EPLC Education Notebook

Monday, March 6, 2006

    Proposed FY 2006-07 State Budget

    The Senate Appropriations Committee began its round of FY 2006-07 budget hearings last week, meeting with state-funded higher education institutions and the PA School Employees' Retirement System (PSERS), while its counterpart in the House continued its inquiries on FY 06-07 needs with hearings for the Pennsylvania Department of Education, the University of Pennsylvania, and PSERS. Following is a review of last week's discussions.

    House Appropriations Committee Budget Hearings:

    Pennsylvania Department of Education: Secretary of Education Gerald Zahorchak asked members of the House Appropriations Committee to strengthen their commitment to the investments made in education since 2002 that have increased the number of children with access to pre-K and Head Start by 12,500, made full-day kindergarten available to more than half of all eligible students, and positively impacted math and reading test scores for all students in all grades. Zahorchak also asked the Committee to support new investments in programs that will provide students the technological skills needed to succeed in today's global marketplace.

    The Governor has proposed an additional $517 million for pre-K through 12th grade education in FY 2006-07, which includes a 5% increase for basic education ($224.6 million), a 4% increase for special education ($38.1 million) and targeted investments in programs that are proven to increase student achievement. These include: a new $10 million investment to improve elementary level science education based on a program utilized by schools in Southwestern Pennsylvania whose students outperformed the rest of the United States and were on par with or better than students internationally on a comparative exam; an increase of $50 million for accountability block grants which school districts have overwhelmingly chosen to use to support early childhood education; an increase of $15 million for Head Start; and a first-time state investment of $1.2 million in the National Board for Professional Teaching Standards' professional development program. Zahorchak also highlighted the Governor's high school reform agenda, which includes a new initiative to put a laptop computer on every desk in core subject classrooms in recognition that "computers have become the textbooks of the 21st Century"; increases funding for dual enrollment from $5 million to $7 million with greater funding dedicated to low-income students and students enrolled in early college and middle college high schools; and helps 30 more schools to increase curriculum rigor and create small schools within a larger building through a $4.3 million increase for Project 720.

    Representatives of suburban Pittsburgh and suburban Philadelphia said the Governor's 5% increase for basic education sounds generous, but does not represent educational equity considering that some of their districts receive only $500 per student from the state. Zahorchak said the comparison to inequity was being taken out of context of the true disparity that exists because such districts typically spend significantly above the state average due to local wealth. The disparity in total funding per student ranges from about $6,000 to $16,000, according to Zahorchak. Rep. Kathy Manderino, who has a unique perspective representing both the Lower Merion School District - one of the highest-spending in the state - and Philadelphia city schools applauded the administration's efforts to drive funding to districts that need it the most and said educational equity should be determined by whether every school district can educate students in the same way.

    Rep. Scott Petri pressed Zahorchak to explain why some districts that have shrunk in student population have seen budget increases while other districts that are experiencing student growth are receiving fewer dollars per student. Zahorchak said the proposed education budget recognizes growth in a number of ways and takes into account whether a region's tax base is experiencing parallel growth or whether growth is occurring with a stagnant tax base.

    Rep. Mike Sturla suggested that the state needs to determine how much it costs to educate a student to meet state standards. Sturla said the testing required by No Child Left Behind provides an unforeseen benefit in that we now have data that may help up quantify how much it costs to move a student from basic to proficient levels of attainment. Until we determine this cost, we will continue to underfund education in Pennsylvania, said Sturla.

    Rep. Douglas Reichley asked Zahorchak whether the Allentown School District is receiving requisite funding to meet its needs. A recent study commissioned by Lehigh Valley business leaders concluded that the district is "in a revenue crisis" and does not have the local capacity to fulfill its needs. Zahorchak said districts like Allentown benefit from the Governor's proposed budget through its foundation funding supplement and the increase in special education funding. The Governor's foundation funding proposal targets $64 million of the basic education subsidy toward districts that spend less than $9,030 per student and already have a significant tax burden.

    Other issues identified by Committee members focused on the Governor's initiative to put laptop computers in high schools and special education funding. Rep. John Maher suggested laptop funding should be rolled into the basic education subsidy so that districts may decide locally whether to use dollars for this priority. Others asked whether the administration is willing to change the special education funding formula which distributes dollars based on the assumption that 16% of a district's students receive special services. If a formula change is not considered, Rep. Sturla suggested increases to the special education subsidy could be targeted toward districts that have more than 16% of students in special education.

    Pennsylvania School Employees' Retirement System: PSERS Board Chair Roger May appeared before the House Appropriations Committee to seek $40.255 million in administrative support for the agency, which represents a slight decrease from the agency's FY 05-06 appropriation. May highlighted PSERS accomplishment in garnering federal approval to offer Medicare Prescription Drug Coverage to eligible participants in its health options program. The agency is one of only 9 Employer/Union entities in the country approved to manage a Medicare prescription plan, which will reduce participants' prescription program contribution rate from $120 per month in 2005 to $49 per month in 2006 and provide better benefits for most members. May cited additional accomplishment in the agency's strong investment return of 11.54% for the calendar year ending December 31, 2005 - among the top performing public funds nationally - which has helped the fund reach a record high of $56.5 billion. While the fund continues to grow, it "faces major challenges including rising employer contribution rates."

    PSERS' employer contribution rate is projected to spike from 5.46% in 2012 to 22.52% in 2013. The projected rate has decreased from an initially-project 28% to 22.52% because of PSERS strong investment returns. PSERS counterpart, the State Employees' Retirement System, projects a similar rate spike in 2013. Committee members questioned whether the state can avoid such a dramatic increase by extending a 4% floor on contribution rates, shifting to a defined benefits rather than a defined contributions system, or prohibiting retired employees from withdrawing cash in lump sums before they reach a certain age. PSERS staff said a 4% floor will merely stretch the same liability over a longer period of time, while the impact of establishing a defined benefits system or limiting cash withdrawals would not impact the system for more than a decade because the changes would apply only to future, not current, members. Contribution rates were about 18% in the early 1990s and reached a high around 20% in the 1980s. According to PSERS, the stock market boom of the 1990s provided a holiday from these high rates, but we are now being shocked with reality.

    University of Pennsylvania: President Amy Gutmann highlighted the important social services provided by the university's veterinary school and dental clinics and asked the House Appropriations Committee to consider increases beyond those proposed by Gov. Rendell to maintain and enhance these programs. The Governor has proposed a 3% increase for each of Penn's four programs that receive state dollars which would bring total state funding for the university's dental clinics to $1.083 million, medical programs to $4.037 million, veterinary school to $39.254 million, and cardiovascular studies to $1.601 million. Penn had requested an 11% ($4.2 million) increase for its veterinary school that would restore state funding to the level received in FY 2002-03. As the Commonwealth's only veterinary institution, Gutmann said the school is vital to Pennsylvania in defending against threats of infectious disease which often first arise in animals, serving as part of a coordinated response team for threats of agroterrorism, and preparing veterinarians that serve the agricultural industry.

    If the veterinary school appropriation receives a boost, the university plans to increase its Commonwealth Scholarships program, which provides scholarships to Pennsylvania residents. Gutmann said the program can encourage students to pursue careers caring for farm animals rather than seeking more lucrative salaries in other veterinary fields to assist in paying off large debt loads. The university is requesting a $2.040 million increase for its medical school, which would restore funding to the level received from the state in 1997. Gutmann said the state's expensive malpractice insurance costs drive up the price of providing medical education in Pennsylvania. Penn's malpractice insurance premium can be double that of schools in other states. Finally, the university is seeking an 18% increase for its dental clinics, which provide dentistry services to underserved residents in the Philadelphia region.

    Senate Appropriations Committee Budget Hearings:

    State-related Universities: The presidents of Penn State University, Temple University, Lincoln University and the University of Pittsburgh appeared before the Senate Appropriations Committee on Tuesday seeking increased state appropriations to combat the rising costs of health care, insurance and library resources and to restore state appropriations to levels received earlier this decade. Penn State is seeking a 9.5% increase over its FY 2005-06 appropriation, Temple is seeking a 6% increase, Lincoln is seeking a 62% increase, and Pitt is seeking a 10% increase. The Governor has proposed an overall 3.3% increase for Penn State (which would bring its state appropriation to $322.399 million), a 4% increase for Temple (to $168.706 million), a 4% increase for Lincoln (to $13.451 million), and a 3.7% increase for Pitt (to $163.059 million). The institutions hope to moderate tuition increases if appropriations beyond what the Governor proposed are allocated. The presidents noted that proposed reductions for student aid at the federal level will increase pressure on students who already graduate with significant debt.

    Among the specific concerns raised at the hearing was distress over the third consecutive year of no proposed increase for Penn State's agricultural research and extension services. The university already has reduced staffing by 164 for these programs that address avian flu, food safety and other public health concerns and may need to eliminate an additional 54 positions if state funding does not increase. Committee members also questioned the Governor's proposed shift of tobacco settlement research dollars into the Jonas Salk Legacy Fund. The presidents said they need more detail on the proposal, but the current system serves them well. Temple President David Adamany cautioned that committing dollars now for capital projects may hinder future research in areas that, because of the evolutionary nature of medical research, we may not be able to forsee. Senators also asked how the universities are faring after last year's shift of medical education funding from state dollars to federal Medicaid dollars. While federal approval for this use of Medicaid has been granted, the universities would be more comfortable with this funding stream if future budgets continue to include a provision that guarantees the state will fund medical education if federal dollars come under future scrutiny and are no longer approved for this purpose. Finally, Senators asked about the number of students graduating with degrees in math and science-related fields in light of comparisons that show the United States lags in these areas and in light of the Governor's focus on investing in math and science at the K-12 level. The presidents felt positive about the number of students graduating in these fields, but expressed deep concern about the lack of students interested in careers teaching math and science at the high school and college levels.

    Pennsylvania State System of Higher Education: State System of Higher Education (SSHE) Chancellor Judy Hample is seeking a $26.7 million (6%) increase for the system's 14 universities in FY 2006-07. Additionally, SSHE is seeking $26.2 million in special purpose appropriations that would be used to increase the system's performance funding initiative and also to support integrated information systems, the PA Academy for the Profession of Teaching and Learning, costs associated with the PA Employee Benefits Trust Fund, diversity and equal opportunity initiatives, the McKeever Environmental Learning Center, and the PA Center for Environmental Education. The Governor has proposed a $20 million (4.5%) increase for SSHE universities education and general expenses. The State System's overall budget would increase by $18 million (3.9%) under the Governor's proposal, less than the increase for universities' general expenses because funding for the PA Center for Environmental Education and for employee benefits was eliminated. Details about SSHE's FY 06-07 budget request are available at www.passhe.edu/content/?/0607appropriationrequest.

    Representatives of state-related universities and SSHE testified before the House Appropriations Committee last week. For a review of their discussion with House members, see the February 27 edition of the EPLC Education Notebook at www.eplc.org/notebook2006/February27.html.

    Information about the proposed FY 2006-07 state budget, including links to testimony provided at this week's Appropriations Committee hearings, is available on EPLC's Education Policy Information Clearinghouse at www.eplc.org/clearinghouse_2006-2007budget.html.

    Pennsylvania Education Policy Activity

  • The House State Government Committee held an informational meeting Tuesday on legislation ( House Bill 2339) that would establish a cost of living adjustment (COLA) for both state and school retirees. The Pennsylvania School Employees' Retirement System (PSERS) estimates the proposed COLA would create $1.98 billion of unfunded liability in the retirement fund. Costs associated with a COLA would be paid for through increased employer contribution rates, meaning the amount contributed by the state and local school districts would go up. According to PSERS projections, the employer contribution rate currently is expected to spike from 5.46% in 2012 to 22.52% in 2013. Enacting a COLA would cause this rate to increase. Committee Chair Paul Clymer said he will work with interested parties to craft a COLA that is reasonable for retirees without burdening taxpayers.

  • All legislation from the Pennsylvania General Assembly, including bills cited in this Notebook, can be found at www.legis.state.pa.us/cfdocs/legis/home/session.cfm.


  • The housing and early registration deadline for the 2006 Pennsylvania Education Policy and Leadership Conference has been extended to March 6. The Fourth Annual Conference, which will be held Sunday, March 12 to Tuesday, March 14 in Harrisburg, will feature two Pre-Conference Workshops on March 12 from 1:00 p.m. to 3:45 p.m. The Workshops are on "Building Effective Community-Based Education Foundations" and "Interventions that Work to Improve Student Achievement". The Conference begins on Sunday at 4:00 p.m. with a session that looks at the 2006-07 budget proposal made by Governor Rendell. Speakers include Pennsylvania Secretary of Education Gerald Zahorchak. For additional information, including registration materials and a preliminary agenda, see www.eplc.org/conference.html.

  • Education Issues Workshops for Legislative Candidates and campaign staff will be hosted by EPLC in Valley Forge (Friday, March 17), Monroeville (Saturday, March 18) and Harrisburg (Tuesday, March 21). These Workshops are open to incumbent and non-incumbent candidates and staff. For a Workshop agenda, registration form and additional details, see www.eplc.org/candidateworkshop.html.

  • This Week...The Senate Appropriations Committee holds budget hearings for the state Department of Education on Monday and PSERS on Tuesday. The Pennsylvania Association of School Business Officials holds its annual conference in Hershey on March 7-10. The House Education Committee holds an informational meeting Wednesday on audit resolution funding for the schools for the deaf and blind and other approved private schools. The Governor's Commission on Training America's Teachers meets in Harrisburg on Friday. For information on these and other upcoming events, see www.eplc.org/calendar.html.

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