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F I S C A L I M P A C T R E P O R T

SPONSOR Nava

DATE TYPED 03/09/05 HB

SHORT TITLE Funding Formula Study Task Force

SB 125/aSFC

ANALYST Chabot

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 120, SB 4, SB 124, and SB 274

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Public Education Department (PED)

SUMMARY

Synopsis of SFC amendment

The Senate Finance Committee amendment to SB 125 strikes the appropriation, changes the rep-

resentation on the task force from three superintendents to four representatives of public school

administrators including one each from a small school, a growth, an impact aid and a mid-sized

districts chosen by Legislative Council from a list submitted by the New Mexico Superintendent

Association, and further expands the funding formula study to include the expectations of the

public and statutory requirements of the public education system and estimates of the cost of

these expectations.

Funding of $200 thousand for the task force is in House Bill 2 as amended.

Synopsis of Bill

Senate Bill 125 appropriates $350 thousand from the general fund to the Legislative Council

Service for fiscal years 2005 through 2007 for the purpose of paying for the costs associated with

Senate Bill 125/aSFC Page 2

a public school funding formula task force and study. The task force is to composed of 3 mem-

bers from both the House of Representatives and the Senate appointed by the Legislative Coun-

cil, 3 members appointed by the Governor, 3 school superintendents appointed by the Legislative

Council, and the president of the New Mexico School Board Association or designee. Staff will

be provided by LESC, LFC, PED and DFA. Recommendations are due to the Legislature and

Governor by December 15, 2006.

Significant Issues

The intent of the 1974 Public School Finance Act (Sections 22-8-17 through 25 NMSA 1978) is

to equalize financial opportunity at the highest possible level and to guarantee each New Mexico

public school student equal access to programs and services appropriate to educational needs re-

gardless of geographic location or local economic conditions. Approximately 90 percent of the

public school’s operational revenue is derived from the state equalization guarantee (SEG) ap-

propriation. SEG is the mechanism used to distribute funds appropriated through PED to indi-

vidual school districts. Adjustments to the formula have been made for specific items without a

review of the total formula. For example, a factor for elementary fine arts was added in 2003 as

an add-on to elementary school funding. DFA estimates there have been over 70 changes in the

formula since 1970. The last comprehensive study of the formula was done in 1996-97 at a cost

of $150 thousand. The 2003 General Appropriations Act included $300 thousand to LESC to

study the formula but was vetoed.

Growing districts complain the enrollment growth factor is too low; districts losing students

complain size adjustment units are insufficient to continue programs in existence. Charter

schools are allowed to receive small-school formula adjustments while similar sized districts

schools may not. Lastly, minimum teacher salaries have been statutorily mandated based upon

level of licensure but the calculation of the training and experience index stayed the same. Sev-

eral bills have been introduced that are related to or could impact the funding formula and high-

light the necessity of a comprehensive review rather than piece meal changes.

PERFORMANCE IMPLICATIONS

If a more equitable formula results, better student performance may result from increased fund-

ing to some school districts.

FISCAL IMPLICATIONS

The appropriation of $350.0 contained in this bill is a non-recurring expense to the general fund.

Any unexpended or unencumbered balance remaining at the end of fiscal year 2007 shall revert

to the general fund.

The LFC recommendation includes $200.0 for a funding formula study, the LESC recommenda-

tion is for $350.0, and the executive recommendation is for $200.0 appropriated to DFA.

OTHER SUBSTANTIVE ISSUES

The Executive Budget Recommendation, Fiscal Year 2006 includes $200 thousand for the DFA

Office of Educational Accountability to conduct the study. Specifics are not included in the rec-

Senate Bill 125/aSFC Page 3

ommendation on whether it should be a task force or a study either contracted or in-house. In

addition, DFA suggests a teacher representative be added to the task force specified in this bill.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

The public school funding formula is established in statute and would not change.

POSSIBLE QUESTIONS

1.

Should all bills making changes to the public school funding formula be tabled until a

comprehensive study is complete.

2.

Is the composition of the task force sufficient to ensure a comprehensive review.

GAC/lg