The first meeting of the Interim Joint Committee on Education was held on Monday, June 8, 2009, at 1:00 PM, in Room 149 of the Capitol Annex. Senator Ken Winters, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ken Winters, Co-Chair; Representative Carl Rollins II, Co-Chair; Senators Charlie Borders, David Givens, Dan Kelly, Alice Forgy Kerr, R.J. Palmer II, Tim Shaughnessy and Jack Westwood; Representatives Linda Belcher, John "Bam" Carney, Hubert Collins, Leslie Combs, Jim DeCesare, Ted Edmonds, C. B. Embry Jr., Tim Firkins, Kelly Flood, Jim Glenn, Derrick Graham, Jeff Greer, Jimmy Higdon, Reginald Meeks, Rick G. Nelson, Marie Rader, Jody Richards, Tom Riner, Charles Siler, Dottie Sims, Kent Stevens, Wilson Stone, and Addia Wuchner.
Guests: Ms. Marcia Seiler, Office of Education Accountability; Mr. John Wilkerson, Kentucky Education Association; Mr. Wayne Young, Kentucky Association of School Administrators; and Mr. John LeFevre, Kentucky Department of Education.
Legislative Guest: Senator Katie Stine
LRC Staff: Audrey Carr, Laura Blaser, Sandy Deaton, Janet Stevens, Ken Warlick, and Lisa Moore.
Senator Winters introduced and welcomed the new members of the Interim Joint Committee on Education. He noted that the subcommittee membership lists were located in the members’ folders as well as a copy of the tentative schedule of meetings for the 2009 interim.
Senator Winters introduced Ms. Mary Lassiter, State Budget Director, who gave an overview of Kentucky’s revenue picture and the potential impact of America Recovery and Adjustment Act (ARRA) Funds. Ms. Lassiter presented a PowerPoint presentation and responded to questions from members. Highlights of the presentation included the proposal to balance fiscal year 2010 by requiring no new taxes; using stimulus funds to avert severe cuts; preserving priorities of education, health care, public safety and economic development; reducing spending from budgeted levels; restructuring outstanding debt; enhancing revenue collections; suspending pay for certain state holidays; and adding required funding in limited areas.
Senator Kelly asked if the Support Educational Excellence in Kentucky (SEEK) per pupil guarantee of $3,866 was to the base amount in the budgets and not to the school districts. Ms. Lassiter said that was correct.
Representative Collins asked if the additional funding for vocational rehabilitation funding had to be matched with federal dollars. Ms. Lassiter said there is no state match associated with the additional $9.32 million in vocational rehabilitation state grants, and this should be helpful to mitigate some of the challenges the program has faced. Representative Collins asked what the state budgeted for vocational rehabilitation in the past budget. Ms. Lassiter said she did not have the figure committed to memory, but thought around $12.8 million. Ms. Lassiter explained these funds were in addition to the money regularly budgeted for vocational rehabilitation.
Representative Rollins asked if the increased education funding in the educational technology state grants could be money used to cover the cost of the KIDS information data system. Ms. Lassiter was not sure. Mr. Larry Stinson, Acting Deputy Commissioner, Learning and Results Services, Kentucky Department of Education (KDE), said he is not clear on how to answer that question either, but 50 percent of the money will be distributed according to formula, and the other 50 percent can be by grant to school districts. He said this is one item that the KDE is awaiting additional guidance from the federal government on exactly how the money will be processed. Representative Rollins asked Mr. Stinson if they were going to try and find money for KIDS, and he said the KDE is looking for sources of funding for KIDS in every place that is appropriate.
Representative Carney asked if Title I funds could be utilized to help school districts cover the one percent or step raises for faculty and staff. Ms. Lassiter explained that Title I funds have very strict guidelines and cannot be used to cover raises. However, more dollars in targeted programs can possibly help school districts deal with the raise issue indirectly.
Senator Winters asked about increased money budgeted for prosecutors and not for public defenders in fiscal year 2010. Ms. Lassiter said the government’s proposal is to honor the enacted appropriation for public defenders and they were scheduled in the budget to receive more funding in 2010 than in 2009. She noted the prosecutors were straight-lined from 2009 to 2010, and that is why there is additional funding proposed for them.
Senator Shaughnessy asked if Kentucky was just getting by with the alcohol and cigarette tax increase dollars and stimulus funds. He asked if Kentucky would find itself in a billion dollar budget deficit again in three years. Ms. Lassiter said a slow growth recovery is predicted, but it will fall far short from meeting current expenditure needs. She said by fiscal year 2012, all the stimulus money being used to balance the budget will be gone and she said there will be a significant challenge to meet. Senator Shaughnessy said Kentucky is basically treading water. Ms. Lassiter said the choices are to raise revenues or significantly cut spending. She noted $600 million has already been cut from spending levels over the past 18 months and the Governor decided it was appropriate to use the stimulus dollars to avoid severe cuts to education, healthcare, and public safety.
Representative Rollins asked about the suspension of three to five paid holidays for state employees depending upon their salary. He did not understand the reasoning for this because this is offsetting any benefit the employees would receive from the one percent pay increment. Ms. Lassiter said there have not been significant layoffs for state workers and by freezing these holidays it ensures that state workers will not be laid off. The decision was made to preserve jobs and she noted the one percent raise has a compounding effect over time for salary and retirement purposes and that is why it was kept intact. Representative Rollins noted that there have not been direct layoffs of state workers, but state government has had high attrition levels over the last four or five years. He said he feels there is a better way to handle the budgetary problems and will be working on offering different solutions.
Senator Winters introduced Mr. Stinson and Mr. Larry Taylor, Director, Division of Exceptional Children Services, KDE, to give the status of program budgets and the use of ARRA funds. Mr. Taylor began the PowerPoint presentation by explaining that Title I and the Individuals with Disabilities Education Act (IDEA) were the two federal programs that were selected to be able to flow the stimulus dollars through to the local school districts.
Mr. Taylor said the Title I ARRA funds are one-time, and school districts should not put systems in place that are dependent upon this money. He noted Title I funds must be spent within a federally-mandated, 27-month timeframe. He explained the three parts of the Title I formula in detail and the information is located in the meeting folder located in the Legislative Research Commission (LRC) library.
Mr. Taylor said the large one-time increment in IDEA funding must be used consistently with current IDEA statutory and regulatory requirements. IDEA funds are to be used for the excess costs of educating students with disabilities. IDEA ARRA funds flow through to local school districts and do not increase the amount that the state may set aside for state level activities and must be separately tracked and reported. He said systems currently exist that track and report the regular IDEA funds. The awarding of regular and ARRA IDEA funds went to school districts on May 1, 2009. School districts have 50 percent of IDEA ARRA funds available currently, and the second 50 percent will be made available on October 1, 2009.
Mr. Stinson discussed the State Fiscal Stabilization Fund (SFSF) and other competitive opportunities available to districts. Kentucky received $651,341,789 in SFSF dollars and there is $5 billion available in competitive grants nationally. He said 81.l percent of the SFSF goes to education and is required to be distributed through the state’s primary funding formula to restore support to K-12 and higher education to the greater of 2008 or 2009 levels for 2009, 2010, and 2011. If insufficient to restore both, must be apportioned between both K-12 and higher education based on the relative shortfalls at each level. He noted the other 18.2 percent will be distributed to general governmental services.
Mr. Stinson said the first 67 percent of the funding formula will be provided to the state upon submission of the approved application, which is due July 1, 2009. The remaining 33 percent is expected to be available by September 30, 2009. The state must have an approved plan that meets specific criteria in order to receive the remaining 33 percent of the money.
Mr. Stinson explained the SFSF competitive grants and other possible ARRA funds. A specific list of the grants and the awarding process are located in the meeting folder in the LRC library.
Senator Winters introduced Mr. Robert L. King, President, and Dr. John Hayek, Vice President for Finance, Council on Postsecondary Education (CPE), to give an update of the ARRA and Kentucky Postsecondary Education. President King said college applications are up significantly for the fall of 2009 for a number of public postsecondary institutions. He said net general funds to universities and the Kentucky Community and Technical College System (KCTCS) have been cut $78 million or 7.2 percent over the past 18 months. He noted that the CPE worked with institutions to moderate growth in tuition with the lowest rate increases in a decade.
President King said the ARRA stimulus bill has impacted Kentucky Postsecondary Education in three ways. They are: 1) Funds distributed by formula in the form of grants to states; 2) Funds distributed via competitive grants, and 3) Funds distributed directly to individuals.
President King said over $1 billion in federal education-related program funds is available in state grants for mostly K-12 programs. Approximately $533 million of Kentucky’s share of the SFSF will go to K-12 and higher education. He said the Governor’s plan calls for approximately 55 percent of the SFSF, in combination with general funds, to be used to keep public postsecondary education and K-12 at current funding levels for FY10. He also said Kentucky is required to establish a longitudinal data system to track students from K-12, to college, and ultimately, to the workforce, as an assurance for SFSF.
President King said there are billions of dollars to be distributed via competitive grants from various federal agencies. He said the CPE coordinated a process to gather multiple-institution and institution/industry collaborations. Workgroups were formed in seven key areas: Energy and sustainability; Homeland security; E-Health; Technology and networking; College readiness; S.T.E.M.; and NASA/space science. He said 58 concept papers were generated to compete for ARRA grants in the seven key areas.
President King said Pell Grants for low-to-moderate income families will increase significantly, from $4,731 to $5,350 in FY10 and $5,550 in FY11. The American Opportunity Tax Credit, which will replace the Hope Tax Credit, will increase to $2,500 per year for direct educational expenses. He said federal work study funds to Kentucky will increase by about $2.6 million. It was noted that approximately $234 million in Pell Grants were awarded to 87,906 Kentucky students in 2007-2008.
President King discussed cost containment and avoidance strategies implemented by campuses and universities across the Commonwealth. He said they reduced faculty and staff by over 700; made changes to various employee benefits saving over $32 million; restructured academic and administrative units saving over $25 million; increased participation in joint purchasing agreements saving over $7 million; restructured debt service saving over $15 million; and engaged in new energy contracts and initiatives saving over $5 million. He said recent general fund cuts have resulted in increased operating efficiencies, internal reallocations, and additional cost containment measures. He gave some specific examples of need and merit-based aid at UK and UofL, comprehensive universities, and KCTCS by student type and family income.
Senator Winters introduced Mr. Jim Ackinson, Executive Vice President, and Ms. Jo Carole Ellis, Vice President, Government Relations and Student Services, Kentucky Higher Education Assistance Authority (KHEAA). Ms. Ellis gave a PowerPoint presentation on the impact of federal changes on Kentucky Student Aid Programs.
Ms. Ellis said the stimulus funds add $500 to the Pell Grant in academic years 2009-2010 and 2010-2011. She said the stimulus funds also add approximately $2.6 million in Federal Work-Study funds for Kentucky students. She explained the eligibility requirements for students to receive Pell Grants in Kentucky and projected 84,047 Kentucky students would received a Pell Grant in 2009-2010.
Ms. Ellis explained the coverage of tuition and fees by the Commonwealth Access Program (CAP) program and maximum and average Pell Grants at Kentucky Postsecondary schools. She also discussed the CAP and the Kentucky Tuition Grant (KTG) disbursements and unfunded awards. There is a detailed and comprehensive graph located in the meeting folder in the LRC library.
Mr. Ackinson discussed the fiscal year 2010 budget proposal to eliminate the Federal Family Education Loan Program (FFELP). He said all student loans beginning in 2010-2011 would be made through a direct loan program. Reconciliation instructions for student loans direct the committee to share $1 billion from programs under their jurisdiction for fiscal years 2009-2014. He said the committees must report recommendations by October 15, 2009. Federal lawmakers are likely to seek those savings through major changes in FFELP, perhaps eliminating it altogether.
Mr. Ackinson said many federal lawmakers remain wary of efforts to end FFELP. He said KHEAA and the Kentucky Higher Education Student Loan Corporation (KHESLC) are doing everything they can to ensure Kentucky agencies maintain an important role in the federal student loan programs and continue to provide valuable programs and services to Kentuckians.
Mr. Ackinson said the best alternative for Kentucky would be a modified FFELP program, rather than the elimination of the program, that would best serve Kentucky students. He said KHEAA and KHESLC could continue to earn revenue to reinvest in Kentuckians by providing borrower benefits, additional student aid awards, administrative costs of state student aid programs, and college access and outreach programs. In the absence of a modified FFELP program, state-based services would achieve the objectives of the President’s proposal. If FFELP is eliminated, KHEAA and KHESLC have proposed that all federal student loans made in a state be originated, processed, and serviced by the state’s public nonprofit agency.
Mr. Ackinson said Kentucky faces several obstacles. He said the servicing of student loans would be contracted to private entities; however, the United States Department of Education (USDE) has limited loan servicing contracts to the six largest loan servicers, five of which are for-profit entities. KHEAA and KHESLC have been given no indication that state-based nonprofit organizations would be provided an opportunity to serve their states. He noted congressional action will be needed; the USDE has not demonstrated a willingness to work with smaller, state-based nonprofit agencies such as KHEAA and KHESLC.
Mr. Ackinson noted the many items that Kentucky’s educational system would lose without KHEAA and KHESLC. Kentucky would lose the additional funding for state student awards from the state’s financial aid programs, which was $5.6 million in 2008. He said borrower benefits to reduce the cost of borrowing to pay for higher education would be gone and cost-free administration of state student financial aid programs and services. He also noted losing the free college planning and financial aid publications for high school students and adults and the employment of over 420 people in Frankfort and Louisville.
Senator Winters introduced Mr. Joe Meyer, Deputy Secretary, Kentucky Education and Workforce Development Cabinet, to discuss the ARRA funds and impact within the cabinet. Mr. Meyer said the total amount of ARRA funds will be $156,447,816 in the Education and Workforce Development Cabinet.
Mr. Meyer said $44,615,045 will go into the Workforce Investment Act. This is the primary source of job training money for the state and is distributed through the local workforce investment boards that are administered by the area development districts. He said ten percent of this money will be held for the statewide reserve fund and cannot be used for capital purposes. He noted the cabinet has received over $284 million in capital requests from libraries, area technology centers, community colleges, and colleges for capital projects and there are no funds to honor any of those requests.
Mr. Meyer said one immediate impact will be a summer youth employment program that will be fully implemented by June 22, 2009. He said this program creates 3,000 to 4,000 jobs for young people in the age group of 16-24.
Mr. Meyer said the bulk of the program is the unemployment insurance fund. He said there are major issues with the solvency of the trust fund. In addition, as part of the federal stimulus program, the President has proposed modernizing, updating, and expanding the benefits of the unemployment insurance program. The Governor has appointed a task force to study both the solvency issues and to make recommendations whether the state should participate in the modernization program. The task force recommendations will be ready in October of 2009 in time for the General Assembly to take action in the 2010 session.
Mr. Meyer said the Office of Vocational Rehabilitation and the Office for the Blind are proposed to be subjected to another 2.6 percent cut during the proposed upcoming special session. He said the 2.6 percent cut translates to a general fund cut of about $300,000 as well as a 4 to 1 federal fund match, or a $1.5 million cut to the total agency’s budget. He did say impact cuts to vocational rehabilitation would be significantly off-set because of the availability of the stimulus money.
Mr. Meyer said the Office of Career and Technical Education, which operates 53 area technology centers across the state, has taken the full brunt of every budget cut so far. He feels the area technology centers are a program worthy of being funded. He also said the Education Professional Standards Board (EPSB) is subject to being cut again and they are significant in providing teacher quality programs and teacher and principal training. He said there are no stimulus funds to help either of these two agencies.
Representative Collins asked about the cuts to the Department for Vocational Rehabilitation and to the Carl D. Perkins Center for next year. Mr. Meyer said they would lose $1.5 million next year from the agency’s current budget level. He said $8 million is being added back into the budget in stimulus money and this impacts the offset of the decreased funds. His concern is that the stimulus money is one-time and will not benefit the department after next year. He also said the matching funds needed to run the Carl D. Perkins Center are at-risk.
Representative Stone said it speaks well of Kentucky that it has found a way not to reduce the SEEK formula in tough economic times. He said it is a good thing that local support for public schools comes primarily from the property tax, which does not go up and down like the economy does, even though people may be having a difficult time paying it. He asked the KDE if the stimulus money will have a positive impact on the general fund balance in most school districts.
Mr. Taylor responded to Mr. Stone and said a maintenance of effort is required each year by a school district to spend a specific amount of state and local dollars for the excess cost of educating students with disabilities. If a district met requirements with its annual determinations then that district has flexibility to be able to reduce the maintenance of fiscal effort by 50 percent of the increase of this year’s money, which is double what they received last year. School districts can reduce local and state dollars spent for educating exceptional children. He does not know the specifics of Title I dollars, but he thinks the stimulus money will allow school districts to purchase some things that would have normally been purchased with local dollars.
Mr. Stinson also responded to Mr. Stone and cautioned that Title I dollars will still have to be spent according to the authorized purposes as well as the dollars spent within the IDEA. He said local school districts will not be able to shift something that is currently being paid out of general funds into those sources with the exception of the 50 percent off-set.
Representative Stone asked if there was any feel of the impact for the step increases and the 1 percent raises. Mr. Stinson said there is no data for this year. In the past, school districts have shared that step increases where staff receive additional dollars for years of service, or because they have enhanced their rank in education, can be as much as 1 to 3 percent increase in salaries for those individuals. He said personnel costs attribute from 75 to 82 percent of a school district’s budget. He said a 1 percent raise in schedule can mean a 2 or 4 percent increase in personnel costs for a school district.
Representative Rollins asked if the stimulus dollars have to be spent in 27 months or committed within 27 months. Mr. Taylor clarified that it has to be spent or obligated by September 2011 and obligations have to be paid by December 2011.
Representative Wuchner asked about possible funds that could fund the Infinite Campus. She said the school districts were just billed $6.31 per student and now there is an opportunity for some matched funds for technology. She asked if the ARRA or SFSF funds could be utilized to fund the $6 million cost of the Infinite Campus. Mr. Stinson said there is nothing available at this point that can be used at the state level, however districts could use the dollars that flow to them. He said school districts will have to be careful utilizing dollars from Title I or IDEA that had very specific uses. Representative Wuchner asked about KDE offering school districts the opportunity for a $10 match fund for technology. She said her school district was asking to do a $4 dollar match instead of $10 out of their general fund and hopes that KDE will consider this request as general funds are still limited.
Representative Graham asked KDE if they were still planning on paying the maintenance fee for Infinite Campus for school districts. Mr. Stinson responded that it was KDE’s intent that the cost would not be passed along to school districts but after a review process, this was not feasible. He said the matching process is the best resolution that KDE can offer at this time. Representative Graham feels this is unfortunate and local school districts will be hard pressed to find this funding. It also furthers their disappointment in KDE’s decisions with implementing mandates that are not funded.
Representative Wuchner asked the KDE to come up with an additional plan as everyone is disappointed in this decision. She noted that it is in reflected in meetings that Infinite Campus was very expensive and KDE’s original intent to bond the cost was lost with the budget constraints and passed on to the local districts. She said local school districts are under great constraints right now and would like to see a new plan on the billing of Infinite Campus costs.
Representative Carney discussed his concern about Infinite Campus. He feels that the KDE and local school districts should work together to find a compromise in this situation.
Representative Rollins asked CPE President King about figuring the cost of attendance and about the 38 percent of students reflected on the chart that are financial aid recipients with no income information available. He wants to know who they are and what kind of aid they receive. President King said these are students who have not filed the Free Application for Federal Student Aid (FAFSA) form, but who have received merit-based aid either through KEES or from the universities or campuses directly. He also said the cost for room and board was not included in the chart because he feels this is not a direct cost of college as people would have to pay for room and board in the workplace as well. He said they focused on expenses that were singularly related to college attendance. This does not include the loss of income of individuals who choose to go directly into the workplace and not attend college. Representative Rollins said he agrees to an extent, but people cannot attend college and live outside and not eat. He said students need certain basic needs met and these costs are figured in the cost of attendance.
Representative Siler said he is upset over the loan forgiveness program for the “Best in Class” program. He said the legislation passed took care of the interest payments for the current year, but does nothing to relieve families and teachers of long-term obligations. He asked if any of the stimulus money could be used for the “Best in Class” forgiveness program that Kentucky sold with good intentions, but fell short in compliance. Ms. Ellis responded that the stimulus money is not eligible to be used for the loan forgiveness programs. She said most of the stimulus funds are directed toward certain federal programs that are already in place or other types of initiatives. Representative Siler asked if the competitive application program under additional opportunities would qualify to cover loan forgiveness debts. Mr. Ackinson said KDE officials would have to address that question. He noted that KHEAA and KHESLC have no control over administration of general funds. He said they can only address revenues over the programs they administer and he assured him they remain dedicated to use all available revenues to off-set the borrower benefits in the “Best in Class” program.
Mr. Stinson gave a brief presentation on the implementation of HB 322 that was passed in the 2009 Regular Session relating to disaster days in school calendars. He gave a brief history and noted this bill was passed to provide assistance to school districts in fulfilling calendar requirements when dealing with excessive days missed due to inclement weather such as hurricanes and ice storms. He mentioned that most requests were approved within the 10-day timeframe, however in some instances, decreased staff made it impossible to make a decision within 10 days. He said most of the decision-making on KDE’s part was ensuring that the district was in compliance with requirements in other statutory laws such as whether they had used all the make-up days they had intended to use for that school year. Senator Winters commented that several school districts were frustrated by not receiving approval or disapproval of their amended calendar within the 10-day timeframe.
Mr. Phil Rogers, Executive Director, Ms. Alecia Sneed, Director, Legal Services Division, and Dr. Marilyn Troup, Director, Education Preparation Division, EPSB, explained administrative regulation 16 KAR 5:010 - Standards for accreditation of educator preparation units and approval of programs. Ms. Sneed said the proposed amendment transfers responsibility for reimbursing the State Accreditation Board of Examiners team members for travel, lodging, and meals from the EPSB to the institution seeking accreditation. The amendment incorporates by reference the current edition of the “Professional Standards for the Accreditation of Teacher Preparation Institutions” issued by the National Council for Accreditation of Teacher Education (NCATE).
Senator Winters discussed the NCATE process compared to the EPSB accreditation process. Ms. Sneed said the institutions pay for the NCATE team and the EPSB pays for the state members. She said now all members will be paid by the institutions. Senator Winters asked if NCATE had a companion group that accompanies the EPSB team and Ms. Sneed said not for state accreditation and only if it is a joint state and NCATE accreditation.
Representative Rollins asked who makes the travel arrangements. Dr. Rogers said the university makes the travel arrangements and this is the reason for making the change in the regulation. Dr. Troup said her division actually assigns the board of examiner team and the institution informs the division which hotel they will be staying in and this is checked out. She said there have not been any conflicts or problems in the past.
Senator Winters asked if all eight public institutions were accredited by the NCATE board. Dr. Troup said yes. Dr. Rogers clarified that state employees are not reimbursed by the institutions and said it is only volunteers from other universities who are there to serve on the board of examiners. Senator Winters asked how many individuals typically are there to volunteer. Dr. Troup said it depends on the size of the institution, whether it is a joint visit with an outside team or a state only visit, but usually between four and six members.
Mr. Kevin Brown, General Counsel, and Mr. John LeFevre, Financial Analyst, KDE, explained 702 KAR 3:090 – depository bond, penal sum. Mr. LeFevre said this regulation amends the process for designating depository bonds. The proposed amendment deletes obsolete language relating to collateral requirements and requires a board of education to determine the penal sum of the bond of depository at least 30 days prior to the depository entering upon its duties and retains the July 1 deadline of each fiscal year. He said this provides more leniency to banks and allows them to move collateral up and down as the balances change on a day to day basis.
Representative Stone asked it this changes the nature of what the collateral must be. Mr. LeFevre said it widens the collateral.
With no further business before the committee, the meeting adjourned at 3:30 p.m.