MINUTES OF THE MEETING OF THE

The Joint Subcommittee on Human Resources/K-12 of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman Raymond D. Rawson, at 8:16 a.m., on Wednesday, May 5, 1999, in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator Raymond D. Rawson, Chairman

Senator William J. Raggio

Senator Bob Coffin

Senator Bernice Mathews

ASSEMBLY COMMITTEE MEMBERS PRESENT:

Ms. Jan Evans, Chairman

Mr. Joseph (Joe) Dini, Jr.

Mr. David E. Goldwater

Mr. Parks

Mr. Lynn Hettrick

STAFF MEMBERS PRESENT:

Patricia Hampton, Committee Secretary

OTHERS PRESENT:

Distributive School Account – Budget Page K12 ED-81 Volume 1)

Budget Account 101-2610

Class Size Reduction – Budget Page K12 ED-89 (Volume 1)

Budget Account 101-2710

Jeanne L. Botts, Senior Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said the first of the unresolved issues concerns special education unit funding. She pointed out the Governor recommended the funding be consolidated into the Distributive School Account (DSA) and distributed through the per-pupil allocation rather than in separate special education units.

Ms. Botts said information received indicates the school districts do not favor changing the unit method of funding at this time, nor does the State Department of Education. She said there is strong interest in retaining the unit method of funding because it does provide the department with a method of accounting for how that money is used and it holds the districts accountable. She noted the special education unit and what the money can be used for are defined in law. She said it has been suggested the definition be expanded to include teachers’ aides, school psychologists, physical therapists, and other types of professionals that work with special education students.

Ms. Botts provided a letter from Mary Peterson, Superintendent of Public Instruction, dealing with class-size reduction (CSR) and a suggestion from the State Department of Education on how the current law might be amended to expand the definition, found on page 6 of Exhibit C, of what constitutes a special education program unit.

Ms. Evans pointed out that the two decisions are whether to consolidate the special education unit funding into the DSA and whether to expand the definition of the special education unit to include other types of individuals. She recalled previous testimony indicated considerable interest in including other professionals in an expanded definition, but there was concern about including teachers’ aides.

Senator Raggio asked whether there would be an additional fiscal cost if the definition of a special education unit is expanded to include any or all of the services shown, or whether this would this just authorize the use of the money for all of those purposes. Ms. Botts explained it would just be an authorization; there is no plan to increase the number of units above what the Governor has recommended. Senator Raggio said if the definition is expanded he would expect there would be a future effort to expand the cost, and he believed it should be made clear that is not the intent.

Senator Raggio said that he favors a consolidation into the DSA because he did not believe this action would do any damage, and that he believes the Governor’s purpose was not to reduce anything but to provide a better way to view this since there is often criticism that not enough funding is provided by the state. He maintained the consolidation would present a better picture of what the state is providing.

Ms. Evans agreed the consolidation would not suggest additional units, only what is within the allotted number, and that the schools have the suggested flexibility. She recalled that in some cases, in some districts, unused units had to be returned because they were not needed for teachers; however, the districts could have used the units for other professional services. Ms. Evans asked whether speech therapists are currently authorized under the definition. Ms. Botts answered yes.

Ms. Evans said one of the considerations on the unit funding was based on testimony to the effect there would be a negative fiscal impact for some of the school districts as a result of consolidating special education units into the DSA. Senator Coffin recalled there was testimony that some of the small counties would lose money if there were a consolidation.

Senator Rawson stated it did not seem to him that would necessarily occur. He said it can be expressed that the intent is, there not be a redistribution of funds. He recalled he had requested at a previous hearing for either specifying 5 units for the StarGATE Program or adding 5 units for the program, which is for gifted children.

Mr. Goldwater wondered, "If everything is going to remain the same, why would there need to be a consolidation?"

Ms. Botts pointed out that even if there is a consolidation, consideration might be given to leaving some discretionary units – there are currently 40 such units–for unusual circumstances. She said that in the past the rest of the units have been allocated among the districts on the basis of past usage. She noted the occurrence of handicapping conditions across the school population is not uniform. She said some districts have more highly developed programs, and perhaps proportionately more units, but they serve as a "hub" and parents may move to those districts because of the services offered. She reiterated it might be well to consider having some discretionary money (maybe not called units), for the State Department of Education to award, in case a small district received a severely handicapped child having special needs.

Senator Raggio pointed out there are currently discretionary units. He said the consolidation would not change anything and some discretion could be provided with the consolidation. Ms. Botts agreed it could be but said that under the Governor’s proposal there would be no special education units. She said some money could be set aside for the State Department of Education to administer. Senator Raggio asked whether this would be in the same percentage that is currently being utilized. Ms. Botts answered yes.

Senator Raggio stated he opposes the motion at this time because he would propose the alternative, that it be consolidated because it does not change anything but that the discretionary money be specifically reserved in the same manner as it is at present. He said the reason was that in his opinion the purpose for all the consolidations is that consolidation preserves accountability and provides a clearer picture of the effort the state puts forth for education.

Mr. Dini said he represents three school districts and not one of them supports consolidating the special education unit funding into the DSA.

Senator Raggio pointed out this is the amendment provided by the State Department of Education. Ms. Evans noted that Mr. Goldwater’s motion was to include the professional positions, but not the aides. Senator Raggio stated his motion includes the paraprofessionals recommended by the department.

Senator Raggio pointed out Mr. Goldwater’s motion failed with the joint subcommittee. He said this is a new motion for the subcommittee to consider and must be voted on.

Mr. Goldwater stated that the motion the Assembly passed earlier sufficiently addressed his concerns and he will not vote for this separate motion.

Ms. Evans stated the Assembly members approved including the professional positions only but the Senate members approved inclusion of the professional and paraprofessional positions. Senator Raggio stated that as he understood the joint subcommittee process, as a result of these votes the joint subcommittee has no recommendations on any of the motions and it will be up to the Senate Committee on Finance and the Assembly Committee on Ways and Means to decide.

Ms. Botts stated that another unresolved issue is whether or not Class-size Reduction program (CSR) funding should be consolidated into the DSA. She noted the money is currently in the Trust Fund for Class-size Reduction, and the Estate Tax money is deposited to that account as are the General Fund appropriations. She said the Governor recommended the Class-size Reduction Program be consolidated into the DSA and allocated in accordance with the formula.

Ms. Botts recalled testimony that the school districts generally do not favor the consolidation to the extent that the money would be distributed through the Nevada Plan formula, because the districts having the most need for the class-size reduction teachers would not receive as much funding as they currently do. She said the districts favor putting the money in the DSA but allocating the funds by the same methods utilized in the past, to ensure the funds are distributed to the schools with the greatest need for those teachers.

Senator Coffin stated he has been concerned about this proposal from the beginning. He said the districts have always been uneasy about the CSR and if the fund is consolidated into the DSA there is a symbolic loss. He urged the senators to reconsider this motion and not approve the consolidation. He said there is a great deal of personal and moral investment in the creation and sustenance of this program, which he believed has been demonstrated to work. He stated he would "hate to see it disappear into the great big yawning maw of the DSA."

Senator Raggio said this was a mischaracterization. He emphasized there is no intent at all to do what Senator Coffin suggests would happen, nor would this motion in any way do that. He said the school districts, for the most part, favor the consolidation. He maintained the authorized class-size ratios would not be changed at this time. Senator Raggio said the consolidation would be helpful to most of the school districts and their concern should be heeded.

Mr. Goldwater said he would oppose this motion because his interpretation of the proposal to consolidate was different. He testified that it did not seem to him that there was significant benefit to consolidation and if everything is going to remain the same, except that it would be funded differently, testimony from the districts indicated they were concerned the consolidation would hurt them. He maintained the "downside" risk far outweighed any "upside" potential.

Senator Rawson assumed chairmanship of the meeting.

Senator Rawson asked fiscal staff whether there is any cost implication for action, either way, on this issue. Ms. Botts answered there would have been a cash-flow benefit to having the CSR program allocated from the DSA in Fiscal Year (FY) 1997-98. She said the CSR fund was short because the Estate Tax had not come in as projected. She pointed out the State Department of Education went to the Interim Finance Committee (IFC) and received $2 million from the IFC contingency fund to help get through FY 1997-98. She said the department still needs approximately $850,000. She explained that situation could have been alleviated had she remembered that the Budget Division had asked for the ability to bring forward part of the second-year appropriation into the first year, if needed. Ms. Botts said having the ability to bring forward part of the second-year appropriation would help, but having the allocations made from the DSA is an advantage. She noted that even the DSA is subject to cash-flow problems and currently the allocations are being made monthly because of that.

Senator Rawson called attention to the next issue, that of consolidating the funding for elementary school counselors into the DSA. He pointed out some of the larger school districts are in favor of the consolidation, but the smaller districts are afraid they may not receive enough funding to keep the counselors they have. He said one possibility might be to earmark $50,000 to $100,000 per district for special student services or counseling programs. He noted this would allow small districts to continue to support the state-funded position, but it would also offer the districts flexibility in how the funds are spent.

Mr. Dini asked how many small districts would be able to cover counselors with a $50,000 limit. Ms. Botts replied that currently each district receives approximately $43,000 and there would be $50,000 earmarked for each of the 17 districts, for a total of $850,000, to be used for special counseling services for students. Ms. Botts pointed out there is currently an additional amount of $2.3 million funded for 50 elementary counselors. She explained the remainder would be consolidated into the DSA and allocated in accordance with the formula.

Senator Rawson said the next issue is whether funding for adult high school diploma programs should be consolidated into the DSA. Ms. Botts explained that on this issue, the Governor had recommended the amount for prison education programs continue to be allocated separately through the DSA because there are only four counties that have prison education programs. She said the Governor’s budget has consolidated the amount of money for regular adult high school diploma programs into the DSA to provide flexibility to the school districts on how that money is used. She pointed out the larger districts seem to favor the consolidation, but the smaller districts would like a base level of funding to continue their programs. She said that generally districts with a well-developed adult education program receive more money because the funding is based on what has been spent in the past, which makes it difficult for a district attempting to start up or expand a program.

Ms. Botts noted there was considerable support for the idea of transferring the funding for adult high school diploma programs, both regular and prison, to the NDE Continuing Education budget account. This account also contains federally funded adult education programs and the Job Training Partnership Act (JTPA) program as well as the state-funded adult literacy program.

Ms. Botts said staff support for this program would be provided by the Workforce Education Team, and if this team oversees the distribution of funds there might be an opportunity to phase in a more equitable distribution of the funds. She stated the team might also be better able to account for the expenditure and monitoring of these funds. Senator Rawson inquired whether this accounts for what is considered to be Option B on the option list provided to the committee. Ms. Botts said this was on one of the option lists and was basically an idea from the Nevada Adult Education Association. She testified there was concern that if these monies were allocated in the regular per-pupil amount, the programs might be diminished in some way. She said the concern was that if amounts were not amounts separately earmarked for the adult programs, the funds could eventually be taken away and used in the regular K-12 program.

Mr. Dini inquired about the small school districts’ desire to have a base level of funding to be able to continue their programs, and asked what that would involve. Ms. Botts answered the department currently has a base funding of approximately $35,000, but that is different from the proposal to have the money allocated by the State Department of Education staff on the basis of need. She said the staff could ensure the small districts receive what they needed and not necessarily cap the allocation at $35,000.

Senator Raggio asked whether the Governor’s recommendation was to include all of the programs. Ms. Botts clarified that the Governor recommended the prison program remain in the DSA and be allocated as in the past, but that the amount of money for the regular adult diploma program, approximately $7 million, be consolidated in the formula and distributed in the regular per-pupil amount. There would thus be no separate earmarking of money for regular adult programs, but there would be for the prison programs.

Mr. Dini said he thought the flexibility was being taken care of by the State Department of Education distributing the money, allowing the small districts to participate. Ms. Botts explained if that is what the committee wanted to do, the money could be either transferred from the DSA account to the Continuing Education budget account or it could be added to the Continuing Education budget and have the department work with the districts and the prison education programs to more equitably distribute the money. She recalled that at a previous hearing she had noted the ratios—for example, on administrators in the prison programs—were high in some of the districts. She said the department could be given the flexibility to reallocate the monies.

Ms. Botts said the next question is, Should school districts be allowed flexibility in the use of funding designated for class-size reduction? She noted the Governor had recommended the class-size reduction money be consolidated into the DSA and flexibility be provided to the districts. She said there were no changes proposed to the existing law in a communication received from the Governor on April 8, 1999. She said the questions to be answered are, Should the current flexibility in the use of the 3^rd grade funding for approved remedial programs be continued and should this flexibility be expanded to all class-size reduction funding or limited to the 3^rd grade share?

Ms. Botts said Lyon, Washoe, and Churchill Counties have been using the money for their Reading Recovery programs, which have demonstrated significant improvement in student achievement, and wish to continue to do so. She said that at the last hearing Elko County School District requested flexibility to reduce ratios in grades K-5 to 22:1 so the district can eliminate team-teaching.

Senator Rawson commented that to offer complete flexibility would be a big step. He said the way the program was designed, and modified in each legislative session, makes it impossible to perform an accurate assessment of what has been accomplished by CSR. He stated he suspects this process will continue for some time and it will most likely take a decade for the program to stabilize so the benefit of the program can be evaluated.

Senator Rawson suggested if flexibility is to be offered, it be offered on a limited basis and approved by the State Department of Education with perhaps more flexibility being offered to the smaller counties.

Ms. Evans resumed chairing the meeting.

Senator Raggio commented this seems like an excellent suggestion. He maintained this would in no way change the ratio that is in the law. He emphasized he was impressed with the districts that have been given the flexibility with the 3^rd grade CSR money to utilize the funds in remediation programs, particularly the Elko County School District, in their quest to eliminate team-teaching. He stated it appears that if there is one uniform assessment of CSR, it is that team-teaching has been used as a vehicle for compliance when in fact there was no such intention at the outset of CSR. He said it came about as a device to "fit" the CSR into schools because there were not enough classrooms. He agreed the flexibility to use the funds should have some restriction. Senator Raggio said he would not be prepared to increase flexibility beyond grades K-3. He stated he would not like to impose numerous restrictions on the school districts asking for this kind of flexibility.

Senator Raggio stated he believed the school districts should have the flexibility in grades K-3 when it can be demonstrated that it is advantageous for their remediation programs, or to eliminate a team-teaching situation. He said this would provide control and still allow districts to utilize the funds in the most cost-effective manner. He noted the purpose is to make better teaching situations for the earlier grades and not to preserve some program that has to be carried forth in a particular ratio. He said it has been a disservice to the entire effort of CSR by substituting the 32:2 classrooms, in order to accommodate what the law stated. He emphasized that was never the intention of the Legislature.

Senator Coffin pointed out the number of classes taught with team-teaching is very small. He said the idea of providing flexibility to the smallest districts is laudable. He noted the reason he supported the CSR initially was basically due to its potential in the area of the reading skills more than anything else.

Mr. Dini said the flexibility for grades K-3 in Lyon County has made for an excellent "program" and he would like to see it continued. He stated that in regard to the Elko County School District request it would seem the district could develop a pilot program under the State Department of Education to see how it works and then determine next legislative session whether it has been effective.

Senator Mathews agreed. She said the school superintendent from Elko made a compelling case for the need for flexibility in the Elko County School District.

Mr. Goldwater noted that CSR is a major policy issue in Nevada. He submitted that while everyone has made salient points, the issue probably deserves the consideration of the full Legislature. He said any changes made via the funding mechanisms need to be on a limited basis and as narrowly crafted as possible and must have some economic justification that there is a "greater good being done." He agreed a limited pilot program in Elko would be an outstanding idea.

Mr. Hettrick said the school districts have been given the task of doing the best job they can in teaching children. He called attention to responses from a survey shown on page 3 of Exhibit C indicating that 14 of the school districts said they want flexibility. He said it should not be up to the Legislature to tell the schools the best way to teach children. He stated that if there is one teacher teaching 22 children rather than 16 and the other teacher has a class of 10 because the students need remediation, the ratio still comes out to be 16:1 and those students needing help, get help. He asked why the Legislature is limiting a school district’s ability to teach children. He maintained this does not make sense, simply to maintain ratios that are artificial. Mr. Hettrick stated the schools have been given a directive to raise standards and should be given the tools they need to raise the standards. He stressed that is what this is about.

Senator Raggio said he would like to emphasize what Mr. Hettrick had said so well. He stated he could not support giving only one school district this type of flexibility because currently, the ratios are artificial. He declared there has been 7 years to study CSR, the Nevada Education Reform Act has been implemented, and the state has embarked on a great mission to try to provide whatever tools are necessary to have students achieve. He maintained that if the schools are confined to artificial ratios and can only give "lip service" to programs for the sake of saying the program exists, a disservice is being done to the mission of better educating children.

Senator Raggio said the school districts, which have elected school boards and good administrators, need to be trusted to determine the best use of these funds. He emphasized the flexibility option would not change the funding or the requirement for the number of teachers per student, only provide flexibility in the way the funds are used. He reiterated failure to do so would be a great disservice to this effort merely to please someone who thinks that keeping the ratio this way is helpful, "because it is not."

Senator Mathews said, that as a teacher she knows there is a big difference between having 22 students in a classroom and having 16. She noted her daughter teaches school in Las Vegas and the turnover that occurs at her year-round school, when the students come back after their 15-day break, is tremendous. She stated it is like starting over each time with the new students because they are behind. She supported implementing a pilot program in Elko.

Ms. Evans reviewed the points on the two questions. She said that in the past, flexibility has been allowed only in the 3^rd grade. She stated the options for consideration are (l) to allow flexibility for grades 1-3, (2) to allow flexibility for K-5 for all districts with a ratio not to exceed 22:1, and (3) to allow flexibility for K-5 for a pilot program in Elko County.

Mr. Hettrick stated the ratio still comes out to be 1:16, but it is not specified there must be 16 students in any given classroom. He maintained that the same amount of funding is being provided and the task for the school remains the same. He said the question is whether or not the school can better utilize a classroom and teacher for children who need to have remediation and need to be in a classroom with fewer children. He suggested flexibility in grades 1-3 and no change in the ratio.

Mr. Goldwater acknowledged he does not have a background in education but said if it is left up to schools at the local level, there would be many different solutions and methods. He wondered who would determine which was best but said there is no right answer to the question of what is best. He stated there should be a policy that the Legislature believes to be best. Mr. Goldwater said that so far, the current CSR policy allowing flexibility in grade 3, "whatever that means," works best. He said the proposed new policy should be considered thoughtfully and thoroughly before any changes are made.

Saying he sensed some misunderstanding as to what is currently in place, Senator Raggio noted that grade 3 has a class-size reduction of 19:1 and the ratio in grades 1-2 is 16:1. He said the funding for 3^rd grade has been allowed to be used "otherwise" across the grades, for schools that have a need for remediation or "other types of programs." He noted the proposal outlined by Mr. Hettrick would allow the flexibility for this funding across all three grades, 1-3, for remediation and related purposes. Senator Raggio said his suggestion was not to give complete flexibility but to allow flexibility when a need to enhance the remediation programs or reading enhancement programs has been demonstrated, or where it can be shown the use of the funding will eliminate the need for team-teaching. He maintained that suggesting only a pilot program is delaying the schools’ improvement. He stated this will not help the 16 other school districts help the children in these lower grades to achieve.

Ms. Botts pointed out the flexibility currently available in the 3^rd grade funding is not "wide-open"; the districts have to file a plan with the superintendent of instruction and the plan has to be for an approved remedial program or one where there is evidence that it is effective.

Senator Coffin pointed out this program has not been in effect for 7 years. It was approved in 1991, but due to budget considerations it was only in 1993 that there was full appropriation. The program did not go into effect until late in 1993, so there are only 6 years of data available with which to assess the CSR program.

Ms. Evans said it seems the legislators are trying to determine what is meant by flexibility. She reviewed that in grades 1-2 the ratio is 16:1, in grade 3 it is 19:1, and the Elko County School District has requested to increase the ratio to 22:1 in grades K-5.

Senator Rawson said he understands Elko County’s desire and the district’s testimony is compelling, but he called attention to what happens in some of the formulas and systems when significant differences are allowed. He noted that some of the institutions in the University and Community Collage System of Nevada which have received the same amounts of money but have used it in different ways have ended up with significant differences. He said what will be seen in the future, if there are significant differences in the districts, is that districts will be coming to the Legislature saying they are not receiving what other districts are. He believed the Legislature should proceed carefully.

Mr. Hettrick explained the funding ratios would remain as they are currently, but with the same flexibility that is allowed for 3^rd grade to apply to grades 1-2.

Senator Coffin said it was his understanding funding ratios can be broadly abused because "you can fund at one level but allocate the teachers at another level." He stated it must be proved the CSR works. He agreed that in some of the smaller counties it might be necessary to have flexibility for grades other than the 3^rd grade.

Mr. Hettrick reiterated his intent was still to fund the program based on an overall 16:1 student-to-teacher ratio. He said the point is that the same thing be done, regarding flexibility, for grades 1 and 2 as is done for the 3^rd grades.

Ms. Evans asked whether, for example, there would be a focus on reading remediation. Mr. Hettrick answered, "Whatever the district feels is needed, as long as there is an approved program with an approved remediation course."

Senator Raggio said he would support the motion except for the portion on the pilot program, because if the flexibility that is in the principal part of the motion is approved there would not be a need for the pilot program. He stated that until it can be seen how this works, he is nervous about having only one school district embark on a pilot program.

Mr. Hettrick stated he and Mr. Dini are willing to divide the motion to separate the two issues.

Mr. Goldwater reiterated he cannot support the motion. He maintained the issue of flexibility is ill-defined and the issue of funding the ratio and giving a large sum of money over to the districts, without any good policy definitions, is irresponsible.

Ms. Evans asked Mary L. Peterson, Superintendent of Public Instruction, State Department of Education, to clarify the motion before the committee and how, in a practical sense, it would work. Ms. Peterson answered most of the districts currently receive waivers from the law, because the law states there shall be pupil-teacher ratios of 15:1 but the funding level has been at 16:1. She called attention to a point made earlier that the Department of Education has been giving waivers and said waivers are granted because of the difference between what the law states and what is received in funding.

Ms. Peterson said the flexibility option provided for 3^rd grade has been in place for 3 years and three districts have taken advantage of the flexibility. The department has worked with every district that has applied for the flexibility waiver. The district must show that it is implementing a proven program which targets certain specific needs and has been proven in other school districts to be effective. Ms. Peterson pointed out no districts have been denied a flexibility waiver. She said the district must have an evaluation plan and a proven program.

Mr. Dini pointed out that expanding flexibility to the 2^nd and 3^rd grades would not change anything because the districts are either complying or are receiving waivers. Ms. Peterson said that is her point. To her knowledge, all of the flexibility options requested have been approved, using the 3^rd grade CSR money to implement remediation programs.

Ms. Botts said it was important to point out that the current law, which has been in place for 3 years and which allows the 3^rd grade money to be used more flexibly for approved remedial programs, also requires that the aggregate pupil-teacher ratio in grades K-3 not be increased. She stated the ratio is held to the 1996-97 level in the latest bill. She said the ratios are done on a districtwide level, so the situation of one class having 22 students and another, 10, does exist. She noted Clark County School District requested that type of waiver in the second or third year of the program in order to provide lower ratios in at-risk schools.

Ms. Botts said 1990-91 was the first school year of the program and the statewide ratio in first grade was 16:1, and the following year 2nd grade was added.

Ms. Evans commented that if the flexibility is allowed for the other grades at the current ratios, a request might be included for a report in 2 years on how the plan is working. An evaluation could then be made on the program to decide whether it is worthwhile and should be continued.

Ms. Evans stated a vote will be taken on the first part of the motion, to keep the funding ratios in grades 1 through 3 as they are now and to provide the same type of flexibility in grades 1-2 as is now allowed for grade 3.

Ms. Evans said the next consideration is whether to approve a pilot program for Elko County School District, to include grades K-5 with a ratio of 22:1. She recalled there had been discussion for some time on whether an impact could be made on the growing class size in other grades, and it was suggested the CSR program be expanded to 22:1, adding grades 4 and 5.

Ms. Botts asked for clarification on the CSR program. She asked whether the desire is to consolidate the CSR into the DSA and still allocate the funds by the same formula but have the money actually in the DSA account, as recommended by the Governor, or to keep the CSR in the Class-size Reduction Trust Fund. Senator Raggio said he thought that motion was voted on earlier and it failed. Ms. Botts agreed.

Ms. Botts asked whether the $8 million, which the Governor recommended for school improvement programs to be identified by the Legislature, be funded directly by the DSA, with Estate Tax deposited to offset the cost of the programs. She explained the Budget Division has recommended that after $13.8 million of Estate Tax has been deposited to the DSA, additional Estate Tax receipts be deposited to the renamed Trust Fund for School Improvement. The Legislature would have to specify how the money would be spent. She said four programs have been discussed that might be funded with the $8 million. First is the remediation money for improved remedial education programs for low-achieving pupils, and the range that has been suggested is from $3-$6 million a year. Ms. Botts said another program would be for professional development, to help teachers teach to higher academic standards, with a range of approximately $1-$3.5 million a year. She stated the difference would be whether the State Department of Education would be conducting the training or whether there would be four regional professional development centers established. The third program would be the new standards-based exams in grades 3 and 5, in reading and math, at a cost of approximately $300,000 a year. In the fourth program a contractor would be hired to improve the high school proficiency exam. The two estimates received by the department were between $600,000 and $900,000 a year.

Senator Raggio stated he is clear on the $8 million. He asked whether that amount would be in the DSA. Ms. Botts replied the Governor did not have the $8 million in the DSA originally, but because the Estate Tax money has not been forthcoming, the Budget Division had proposed that the programs be funded through the DSA. As the Estate Tax revenue is received, it would be deposited into the DSA to reimburse the account for the cost of those programs. Ms. Botts said if there is some discussion of retaining the CSR program in the Class-size Reduction Trust Fund, by law the Estate Tax money must go to that account. She stated that perhaps this will be funded from the General Fund.

Senator Raggio said he believes everyone on the committee approves of the Governor’s recommendation to earmark $8 million for school improvement programs and added, "Hopefully that amount can be augmented." He stated the $8 million needs to be allocated among the four programs but said he does not know how the various amounts to the programs can be defined. He maintained funding for professional development will depend upon what is finally agreed upon regarding resource centers.

Ms. Evans pointed out that in the last biennium the remedial education component request was for $3 million and it was recommended that amount be increased this legislative session. She said one recommendation was to increase the amount to $3.3 million for remedial education in each year, providing $3.5 million for the professional development centers, $300,000 for the standards-based exam, and $900,000 for the high school proficiency exam.

Senator Raggio asked whether the $900,000 for the proficiency exam is needed each year. Ms. Botts answered, "Yes, because a contractor would be hired to take over the program."

Ms. Evans asked whether this is a proper characterization of the programs. Ms. Peterson said it is accurate.

Don Hataway, Deputy Director, Budget Division, Department of Administration, said that on the basis of the decision not to consolidate the CSR with the DSA, $13.8 million a year is needed to balance the CSR. Whether that would come from the Estate Tax or from an additional General Fund appropriation would be up to the committee. He said that on the basis of the fact the Estate Tax and general fund appropriations have funded CSR to date, he is not sure the $8 million is " any longer on the table" unless there is additional funding. He pointed out there is additional funding from the Economic Forum, through the Local School Support Tax (LSST), that would help provide an offset. But the program as originally recommended by the Governor, through the use of Estate Tax funds, is not available at this time based upon the decision not to consolidate the CSR into the DSA.

Ms. Botts provided a handout showing the number of schools potentially eligible for remediation funds (Exhibit D). She said this report is based on the number of schools tested last October and the results are shown in Exhibit D. She noted the first 8 schools are those having been designated as having inadequate achievement. This is down from the 23 that were designated in the prior year. Also identified are 5 schools that are on the list for a second year, and 3 that have been added for the first time

Ms. Botts explained she has added schools which have perhaps escaped designation because one of the grades tested had passed, but another one failed. She said examples of that happening would be some of the small areas where there are 4^th, 8^th, and perhaps 10^th grades, all considered to be within one school. She pointed out she had added the number of schools that are too small to receive a designation of whether their achievement is adequate or not, under the State Department of Education’s regulations. She said if those schools can also apply for the funds, approximately 36 schools would be covered. Ms. Botts pointed out a school can apply for the amount of funding needed for the remedial program. She said that since 23 received funding in the first year, these schools would all be eligible, under this plan, to apply again; but they would not need as much money.

Ms. Botts said that because of the DSA and the considerable balance in that account, it was proposed that funding for the CSR program and the $8 million for school improvement programs come from the DSA and that the Estate Tax revenue be used when it comes in, to replenish the DSA. She stated that if CSR is left in the Class-size Reduction Trust Fund, there would most likely be a shortfall in the $13.8 million needed to fund the program.

Ms. Evans said the information provided by Ms. Botts provides a formula for usage of the money, based on those schools that have failed repeatedly. She pointed out the need to provide continued assistance for schools that have just risen above the "inadequate" classification so they can continue to improve.

Senator Raggio said he was disturbed by the testimony provided by Mr. Hataway. He maintained it will do no good to approve a motion when it will not do any good to allocate funds if the decision not to consolidate the CSR into the DSA makes the money unavailable.

Mr. Hataway referred to a summary sheet (Exhibit E) showing the Governor’s recommendation for total basic support. He explained that included in the $1,356,529,637 figure is $83 million for CSR in FY 2000 and $87 million in FY 2001, so that number would be reduced by those amounts and the basic support would decrease accordingly. He stated:

Ms. Botts responded, "If it is decided to spend the $8 million for school improvement out of Estate Tax or General Fund it is a wash either way." She stated she appreciated the concern that the CSR and school improvement are going to be in a separate accounts, without the cash-flow advantages that the DSA offers. She said it should not be a problem, however, if the $8 million is replaced with General Fund dollars. Ms. Botts said that in the Governor’s budget approximately $5.9 million goes into the DSA. She said she had shown the full $13.9 million estimated as being the total revenue from Estate Tax.

Mr. Hataway asserted, "If you take the $83 million and $87 million out of the DSA, and put it over in CSR, you will need $13.8 million to balance that budget."

Ms. Botts answered the amount needed in the DSA would be either $13.9 million of Estate Tax or perhaps $5.9 million would be transferred to the school improvement account, with only $8 million of Estate Tax to be left in the DSA.

Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, said he thinks the cost of the CSR program is the cost of the CSR program regardless of whether it is in the DSA or in a separate CSR account. He remarked, "No one is talking about changing the cost of the program, it is just a matter of where you put it." He stated the program can be funded with 100 percent General Fund dollars or with General Fund dollars less whatever is assumed to be received in Estate Tax money, but the price of the program will remain the same.

Mr. Dini said, "The money was there or it wasn’t, either way, right? It’s the same money and if we didn’t have it originally, we don’t have it now."

Ms. Botts said perhaps the concern is that the Estate Tax has not been performing very well, and whether $13.9 million would be received is the big question. She stated, "But if it is in the DSA or whether the CSR Trust Fund is allowed to borrow from their second year’s appropriation, it would work either way."

Senator Raggio said that as he understood the motion it would be to recommend the allocation of the $8 million budgeted for school improvement programs be authorized at $3.3 million for the remedial education programs for low-achieving pupils, $3.5 million for professional development resource centers to help teachers teach to higher standards, $300,000 for developing and implementing new standards-based exams for grades 3 and 5 in reading and math, and $900,000 for improving the high school proficiency test. He suggested the motion intend that these monies not be available to be used for any other purposes, such as negotiations, or to replace any other money appropriated.

Mr. Dini stated he does not believe these funds are available for bargaining; this funding is for special programs. Senator Raggio thought that should be included in the motion.

Senator Coffin asked, "When did the Legislature start segregating funds from the pool of money available to the districts, for whatever its elected officials elected to do with the funds?" He said it needs to be made clear that specifically designating the use of funds is an exception. He asked whether the intention is to place all funding into a separate account, unavailable for bargaining, in the future.

Senator Raggio stressed these four school improvement programs are the highest priorities if the state is to continue reforming education, and they must be utilized for the stated purposes. He said it must be ensured that all of the monies available for improvement programs not be used for other purposes. That is the specific reason the delineation is being made.

Mr. Goldwater asked where the money goes. Senator Raggio replied it goes "in different ways, depending on the usage." He explained that the professional exams have to be purchased and disseminated, requiring a payment to the school districts that will most likely be made through the State Department of Education. The remediation programs are a cost to the school districts and the teacher development program will be utilized in the proposed resource centers. Mr. Goldwater asked whether these are new or existing programs. Ms. Botts replied three of the programs are new and one is existing.

Ms. Botts explained the remediation money is not totally new; this is the first year in FY 1998-99 that the money has been used. She said it was approved last legislative session and there is $3 million for this purpose in the current year. She pointed out that currently the school districts have to apply for the money, which is allocated by the IFC and can only be used for a remedial program that has been found to be effective. She said that in the current year, the money could only be used by schools which have received a designation of having inadequate performance. Ms. Botts referred to the summary of schools potentially eligible for remediation funds (Exhibit D). She said this proposes that more schools than just the 8 designated as "having inadequate achievement" could apply for money. She suggested this would allow schools that had been failing in only 3 out of 4 areas also to apply. Schools which are so small that under the department’s designations they have not received a designation could also apply, but the remedial program chosen has to be on an approved list. She said there are 30 programs on the approved list. Ms. Botts pointed out the Legislative Committee on Education makes recommendations for the list and the State Department of Education approves the list of approved remedial programs.

Ms. Botts said the approximately $3.5 million for the regional professional development centers is a new concept coming from the Legislative Committee on Education. She noted four regional workshops were held around the state to receive input on what teachers need in order to teach to higher standards. She said that based on responses at the workshops, it was determined the regional centers would be the best way to achieve the goals and the centers would be established in Clark, Douglas, Elko, and Washoe Counties. She explained the centers will be governed by a board made up of superintendents from the counties, representatives of higher education, and master teachers. She said that also, the State Department of Education had suggested a member of the department staff be included on the governing bodies. Ms. Botts said the training would be provided either in the schools or in one of the training centers, utilizing existing buildings and equipment.

Ms. Botts noted the standards-based exam was funded by the 1997 Legislative Session, but the money was reserved for reversion so the State Department of Education has not begun work on the tests. She said the Council to Establish Academic Standards for Public Schools has recommended that those exams begin in grades 3 and 5.

Ms. Botts stated the high school proficiency exam is a long-standing program. She noted that under the Legislature’s direction, the State Department of Education has made the exam more difficult. She pointed out the exam will be made more difficult as the exam is coordinated with the higher academic standards and the department has asked for money to hire a contractor to assist with development of the exam.

Ms. Evans stated that one of the issues at a previous hearing was the need for support for summer school because some of the remediation occurs in summer school. She asked how these proposals would address that concern. Ms. Peterson answered the hope would be that intersessions, summer schools, and before- and after-school programs, which are designed to meet the needs of students having difficulty in meeting standards, could be included. She noted the State Department of Education’s original recommendation was that the definition of a remediation program would be carefully expanded to include those kinds of programs targeted specifically for those students having difficulty passing the new proficiency exam and meeting standards.

Mr. Goldwater asked whether there are other program options. Ms. Evans replied these programs are simply suggestions that respond to a variety of previous testimony. Mr. Goldwater asked whether the regional professional development concept goes through the Assembly Committee on Education or only through the Legislative Committee on Education. Ms. Botts answered the concept was from the standing Legislative Committee on Education and there is an appropriations bill, Senate Bill (S.B.) 60, that is currently in the Senate Committee on Finance.

Ms. Evans restated that in each year of the biennium the figures for allocation of the $8 million would be $3.3 million for remedial education, $3.5 million for professional development, $300,000 for the standards-based test, and $900,000 for the high school proficiency test.

Ms. Botts asked whether General Fund appropriations recommended for the DSA should be reduced. She said this is an old issue. She noted the latest estimates of assessed value would provide approximately $9 million in new revenue in the first year of the biennium and $8.5 million in the second year. She called attention to a recap of the changes in revenues based on the information received late Thursday from the Economic Forum (Exhibit F). She reviewed the summary of changes. She said the property tax is broken into two components, the 50-cent portion that is considered "outside" the Nevada Plan and the 25-cent portion that is considered "inside" the plan. She pointed out the two would have to be added together to arrive at the $9.2 million and $8.5 million of new revenue. She said that under the revenues outside the Nevada Plan, 50 cents of the property tax adds $6.1 million in FY 2000 and approximately $5.7 million in FY 2001.

Ms. Botts called attention to the difficulty in understanding what is happening with the Motor Vehicle Privilege Tax. She said the Budget Division had originally estimated growth of approximately 15 percent in FY 2000 and 11.7 percent in FY 2001, based on historical performance of that particular tax. She noted the school districts expressed concern that the revenue had not been received at the projected level. She said the Budget Division had lowered the estimates to 12.06 percent, which is an 11-year average of the collections of that tax, and that is what is represented as a reduction of approximately $3 million a year as shown in Exhibit F.

Ms. Botts reported the information received yesterday indicates that perhaps part of the problem at the Department of Motor Vehicles and Public Safety (DMV&PS) is an extremely large backlog of mail-in registrations, but it has not been verified if that is exactly the problem. She said that with the retail sales of automobiles up 12.7 percent and the population still growing, the Budget Division still expects the tax to come in at approximately 12 percent, so she has included the Budget Division’s recommendation. She stated, "This nets out an additional $3 million in FY 2000 and $2.5 million in FY 2001 of revenue ‘outside’ the Nevada Plan." She said, "Now when we look at revenue ‘inside’ the Nevada Plan, based on the Economic Forum’s estimates, we will have $11.7 million more in Local School Support Tax in FY 2000 and $12.9 million in FY 2001." She pointed out these figures are based on percentage increases, chosen by the Economic Forum, of 5.9 percent in FY 2000 and 4.8 percent in FY 2001, and an 8.7 percent growth in the current year.

Ms. Botts called attention to the 25-cent property tax of approximately $3 million more a year. She said the amounts shown under Annual Slot Tax are estimates from the State Gaming Control Board, approved by the Economic Forum, that will add $116,800 in FY 2000 and $626,400 in FY 2001. She stated these are percentage increases of 1.02 and .49 percent.

Ms. Botts pointed out that, as discussed in previous meetings, she has left the revenues in the federal mineral land lease "flat," which brings about a deduction of approximately $2.2 million. She said she used the Budget Division’s estimate.

Ms. Botts explained the estimate for the current year on out-of-state sales tax is 12.95 percent. Increases of $583,451 in FY 2000 and $327,906 in FY 2001 are based on numbers received in the latest revised budget from the Budget Division and are slightly higher than the percentage increases for Local School Support Tax and the sales tax figures that the Economic Forum chose. She said that for the past 6 to 8 years the tax on out-of-state sales has grown faster, so these percentage increases are 7.77 percent in FY 2000 and 7.09 in FY 2001.

Ms. Botts stated the net effect is a total increase in available revenues of approximately $16 million. She pointed out this does not include the $8 million identified by the Governor for school improvement programs.

Ms. Botts called attention to the bold-outlined columns on the DSA spreadsheet, shown in Exhibit E, where it is indicated on the last line balance that there is $16.4 million in FY 2000 and $16.9 million extra in FY 2001. She said this is because she has held the appropriation at the level recommended by the Governor, for display purposes. She stated the decision for the committee is whether the appropriations should be reduced by the entire amount of approximately $16 million or some lesser amount, or should not be reduced at all. She said the other revenues that have been projected to be available were not available at the time the Governor closed the budget.

Senator Mathews asked, "How do you find out where the monies are if the car sales are up, but the privilege tax revenue is down? And is there an audit trail?" Ms. Botts stated the Fiscal Analysis and Budget Divisions have been working for almost a month with the DMV&PS to try to determine what the problem is. She said the information was received that perhaps the problem is the significant backlog of mail registrations, as mentioned earlier.

Mr. Hataway reported that the only thing he was able to verify after hearing this information was that, according to the DMV&PS, the department is approximately 8 days behind in processing. He said the DMV&PS could not give "quantities of what the 8 days represents."

Senator Raggio said he would suggest not making any decision at this time on the issue of reducing General Fund appropriations recommended for the DSA. He maintained the committee is not prepared to make this decision until all of the other needs are identified, to see how this would fit into the overall final decision.

Ms. Evans said that in some ways this item, the issue of retaining appropriations to the level originally recommended by the Governor, and the "new" money used to fund identified needs are tied together. That is because there are a number of follow-up issues to be considered, such as inflation, removing the vacancy savings factor, increasing money for textbooks and instructional supplies, covering increases in group insurance, supporting technology, and covering potential shortfalls in revenues such as mineral lease or motor vehicle privilege tax revenues.

Senator Raggio indicated he knows the Governor has, through his aides, indicated a proposal for use of additional funding of this kind for the textbook issue and has indicated some degree of commitment to removing the vacancy savings factor. However, it would be premature for decision of the kind to be made at this time, the senator stated.

Ms. Evans recalled the Senate Committee on Finance and the Assembly Committee on Ways and Means had discussed and suggested possible "adds" to the budget (Exhibit G).

Mr. Goldwater said that before adding anything to the budget he would like the issue of the fixed cost of the health insurance program to be addressed.

Ms. Botts reviewed several options on group insurance (Exhibit H). She noted she had included the Governor’s recommendation and the revised spreadsheet which the State Department of Education provided today (Exhibit I). She pointed out what has changed on the "add list" (Exhibit F). She said that on the scaled-down proposal for the Statewide Management of Automated Record Transfers (SMART), the amounts have been spread over 2 years and the same is true for the priorities of the Commission on Education Technology. Ms. Botts said it took $2.7 million to bring the remaining schools up to what the commission calls "Level 1," meaning one computer per classroom, or the equivalent, in a computer laboratory-type setting.

Ms. Botts said completing the satellite downlink project would require $644,572 a year and she has detail on this if needed. She called attention to the $300,000 a year for English as a Second-Language (ESL). She pointed out that for several years Clark County School District, has received about $200,000 for a pilot program. She said she has indicated another source of funding has been considered for the issue of assistance to rural school districts having problems with school facilities. Additionally, she said she was asked to "increase inflation" so she increased the inflation allowance for textbooks, library books, instructional supplies, and software from 2 percent to 4 percent.

Ms. Botts said the other new item on the list was a request from Senator Rawson for 5 special education units, designated specifically for the gifted and talented in the StarGATE Program, shown in the amount of $144,065 in FY 2000 and $146,945 in FY 2001.

Ms. Botts said the State Department of Education had indicated the $46,000 allocated in the DSA in the Governor’s budget for the Lyon County School District’s special transportation costs would not be adequate. She therefore increased the allocation to $60,000, the amount being spent in the current year. She said items 21 and 22 of Exhibit G are adjustments she has made to adjust the number of special education units to a whole number and the dollar amount per unit to a whole number, so it will make it much easier for the department to administer. She stated the number of units was increased exactly equal to the rate of growth projected in regular enrollment and the amount per unit by the 2 percent roll-up factor.

Ms. Botts explained that she did the same thing on item 22 of Exhibit F. She adjusted the current year’s level of funding for adult diploma programs and increased it by 2 percent for rollup costs and for the same growth in enrollment that is budgeted for K-12 enrollment, which resulted in a decrease of approximately $19,000 in FY 2000 and an increase of approximately $20,000 in FY 2001.

Ms. Botts called attention to item 23 of Exhibit G. She said a letter was received from the State Department of Education indicating the department is projecting a need for a second supplemental appropriation in the CSR program of approximately $4.2 million. That request is included under FY 1998-99.

Ms. Botts stated she was asked to provide a tally and pointed out that the items in Exhibit F which have an asterisk were included in the totals of approximately $14 million.

The meeting was adjourned at 10:46 a.m.

RESPECTFULLY SUBMITTED:

Patricia Hampton,

Committee Secretary

APPROVED BY:

Senator Raymond D. Rawson, Chairman

DATE:

Assemblywoman Jan Evans, Chairman

DATE: