Video Conference

Various locations

PRESENT: Senator Phil Nicholas, CoChairmen.

Senators: Ray Peterson and Chuck Townsend.

Representatives: Rosie Berger, Steve Harshman, Alan Jones, Pete Jorgensen, Owen Peterson, and Jane Warren.

Legislative Service Office: Brenda Long, Dave Nelson and Steve Sommers.

Others: Joyce Hefenieder, State Budget Office, Mike O’Donnell and Amy Pauli, State Attorney General’s Office.

Supporting documents on file with Legislative Service Office

Thursday, November 1, 2007

CoChairman Nicholas called the Committee to order at 1:10 p.m.

Executive Summary

The Committee is required by W.S. 21-13-309(o) to make a recommendation to the legislature and the governor on or around November 1, on an external cost adjustment or ECA that adjusts the K-12 school funding model for the effects of inflation. The Committee met on November 1, 2007 via a video conference, discussed the various indices available for such a purpose and made a recommendation that the same index used last year, the ECI or Employment Cost Index for education workers be utilized again this year. The value of the index for the most recent year is 4.3%, as compared to a value of 3.8% last year. It is estimated that the cost of a 4.3% ECA for the upcoming biennium would be $33.4M per year.

K-12 External Cost Adjustment (ECA)

Dave Nelson, LSO School Finance Manager opened the discussion with a brief synopsis of the ECA process. He informed the Committee the ECA process had been in place since the adoption of the original MAP school finance model and even with the re-calibration of the model, the JAC was required by statute to make an ECA recommendation every year. He reminded the Committee that last year the Committee recommended the ECI – Employment Cost Index for education workers (a value of 3.8%) be used as the ECA, and that the legislature did adopt that recommendation for the current school year. He referred the Committee to the memo prepared by Lawrence O. Picus and Associates dated October 10, 2006 for an explanation of the current alternative indices that could be chosen as a guide for recommending an ECA, and also reminded the Committee that the Picus and Associates recommendation was to choose an appropriate index and then stay with that index over time until the next re-calibration takes place.

Brenda Long, LSO School Finance Analyst walked the Committee through the various indices and their associated values for the latest year that were presented in the hand-out supplied to the Committee. She indicated that the ECI for this year has a value of 4.3% and the cost associated with that value was estimated to be $33.3M per year. She also reminded the Committee that the ECA is a cumulative factor, that is, each year’s adjustment is built into the base that is adjusted the subsequent year and so on.

Dave Nelson briefly explained the K-12 health insurance funding mechanism and that for the upcoming year the costs would be similar to the current year, but they are expected to increase the year after that. In response to questions from the Committee, Mr. Nelson stated that the health insurance funding is provided to the districts as a block grant. That is, the districts are not required to spend the exact amounts on insurance, and some districts may spend more and others less than the amount provided. There was some additional Committee concern over whether the ECI index used for the ECA would have a health insurance component within and if so, if that wouldn’t result in a doubling up effect on the health insurance portion of the amount of funding provided through the ECA. Ms. Long responded that such was probably the case, but she would not be able to quantify that amount.

With respect to the ECA, there was some Committee discussion on the appropriateness of using any of the indices other than the ECI as those indices measure the overall cost of living (such as the WCLI or the CPI-U) and include such things as health care and housing costs that may not be appropriate for measuring school district costs when approximately 80% of the costs of the districts are associated with personnel. There was also some concern expressed over regional cost differences based on the regional cost of living indices the state department of administration and information provide. For example, certain booming regions of the state are experiencing higher rates of inflation in some categories. Mr. Nelson responded that the regional cost differences are accounted for in the ongoing K-12 funding model and those differences are updated every year.

Cochairman Nicholas asked if the staff could provide some figures for a CPI-W, or the CPI for wage earners. Ms. Long responded that she would have to research that index value and provide the Committee with that information via an e-mail.

There being no further discussion, Representative Harshman moved the Committee recommend a 4.3% ECA based on the Employment Cost Index (ECI) associated with educational workers. Representative Berger seconded and the motion was adopted on a 9 to 0 roll call vote (see Appendix for voting specifics).

Other Committee Business

The Committee briefly discussed the upcoming budget hearings in December, and Cochairman Nicholas suggested that Mr. Sommers poll Committee members a few days ahead of receiving hard copies of the budget documents on December 1 to see who wanted budgets mailed. Mr. Sommers reminded the Committee the budget hearings are scheduled to start at 8:00 a.m. Monday, December 10 and the Governor will appear at 8:30 a.m. allowing the Committee 30 minutes of planning time.

Having completed all agenda items, Cochairman Nicholas adjourned the meeting.

Respectfully submitted,

-------------------------------------- ---------------------------------------

Phil Nicholas, Cochairman Frank Philp, Cochairman