October 7th, 2016

Measure 2 will raid the K-12 education savings account (Foundation Aid Stabilization Fund), a constitutional fund established by the citizens of North Dakota in 1994 to be used exclusively for K-12 education. Its purpose is to offset any reductions to K-12 education when the state experiences a revenue shortfall. Only the governor was given the authority to transfer money from this fund to the state’s general fund. Now, legislators want access to raid this savings account.

Measure 2 will do the following: reduce the K-12 savings account to all but 15 percent of the money it takes to finance K-12 education, allow the governor to access the remaining 15 percent, and allow the legislative assembly to spend dollars in the savings account for any “education-related purpose.” That could include anything related to higher education and/or any creative or imaginative idea the legislative assembly could possibly tie to education — even a road through a community that just happens to end up at the school parking lot.

Due to North Dakota’s revenue shortfall this year, the governor twice made across-the-board budget cuts to state agencies. School districts did not suffer a cut because over $116 million was transferred from this savings account to the state general fund. The fund is working exactly as the people had intended, i.e., as a safety net for K-12 education during a state budget cut.

In addition to providing the legislative assembly access to this savings account, there are two other major flaws in Measure 2. First, the legislative assembly can spend the fund down to 15 percent of the money necessary to finance K-12 education. As a result, this measure will transform a savings account used as a safety net for tough times to a permanent source of funding. It’s a shortsighted measure with the sole purpose of allowing legislators an opportunity to raid this fund to help them balance the 2017-19 biennial budget and future budgets as well.

A second flaw of the measure is that it allows the legislative assembly to spend dollars for any “education-related purpose.” This vague, undefined term would become part of the state’s constitution.

Supporters of the measure say they merely want to “loosen up” money in the savings account, but providing access to over half the savings account ($300 million) is actually raiding the account. Supporters also use a scare tactic by claiming if Measure 2 fails, taxes will increase. That “red herring” is used to mislead the public because this measure has nothing to do with taxes.

Supporters of the measure believe if the measure passes, there will be enough money remaining in the savings account to handle future budget shortfalls. First, how do they know? And second, legislators plan for the next two years. School boards think five, 10 and 20 years out. Once K-12’s savings account is gone, except for the remaining 15 percent, it’s gone for good; and this ballot measure provides the means, motive and opportunity for that to happen.

Vote no on Measure 2.

Coalition to raid school trust fund seeks to bailout legislator's previous over-spending at the cost of the Foundation Aid Stabilization Fund

The debate over Measure #2 continues to heat up.

This morning on the News and Views with Joel Heitkamp, Nick Archuleta with North Dakota United (Teacher and Public Employee Union) was on promoting the measure.

And, what up till this point has been a fairly well kept secret slipped out.

The North Dakota Chamber of Commerce is joining with the Teacher's Union in opposing the School Board Association's efforts to protect the Foundation Aid Stabilization Fund.

How can this be?

Unfortunately it seems that the coalition in favor of Measure #2 is using scare tactics to mislead the public into thinking Measure #2 is about more money for education.

The reality is that all Measure #2 represents is an easy way out for legislators that want to kick the consequences of their over-spending down the road in hopes that the oil market will come back.

That's not good policy - it's gambling.

And school board members around the state should back up their associations' efforts to push back against the ulterior motives behind Measure #2.

And taxpayers should realize that taking money from the school's trust fund actually makes future property tax hikes more likely not less likely. Once the money is gone, it's gone.

Yesterday, Rob Port of the SayAnythingBlog hosted a debate on his radio show featuring State Senator Tim Flakoll (R-Fargo) and North Dakota School Board Association Jon Martinson.

And the debate got quite heated with Senator Flakoll mis-characterizing testimony given during the legislative session.

Senator Flakoll repeatedly claims that property taxes will go up if this fund is not opened up to be spent - this is a scare tactic and proves that when the "property tax reform buydown" money was rolled into the Permanent Education Spending Formula it was not so permanent afterall.

During the 2013 legislative session, the money that was used for the original Property Tax Buydown was rolled into the K-12 Education Funding Formula, as Governor Dalrymple's press release stated:

Following Dalrymple’s recommendation, the Legislature approved the most significant reform in K-12 funding in state history. The Legislature approved the governor’s proposal to establish a new, integrated formula to deliver both property tax relief and strong funding for schools so that all students receive the educational resources they need to succeed.

The Legislature approved $1.7 billion to fund schools and reduce the local cost for school funding. The appropriation represents an increase of $477 million compared to 2011-2013 funding. The new funding formula is sustainable and will result in most school districts needing to levy no more than about 70 mills to cover the local share of school funding. For the average school district, this represents about a 45 percent reduction in local property tax rates.

The Legislature also approved the governor’s recommendation to provide grants to school districts challenged by rapidly growing enrollments. The Legislature provided $13.6 million for school districts that experienced enrollment growth of four percent or more during the previous year. Additionally, the Legislature approved the governor’s proposal to increase school transportation funding by more than 10 percent, from $48.5 million to $53.5 million, to help districts meet the rising costs of providing student transportation services.

Now, all of a sudden, when the budget has gone beyond what revenue can support, the Chairman of the Senate Education Committee says that if the legislature can't raid the Foundation Aid Stabilization Fund your property taxes will go up.

So was Governor Dalrymple misleading the public when he said "The new funding formula is sustainable and will result in most school districts needing to levy no more than about 70 mills to cover the local share of school funding."

Or is Senator Flakoll simply manufacturing a scare tactic to promote the Teacher's Union agenda?

Why is it every time politicians spend too much money they end up threatening taxpayers?

The debate is about 36 minutes long, and for those who want to get a good handle on this issue, it is worth a listen.

There will be plenty more on this issue.

Various education factions take sides on opening up trust fund to being spent on wider range of purposes in non-emergency situations.

Since last week, a few notable events have occurred revolving around Measure #2 which has gotten very little coverage so far this campaign season.

The first item of note is that the North Dakota School Board Association has come out AGAINST Measure #2 with similar reasons to our Watchdog recommended NO vote, but specific to their point of view. It is not often that a taxpayer advocacy group such as the North Dakota Watchdog Network agrees with a group like the N.D. School Board Association, but in this instance there is significant enough common ground to establish what the common sense stance on this years Measure #2 really is.

From the 2016 Watchdog Ballot Measure Guide:

Measure #2 is a legislatively-passed effort to place an upper limit on how much oil tax revenue can be placed in the Foundation Aid Stabilization Fund (15% of General Fund Spending on Education).

The exact language of the new text reads:

Whenever the principal balance of the foundation aid stabilization fund exceeds fifteen percent of the general fund appropriation for state aid to school districts, for the most recently completed biennium, as determined by the office of management and budget, the legislative assembly may appropriate or transfer any excess principal balance. Such amount may be used for education - related purposes, as provided by law.

The North Dakota Watchdog Network follows federal guidelines on taking stances on ballot measure.

Dustin Gawrylow, Managing Director

North Dakota Watchdog Network