Committee on
Education
Public Hearing
LB 719
March 11, 1991
Page 35
SENATOR WITHEM: Okay, thank you very much Senator Dierks. Members of the committee, LB 719 deals with the whole troubling question of- school district reorganization, affiliation, blended levies, timetables all of that type of situation. The bill, as introduced, simply changes one date, a deadline date of July 1, 1993 to June ... 1994, to June 30, 1994. Obviously that is not the intent of the bill, a simple change like that. This bill was introduced because there have been some on-going discussions about the whole question of affiliation, a number of ... now that they are in the process of attempting to make the system work, a number of people are finding some glitches that are in the statute, made some suggestions that could make the process operate more smoothly. At the time of bill introduction we did not have all of those ideas pulled together into a coherent pattern. As a matter of fact, the message I gave to folks representing different entities, within the education community, that because the Legislature has spent such a great deal of time on the issue of school district reorganization over the last several years, just leave it at several, that I did not have a great interest in reopening this issue this year if it was going to cause another major donnybrook within the Legislature, that the Legislature last year made a statement that we attempted to resolve this, wished to resolve this with a ... with a compromise piece of legislation and rather than revisit that compromise and do major battle over it I would rather see the system work even with the warts on the system than do the battle. So if. there were things that needed to be done to improve the operation of the system, I'd be willing to look at those, by and large the education community needed to run and go off into a corner, analyze the various problems and come back with something that would have near unanimous support. And I say "near unanimous", it does not have total unanimous support. What I am going to do here is try and set the stage just a little bit and then I'm going to ask Larry Scherer to suggest, to explain some amendments to the bill which will in fact constitute the bill. We have had considerable discussion on these amendments. We have circulated them so people will be aware of what we will be talking about today. Back in 1985 when I first began to chair this committee we were just coming off the battle to enact LB 662, the bill that would have provided mandatory reorganization of school districts. During the first few months I chaired this committee the battle was rejoined with
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March 11, 1991
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a number of different proposals, the redraft of LB 662 was proposed to us. Senator Lynch brought forward his proposal, one school district for one county. I had a bill dealing with changing the voluntary reorganization, county organization process to frankly more of a mandatory localized reorganization process. Thanks to Governor Kay Orr who said at that time, "Look, isn't there some way, this is a problem that the state has. There are problems, good arguments on both sides of it, can't we get some people together to try to resolve this." Thanks to that request we began that process. It took us, as a Legislature, four years to arrive at a compromise. That compromise was LB 259, that past last year. A lot of agony went into making that compromise. A lot of sweat, a lot of accusations back and forth, we finally concluded with a bill that passed last year that provided for moving into this process in an orderly fashion. The first part of the process is to be accomplished by July 1 of this year, and that is the affiliation of... July I of this year, is that correct? No, July 1 of 1992, I'm sorry. July 1, 1992 and that will be where all property that is not in a high school supporting district will have to become affiliated with a K-12 system. And, the levy to support that high school will be calculated by a-by a formula that is very similar to our current nonresident tuition formula. Then by July 1, of 1994 to provide a tax equity situation. There will be a concept we call a "blended levy" that allows for a common budget to be calculated for the high school district, the high school supporting district and all affiliated Class I's so that every taxpayer within that affiliated unit will pay the same levy, K-12. It is a compromise that ended, ended with those individuals who would have liked to have seen total annihilation of all Class I's weren't entirely satisfied with it- Those who wanted to see the Class I's continue to operate in perpetuity without any additional restrictions weren't very happy with it. But, most people out there are saying that they can-live with it. I would ask you, as you hear these bills today, and hear these changes, both the ones that we will be proposing to you as amendments and those that will be brought to you by other people, I would ask this committee to remain true to the basic principles of that change that ... that change that we enacted into statute last year. Far too much time and energy has been spent on this issue, at the cost of time that should have been spent on other education related issues to have us reopen the battle -entirely. Larry is going to be presenting to you two different amendments. The first one will be fairly technical in nature and it deals with, just ways that the system can be made to function
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better. You will be hearing rationales for those changes. The second one frankly is a little more substantive and I'm -presenting it to you for your consideration. It is not one that I plan on pushing terribly hard. If the committee feels comfortable with it, feels comfortable advancing it I will be supportive of it- If the committee does not feel comfortable with it, then we don't have to do it. That deals with the question of timing. There have been those, and you have probably gotten letters that indicate that we need to delay this process another year, push back the time lines, instead of 1992 make in 1993. I'd remind you, I guess, I have asked Larry to go back into history on how many times have we delayed this process so far. Originally LB 662 had a date of July 1, 1989. Had that been successful we would be a year and a half into the operation. Legislative Bill 940 provided for a reorganization plans to be due and into the county' reorganization committee's by January 1, 1990 and those were done. The original LB 259 provided for July 1, 1991, date for affiliation. And there was a Haberman amendment that delayed that to 1992. So, simple delay for the purpose of one more year I don't think would serve a great function. There are those that are proposing a compromise on the delay question though, and I'm bringing that forward to you for your consideration. That would be one whereby we would delay the implementation date of this one year to July 1, 1993, but rather than going into this middle phase where we continue to pay the nonresident tuition formula on affiliation, we would go right into the final blended levy approach.. If that is acceptable to members of the committee as a means of providing more time, but also get us to the final phase of our problem that much quicker, I would suggest that we may want to consider that as a committee. With that, if you have any questions I'd be happy to respond to them.
SENATOR DIERKS: Questions of Senator Withem? Senator Schrock.
SENATOR SCHROCK: Senator Withem, this blended levy, I don't have any trouble with the concept, but -I sometimes wonder how are we going to control our spending when a Class I might say, "Well, we'll spend money here because the K-12 district is going to help us." And the K-12 will say, "Well Class I is going to help us and I know we have a lid, but lids are notorious for not working. It looks to me like we are going to be helping each other spend money and it could become a runaway type of situation now and I think we have already probably exceeded the limits of our ability to spend money on education.
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SENATOR WITHEM: The original 259 as it passed last year had a measure dealing with that particular problem, that being that if one district spending increase was greater by a particular percentage above that of the entire group, then that district would bear the... all the additional cost themselves. The proposal that we have here today that the folks in the Department of Education feel would be more meaningful would be to allow the 1059 lid to operate and because we have that other lid, not to use this, you may want to when we are looking at that particular amendment give special attention to that and see what your thoughts are on it.
SENATOR SCHROCK: It just looks to me like we are going to guarantee that we are going to spend up to that lid every year. I just don't see any way out of it. There will be no incentive to spend less than that. Then they will come up and they will want to come back and...
SENATOR WITHEM: The only incentive to spend less is that under the 1059 budgetary limitation is that they don't have to use it or lose it- Other lids we have had if you didn't spend up to that level then your base was at a lower level and you can never spend that money in the future. So there was an urge to go ahead and spend it. The 1059 lid allows a carry-over of the "nonexpended" budgetary authority. So, they don't have to spend up to the lid.
SENATOR SCHROCK: I guess what I am having trouble is that a K-12 district spending money that the Class I over here has no control over and vice-versa, a Class I spending money that is going on in... the K-12 districts or the Class III budget and neither one has control over either one's spending.
SENATOR WITHEM: I understand the arguments. My only response would be is this is what the Legislature determined might be a compromise so that we would not have to take the step that was taken in 1985, in LB 662 and that is forced consolidation. That is the other option that is out there.
SENATOR SCHROCK: Isn't there something easier than that though? Something a little more basic that we can do? I don't have the answer either.
SENATOR WITHEM: Yeah, we didn't either. We worked on this for four years, with your help, frankly prior to your being here and you were quite helpful when we were dealing with
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the initial affiliation approach. We didn't find anything better. What our goal was to deal with the ... those who are urging reorganization put forward the arguments that we are perpetuating a lot of inefficient school districts with allowing the Class I's to continue to operate. We have no assurance of quality and we have great tax equity problems that they tend to be, by and large, and although we have a lot of exceptions that come forward, by and large, residents of Class I districts, on the average, pay considerably less in property taxes than do people in others. Those on the other side of the issue said we like our style of education. We want to maintain local control. We want to be able to keep our Class I's open. So solving... so this is the approach that we came up with to solve those problems that would allow continuation of Class I schools. Frankly I am at the end of my creativity. Legislative Bill 259 was my personal last best shot at it. If others have better ideas that can deal with the tax equity issue, to the satisfaction of the constituencies that we have been attempting to respond too, that is fine. The only other thing that I can think of is the attempt that we avoided throughout this whole process and that is bringing back another son of 662, which would be a forced reorganization issue. I don't want to do that anymore. There was one time that I did want to bring about forced reorganization. I think, my philosophy on education improvement, I think it is kind of ironic that when I go to national conferences I'll hear people talking about things that we need to do to improve education and they will say one of the problems we have is a typical school is too big now, and the kid is faceless in it. We really need to have smaller groups of students and maybe one teacher deal with those students all day long and maybe teach more than one subject. I don't know if that concept is at all familiar with you Senator Lamb, but maybe it is. Another approach is we need to have kids working at their own pace. And, working on an individualized approach instead of lock step with a bunch of other students in their class. And again that may sound like a familiar concept, Senator Lamb, I don't know. The latest thing, and as I remember one of the things that Governor Orr came back from the Governor's conference on education all excited about was a mentoring program where students in the upper grades, when they finished their own work, might be able to spend a little le time helping along students in lower grades. Again a marvelous new concept that nobody has probably ever heard of- A lot of good things really happened in the Class I schools and I don't want to see them close down if we can maintain it, but at the same time deal with these very significant problems that are out there. I'll try to be a
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little briefer in my answers.. I'm sorry, since I spend a lot of time on it I get carried away.
SENATOR DIERKS: Senator Schrock.
SENATOR SCHROCK: Senator Withem, I'm not suggesting that we change 259 or gut it or do away with it or ... I certainly don't want to go back to 662. What I am saying isn't there someway we can reward some fiscal conservatism on the school boards out there with a... so when there is, maybe just take the top echelon of their budget and say if you spend over last year's budget then you are spending your own tax dollars, not somebody else's because as I see it we are spending other school district's money.
SENATOR WITHEM: Yeah, I understand the argument and I would sure be happy to see if we can find some answers to that that are different than what is either in 259 now or what is in the current bill
SENATOR DIERKS: Senator Withem, you have an appointment over in Banking Committee, so you will have to answer these questions later...
SENATOR WITHEM: Oh, that is a good way to shut me off. Thank you very much.
SENATOR NELSON: Boy I tell you, I resent that.
SENATOR DIERKS: I think that Larry can ...
SENATOR NELSON: Oh, I'm just kidding.
SENATOR WITHEM: Well I'll stick around if you want ... no, I need to get over to the Banking Committee.
SENATOR DIERKS: Is Larry coming up next?
SENATOR WITHEM: Yeah.
SENATOR DIERKS: Larry Scherer.
LARRY SCHERER: Senator Dierks and members of the Education Committee, my name is Larry Scherer and I'm here to explain the amendments to LB 719 which were printed in last week's journal of the Legislature. There is an explanation that you have, if anyone in the audience would like one, raise your hand right now and a Page will make a number of copies and get that to you before the day is out. The amendments
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are, I will explain the technical ones, I think Senator Withem has already explained the amendment two, this would be amendment number 574, that I'll explain. The first, the first as a clarification of the definition of affiliated school system, as you may recall last fall there was some debate about whether it would be possible for a Class I to affiliate with more than one school district and that was always the intent of the Legislature. The definition of the term affiliated school system is clarified here so that that will be possible. The definition is one high school in all the Class I districts, or parts thereof, which affiliate with a high school district, the second change is a clarification of how services will be provided to Class I school districts. In the original bill there was a system whereby the Class I's would request the high school districts, the services they wanted, and then if it was a reasonable request the K-12 district was supposed to supply those services and the extra cost would then flow through the high school district's budget. Under the proposed amendment the Class I would contract for services with either the high school district or any provider and the cost for those would flow through the Class I district budget which is also under LB 1059. Since all-the property tax requirements are under a shared common levy, then each district ends up paying for those services based on their valuation. The third change is that under the original bill there was the system of open enrollment or option enrollment that was separate from the option enrollment bill, the enrollment option bill the legislature enacted. The amendment would place that option enrollment, if a student in a Class I facility wants to go to a K-12 facility or vice-versa, it would, that procedure to be used would be the existing enrollment options law. The number four is one that has been discussed, I think, previously. in Senator Schrock's question, there is a provision in LB 259 that any increases beyond 101 percent of the county-wide average will go back to the budget and the tax levy of the school district which would ask for those increases. Because LB 1059 wasn't in place when this was adopted, this provision was put in there, the thought here was that it was going to be very, very difficult to determine what is a county-wide average and that we already have LB 1059 budget limitation in place. This would delete that provision and schools would be under the LB 1059 lid. Number five, provides what happens if a Class I district dissolves after July 1, 1992. It basically says that they may be merged with a Class II, Class III, IV, V or VI school districts or they may merge with an affiliated Class I district in which case that Class I would keep it's original affiliation. if
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they merge with a Class I that is a part of a Class VI, then the area would obviously become a part of a Class VI. Number six, if the ... what happens if the Class ... the high school district dissolves, there is a situation where, for lack of students, for example, a high school district may dissolve and what happens in those cases. This amendment would specify that if the ... that the Class I district could merge with any Class II, III, IV or V school district and if merged with an affiliated Class I district, again the area retains its original affiliation. If it is merged with a Class I, part of a Class VI, then the area becomes a part of the Class VI. Number seven, provides a ... there was a problem that occurred when you, when we go from a nonresident tuition system to an affiliation system. The problem has to do with holding school districts accountable for nonresident tuition that is two years old and the school district might not have any of the land affiliated with it. So under 1059 they would still be losing state aide essentially because of that old nonresident tuition trail, which is two years old, whereas they wouldn't be getting any valuation increases under affiliation. So the amendment would provide that the K-12 district is going to be held accountable for current year nonresident high school tuition levels, plus any Class I valuation that attaches to that K-12 district would have the local effort rate applied to it so that they are held accountable, in the current year, either for valuation or for current year nonresident tuition amount, or excuse me, and it's a combination. Number eight is a clarification that all taxable property, as opposed to real property, will be part of a K-12 system which includes affiliation of Class VI's. Number nine, eliminates the option for Class I districts to affiliate with a Class VI. Class I districts can still merge with a Class I and thereby become part of a Class VI, they can join a Class VI as a separate entity but there was, it was virtually impossible to come up with a way to figure a common or a blended levy in Phase III if you affiliate with a Class VI. So, Class I's would have the option of only affiliating with Class II, III, IV, or V districts. Number ten, provides a system for state aid to districts in an affiliated school system. This was one of the areas where 259 and 1059 were silent and I think Tim Kemper may explain this a little more later, but essentially an affiliated school system would have its aid determined as a unit. And then the aid flowing to those districts would be distributed based on the amount of need each one generated in the formula. So you no longer look at them as individual entities for purposes of determining aid. You look at them as a unit. Number eleven clarifies the time period for which high school and
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affiliation levies become effective, and the nonresident tuition levy no longer applies. The Department of Revenue pointed out to us that a strict reading of the bill, there is a year gap between the year, the time nonresident ends and affiliation levy plugs in, so essentially there is a tax free year for the Class I's and the Department of Revenue thought that was not a wise policy choice so they suggested clarifying language. Number twelve, clarifies some terms and calculations in the calculation of the high school district levy during the 1992-94 period. And, thirteen talks about a situation where an affiliation, the districts decide that students want to continue their education in some other district and the responsibility for payment of tuition is clarified in this section. Number fourteen talks about the standard of review of affiliation plans. As some of you will recall, there is a review by the County Committee for Reorganization and they look at basically traditional attendance patterns, whether any nonresident tuition students have attended the K-12 district with which affiliation is proposed, whether any new facilities will be required and if 40 percent of the valuation will go to... less than 40 percent of the valuation will go to districts which educated at least 80 percent of the students. The clarification is that the county committee will use these criteria in reviewing affiliation plans and petitions, not just when a plan or a petition has been rejected twice, but under existing reorganization laws and procedures when those affiliations come up for hearing before the county committee, as they normally would. Those are the amendments, as I think Senator Withem mentioned, the only difference between 574 amendment and 575 is that 575 deletes Phase II, which is the 9-12 affiliation and moves up Phase III, which is K-12 affiliation, so that 1993 you would start right in with the common levy, or the blended levy, whatever terminology you want to use. If there are questions, I'll try to answer them.
SENATOR DIERKS: Senator Nelson.
SENATOR NELSON: Yes Larry, this was the question I was going to ask Senator Withem or maybe others or something, but in general all of the amendments, I think I fairly well understand, and certainly support most all of them, but I certainly have a lot of comment and concerns and Senator Schrock maybe alluded to it a little bit and there is a lot of objection in my area to the common levy for Class I districts, in other words, I may clean my own bathrooms, I may pay my teacher $15,000 and another Class I district off north of Chapman, Nebraska, they have a janitor, they have
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air conditioning and we open up the windows and let the bugs come in and why should we be penalized for them to run their school in maybe a first class condition and only have, well, have five teachers for eight grades and here I get by with two teachers for eight grades and all of those things that you know that would come up and there is a lot of objection. The affiliation, the high school level, there is no problem at all but there is a lot of objection based on those things that I just mentioned, of the common levy, and I'm just somewhat referring to you, and that was my question, I was going to say to Ron, and there is a lot of opposition to that. I don't know if you can help me out ...
LARRY SCHERER: Yeah, I think Senator Withem discussed that, the argument is there is a trade-off between tax equity on one hand and purer local control where you have the governing board setting the budget and that determining tax rates on the other hand. The compromise in 259 was that the school itself would remain open. The budget would be set by the Class I board. They would control hiring and firing of teachers and staff and all other programs. But, when it came to taxing, essentially a separate taxing district is set up so that you can have tax equity between the two. So there is no longer the argument between the two. And, you can make arguments that some control is lost. But there has to be a trade off there I guess between that and the tax equity.
SENATOR NELSON: I realize a compromise but that, as Senator Schrock says, there is no incentive for me to sweep my own bathroom floors when someone else... if I have to pay the same tax levy, see?
LARRY SCHERER: I understand the argument.
SENATOR DIERKS: Senator Schrock.
SENATOR SCHROCK: I didn't raise my hand but ...
SENATOR DIERKS: I thought you did. Senator Lamb please.
SENATOR LAMB: Larry, would you say that these amendments, well I guess it would be the second amendment, does that satisfy the concerns that are brought forth by LB 512 and 785 that we are dealing with today?
LARRY SCHERER: As to how services are provided?
SENATOR LAMB: Well 512 is Senator Coordsen's bill.
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LARRY SCHERER: Oh, I'm sorry, the second amendment. Whereby the affiliation requirement is pushed back one year but you go. right into K-12 affiliation? I don't know whether that satisfies people or not. It has the same effect of giving people one year longer to ... it just skips ...
SENATOR LAMB: It skips Phase II.
LARRY SCHERER: Right. Right. No, it is not the same thing as Senator Coordsen's ...
SENATOR LAMB: Well I know it is not the same ...
LARRY SCHERER: Coordsen's bill pushes everything back a year. Phase two is still retained.
SENATOR LAMB: Yeah I guess what, well I guess other people will make that clearer as they come forward to testify. But, and then in your explanation under number one, now is this ... a ... it clarifies that affiliation with more than one K-12 district is permissible, but, in that situation what do we do with the levy? Are we talking about, well I talk ... don't you call that a blended levy?
LARRY SCHERER: Right, right.
SENATOR LAMB: Where as the other one you would call it a common levy when you are in one school district or one..*.
LARRY SCHERER: The term common levy was probably always a misnomer. In the case-where you have more than one class, you have a Class I splitting up and affiliating in different directions because essentially what has to happen is ... to come, unless you have a number of different levies apply in that Class I, you have to do an averaging process of the levies so that in the end the levy that applies in that Class I may or may not equal what it is in the K-12's.
SENATOR LAMB: Does that mean that if... say a Class I affiliates with say three different K-12's schools, then are we blending the levy between the three schools?
LARRY SCHERER: No, no. You are just blending the levy within the Class I district, and that was part of the issue this fall when Commissioner Lutjeharms raised the issue does an affiliated school system include the K-12 and the Class I or does it include all the K-12's that are affiliated with
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the Class I, and if so, you are seeming to say that the K-12's have to have the same levy just because the affiliated with one particular Class I and that was not the intent of the legislation last year.
SENATOR LAMB: So we are not talking about a blended levy between the ... several ...
LARRY SCHERER: High schools?
SENATOR LAMB: ... K-12's.
LARRY SCHERER: No, it is a blended levy within the Class I.
SENATOR LAMB: Okay, thank you.
SENATOR DIERKS: Any other questions of Larry? Well, I think that I have one and when you talk about the Number 8, clarify that all taxable property as opposed to real property is a part of the affiliation, could you go into that a little bit Larry?
LARRY SCHERER: The intent was stated in LB 259 that by July 1, 1994 all property and all students would be in a school system offering education in grades K-12, and for purposes of the law Class VI's are considered in K-12 and affiliated school systems are considered K-12. The problem was that the specific language used was that all real property shall be included, not for personal property. Now maybe we were foreseeing the Supreme Court's decision by a couple of months but I tend to think it was just a bill drafting accident and all this does is say taxable property. It may be that after this year there is nothing but real property taxable. But, that certainly wasn't the intent of this bill.
SENATOR DIERKS: Okay then over in,. I believe that it was in the thirteenth point that you made, does this deal with the problem we had where districts were applying to affiliate with one school district and then opting their students out to another one because of the tax differential, is that ...
LARRY SCHERER: That was mainly a problem between affiliation and the choice law, or enrollment options. Legislative Bill 259 said that when you do an affiliation plan, you can include provisions in it that students who have always been attending high school X can continue to go to high school X and tuition would be paid for them to continue their education until they graduated. But, it
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didn't exactly specify which district was responsible for paying for those tuition costs. And the amendment tries to specify that, you know, who is responsible for those tuition costs. It is related to the problem that we have with option enrollment because it offers an alternative way to ...
SENATOR DIERKS: Thank you. Other questions? Senator Nelson.
SENATOR NELSON: Larry you opened up another one then. I think we tried to address this is another bill, but does this satisfy the problem then that I sent my kids to Lincoln, as an example, or I sent my kids to Grand Island and then I move outside of Grand Island or I move a mile or two outside of southwest Lincoln here and normally my kids would have to go to Waverly. Okay, then they could move into a much, much lower tax district, particularly a small Class I district, I'll say around Grand Island, where it is 90 percent agriculture and agriculture then would be supplying the funding for the school. And back to the choice bill or the tuition, I send my kids to Grand Island and so then I, even though I move into the Class I district, the much, much lower tax rate I can still send my kids back to Grand Island to school or the same thing in Lincoln and that was a big problem with me.
LARRY SCHERER: No, this really just deals with students that are living in Class I's and they, under the nonresident tuition system have a history of going to a particular high school and their affiliation plan wants to allow those families and those students to continue to go there ...
SENATOR NELSON: For one year wasn't it or...
LARRY SCHERER: Well basically until they would graduate, but the affiliation petition or plan would cover the length of the term. No, it is not really the same problem.
SENATOR NELSON: Thank you.
SENATOR DIERKS: Other questions? Thank you Larry. Are there proponents of ... let's see, Larry does he want to go ahead and introduce all of the bills?
LARRY SCHERER: I think he wanted to get them all introduced. The Department of Education has some comments and I think those are primarily directed to 719, 1 don't know how you want too ...
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SENATOR DIERKS: What do you want to do George?
SENATOR COORDSEN: I want to introduce this one
SENATOR DIERKS: Okay. Let's get Senator Coordsen's bill introduced, LB 312 please, and then we will take the Lamb.