Panel delays proposing a school-aid boost till Nov. 1

— The panel created to determine how much money is necessary for school districts to provide an adequate education for Arkansas schoolchildren submitted its report Tuesday without recommending an amount.

Earlier this week the Joint Adequacy Evaluation Oversight Subcommittee withdrew its week-old recommendation that the Legislature allot $69 million more for schools in fiscal 2012, a 2.5 percent increase.

A 2002 state Supreme Court ruling requires Arkansas to appropriate sufficient money for the schools to provide every student an equitable and adequate education.

State law requires an annual study to determine how much is needed.

Though the deadline for its recommendation is today, the legislative committee voted to give itself an additional two months to decide how much money to recommend. Lawmakers cited the current tough economic times as justification for delaying its action.

State Rep. Bill Abernathy, D-Mena, co-chairman of the committee, said its members aren’t comfortable increasing funding while the economy is uncertain.

“The major thing of uncomfortableness is we don’t know what the economy’s going to be out there. The indicators can change by the economy changing,” Abernathy said. “Between right now and Nov. 1, why do we have to make that decision right now? That’s what’s being said.”

Arkansas Code Annotated10-3-2102 (a) (8) states that the committee must make a funding recommendation “based on need and the amount necessary to provide an adequate educational system, not on the amount of funding available.”

“It’s just part of the overall daily cost of living. Things are going up,” co-chairman Sen. Jimmy Jeffress, D-Crossett, said. “The constitution of the state of Arkansas says that we’ll provide an adequate education for our young people. It doesn’t say unless the economy goes sour.”

The House and Senate Education committees met together immediately after the subcommittee and approved the report so that a report is out in time to meet the Wednesday deadline set by A.C.A. 10-3-2104.

The recommendation will go to the Legislature’s budget committee for further evaluation during the 2011 legislative session that starts Jan. 10. The committee gave itself until Nov. 1 to decide on the funding amount to recommend to the budget committee. It could postpone again, were it so inclined. The general election will be Nov. 2.

The committee chairmen and Gov. Mike Beebe said the delay was not done for political reasons.

State Department of Finance and Administration Director Richard Weiss has said he won’t present the official general-revenue forecast for the next two years until Nov. 10, the date previously established for the forecast to be made.

State law allows the recommendation and the subcommittee’s report to be modified or added to as needed.

By waiting, “it gives us two additional updates. It just gives us more information going in, and we can still have the recommendation made before the governor presents his forecast, balanced budget and all that later in November,” Sen. Johnny Key, R-Mountain Home, said.

Inflation projections are updated around the 20th of each month, said Richard Wilson, assistant director of the Bureau of Legislative Research.

Last fiscal year Beebe cut the state’s budget by $246.9 million because of decreased tax collections.

A state law requires that when revenue declines, education must be funded even atthe expense of other aspects of state government, a measure known as “the doomsday law.”

“That is the first money that gets paid, and everything else has to take a back seat to that, so they just need to get it right. Whatever it is they need to get it right,” Beebe said.

“We're going to fund adequacy before anything else, and if that means that somebody else has to do without, then so be it. That's what the court calls for, that's what the statute calls for, so they need to be right.”

Beebe said he and his office approached lawmakers with concerns that the committee made its decision quickly and without all the information needed.

“You shouldn't base it on any just arbitrary number; you should take all of the factors into consideration and make a determination on what's adequate,” Beebe said. “Certainly inflationary numbers are one component that has to go into that, but that’s not the end-all be-all.”

The subcommittee’s original recommendation for a $69 million increase was based on inflation being projected at a 2.5 percent rate.

The governor said the committee should consider changes to the cost of technology, transportation and living expenses that might be different from an across the-board amount.

The 2.5 percent increase was derived from inflation projections for consumer spending from Moody’s Analytics and IHS Global Insight.

The panel had also recommended a 2.9 percent increase in fiscal 2013.

A.C.A. 10-3-2101 lays out the committee’s requirements, which include adjusting funding for either inflation or deflation.

One issue in the discussion of the recommendation is which method of anticipating inflation should be used to determine the adequacy amount. The Bureau of Legislative Research, which reports to the legislative branch, suggests using estimated inflation for consumer products. The Department of Finance and Administration, a part of the executive branch, presented a 1.44 percent inflation estimate for fiscal 2012 based on state and local government consumption.

“We wanted to point out that there was a substantial difference in methodology which was a substantial difference in the amount of percentage you would apply,” Weiss said.

But Wilson, the Bureau of Legislative Research official, said the state shouldn’t base its increase on the inflationary rate of government spending.

He said 82 percent of the state’s adequacy funding goes to teacher salaries, and teachers are more likely to be affected by changes at the consumer level than at the government inflation level.

In 2008, the last time the committee recommended a funding amount, it offered the budget committee a range. It used the consumer rate as the low end of the spectrum at 1.6 percent and the government inflation estimate at the higher end at 2.8 percent.

In his budget the governor recommended a 2 percent increase across the funding formula, which was approved by lawmakers.

Wilson said he has since learned from one of the economic forecasting companies that the government inflation amount is not the best method to use for Arkansas teachers or schools.

“That number was driven more by urban union type negotiation for large city fire, police that sort of thing,” he said.

He said he stands by his original recommendation that the state follow the inflation estimate for consumer spending.

John Shelnutt, who presented the government numbers for the Department of Finance and Administration, said the state needs to pick an economic indicator and stick with it.

He said it is normal for inflation to vary year to year and “switching back and forth creates distortion.”

Front Section, Pages 1 on 09/01/2010

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