forward despite a significant shift in cost to Falmouth that can be eliminated through a local cost-sharing agreement if the legislation passes. - Freeport, Pownal and Durham have been holding consolidation discussions, but cost-shifting caused by the addition of Durham to the mix has been a concern that could now be addressed through a local cost-sharing agreement. - The consolidation of Caribou, Fort Fairfield, Limestone and surrounding communities is another example of an RSU that will benefit from the provision to allow local cost-sharing agreements.
Remove the requirement that all units joining a regional school unit must raise at least 2 mills toward the cost of education (the Essential Programs and Services allocation). The requirement for the 2 mill minimum, which affected roughly two dozen mostly higher property valuation communities, had the effect of discouraging some consolidations because the penalty for opting out of consolidation would be less than the added cost of raising 2 mills. The proposed changes remove the 2 mill requirement. Approximately two dozen school units around the state will benefit from the removal of the 2 mill minimum requirement, including Southport and Rangeley Plantation.
Ensure that “minimum subsidy receiver units” would not lose their subsidy if they joined in an RSU. Under current school funding law, a unit that is able to raise its entire Essential Programs and Services allocation for less than the state-determined mill rate receives a minimum subsidy – the greater of 5 percent of the EPS amount or 84 percent of special education, usually the latter. Under the existing reorganization law, in some circumstances, when a minimum subsidy receiver joins with a regular subsidy receiver, the new RSU would become a regular subsidy receiver meaning the RSU would lose the minimum subsidy, adversely impacting the RSU as a whole, and especially the former minimum subsidy receiver. The bill would restore the minimum subsidy to the new RSU, specifically to the current minimum subsidy receiver. About 80 school units are minimum subsidy receivers, though not all of them have been adversely affected by the potential loss of minimum subsidies. Among those benefiting will be: Saco, Dayton and Old Orchard Beach; the units in the Mount Desert Island area; and the units on the peninsula that includes Boothbay Harbor.

Governor Baldacci said the fixes to the funding law will allow units to move forward and the law to have its intended effect.

“Make no mistake, this is a complicated process with an aggressive timeline,” he said. “People of good faith are making this work, and with these changes to the funding side of the law we can make their jobs a lot easier.”

The bill, sponsored by Education Committee co-chairs Sen. Peter Bowman, D-York County, and Rep. Jacqueline Norton, D-Bangor, is scheduled for a public hearing before their committee on Dec. 12 and a work session the next day. Additional co-sponsors are senators Elizabeth Mitchell, D-Kennebec County, and Karl Turner, R-Cumberland County; and representatives Emily Cain, D-Orono, Sawin Millett, R-Waterford, and Meredith Strang Burgess, R-Cumberland. The bill is expected to go before the full House and Senate almost immediately after the Legislature returns to session on Jan. 2.

The full text of the bill, LD 1932, can be found online at: http://janus.state.me.us/legis/LawMakerWeb/summary.asp?ID=280027315

Or by going to http://www.maine.gov/legis and entering “1932” in the box in the upper right corner.

The Department has posted information about developing local cost-sharing agreements, including a template and link to the legislation, on the planning and resources page of its reorganization website: http://www.maine.gov/education/supportingschools/planning.html .

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David Connerty-Marin, Director of Communications, Maine Department of Education, 207-624-6800

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Bill Would Remove Financial Barriers to Consolidation