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

SPONSOR HEC

DATE TYPED 2/25/05

HB 703/HECS

SHORT TITLE Define Rural School District

SB

ANALYST Chabot

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$153.2 Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Education Department (PED)

SUMMARY

Synopsis of Bill

House Education Committee Substitute for House Bill 703 would enact a new section in the Pub-

lic School Code defining a rural school district as having 1,000 or less students or one located in

a county with a population density at or below 30 people per square mile and whose largest mu-

nicipality has less than 30,000 people. It also requires the rural education division of PED to as-

sist rural school districts in obtaining federal funds. An individual school with less than 1,000

students and is located on tribal land is entitled to assistance from the rural education division.

Significant Issues

The following is taken from the PED analysis.

PED’s working definition of a rural school district is one with an enrollment of fewer than 1,000

students. This definition addresses district size, but not geographic isolation. The rationale for

using this approach is that smaller districts are funded to provide the same educational services

as larger districts, but have smaller budgets and fewer employees with which to do so. Under the

current definition, 48 of the state’s 89 school districts are considered rural.

House Bill 703/HECS -- Page 2

The definition proposed in the bill bases status as a rural district on both district size and the

characteristics of the counties in which they are located. Generally, in counties with low popula-

tion densities and cities of less than 30,000, the distances from specialized personnel, the ser-

vices of major state universities and other resources available in urban areas are greater. Using

the definition in the proposed legislation, more than 70 of New Mexico’s 89 school districts

would qualify as rural districts, an increase of more than 45 percent.

Comparisons of how particular schools and communities are classified under each definition are

revealing. Applying PED’s definition, Grady and Reserve are considered rural districts, but

Grants and Hobbs (with enrollments exceeding 1,000 students) are not. Under the proposed defi-

nition, all four would be counted as rural.

If the bill becomes law, these districts and others now considered non-rural under the PED defi-

nition would be identified as rural: Artesia, Carlsbad, Deming, Gallup, Grants, Hobbs, Raton,

Silver City and Taos.

In terms of the regional distributions of rural districts according to the two definitions, the one

currently in use includes numerous districts in north central and eastern New Mexico, but fewer

in the southern and western portions of the state. The proposed definition would eliminate from

rural district status only those districts of more than 1,000 students in the counties including

Alamogordo, Albuquerque, Farmington, Las Cruces, Los Alamos, Los Lunas, Rio Rancho, Ros-

well, Santa Fe and Clovis. As a result, more than 20 additional districts would be identified as

rural, and the distribution would be more evenly spread around the state.

The designation of a district as rural by the PED has no impact on eligibility for general fund ap-

propriations or federal grant awards. Eligibility for U.S. Department of Education grants is de-

termined on the basis of federal definitions of rural schools and districts, not the state’s defini-

tion. In addition, there is no impact on the number of districts allowed to take advantage of the

flexibility available in meeting the highly qualified teacher licensure requirements under the No

Child Left Behind Act (NCLB).

FISCAL IMPLICATIONS

PED assesses the Rural Education Division would add more than 20 districts to the state defini-

tion as rural. The division would be unable to provide complete services to the additional dis-

tricts; it estimates $153.2 would be required plus 2 FTE to serve the additional districts desig-

nated as rural.

The LFC FY06 appropriation recommendation is balanced between revenues and expenditures

and any increase in recurring funding must be offset by reductions in other areas of the recom-

mendation. The Legislature must consider all priorities and funding requirements to find reve-

nue to support this legislation.

Education reform may require the expenditures of at least an additional $26 million in FY07 as

follows: $16 million for raising minimum salaries of level 3-A teachers to $45,000; $4 million

for pre-kindergarten; and $6 million for fine arts. These will be in addition to expected increased

costs for opening the doors (fixed costs, insurance, enrollment growth, and increased employer

contributions to the educational retirement fund) which could be another $35 million. In addi-

tion, $4 million is needed for increased employer contributions to educational retirement fund

House Bill 703/HECS -- Page 3

from higher education institutions. It may be prudent to avoid additional commitments to recur-

ring appropriations in future fiscal years.

ALTERNATIVES

PED suggests a working group could be convened during the interim to define the term “rural

school district” and address the practical delivery of services to the rural districts.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

PED’s working definition would continue to be used to define rural school districts.

POSSIBLE QUESTIONS

1.

Why does the definition of a rural school district need to be placed in statute.

2.

Can FTE be moved within PED to meet the additional workload in the Rural Education

Division.

GAC/sb