Iowa Education Leader #10 * March 28, 2003
A policy and advocacy update from the Iowa Department of Education

What to Hold on to in Tough Economic Times

Every school district superintendent and every community college president is today confronted with the same challenge now facing the Iowa Legislature and our Governor: In the face of resource levels that fail to meet the growth in expenditures, what do we keep? We are in the middle of two or three years of resource shortfalls and may likely see two or three more years of similar scenarios. Increasingly, the "easier" decisions already have been made and the one-time resource pools have already been tapped. How can we make further reductions in a manner that yields the least long-term or permanent damage?

I know that each of you is proceeding with wisdom and courage, yet will be unlikely to receive many accolades for your efforts. This type of planning and decision-making is one of the toughest leadership tests, especially since you have to create priorities that best meet the needs of the greatest number of students. In addition to providing you some empathy, since we have had the same issues in the operation of our department, I would also like to provide you with some perspective on potential state-level decisions as you consider your own course of action.

Iowa's financial position is not as grave as many other states, due in part because we have exerted more control in reducing or controlling expenditures. I do not pretend to be an economist, but I have not heard much in the way of projections to suggest that this situation will reverse itself in the next year or so. Just as districts and community colleges have had to deal with increases in costs (like health insurance, over which they have little short term control), the state expects to have very large increases in "mandatory" or high-need kinds of services such as Corrections, Medicaid, and possible costs of changes in gaming tax revenue. This expenditure growth is not only higher than revenue growth, but also ongoing or long-term. Coupled with very modest increases in K-12 funding, major items such as these tend to consume all the revenue growth. Sound familiar? 

As a result, what we are seeing is a concerted effort by legislators to very closely examine state expenses and make some bold decisions about large expenditure categories - even some that may have in the past been considered "mandatory." As you might imagine, it is nearly impossible to ignore educational appropriations in this process since, when all levels of education are considered, that accounts for approximately 60% of all state expenditures; K-12 alone accounts for nearly 40%.

I have listed below some of the areas that we know are under serious consideration. I think the test the legislature will need to meet in each case is the same one I suggested for you: How can we make further reductions in a manner that yields the least long-term or permanent damage?

• Phase III: While the Governor included maintaining the current (already reduced) level of funding for Phase III in his budget, it is not clear that Phase III is continued in the budget targets set by Legislative leadership. Ending this program eliminates nearly all of the professional development needed to continue our efforts to improve instruction and improve student performance.
• Class Size Reduction: There are proposals to shift limited amounts of funding out of the Class Size Reduction/Early Intervention appropriation to other purposes. Our preliminary data already indicates that class sizes are going back up and further reductions in this funding will only exacerbate this problem.
• AEA structure and funding: More recently, there is at least one proposal to dramatically change the structure of area education agency (AEA) services by changing to a "fee for service" model. In general, AEA appropriations would be transferred to districts, who could purchase those services from the providers of their choice. In order to save enough money to justify this disruption, my assumption is that fewer funds or a lower spending authority would be transferred to the districts. It is not clear how districts would cope with the requirements of special education services and compliance, or if other service providers would be interested in providing the spectrum of services we now see available statewide.
• Community Colleges: The greatest ambiguity exists for community colleges, since much of the hope for increases may be tied to economic development initiatives that are as yet undefined. While there is optimism that the legislature and Governor will be able to establish a very strong economic development initiative in the state, it may not be clear for some time how community colleges fit into that plan. In the meantime, it appears that community college funding is not increasing. That does not bode well for either tuition levels or program maintenance at our community colleges.
• Regents: It is already clear that the current budget targets impact the Regent's universities very directly. It would appear that their level of reduction is slated to be well over $20 million.

There will be ongoing developments, of course, and we will continue to communicate updates as they become available. These proposals and considerations deserve your attention and concern, particularly as we ask, again: How can we make further reductions in a manner that yields the least long-term or permanent damage?

Iowa Education Leader will be distributed periodically from Iowa Department of Education Director Ted Stilwill. To send comments or receive a faxed copy, please contact editor Kathi Slaughter, 515/281-5651, kathi.slaughter@ed.state.ia.us.