Transcript Prepared by the Clerk of the Legislature

Transcriber's Office

Committee on Education LB 1134

January 27, 1998


Page 21


LB 1134


SENATOR JANSSEN:  Madam Chairman, members of the committee, for the record, my name is Ray Janssen representing the 15th Legislative District.  It's my pleasure to be here today to introduce to you LB 1134.  This bill makes several adjustments to the reorganization incentives that we currently offer to reorganized school districts under Section 70-1010.  The main goal of this bill is to simply move up the payments of the reorganization incentives to the first year in which the reorganization district provides educational services.  Currently, there is at least a two year time between when the school district reorganizes and when '%-.hey receive the incentive under Section 79-1010.  1 feel that it is important to make these incentives available to the school district the first year that they operate as a reorganized district.  In order to accomplish this change in payment date, a number of changes need to be made to the time line for when these incentives are determined..  However, I thought that it might be helpful to just give a quick reminder of how these reorganizations' incentives are currently determined and paid.  Where organization incentives are available under Section 79-1010 to the school districts whose reorganizations are effective between May 31, 1996 and August 2, 2001.  Currently, the


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reorganization incentives are determined at the time...  at the same time that the state aid is certified to the school districts.  Therefore, they are determined and certified to the districts in December of the school year before they are set to receive them.  The amount of' reorganization incentives are determined by comparing the number of students that are in the district as in each of the grade ranges prior to the reorganization on how many students will be in that grade range following the reorganization.  There are three grade ranges.  Grade 1 through 6, 7 and 8, and grades 9 through 12.  School districts receive a certain incentive for or each student that moves from a small number of students to a larger number of students in that grade range.  The idea is to reward the school districts that are joining together to increase the efficiency and the educational opportunities which is reflected in moving more students from a smaller group into a larger group of students.  The number of students that move into the different size ranges is determined by comparing the average daily membership in each of the grade ranges in the districts in the school year immediately preceding the first year the boundary changes in the effect and the number of students that would have been ...  would have been in each grade range that had the reorganization occurred during a prior year.  The number that would have moved is then taken times a set incentive for that grade range and size change.  These per student incentives are then added together and paid to the reorganized district over a 3-year period.  The question has become when to do these payments.  When do they begin?  The language in the current section of the statute says that these payments to the school district are to begin in the base fiscal year.  The definition of base fiscal year is found in Section 791003 and has changed over the last couple of years.  Originally, base fiscal year was determined as the first fiscal year in which all data resources reflected the reorganized district as a single district for the calculation of state aid.  The Department of Education interpreted this to mean the first year in which all of the reorganized districts informed (sic) was received on their annual financial report.  Therefore, due to timing issues, base fiscal year was interpreted to mean that the reorganized school district would not receive their incentive payment until three years I after the reorganization took place.  Me definition of base fiscal year was then changed last year in LB 710 to try to move the payments up.


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The definition now says that for the reorganization during ...  occurring during or after 1995-96, the base fiscal year is the second fiscal year following the year, following the year in which the organization occurred.  Therefore, a school district that is reorganized in 1997-98 school year would not receive any incentive payments until the 1998-99 school year.  Therefore, the first change that LB 1134 makes is to.  change the time line for when reorganization incentives are determined in order to move up the payments of the incentive.  The first step in accomplishing this is to change the definition of base fiscal year.  Legislative Bill 1134 defines the base fiscal year as the first year in which the reorganization...  reorganized school offers educational service for reorganization during ...  occurring during the 1997-98 school year and after.  Therefore, a school district which reorganized during the fall of 1997 and offers educational services as a school district during the 1998-99 year will receive the first third of their incentive payments during 1998 and in '99, remembering they are in three years.  However, in order to accomplish this, the time line needs to be changed as well.  As I said before, the reorganization incentives are determined by looking at the average daily membership, numbers of the school districts in the year prior to the reorganization being effective.  From what I understand, these figures are not reported to the Department of Education until the annual statistical summary is turned on July 1 following the school year.  Since state aid is certified and incentives ...  and the incentives are currently determined the December before, this causes a problem.  Legislative Bill 1134 would address this problem by separating the certification of the state aid from the determination of the reorganization incentives.  Certification of state aid is left in the December of the previous year but the determination of the reorganization incentive is moved to August 2, immediately before the school year in which the reorganization incentives are to be paid.  This works better for several reasons.  First, it is necessary to wait until after July 1 since this is the date when the average daily membership numbers are received from the school districts.  Second, this would also allow the Department of Education to know all of the school districts that would be reorganized for the next school year since reorganization for the next year must have been ordered to change the boundaries issued no later than June 1, under Section 79-479.  Also the boundary changes for reorganized


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districts must be effective prior to August 2.  This would give the Department a month, after receiving the average daily membership figures from the district and two months after they were aware of all reorganizations to clarify the amount of the incentive.  The final step in accomplishing this change in the time line is established...  is the establishment of a separate fund to pay for these incentives.  Currently, the reorganization incentive payments are funded by one percent of the Tax Equity and Educational Opportunities Support Fund.  Currently, the portion of this one percent is not necessary for incentive payment goes back to that fund, whatever is not used there, it goes back into the fund, or a general pot of money for distribution to all districts as state aid.  Legislative Bill 1134 would take this one percent and put it into a separate new fund called the Reorganized School Assistance Fund.  Each year the state treasurer would transfer the one percent from the Tax Equity and Educational Opportunities Support Fund.  The amount to be transferred to the new fund would be subtracted out of the state aid money prior to the calculations affecting the distribution of state aid that are made in December.  The fund would only exist until the year 2004 when the last of the incentive payments should be made.  Then the remainder of the Reorganization School Assistance Fund would go back to the Tax Equity and Educational Opportunities Support Fund.  That's a lot support funds and ...  to be used for the equalization aid.  Since the one percent has already been certified to schools for the upcoming 1998-99 school year, LB 1134 calls for a one-time appropriation of $1 million to the newly-created Reorganization School Assistance Fund to help pay for those costs ...  for the costs of the reorganization incentives during that first year.  These changes include amending the definition of base fiscal year, separating the determination of reorganization incentives from the certification of state aid, delaying the determination of incentives until all reorganizations are completed, and creating a separate fund to provide for these incentives would allow these incentives to be paid to the school district when they really need them, the first year that they have to provide educational services.  Improving the timing of these incentives might make a big difference in encouraging a school district to reorganize.  It might allow them to show their members that they are ...  that they will be faced with ...  that they will facing funding shortages at the time that they are


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reorganizing.  These are immediate causes.  There are a lot of immediate causes associated with reorganization that may be decreased over a period of time, which I'm sure they would, such as costs for picking up new staff and making sure that everyone is placed on the same pay scale.  Having some extra funding in the beginning might allow some staff to leave through attrition, rather than by outright termination.  There are other costs of merging, books, joining curriculum, improving facilities and so on.  The list goes on.  By the time many of these school districts are ready to merge, they may have spent the last of their money trying to save their school.  There is often a little cash reserve left to cushion the initial cost of the reorganization.  In addition to moving up the payments of the incentive, the bill would suggest other changes that makes the incentives more fair.  Legislative Bill 1134 requires that the amount of the reorganization incentive shall be doubled for any reorganization involving a Class VI and Class I school.  This idea was brought to me by several school districts and seems to make a lot of sense.  When a Class VI and several Class I's merge, there are unique costs involves such as the Class VI bringing on the teachers in the.  elementary program and developing a new elementary program for the students in the Class I's.  Traditionally, many of these Class I teachers may be paid less and must be brought on to the higher pay scale and the benefit programs.  Improving the incentives for these types of schools also might encourage some schools to reorganize since the incentive payments for the movement of these younger students is traditionally small.  The final change in LB 1134 would make...  is to make...  is to put back into place a form of protection that was formerly available to the reorganized school district that guaranteed that the reorganized district would not receive less in state aid during the first year of their reorganization than they did in the prior years as separate districts.  Legislative Bill 1134 provides that for fiscal year 1998-99 and after the reorganized district cannot receive less state aid in the base fiscal year than they received as individual districts in the year prior to the first year that they provided educational services as a reorganized district.  I believe that this is important, that we put this 100 percent protection back in for that first year that the districts operate as a reorganized district.  This protection would allow the district to have certainty in planning as they go


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through the reorganization process.  And allow them to not face uncertain fundings at the same time they're going through lots of other changes.  In conclusion, I believe that 1134 makes several necessary changes to the core reorganization incentives.  It is important to provide that these incentives and the protection during those first years that a school districts are reorganizing rather than 2 to 5 years down the road after the transfer is complete.  These schools need the assurance and assistance with the funding during those first years that changes are occurring and that transitions of the new system is being completed.  In addition, there is the issue of the Legislature position on encouraging consolidation.  I believe that it is time that we put our money where our mouth is and make the changes necessary to help make these incentives really work for the school districts.  I feel so strongly that these changes need to be made right away that I have designated this bill as my priority bill for this year.  And I want to express my willingness to work with this committee to see that this important legislation is advanced.  There is one issue which I would like to quickly address with you on possible changes on this bill.  I would suggest that the $1 million appropriated was merely a starting point.  I know that the first incentive payments are being made this year, of about $870,000.  I've also seen estimates that the number of reorganizations is increasing so actually, more than $1 million might be necessary that first year.  One percent of the fund, had it all been appropriated, would have been about $6 million from what I understand.  This is an issue which might be discussed by the committee and, again, I would be glad to assist you in any way I an.  Again, I want to thank you for considering LB 1134 and look forward for your advancing of the bill.  And I would try to answer any questions that I could.  There are some other testifiers behind me that will elaborate on some of the problems that they are occurring.


SENATOR BOHLKE:  Thank you, Senator Janssen.  Questions from the committee?  Senator Stuhr.


SENATOR STUHR:  I do want to thank you, Senator Janssen, for bringing this bill.  We have a situation in my district that I think this could be very helpful, the concern about the increased costs during that first year.  But my question is, is it.  really necessary to have double the incentive for that


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Class VI and Class I.  Could you...


SENATOR JANSSEN:  Well, Senator Stuhr, in my opinion, yes, it is because of the main reason is bringing aboard some of the teachers from the Class I, that are ...  were grossly underpaid to begin with.  And they will have to be brought on to that, you always them on to the higher district's pay scale when you do that.  And that will be quite a cost.  The other cost would be the starting of a Class I system,,, because the reason we're bringing the Class I's all into one group is that their curriculum will be the same and so on and so forth, and there will be a lot of starting-up costs when initiating the books and so on, to get these ...  to get all of the elementary students on the same level or on the same schedule as everyone else.  Did that answer your question?


SENATOR STUHR:  Thank you.  Yes, it helped a bit.  Thank you.


SENATOR JANSSEN:  It doesn't convince you but it helps you.  (laughter)




SENATOR BOHLKE:  So, Senator Janssen, what we're doing is, in a way, subsidizing the decisions by that Class I school board who have, using your terminology, grossly underpaid teachers, by subsidizing it now with state funds by those decisions.


SENATOR JANSSEN:  Well, this is something that we have looked down the road at.  We're going to have to make our districts larger and in order to do that, sometimes we do need to subsidize them.  But you realize that after that three years, then there is no other subsidizing, so you...


SENATOR BOHLKE:  Right.  But I mean...


SENATOR JANSSEN:  ...  then they're a free-standing district on their own and they will support that and go into the formula with everyone else.


SENATOR BOHLKE:  It's something I think we're going to have to consider and talk about.


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SENATOR JANSSEN:  I'm sure you will.


SENATOR BOHLKE:  Cause I'm thinking, you know, that they've been able to keep their levy down by having a lower cost by paying their teachers less and so now, we're, I guess, yeah.


SENATOR JANSSEN:  Not all of them though.




SENATOR JANSSEN:  Not all of them.


SENATOR BOHLKE:  That's true.  And we always have to remember that.  So that'll be an interesting discussion I think we can have.  I assume maybe some of the people who are going to testify are here from those Class ...  or from the Class Igo.  All right.  Any other questions from the committee?  I see none.  Thank you, Senator Janssen.


SENATOR JANSSEN:  I would like to close it, just.


SENATOR BOHLKE:  Yeah, okay.  First proponent?


REX SCHULTZE:  Good afternoon, Senators, my name is Rex Schultze.  I'm an attorney practicing here in Lincoln, Nebraska.  I represent the Logan View Jr-Sr High School District, now the Logan View School District which be a operating Class III school district for the 1989-99 school year.  I would first like to echo Senator Janssen's comments that LB 1134 is a very important piece of legislation.  I think, to begin my comments, I'd like to pick up where we left off here with Senator Stuhr's question because I think it's an important one.  And I think it's an important one for a public policy reason.  We used the word a moment ago, subsidizing the Class I's or something of that nature.  Something very fundamental is going on around the state as a result of the legislation that, I think, this committee brought forward and the Legislature passed last year in LB 806.  And, essentially what's happening is, is because of the decisions made that have to be made by Class VI boards of education with regard to the budget of expenditures for the Class I school districts or by the Class III' boards of education when Class I's come to them to ask for additional budget authority.  That ...  what's really happening is you


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have encouraged reorganization, which as I have understood, is something that the Legislature has been promoting.  As a result of that, you are changing an entire system by which education has been delivered in this state for 130 or 140 years.  Class I school districts have existed and many of these Class I school districts have existed for over 100 years.  And...  and they have operated at a different level and compensated their staff and had budgets in different manners.  However, you're now, through encouraging reorganization, bringing these systems to an end and you're now creating K-12 school systems.  And those K-12 school systems are going to educate the children that formerly went to each of the Class I's.  And by statute passed by this Legislature, the salary schedule of the largest school district in any reorganization is the salary schedule upon which ...  or the negotiated agreement, I should say, all of the teachers who come into this new school district and new school system must be paid.  Now, Senator Stuhr asked, why do we have to double it for Class VIs.  Well, somewhat that's a function of Section 79-1010, Section 79-1010 if you look at is broken down into three separate categories by which incentive aid is calculated, grades K-6, grades 7 and 8, and grades 9-12.  When a Class VI school district reorganizes, unlike when two Class III or Class II school districts reorganize, you are not moving students who are in grades 9-12, or in the case of Logan View, in grades 7-12 from a smaller district to a larger district because there is no charge ...  or I should say a larger attendance area, because there is no change in the Class VI portion of the reorganization.  The only change occurs in the K-6 area.  So, therefore, in a reorganization that has a ramification just as great or greater than combining two K-12 districts, Class III districts, there is no incentive placed in there.  You don't get additional monies for moving any of the high school or junior high kids and so they ...  the Class VI is at a distinct disadvantage.  In the meantime, when a ...  two K-12 school districts come together, generally those teachers, K-12, including the elementary teachers are paid on a similar salary schedule because those two schools that are getting together are of similar size, generally.  So they have gone through the comparability process promulgated by .the Commission of Industrial Relations and they're going to pay about the same rates of pay.  And, significantly, that's going to be across the board, both for elementary and secondary people; and it's going to be on a salary schedule;


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and they're going to be providing fringe benefits including, in most cases and I'd say 99 percent of the cases, full family insurance or full single insurance to those people who qualify.  Unlike this circumstance, the Class I school districts in this state generally have not been subject to the comparability requirements of the Commission of Industrial Relations.  In fact, one of the schools under the Logan View Class VI, Nickerson, about four or five years ago went through the Commission of Industrial Relations and to get comparable employment, they had to go 180 miles away from Nickerson to find a comparable employment with a Class I school district of the same size that even had a salary schedule.  In the case of Logan View and ...  and...  and I'm just using that as an example because this would be true, not only of Logan View, but other Class VI systems.  And I'm in the process of working with the North Bend Central Class VI system and looking toward an election method of reorganization this year and I know there are other Class VIs looking at it.  But just to give you an example of the circumstance that we have now.  In Logan View, we have seven elementary schools, one of those is Hooper.  Now Hooper was the largest of the Class I's and you will find this pattern throughout the Class VIs.  You will find the in-town Class I's generally will pay more.  But Hooper has a base salary of $19,000 on a five-byfour salary schedule.  That's five percent, vertically moving down for experience, four percent horizontally.  They have a similar salary schedule to Logan View.  Logan View's salary schedule is a five-by-four salary schedule but Logan View's base is $20,450 for the '97-98 school year.  So, at the very beginning the Hooper teachers are $1,450 below on base salary to the Logan View staff or the Logan View salary schedule.  In addition, fringe benefits at Hooper, the largest of the Class I's, the one that pays the most, is incremental for health and accident insurance, which means they don't pay at all.  You have to be there for a while for them to pay the full amount.  So there will be an increased cost there possibly.  However, if you take a look at the remaining six Class I's, of the remaining six, based on what I've been able to find, only two others may have salary schedules, four of them do not.  Have no base salaries, specifically, they have individual teaching contracts with, their' teachers.  Their contracts, they have no fringe benefits at all, pay no fringe benefits.  But here is one of the most significant factors, I think, in answering Senator


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Stuhr's question, and two of the board members from two of these Class I's, are present and you can ask them about this if you'd like.  They base their teacher contracts, based on 1,032 hours of instruction, which is the minimum required by state statute.  If you...  and that's what they pay their teachers on.  If you average six and a half hours a day of instruction, that is 159 days of instruction or working days.  Now they add two days at the beginning of the year to get started and two days at the end of the year to wind up, that 163 days, of contracted for work.  In the state of Nebraska, almost all Class III school districts, I'd say 90 percent, have 185 contract days so you're going to be bringing the educational program that I talked to you about before, a Class I program, up to an educational program that we've traditionally offered in this state and you're going to add 22 or 20.  more days on to those contracts.  Now, teachers.  according to the Commission of Industrial Relations are paid on a per them basis and if a teacher if paid on average, if you take a look and I messed with the numbers a little bit today, about $165 a day which would pretty basic standard if you go through and look at their index factors and the number of teachers and you take a teacher times $20 ...  or excuse me, 20 days and then multiply that by an increased number of teachers, let's see.  Oh, let's say, 20, out of the smaller schools.  You can see what that cost is.  The other thing you have to look at and consider and I would commend to you is, what fringe benefits.  To put a teacher on a full-family coverage in this state, depending on what covers the school district provides, it's going to cost somewhere between $5,000 and $6,000 per teacher.  So these are real costs and they're costs that are particularly sensitive to Class I school districts in Class VI systems.  I can tell you, when we had our first community meeting with North Bend Central, one of the board members for the Class VI raised her hand and she said, I just did some quick calculations.  Do you realize it's going to cost us $180,000 the first year simply to put the Class I teachers on our salary schedule?  That is more than the incentive aid they would receive the first year they received incentive aid which would be under the present statute, two years down the road.  So, you know, you're talking about a significant cost.  And the distinction again, between Class VI's and any other system is most of the other systems already have an elementary program in place, as Senator Janssen notes.  There was one other point made that I think is important


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with regard to moving up the incentive aid.  In a matter not related to a Class VI situation but a Class III and a Class I situation.  I'm familiar with it.  In fact, had discussions on just this morning.  Again, LB 806 has created a circumstance where Class I school districts have had to go the Class III school systems or the Class III school system with which they have 67 percent or more of their land affiliated, and ask for an increase, if they so desire, in their budget of authority.  In this particular circumstance, the Class I has gone to the Class III and asked for the additional spending authority and the Class III has said, well, we'll let you do that and we'll give you the spending authority with two conditions.  One, you don't cause the expenditure or an increase in taxation to do that and you spend down your existing cash reserve; and, two, you reorganize at the end of the next school year.  And so that's kind of what's happening out there but what that says is that when that reorganization occurs is there will be no .cash reserve from that Class I school district to pass on to the Class III.  So it's going to be important for that Class III to have some incentive aid and getting that incentive aid that first year out of the chute.  The other point that I would like to make with regard to LB 1134 is that the hold-harmless provision that was eliminated last year and should be put back because it's important for the school districts that are going through the reorganization process to be able to make some plans.  And most plans sometimes have to be made before, even before December 1 when the state aid numbers come out.  Reorganizations occur throughout the school year for various reasons and for various timing reasons.  Some reorganizations, in fact, I have one in mind right now in the central part of the state, occur a year in advance.  This reorganization I am speaking of will be going through and completed probably by the end of next month with the order of the county superintendent entered, but it won't be effective until next March.  And so, therefore, you have school districts that have to be able to plan how we are going to Bit fiscally before we ever know what our state aid numbers may be.  And again, there are reasons for this to occur and one the most reasons for this to occur is, again by state statute, we have to make plans with regard to staffing needs.  If you want school districts to be more efficient, school districts have to be able to be in a circumstance when the school is reorganized., they have the staff that they need to run their school and


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no more.  Because state law requires that the reorganized district inherits all the assets and all the liabilities, including the continuing contracts of teachers with those school districts, unless somehow there is reduction-in-force; and as such, planning has to be done in advance for that and you have to have the monies available to do that.  And by statute, also, if you do a reorganization, you also have to provide, by statutory mandate, payments to teachers who wish to elect to participate, if they're going to be riffed, in staff development and be able to go back to school, at the school district's cost, one-half of their pay for one year; or statutory mandated early retirement incentive program of $740 per year of service is you're over 55.  Now, right now, any agreements to do that, any agreements to do that or payments of that matter, may ...  may not be subject to levy in the budget lids but we'll have to find out how the legislative session handle those.  But, nonetheless, those are payments that have to be made that are statutorily mandated.  So remember that when you're going to do reorganization, there's a cost to it.  You are reorganizing the provision of education in this state and particularly if you're changing the Class I-Class VI systems, there are significant changes in the type of educational program being offered, the number of days of education being offered.  So, I hope I've been of assistance in addressing those issues to you.  If you have any questions, I'd be glad to entertain them.


SENATOR BOHLKE:  Thank you.  Questions from the committee?  Yes, Senator Raikes.


SENATOR RAIKES:  Help me understand here.  You ...  going back to Class I-Class VI, you mentioned now, of the three classes of students on which the incentives are made, one of them gets left out.




SENATOR RAIKES:  Okay, on the other hand, the other two would be bigger, wouldn't they?


REX SCHULTZE:  No, not necessarily.  Well, if ...  well, I don't know if I understand your question.  Let me try to do it this way.  If a...


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SENATOR RAIKES:  Well, there's no elementary in the


Class VI, right?


REX SCHULTZE:  That's correct.


SENATOR RAIKES:  So you've got whatever elementary, so you've got a gain of 100 percent in the two elementary categories.


REX SCHULTZE:  Well, you're taking a look...  if you look at the elementary categories in the Logan View circumstance.  Let's take a look at that.  If you look on page...  if you have the bill, I think it's page 12.  1 guess the graph is on page 13.  What you're looking at is, is you have the smaller Class I's all the Class I's except Hooper would have fallen under the category at line S.  We're taking .01 students to 101 students and we're moving them into a school between 185 and 375, so that $890 per student.  You see that?


SENATOR RAIKES:  You're looking on line?


REX SCHULTZE:  Well, I may not have the right draft of the bill.


SENATOR RAIKES:  Yeah, okay.


REX SCHULTZE:  All right.  And then in the case of Hooper, because they had 140 students this last year, you would look at 101 students to 185 and moving from 185 to 375, that's $300 a student.  But that's all.  Okay.  That's all that Logan View or any Class VI, in their same circumstance, would get.  Those dollars, which when you add them all together, as it comes Out is about $500,000 which divided over three years is $170,000 per year.  That's approximate.  But, if you go down to the next two categories for grades 7 and 8, and grades 9 through 12, which, by the way, if you take a look at the membership range boundary change dollars that you get for those students, are significantly greater, the dollar amount.  For instance, the difference between $590 if you're moving, in the first column or the first category under the K-6, it's $1,640 in the first category for 9-1.2.  But the Class VI does not get to participate in either of the next two categories because they are not


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moving children in those grades from attendance centers that are smaller to larger.




REX SCHULTZE:  Did I explain that?


SENATOR RAIKES:  Yeah, I think I follow you.  What I was getting at was that you pointed out some of the disadvantages in the incentive payments but there are...there would, in fact, usually be some increased number of students transferred in the lower grade categories, right?


REX SCHULTZE:  Yeah, what...  I'm not saying that...  I'm not saying that when a K-12 ...  when two K-12s get together, certainly their going to get incentive aid for their elementary students.  I'm Just talking about the fact that...let's say the K-12s get $170,000 but they may get another $200,000 in state aid from grade 7 through 12 and the Class I's don't get that advantage and their elementary -costs are much, much higher than the K-12s (inaudible).




REX SCHULTZE:  Yeah, so you're right, that's a good point.


SENATOR RAIKES:  The other thing you mentioned about salaries moving from Class I's to...




SENATOR RAIKES:  ...  Class VI and, you know, you partly counteracted, at least my point, when you talked about you have to pick up the contract, whatever it might be and I ...  typically, are contracts for Class I schools with their teachers, several years.  Are they one year at a time or how do they?


REX SCHULTZE:  Well, the teachers have a continuing contract, by law.  All right.  Whether or not teachers get a raise or what their salary is determined by the board of education and the teacher entering into a contract.  The distinction is very few Class I school districts have formed associations.  They're not, you know, the teachers


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kind of come into the board meeting and say, well, what are you going to pay me this year?  Whereas, in most K-12 districts in this state, teachers are represented by an association affiliated with the Nebraska State Education Association.  This is the NSEA salary schedule and fringe benefits book, only one of the Class I school districts under Logan View is even in this book, to indicate to you where they sit with regard to negotiating power.  So, yeah, they have a contract, they have a continuing contract, they have a job every year.  How much they get paid is between them and the particular school district.


SENATOR RAIKES:  Yeah, the general point I was getting at, maybe it's not relevant, is that when you consolidate, hopefully one of the things you gain is some employment efficiencies.  You may not have...




SENATOR RAIKES:  ...  to use every single teacher, before the consolidation, after the consolidation.


REX SCHULTZE:  The difficulty with that ...  the answer is, yes, and will there be reduction in staff?  There may be.  The difficulty is, under reorganizations is, is that if I'm going to reorganize for the '98-99 school year and I want to reduce staff, that action has to be taken by the board of education of the Class I school district, in this particular instance.  Many Class I school districts hire ...  don't feel they have the fund expertise, ability, or desire to make those staffing cuts which leaves it up to the Class III in the year subsequent to the reorganization's completion.  I mean, that's just a fact of life.


SENATOR RAIKES:  Okay.  Thank you.




SENATOR BOHLKE:  Other questions?  Senator Wickersham.


SENATOR WICKERSHAM:  Well, I ...  I think Senator Raikes started to touch on something that's bothering me.  I couldn't help hearing the testimony in this framework.- We need larger incentives to reorganize because after we reorganize, we're going to have higher costs.


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REX SCHULTZE:  That's right.


SENATOR WICKERSHAM:  I think the traditional argument in favor of reorganization is that you should be asked to reorganize because after you reorganize you'll have lower costs.  Which...


REX SCHULTZE:  I think, Senator, eventually you're going to...


SENATOR WICKERSHAM:  ...  which ...  which ...  which part is out of focus here.


REX SCHULTZE:  Well, I don't think...




REX SCHULTZE:  ...  I don't think either part is out of focus.  I think you have to go back to my original point which is, you're changing the system by which you're providing education.  All right?  And I think Senator Bohlke said it earlier when she was talking about...  she used the word, subsidize the Class I's.  If the desire of this Legislature is, is that we should have fewer school districts and ...  and ...  and we should reorganize to become more efficient, I think we will reorganize and be more efficient; but first, you're going to have to, in following state statute, literally reorganize how you're delivering education in this state.  So the answer is, it's both things as you said, Senator, will there be for efficiencies?  Yeah, there will be more efficiencies.  Are you going to be providing an educational program for students that goes 185 days rather than 163 days?  Yes.  Is that good?  I hope so, because that's what we're providing the children throughout the state.  But, yes, you're going to have to spend some money, and that's why you put incentive aid in, as I understand it, to provide monies to take up the impact of getting up and going.  You're going to have to spend some money to change the way the system is delivered and once that gets going, yeah, you're going to be more efficient or you certainly should be.  So I don't know if that's a double answer for you but the answer is two-fold, yes and no.  (laughter) Did I explain that well enough or?


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SENATOR WICKERSHAM:  Yes and no.  (laughter)




SENATOR BOHLKE:  Other questions?  I see none.  Thank you.


REX SCHULTZE:  Thank you.


SENATOR BOHLKE:  Next proponent?


HARLAN SCHRIEBER:  Senator Bohlke, members of the Education Committee, I'm Harlan Schrieber, superintendent at Logan View Jr-Sr High School and I would like to thank you for this opportunity to address you here this afternoon.  Quite a lot of what I have to say is going to reiterate what Mr. Schultze just talked about; but, hopefully, I can explain how that applies to our particular reorganization effort and maybe answer some of the questions that have come up here recently.  The Logan View School System is a combination Class I-Class VI system which includes seven elementary K-6 districts and one secondary 7-12 district.  In 1996, a committee which consisted of representatives from these districts recommended a consultant be retained to perform a study and make recommendation as to how the districts might better be organized to provide quality education in an efficient manner, also recognizing that some of the current elementary buildings needed substantial renovation to meet ADA and fire codes.  It was finally determined that the most efficient and effective solution would be reorganize a district into a single K-12 district, close the elementary buildings, and build a new K-6 facility adjacent to the existing 7-12 building at the Logan View site.  This proposal to reorganize and to build was put before the patrons of the district in May of 1996 and was defeated.  The needs of the district continued, however, and when LB 806 was passed last session and when the members of the board of education realized that the Class VI board was required to set the maximum budget of expenditures for all the Class I schools, they were extremely frustrated.  The Class VI board had no real knowledge of the needs of the elementary districts, had no control over how they utilized their funds what they had available, but had to set their budgets.  The Class VI board did not want to have to set the budgets for the elementary districts and the elementary districts felt that they had already lost most of the


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control over their own schools and that they might have a better chance of maintaining an attendance center if they were to reorganize than if they continued to remain a separate district under the limitations of LB 806.  The Class VI and Class I boards decided that the reorganization issue should be taken to the people again.  This time it would be simply to reorganize into a Class III K-12 district, no closing of buildings, and no new buildings as part of the plan.  This proposal was put before the patrons in November of 1997 and it passed with approximately 70 percent of the voters favoring in ...  voting in favor of the plan.  On June 1 this year, our system of eight separate districts will be a single Class III, K-12 district.  I would like to emphasize that neither of these decisions to attempt the reorganization and consolidation of our districts was easily made.  In both cases, friends were pitted against friends, and neighbors against neighbors.  I know we have lost the support of some of our patrons and, hopefully, they eventually will realize this reorganization effort was necessary and beneficial.  For this to happen, however, we Must have some financial stability and assistance from the Legislature.  Over the years the Legislature has encouraged the consolidation of school districts.  The usual response from many legislators and the Governor, when the concern was expressed by people in the education community about the loss of state aid and levy limitations, has been, you have to get more efficient.  You need to consolidate.  In 1995, hold-harmless legislation was passed to guarantee, that during its first year of organization, reorganized districts would receive no less state aid than all of the former districts received in the prior year.  This was extremely helpful legislation because it guaranteed that, at least for the first year, schools would not receive less state aid because they reorganized.  It also gave some assurance about the amount of state aid to expect when making that decision, whether or not to proceed with the reorganization effort.  In 1996, legislation was passed that offered incentive aid for districts that consolidated and this aid would be available beginning the second year of the new district.  This legislation was also helpful because there are significant costs involved in the reorganization process.  Our first reorganization effort was extremely complicated and costly.  The second effort, because of some streamlining of the process by legislation last session and because no bond issue was included, was


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less costly but still expensive.  When districts consolidate, the teachers for the new reorganized district receive the salaries and benefits of the largest district included in the reorganization.  In most Class I-Class VI systems, this is the Class VI district.  The salaries and benefits of the Class VI districts will be similar to other Class VI and Class III school districts in their area.  The salaries and benefits of Class I districts will be comparable to other Class I districts in the area and tend to be significantly lower, as had been out before.  Bringing the salaries and the benefits of the elementary teachers of our Class I districts on to the Logan View schedule will cost an estimated additional $160,000.  And now with the projection of insurance going up, that will likely be larger.  Reduction-in-force, even though if it were desirable, would have to be completed by April 15.  The new district does not exist until June 1.  What elementary district is going to close their own building and reduce their own staff?  We knew placing all of the certificated staff on the Logan View schedule would be an additional expense but we also believed, and told our patrons, that we would be able to realize enough savings through the consolidation to cover this additional cost for the first year since we knew that state aid which has been extremely unstable from year to year would be no less than the previous year.  The incentive aid that would be available, starting the second year, would further enable us to get the new district on its feet and identify other possible savings and/or reductions during the next two or three years.  Then when we received our certification of state aid for the 1998-99 school year on December 1, we found we would receive $300,000 less than the previous year; and since we knew we would qualify for the hold-harmless on state aid because of the reorganization of our district, we were thankful that the Legislature had put the hold-harmless legislation in place.  However, when checking with the Office of School Finance at the State Department of Education, we were told that there was no longer a hold-harmless on state aid for reorganized districts.  It had been eliminated by the Legislature at the end of the session last year.  The night of this revelation, I attended a meeting at our educational service unit.  Over 20 superintendents, several senators were in attendance, none of them were aware that the hold-harmless provision had been eliminated.  Well, it happened and now we are having a dilemma of not only finding


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a way to fund the extra Cost for the reorganization but doing it with $300,000 less than we expected.  Our patrons believed that at least one reason for reorganizing our district was to be able to function under the levy limitation of $1.10.  In my opinion, going back to them and asking to override the limit at this time is not an option.  The Legislature and the Governor have been pushing reorganization of school districts consistently for years.  Class I-Class II ...  or Class VI school districts have been under constant pressure from bills that are introduced every session that would result in their elimination.  We have done, voluntarily, what many have been trying to force us to do and now it seems as though the rug has been pulled out from under us.  Most of the members of the Class VI and Class I boards of the Logan View system believed that reorganization would, indeed, be advantageous and that we should go ahead and reorganize when we could get some help in doing so.  I have no idea why the hold-harmless was removed.  My guess is, this was not your intent and that perhaps you were not aware that you did it.  I believe, at least for our district, reorganizing into a Class III K-12 district will make us a better school system.  Savings, or a least a more efficient utilization of our resources will certainly occur.  But our new board does need time to evaluate, make whatever changes are appropriate for our district and in a time line that is chronological.  As I stated before, the first year of the reorganization can be costly.  In addition to reinstating the hold-harmless provision, LB 1134 makes the first incentive payment available the first year.  I've also explained why it is expensive to bring Class I schools in to a Class III district.  The difference in salaries and benefits between a Class I, consolidating with a Class II, III, or VI district is likely to be much greater than the difference in salaries and benefits between a Class II and a Class III or between two Class III districts.  In addition, the payments only apply for students in K-6 or K-8 instead of K-12.  I believe the part of this bill that increases the incentive payments for Class I districts is certainly justifiable and necessary if other Class I-Class VI systems are going to be able to seriously consider consolidation.  If you truly believe consolidating districts is desirable, then we need your help.  I believe LB 1134 would be of great assistance to all schools considering consolidation and I urge you give it your enthusiastic support.  Thank you for your time and


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SENATOR BOHLKE:  Thank you.  one note that I think we need to clear immediately is, I think we had some contact from your district saying about the elimination of the hold-harmless and what we told you is, in fact, it has a new name in 806, essentially does the same thing, called the stabilization factor which says you don't get less 85 percent.


HARLAN SCHRIEBER:  That's 85 percent, not 100 percent and I've heard that no school in the state even qualified.  I don't know if that's true or not.


SENATOR BOHLKE:  There were some that did.




SENATOR BOHLKE:  But we can discuss this with you but it was simply...




SENATOR BOHLKE:  ...  the 85 percent as ...  was Moved into 806 and called a stabilization factor.  Senator Wickersham.


SENATOR WICKERSHAM:  I think it's inappropriate to characterize what was in the statute as hold-harmless...




SENATOR WICKERSHAM:  ...because it was a sliding scale.  That was a bill that I introduced.


HARLAN SCHRIEBER:  Well, and I'm talking about LB 840.




SENATOR BOHLKE:  Right.  Yes, Senator Wickersham and I ...


SENATOR WICKERSHAM:  That wasn't the number that I introduced but it was another bill that got folded into 840 when...


SENATOR BOHLKE:  And it was Senator Wickersham's...


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SENATOR WICKERSHAM:  ...  which was the Governor's bill but that was...  the perception of the difficulty was that you shouldn't be asked to jump off a cliff, you might be asked to go down a hill.  If that makes any sense to you, but it was clear that you couldn't ask districts to jump off a cliff and suffer significant reductions in state aid simply as a result of a reorganization.  But it was not a hold-harmless, it was a easing off of the potential reduction in state aid.


HARLAN SCHRIEBER:  But the first year...




HARLAN SCHRIEBER:  ...  you would receive...


SENATOR WICKERSHAM:  ...  those...  I just want to advise you...


HARLAN SCHRIEBER:  ...  yeah, I understand.


SENATOR WICKERSHAM:  ...  that those are very, very different concepts as far as the ...




SENATOR WICKERSHAM:  ...  what ...  how...


HARLAN SCHRIEBER:  Well, maybe...


SENATOR WICKERSHAM:  ...  how I think of them so...






HARLAN SCHRIEBER:  Originally, it said the first year you'd receive no less than 100 percent; the second year, two-thirds; the following year, a third; and eased off.




HARLAN SCHRIEBER:  It's that first year that we were concerned about.


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SENATOR BOHLKE:  Right, but just so everyone knows, because we've done that analysis.  If you take over the three-year period and do the 85 percent over the three-year as opposed to what you're saying, the 100 percent to the 33 to the ...  how it eases off, to the 15 ...




SENATOR BOHLKE:  ...  and how you come out on the end, is...  I just...  is not exactly how it's being portrayed that it's causing you great damage.  The first year...


HARLAN SCHRIEBER:  The first year...


SENATOR BOHLKE:  The first year, but that's why I think...


HARLAN SCHRIEBER:  ...  and...  right...


SENATOR BOHLKE:  ...  we have to be clear...


HARLAN SCHRIEBER:  ...  and I guess my concern is, in reorganization, that first year...  it's difficult that first year to make changes and to take care of these ...  to gain efficiencies because of the timing and it's difficult to reduce your staff that first year.  It was almost impossible because of time lines that are necessary by rif...




HARLAN SCHRIEBER:  ...  and the new board needs to have time to look at, realistically and prudently, what can be done.


SENATOR BOHLKE:  No, and all's I'm trying to do is give a complete picture of what happened...


HARLAN SCHRIEBER:  No, I understand.


SENATOR BOHLKE:  ...  what was in 840 and what is in 806 and what the stabilization factor did.




SENATOR BOHLKE:  Now, probably the biggest impact to your


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district was what kind of increase did you have in valuation?


HARLAN SCHRIEBER:  We had approximately 10 percent.


SENATOR BOHLKE:  Okay, and I had heard it was ...  when we checked, I thought it was higher than that.




SENATOR BOHLKE:  But, I mean a signifi ...


HARLAN SCHRIEBER:  ...  someone said 20 percent.  but if you calculate it out, it's actually 10 percent, that was an error.  It went from roughly $200 million to $220 million, that would not be 20 percent, that would be 10 percent.


SENATOR BOHLKE:  But that certainly had an impact.


HARLAN SCHRIEBER:  Yeah, it had an impact on our state aid going down.


SENATOR BOHLKE:  Right.  And it's meant to...


HARLAN SCHRIEBER:  In addition to that ...  yes, in addition to that, when it was figured by systems than by individual districts, that also caused it to go down and then what other factors ...  with that formula, it's hard to identify.  But it, essentially, did go down significantly, and the timing with that first year of reorganization, made it extremely difficult.


SENATOR BOHLKE:  But there are different things here.  We are talking about incentives and the first year of helping a school district...




SENATOR BOHLKE:  ...  meet those costs and then we're also entering in what happened with state aid which is another separate issue as far as...


HARLAN SCHRIEBER:  But they're all addressed in this bill ...


SENATOR BOHLKE:  ...  I understand that.


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HARLAN SCHRIEBER:  and they all affect us as a reorganizing district.  Right.


SENATOR BOHLKE:  Senator Wickersham.


SENATOR WICKERSHAM:  Well, just so you're aware, and I'm going to have to ask the staff to clarify this for me but you're ...  you're indicating that state aid is a problem in the year of reorganization.  The state aid that you receive in that year of reorganization is calculated on prior year's data and may not have much to do with the year of reorganization.  They're different years.




SENATOR WICKERSHAM:  The data set for the calculation of your state aid is going to be different than the year of reorganization when you receive that state aid.  Unless I've got my time lines wrong.  But I'm going ...


HARLAN SCHRIEBER:  Well, the state aid ...


SENATOR WICKERSHAM:  ...  I'm going to find out about that.


HARLAN SCHRIEBER:  ...  has been certified for next year.




HARLAN SCHRIEBER:  And that is the first year of our reorganization and that is ...


SENATOR WICKERSHAM:  But it didn't use...


HARLAN SCHRIEBER:  ...  it's going to...


SENATOR WICKERSHAM:  ...  but it didn't use the data set or the information that would pertain to that year.  That's prior year's data ...  they didn't have it...


HARLAN SCHRIEBER:  That ...  that may be.


SENATOR WICKERSHAM:  ...  that's derived from a year in which...


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SENATOR WICKERSHAM:  ...  the reorganization...


HARLAN SCHRIEBER:  For whatever reason, the bottom line is, the amount of money we're going to have to work with is considerably less.  than what we expected it was going to be.  And you could argue, well, we should have known that.  Well, perhaps, but most people didn't.


SENATOR WICKERSHAM:  But, just so you're aware, the question I want to satisfy myself is, and I'm not sure reorganization had anything to do with that...


HARLAN SCHRIEBER:  No, it didn't.


SENATOR WICKERSHAM:  ...  because it ...  well ...


HARLAN SCHRIEBER:  It didn't...  it didn't, in our case, cause it...


SENATOR WICKERSHAM:  Well, then...  then the fundamental issue, it seems to me, is what costs should we be examining for a school that result from reorganization that you want to provide incentives to cover so that reorganizations are possible, if that's the kind of policy that we want to state.


HARLAN SCHRIEBER:  Okay, yeah, I ...




HARLAN SCHRIEBER:  ...  I think ...


SENATOR WICKERSHAM:  ...  you're ...  you're telling me that state aid went down, but it didn't go down because of the reorganization.


HARLAN SCHRIEBER:  No.  No.  I'm...I'm...the incentive aid to help us reorganize is one part, of that and that's important.  The other part, as far as the state aid is, is for us to know in advance what the state aid is going to be and we thought we did and then we found that that wasn't the same...


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SENATOR WICKERSHAM:  But that didn't...


HARLAN SCHRIEBER:  ...  as we expected it was going to be.


SENATOR WICKERSHAM:  But, unless somebody can advise me afterward, that wasn't the result of the reorganization.


HARLAN SCHRIEBER:  No, I didn't...


SENATOR WICKERSHAM:  That state aid would...


HARLAN SCHRIEBER:  ...  no, it wasn't...


SENATOR WICKERSHAM:  ...  state aid would have changed...


HARLAN SCHRIEBER:  ...  it was going to happen anyway.




HARLAN SCHRIEBER:  Whether we reorganized or what, the state aid was going to be the same.  But our assumption was, that since we were reorganizing, there wouldn't be a change in state aid.  And when we actually reorganized, the certification of state aid was not out yet.




HARLAN SCHRIEBER:  And we were planning on it being the same because we, again, assumption is a bad word but assumed it was not going to change so we knew we had at least that much.  If it had gone up, we wouldn't have a problem with that part of it, but it did go down.


SENATOR WICKERSHAM:  Yeah.  And again, I want to make clear, and it was the rationale for the bill that was passed in 1995, if state policy is to ask schools and others to consolidate and become more efficient, I don't think you should be asked to literally fall on your sword in order to do it.  That's wrong, you can't be asked to stop and go at the same time.  I don't think that's an appropriate policy.  I'm just having a little bit of trouble sorting out...  I hope you don't think I'm hopelessly dense, but I am having trouble sorting out what happened in your district and maybe we're spending too much time of the hearing doing that.  I'm going to have to ask some questions afterwards, I think.


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HARLAN SCHRIEBER:  Yeah, I'd be glad to talk to you about it.




SENATOR BOHLKE:  Other questions from the committee?  Thank you.


HARLAN SCHRIEBER:  Okay.  Thank you.


SENATOR BOHLKE:  Next proponent.


DAVID HINGST:  Good afternoon, Senator Bohlke and the Education Committee.  My name is David Hingst, H-i-n-g-s-t.  I reside in Hooper, Nebraska, and I've served on the Logan View School Board for the past ten years, have serves as the president for the past six and so have been involved with both of our reorganization plans in this last couple of years.  I wanted to address you this afternoon in relationship to LB 1134 because I think it is a bill that helps reorganization.  And I think that some of the questions that have come up in discussion here after the first two presenters, perhaps I will address a little bit.  One is that I think that I would first also like to acknowledge that, while we have done a reorganization plan to go from a Class VI to a Class I to becoming a Class III district, we are probably not done with reorganization plans yet.  Reorganization is an answer for some of the efficiency question that's being asked across the state.  Although not for everyone, certainly, the gentleman from Arthur had a totally different set of circumstances.  But I think in our area, reorganization is still a very vital issue; and I think that we need this bill, LB 1134, to address the fact that we can present information to our patrons about, a reorganization plan that will address a number of the money issues.  And that gets me into this area where I would really like to see the state aid be maintained from what it was in the previous year because it allows us a working number to take to the patrons.  We do a lot of studies to say what will we change curriculum?  We do a lot of studies to get input from outside sources as far as when you do reorganizations, how will it change the educational process?  But as soon as we go out to the patrons and start our meetings, trying to advise them about the educational


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process and what's going to happen in the reorganization plan, they say, let's cut through the frosting, and let's get right down to what are the dollars and cents going to be here.  How is it going to change our levy?  What is your cost of operation going to be?  I feel the only way for us to give a true and accurate cost of operation estimate is to have a state aid number that is solid and using the previous year's state aid formula number allows us to do that.  When we went through our reorganization plan with people at small groups, we said, based on state aid being the same, based on evaluations, at this point, here will be the cost of operation.  And that's the number that people want.  We have a very difficult time to try and sell the incentives of added educational experiences that can occur.  So, I guess I would first, then, try and come back and, perhaps to Senator Wickersham, say that using a state aid number from the previous year, gives us an exact absolute number to use, and that's important in doing reorganization plans.  It's very important that we can go with absolute numbers, even though they are short-term, even though they are only for the one year.  It gives us that, at least first year that we can tell them a definite answer.  And again, if you...I suspect a number of you have participated back in your home districts in reorganization plan and you know, too, that the one thing the patrons want is, tell me exactly how this new school is going to operate.  And so it gives us that one area that we can give them more of an absolute answer to.  So hopefully, that part of LB 1134 can become central.  In leaving it there, I think that the other thing that it addresses in terms of the state aid issue, which was brought up is, if we are going to reorganize, are we going to become more efficient and operate on less cost per pupil?  And my answer to that is, yes, we believe that that is true of our reorganization plan as well.  But we knew it was not going to be true the first year of operation.  We knew that the first year of operation, because of the constraints of not having one board being able to make the decisions that were really going to be in place, come June 1, we would not be able to do some of the efficiencies that we anticipate we will be able to do during the first two to three years of operation.  Along with the same line then, of course, the incentive money, I think is very important.  And moving the incentive money up to the first year is very important.  I got a smile out of the discussion as far as some other terms incentive money might be, in terms of being a subsidy to


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bringing Class I teachers up because that was a term that one of the people at one of our group meetings said to me, just where is this bribe money going to come from and why they are offering this as bribe money.  And so we had to discuss the incentive money and I guess we took that term, the start-up money, and rather than using necessarily incentive.  I think it does need to be looked at that you are creating a new district.  You are creating a new educational system and there are start-up costs that are different than your existing operating costs are.  So, hopefully, you will look at the incentive money as being an opportunity to let us get started with a new district and I get started in harmony.  I guess I'll try and wrap up here in terms of, again, being supportive of 1134 because it is supportive of reorganization.  I am very supportive of reorganization of school districts when it is possible and I think that if we can work the finances out so that we do not get ourselves dug into a hole to begin with.  In a hole, both in terms of the positive image that we can create to our patrons in our district; the positive image that we create to the staff in the district; then that's where we're going to get off to the correct start and have a more successful plan, in creating our new district.  Logan View was originally consolidated in 1968 to form the Class I/Class VI district that we are now ready to move away from and become a Class III district.  It is through incentive money, it is through operating money such as state aid, that allow us to make changes in our district, and I hope that you will advance this bill of LB 1134 so that reorganization plans can continue and move on.  Thank you.


SENATOR BOHLKE:  Thank you, David.  And I would tell you, Senator Stuhr touched on it earlier that we have heard from other school districts, apart from everything else we've discussed here, the start-up costs or whatever we may call them in that first year being identified by other school districts who were looking to merge or consolidate also.  Questions from the committee?  I don't see any.  Thank you very much.




SENATOR BOHLKE:  Next proponent.  How many others wish to testify?


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LON STRAND:  Mine will be short.  I'm Lon Strand.  I'm from Luther Broadview District 87 which is one of the small elementary schools in the Logan View teaching system.  There are seven small schools in this district ranging from anywhere from 12 to 140 kids.  Four years ago, Logan View was having some trouble in junior high with having the kids in these elementary schools coming into junior high, being on the same page educationally.  Everybody was using different textbooks, different styles of teaching, so on and so forth.  They asked us to form a committee which we called the Common Needs Committee.  This committee was put together simply to try to coordinate some education and come up with some educational ideas that would benefit the junior high kids as well as all the kids in the district.  We got together at that point and decided that, after doing all this educational things that maybe some reorg things were the things that really we should be pointing towards as well as getting some of the educational things done.  This led on to the reorg plan, a bond issue which I was the chairman of which failed, another 'reorg' plan which did pass.  The incentive aids that were offered were a big plus but in...what I want to address is the educational thing and I think 'reorg' does do some things educationally that some things can't be done, especially in our situation with seven small schools which does happen across the state.  And I think the incentive aid is very important.  There are some disadvantages of reorganization but I think in a long run, I think it's the thing that has to be done in some of these situations.  The other thing I'd like to mention regarding Senator Wickersham's question about, it's supposed to save money but it doesn't.  And I think he's right.  Initially, it does not.  Because there are some start-up costs.  In one of our cases here, for instance, when we did the bond issue, when we were going to build a K-12 building, we were talking about a $6 million building, which I know the incentives were not set up to pay for buildings.  But that is just one of those things.  To save money sometimes, eventually you have to spend money.  And that's why I really want to see the incentive aid pushed up in 1134, as well as doubled.  The initial three to four years is costly.  I do think there's going to be some savings ten years down the road.  I think this thing is going to operate a lot cheaper.  We have some opportunities with some of these smaller schools that only have 12 to 15 kids to possibly bring into some other small schools and maybe get our seven feeder schools down to


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maybe.  three or four.  That would be a big savings.  But, it's kind of hard to do everything at once when we have so many things going on.  And that's why the incentive aid is also very important.  And I'd like to thank you for hearing me.


SENATOR BOHLKE:  Thank you.  I remember correctly the committee, and I don't know who was on the committee at that time, visited Logan View just prior to that first bond issue...


LON STRAND:  Um-hmm.


SENATOR BOHLKE:  ...  and met with the board members from each, there was a board member from each of the Class I's?




SENATOR BOHLKE:  And talked about that and actually considered some of that information when we were thinking about the incentives, after making that visit.  So.


LON STRAND:  Yeah, it's somewhat of a double-edged sword because, I mean, the state has done well by trying to get some of the schools 'reorged' because I think it is a good idea, long term; and it's start-up that costs and I'm glad to see them come up with the incentive aid when they did.  It's just too bad that we were maybe confused or misinformed on when we would get it and how soon it would come and so forth.  So, thank you.


SENATOR BOHLKE:  Thank you very much for coming today.  Questions from the committee?  I see none.  Thank you.


LON STRAND:  Thank you.




STEVE KRUGER:  Good afternoon, Senator Bohlke, I'm Steve Kruger, and I thank you for listening to us today.  On Bill 1134, one of the main things that you need to consider in the state's pushing for consolidation is that the transition be as smooth as possible.  And financing the school is becoming more and more difficult.  And 1134 helps to smooth over that transition for the first two or three


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years.  Eventually, like Lon said, our school will probably be consolidated with another school which would save some cost.  I don't think that I could have sold it to the patrons of my district if I went out and told them, vote for this 'reorg' we're going to close your school because we don't have the money afterwards.  I think it's very important that you make this transition as smooth as possible to consolidate schools and financing them and that the money would be there.  Recently, I just attended a forum in another school district where they asked me to come and talk about reorganization.  And they were concerned right away, too, about the start-up costs and things like that because, in the first year, many board policies have to be made.  You know, you have to just throw out all the old ones and start off with all new ones.  I don't think one of the main board policies should be, which school attendance centers are we going to close to make this efficiency.  We will, eventually, make it as efficient as possible.  That's what we try to and I guess I would ascertain any questions you had and thank you for the opportunity to talk today.


SENATOR BOHLKE:  Thanks, Steve.  Questions from the committee?  I see none.  Thank you.


RUTH McMASTER:  Senator Bohlke and members of the committee, my name is Ruth McMaster, M-c-M-a-s-t-e-r.  I'm from Auburn.  I'm a retired school board member and a retired member of the Nemaha County Reorganization Committee.  And I don't have a lot to say that's any different but I have a unique way to come at it because I'm objective, I'm not ...  my school district in Nemaha County has nothing to benefit from this because no one is talking to us about consolidation at this point.  But I want to point out to you that the Legislature is well aware that steps have been taken with budget lids and property tax lids.  Property tax lids are encouraging efficiency and that turns out to be reorganization.  And as you are well aware in listening to the people from Arthur, it's not easy.  For a lot of communities, the school is the town and when the school's gone, the town is pretty much gone.  And so, the decisions are difficult to make.  School districts are spending down their cash reserves to keep their school open and then, as they Bee reorganization is the only choice they have, the cash reserve continues to dwindle while they work out the details of reorganization.  And a couple things, just from my experience on a school


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board, that I might share with you.  Some of those start-up costs that would be there that first year, would be, for example, textbooks.  I know, in southeast Nebraska we have five Class III districts, each in a separate community, separate town, that are talking about reorganization.  They may have five different sets of textbooks for every class.  Another thing, and this maybe isn't real educationally the thing to talk about but it's real important to a new school, uniforms.  I mean, if they become a new sports team and they have five different uniforms and...




RUTH McMASTER:  ...  band, another example, yes.  And so those are things that are important to make that new school go.  So, as Senator Wickersham said, the first years, there are some bigger expenses that will not be there in the later years.  And so I encourage you to support this bill, to move that incentive aid up.  I mean, it's no difference in money, it's three years, it's just that it starts one year earlier.  And the other thing I think that's important is that separate...the separate account for this money because setting aside that one percent and then letting what's not used revert back into the Tax Equity Fund doesn't take into consideration that there will be more expenses for this incentive aid every year.  You know, the first year, there's just a few schools consolidating and this will build as the next couple years go on so that the payouts will increase and I think there should be the opportunity for the carry-over money for this incentive aid to build up so that the needs can be met for these schools and then in the Year 2004, it all goes back to that particular ...  the Tax Equity funneling device anyway.  So I thank you for the opportunity to visit with you and I would entertain any questions.  But, like I said, I'm not representing anyone but myself.


SENATOR BOHLKE:  That's great.  Thanks for the perspective.  Any questions from the committee?


RUTH McMASTER:  Thank you.


SENATOR BOHLKE:  Thank you.  And as I said earlier when we had people here from Arthur County, we always want to thank people who are willing to serve on the local board of


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education and certainly go out and try and do a bond, and for the time that you give to the local school district.  This is proponent?


CRAIG CHRISTIANSEN:  Yes.  Craig Christiansen, President of the Nebraska State Education Association appearing in support for 1134.  1 don't think I can add anything substantive to the discussion that has already been held.  I just wanted to appear to put our name as one of the supporters for 1134.  There are very legitimate needs in that first year after reorganization and I urge you, as you consider this bill and hopefully advance this bill, that you keep that in mind.  Thank you.


SENATOR BOHLKE:  Thank you, Craig.  Questions from the committee?  I see none.  Any other proponents?  Anyone wishing to testify in opposition?  Anyone wishing to give neutral testimony?


VIRGIL HORNE:  Senator Bohlke, members of the committee, my name is Virgil Horne, representing the Lincoln Public Schools.  To this point, a lot of the testimony has referred to a particular set of schools.  I want to clarify that my comments have nothing to do whatsoever with the schools that have appeared before you.  You'll understand why I'm saying that when I start.  As you work through this bill, I would simply ask that you give some consideration to some type of an audit process as these consolidations take place.  As you heard Mr. Schultze say, that the new district receives the liabilities and assets.  You've heard comment about cash reserves.  There are horror stories out there about how cash reserves are spent just prior to a consolidation.  And as you talk about the process of, whatever term you want to use, but as it addresses the amount of money available to the new district, that can make a difference if the Class I comes in with all of its cash reserves.  And it's a very normal thing to consider.  I don't have a method for you.  I'm just asking that you give that some kind of consideration, that some type of an audit process has taken place so that, when these Class I's come in that all that cash reserve was not used for some purpose that was not perhaps the best interest of the school children in that district, but it was in perhaps, the best interest of property tax payers.  That's the only comments I have.


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SENATOR BOHLKE:  Thank you.  Questions from the committee?  I see none.  Anyone else wishing to offer neutral testimony?  Senator Janssen, do you wish to close?


SENATOR JANSSEN:  Just a few words.  I'd like to thank the Education Committee for taking the time to hear this bill today.  It has been rather lengthy but I think you heard a lot of good testimony.  And I've been one that have supported some of these changes we've talked about and have received quite a bit of criticism from people in the 15th District on certain occasions.  But I could see that a lot of these changes had merit and it was for the best part of the state; and I hope that...  and I'm sure that I will, continue to be able to support many of these changes.  But, I think the key is, in this situation, for planning purposes in that first year, they need to know where they're at and that there will not be any reduction.  That seems to be the key.  Cash reserves, I don't think be Class I schools out there, after the last few years, that have any cash reserves left.  If there is, it doesn't amount to anything.  So I think the horror stories of the large cash reserves is not the situation in most of the consolidated districts anyway.  So with that, I thank you for allowing us to be here today and I hope that we can get this bill out of committee and on to the floor as soon as possible.  With that, thank you.


SENATOR BOHLKE:  Thank you, Senator Janssen.  Any final questions from the committee?  I see none.  That then closes the hearing on LB 1134 and Senator Wickersham, LB 1121.