Video Conference

October 31, 2008

Various Locations

 

PRESENT:       Senator Phil Nicholas and Representative Frank Philp, CoChairmen.

                       

Senators:   Rae Lyn Job, Curt Meier, Ray Peterson and Chuck Townsend.

 

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

 

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

 

 

ABSENT:         Representative Steve Harshman

 

Supporting documents on file with Legislative Service Office

 

 

Friday, October 31, 2008

 

CoChairman Philp called the Committee to order at 10:00 a.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 October 31, 2008 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 3.7%, as compared to a value of 4.3% last year. It is estimated that the cost of a 3.7% ECA for the upcoming school year would be $30.3M.

 

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 4.3%) 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 in 2010 for consideration by the 2011 legislature. Mr. Nelson directed the Committee’s attention to the spreadsheet hand-out that provides a variety of updated inflation factors and associated costs and indicated that using the ECI for this year’s ECA would be an increase or adjustment of 3.7% which would cost $30.3M for the 09-10 school year.

 

Cochairman Nicholas suggested that with a 4% salary increase being built into state agency budgets and school districts facing increasing fuel and utility costs, the Committee might want to recommend a 4% ECA for the upcoming year. Senator Job stated that the most recent statewide inflation rate as determined by the Economic Analysis Division of A&I was reported to be 7.9% and that a 4% rate would be more representative of the current situation in the state than the 3.7% ECI. Senator Meier pointed out that school districts have been receiving significantly more funding since recalibration in 2006 and suggested the Committee stay with the consistent measure of the ECI. Senator Nicholas moved that the ECA recommendation be 4% based primarily on the ECI of 3.7% but adjusted up slightly due to expected increases in utilities, fuel and the 4% salary increase for state agencies.  Senator Job seconded and the motion was defeated in a 5 aye, 6 no, 1 absent roll call vote.  Senator Meier then moved that the ECI rate of 3.7% be recommended, Representative Berger seconded and the motion was adopted on a 10 aye, 1 no, 1 absent roll call vote.

 

K-12 Health Insurance

 

Senator Nicholas asked Employees Group Insurance Administrator, Mr. Ralph Hayes, if there would be an increase in employer premium costs for the upcoming year for the state and if those increases are included in the health insurance funding formula for K-12. Mr. Hayes stated that they are planning a 2.9% increase for the upcoming calendar year plan and that the increase was included in the calculations for K-12 health insurance payments for school districts. Senator Nicholas expressed some concern over the possibility of a potential lag between when the districts would receive the increase in funding and when a health insurance premium increase may occur. Mr. Hayes stated that many school district annual insurance plans ran concurrent with the school year so that for those districts there shouldn’t be a problem. Mr. Sommers pointed out that the health insurance funding methodology was never really intended to be an exact reimbursement program and was more of a proxy for insurance costs. The funding is part of the block grant and the school districts have discretion on how to expend the insurance funding as well as the rest of the funding provided by the block grant.

 

Revenue Report

 

Mr. Sommers gave the Committee a brief explanation of the recently released Consensus Revenue Estimating Group (CREG) report. He informed the Committee there was an additional $507.6M earned in actual FY 08 general fund/budget reserve account revenue and the estimates for the FY 09-10 biennium had been revised upward by $402.2M for a total of $909.8M in total new revenue available. He pointed out that all of this additional revenue would flow to the Legislative Stabilization Reserve Account (LSRA) on June 30, 2010 barring any additional appropriation by the Legislature. Mr. Sommers further stated the school foundation program account revenue estimates for the FY09-10 biennium had increased by $616M and that these revenues would all be deposited into the common school permanent land fund on June 30, 2010 barring additional appropriation by the Legislature in the upcoming general session.

 

Mr. Sommers reiterated the concerns of the CREG contained in the report with the unknown effects of the current national economic downturn on Wyoming’s economy and the possibility of a downward revision of revenue in January. Senator Nicholas asked if staff could provide a figure of the actual carryover from FY 08 in the school foundation program account. Mr. Sommers indicated that the figure could be researched and provided to the Committee.

 

Senator Nicholas stated in recent conversations with the Governor he had indicated he was going to recommend placing approximately $150M of foundation program funds into the retirement system to one-time fund the actuarial liability created when the Legislature recalibrated the school funding model. Senator Nicholas stated that perhaps a better approach would be to place the funds in a holding account until the issue could be further explored next Interim.

 

Other Committee Business

 

Mr. Sommers informed the Committee that supplemental budget hearings were scheduled for the week of December 8-12. He reminded the Committee that any action taken during that time would be subject to change by the new Committee once the session started. The tentative budget hearing schedule allows for the first half-day for discussing Interim issues, then starting at 1:00 p.m. with the Governor. Mr. Sommers stated it should take the full week to complete the hearings and make recommendations for the new Committee to consider.

 

Having completed all agenda items, Cochairman Philp adjourned the meeting at 11:20 a.m.

 

 

Respectfully submitted,

 

 

 

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Phil Nicholas, Cochairman                                                  Frank Philp, Cochairman

 

 

 

 

 

 

 

 

 

 

Appendix		Appendix Topic		Appendix Description		Appendix Provider
1		Committee Sign-In Sheet		Lists meeting attendees		LSO
2		Committee Meeting Agenda		Provides an outline of the topics the Committee planned to address at meeting		LSO
3		Vote Forms		Provides details of roll call votes		LSO

4                  Handouts                                      Provides details of various ECA                             LSO

                                                                          Indices and values