Shaking things up in Special Education for MN

The state of Minnesota spends about 46% of its annual general fund budget on K-12 education. Minnesota served a total of 848,031 students, of which 126,809 had special education needs during the 2013-2014 school year.

How the formula works:

There is one large formula the state uses to string together all the different funding calculations it will send to a district. The first part is the general education allowance and it’s meant to serve as a foundation for all schools.

The second half of the large formula is for categorical aid and there are many subcategories like transportation, capital improvement and special education. The general education portion of the entire formula for total funds the state sends a school, is computed by multiplying the per pupil formula allowance by adjusted pupil units. The state calculates adjusted pupil units for a district by multiplying the amount of students in a grade by the weight for that grade. The special education portion of the entire formula is the sum of initial aid, excess cost aid, and cross-subsidy reduction aid. Initial aid covers portions of teacher salaries, classroom supplies, difference between general education allowance and cost to the district for educating a special education child, and summer programming for the aforementioned costs. Excess cost aid is given to a district that have a cost to educate special needs children, after the special education formula dollars are determined, that exceeds 4.36% of their general aid revenue. Cross-subsidy reduction aid is an addition to the special education part of the total formula that will only be in effect for the 2013-14 and 2014-15 school years.

Formula Redesign:

The three primary categories will transition into a census-based calculation inclusive of pupil count averages per district, poverty, size of district, and average cost of educating special education students. The state will change the excess cost calculations to be “the greater of 56 percent of the difference between the district’s unreimbursed nonfederal special education cost and 7 percent of the district’s general education revenue, OR 62 percent of the difference between the district’s unreimbursed old formula special education cost and 2.5 percent of the district’s general education revenue.” Cross-subsidy reduction aid, created to last only 2 school years, will change to “Average Daily Membership (ADM) served times the sum of $450 plus $400 times the district’s poverty concentration factor, plus .008 times the district’s ADM served. The poverty concentration factor equals the number of students eligible for free lunch plus 1⁄2 of the number eligible for reduced price lunch divided by the district’s total enrollment.”

Redesign of the pupil weights for the general allowance formula rolled out at the beginning of the 2013-14 school year and the changes to special education roll out this fall. Further complexity could be added to special education expenditure if universal pre-school legislation is enacted. This would mean three large changes to the entire K-12 education formula in less than a five-year time frame. The changes to special education expenditure calculations appear for now to be in the best interest of districts, but time will tell.

Here’s how MN stacks up to a couple of its neighbors:

	Minnesota	Wisconsin	Iowa
Total K-12 Education Expenditure	$9,338,009,487.00	$5,947,372,600.00	$2,714,800,000.00
% of Total State Budget	46%	44.90%	41.80%
Special Education Expenditure	$1,675,740,416.19	$368,939,100.00	$340,258,865.00
% of Total Education Expenditure	17.95%	6.20%	12.53%
Total Student Population	848,031	874,414	476,245
Special Education Population	126,809	120,669	unable to locate

For further reading:

House Education Finance Committee. "Minnesota K-12 Education Finance System Context and Overview." http://www.house.leg.state.mn.us/hrd/issinfo/K12FinOverview.pdf.

Legislative Services Agency. "Overview of School Finance in Iowa." https://www.legis.iowa.gov/docs/LSAReports/k12Education/SchoolAidPresentation.pdf. p 42, 47, 78.

Minnesota House of Representatives Fiscal Analysis Department. "Financing Education in Minnesota." http://www.house.leg.state.mn.us/fiscal/files/14fined.pdf.

Minnesota Department of Education. "Minnesota Education Statistics Summary." http://w20.education.state.mn.us/MDEAnalytics/Summary.jsp

"Wisconsin Department of Public Instruction Summary of 2013 Wisconsin Act 20 Final 2013-15 Budget With Vetoes." http://pb.dpi.wi.gov/sites/default/files/imce/pb/pdf/Act_20_final_summary_2013-15.pdf.

Wisconsin Department of Public Instruction. "Wisconsin Public Schools at a Glance." http://dpi.wi.gov/sites/default/files/imce/eis/pdf/schools_at_a_glance.pdf.

Funding Bicycle Facilities in MN

The largest sole contributor to bicycle facility funding is federal sources, though federal funding of bicycle infrastructure is fairly new.  It wasn't until 1991 that bicycle infrastructure projects were eligible for federal funding with the adoption of the Intermodal Surface Transportation Efficiency Act (ISTEA) that bicycles were recognized as an integral part of many transportation networks.  Several transportation funding plans have been adopted since 1991, with each defining and funding bicycle infrastructure slightly differently.

For projects that receive funding from federal transportation sources, state or local agencies are expected to provide 20 percent of the projects approved costs.  However, the available amount is limited and there are usually too many projects to be funded primarily by federal sources.

For projects that are not able to receive funding from federal sources, there is a variety of possible funding sources including state and local as well as private sources.   The Twin Cities has used multiple sources to build a bicycle transportation and recreation network which added over 30 miles of bicycle-specific infrastructure between 2000 and 2009.  The City of Minneapolis has identified opportunities to expand the current network and is hoping for $284 million dollars to fund this network expansion, accounting for $2.6 million dollars per year until 2040.  In the past, Minneapolis has used a variety of funding sources to build the existing bicycle infrastructure but has encountered numerous obstacles beginning in 2009 with state cuts in Local Government Aid (LGA).

Most recently, infrastructure planning has emphasized the need for "8-80" bicycle infrastructure, which is infrastructure that anyone from 8 to 80 years old can feel comfortable and safe on while riding.  Many bike-friendly and bike-progressive cities have viewed the realization of this principle as protected intersections and bikeways.  But who funds these projects?  Unfortunately, there is neither enough funds to pay for all of the proposed bicycle improvements, just as their is not enough money to pay for all of the roadway improvements.  But in a funding world where safety for vehicles is prioritized over safety for cyclists, what gives?

Regional Rail in PA and MN

Considering the strong aversion at both the state and federal level to raise the gas tax, it is refreshing to see bipartisan action to fund transportation infrastructure in Pennsylvania based on a fuel tax. Recently, the state of Pennsylvania approved a bill called Act 89 to eliminate the state gas tax and move entirely to an Oil Company Franchise Tax (OCFT). The new law requires an annual increase in both “the millage rate and the average wholesale price of fuel on which the tax rate is determined.” According to TASG, an advisory group, “the millage rate is increased by an additional 64 mills in calendar year 2014, 49 mills [in] 2015, 48 mills [in] 2016, 41 mills [in] 2017, and 39 mills in each succeeding calendar year” (TASG). Pennsylvania gas taxes are now the highest in the nation, at 68.9 cents (pennlive.com). Throughout the state, gas prices are still below $3 per gallon. To put this in perspective, Norwegians paid almost $8 per gallon this month (globalpetrolprices.com).

After 5 years, Pennsylvania's Act 89 will provide $2.3 billion in funding for transportation, $500 million of which will go towards transit. SEPTA provides transit service including 13 regional rail lines and receives funding from federal, state, and local sources. Prior to 2007, the financing formula has not worked well since SEPTA was subject to the annual appropriations process. With the passage of Act 89 in 2013, SEPTA is better able to confront its serious backlog of deferred maintenance especially for its regional rail division.  

The federal Highway Trust Fund (HTF) supports transit throughout the nation and is insolvent.  SEPTA will need to be proactive about financing to maintain its aging system. I recommend that they pursue more innovative value capture policies. These include joint development (JD) at transit oriented developments (TODs). JD can take many forms and can involve the federal government or not. Transit agencies have sold or transferred air rights for development projects or shared operating costs for shared equipment with adjacent buildings (such as HVAC ).  Long term ground leases can provide stable revenues for a transit agency in a transit station area while also increasing ridership.

Minnesota’s Northstar Commuter Rail is only a small fraction of SEPTA's regional rail. Metro Transit, the Twin Cities regional transit agency, is a branch of the Metropolitan Council which is the planning organization for the Twin Cities. The Northstar system benefits from Metro Transit’s connection to planning since TOD goals are linked to transitway planning and community planning.

Ultimately, political discussions of regional rail are a subset of public transit discussions.  Public transportation and road infrastructure projects often compete for funds rather than being seen as complements to the other. Until the U.S. rectifies the artificially low cost of driving, both transit and road infrastructure funding will be a challenge.

Interesting Links:

World Class Greater Philadelphia provides an insightful analysis of Act 89 here. 

Plan Philly provides a summary of the doomed predecessor (a combination of turnpike funds, sales tax, lottery money, and others) to Act 89 here.

A pertinent article about about the pending bankruptcy of the Highway Trust Fund here.

Parks and Recreation Services Expenditures in Saint Paul and Minneapolis

The Department of Parks and Recreation plays a huge role in helping the City of Saint Paul attain its goal of becoming the most livable city in the country. The City’s Parks and Recreation system is a nationally award winning organization that oversees more than “170 parks and open spaces, the Como Park Zoo and Conservatory, 24 city-operated recreation centers, four golf courses, and more than 100 miles of trails. Despite the many entities for which the Parks and Recreation Department is responsible, the total spending budget for the Department decreased between 2014 and 2015; it fell 3% from $58.6 million to $56.9 million, which amounts to $193.29 per resident.

Saint Paul, like many municipalities, is experiencing an increased demand for its parks and recreation center services. Population growth has had significant impacts on its parks and recreation system. To accommodate this growth, additional facilities will be necessary. But whether this accommodation is feasible is another story. Like in countless other municipalities, funding for expansion in Saint Paul is limited. Because the City’s discretionary budgets have been decreased, the Parks and Recreation Department is not sufficiently funded. A consolidation plan, that would close low quality recreation facilities, and thus, reduce maintenance and operating costs, is projected to save the City $20 million over the next twenty years. Though this approach may save money, it poses serious questions of access and equity.

The overall high demand for these services would make it more difficult to justify a decrease in their offering, but budget cuts are a reality that must be considered. There is an alternative option that can be pursued - increasing efficiency through the adoption of a cost of service model, as the City of Portland has done, is one way for Saint Paul to proceed. You can read more about this model here.          

Like Saint Paul, Minneapolis has a nationally recognized park system; however, there is no Parks and Recreation Department. In Minneapolis there is the Park and Recreation Board, an independent board, a separate legal entity – but one for which the City is financially accountable. 

Eight cents of every dollar residents pay toward property taxes will go to the Minneapolis Park and Recreation Board. The Board’s expense budget of $99.3 million, an increase of 2.7% above the 2014 budget figure, is significantly larger than Saint Paul’s budget of $56.9 million. Unlike Saint Paul, whose budget shrunk, the Minneapolis Park Board budget actually increased. The amount spent per resident in Minneapolis is also much higher than in Saint Paul: approximately $248.20 is spent per resident in Minneapolis. The City uses this great transparency platform to provide access to its budget data - I definitely recommend checking it out!

The Board has been able to reduce expenses by over $2 million by undertaking operational improvement initiatives. And with Resolution 369 in 2014, and the adoption of a 4.9% tax levy increase, the Board is now able to levy $50,560,000 from property taxes. The new tax levy may produce the required funding for the Board; however, that has yet to be determined, as this year will be the first time the additional money will be collected. What is clear is that Minneapolis doesn't face the same budget constraints that Saint Paul does.

California's Cap and Trade Expenditures

For decades, California has been at the forefront of the American struggle to preserve natural resources. In 2006, the state passed Assembly Bill 32 which created the nation’s first cap and trade system on carbon emissions. The goal of AB 32 was to reduce California's carbon emissions to 1990 levels by 2020, a mark the state is projected to reach early. The first year of auctions generated over $400 million, but this year the governor's office is projecting over $1B for the first time ever.

According to AB 32, revenues after the $18 million administrative costs for CARB must be spent on improving air quality. The tables on the next page compare the expenditure plans for cap and trade revenue. The first table is the adopted expenditure plan for 2014-15 and the second shows the governor’s proposal for expenditures for 2015-16, sourced from here. 

High speed rail in California has been an expensive boondoggle thus far, but it is Governor Jerry Brown's pet project. With HSR under fire, the budget appears as though its line item has been cut, but a new item in the 2015 budget - "Transit and Intercity Rail Capital Program" - can be raided for HSR purposes.

The cap and trade expenditures plan has also come under fire for its allocations to the Strategic Growth Council, which doubled from $100M to $200M in 2015. Part of the Strategic Growth Council’s mission is to provide affordable housing and transit-oriented development – smart growth, in a sense – but the law requires that cap and trade money must be spent to improve air quality. In order to justify its spending, the Strategic Growth Council patented an innovative technology called the California Emissions Estimator Model (CalEEMod) which quantifies the effect of a development on carbon emissions. Another computer model, CalEnviroScreen, was developed to ensure compliance with SB 535, which requires 25% of cap and trade money to provide benefits to disadvantaged communities.

Although California’s state budget is the largest in the United States, cap and trade has enabled even more spending on environment-related issues as the program ramps up. From 2011 to 2013, the state increased its total spending in that area from $1.4B to $2.6B, which more than doubles Florida, the second-biggest environmental spender.

The next few years are pivotal. The most conservative estimates are over $5B of revenue annually, but some believe that figure could be over $10B. Governor Brown and the high speed rail backers are counting on cap and trade to fund HSR, while environmental justice advocates see cap and trade money as the best route to reducing California’s high poverty rates. Last June, Los Angeles Mayor Eric Garcetti unveiled a plan to invest the revenues in mass transit.

The wisest course of action would be to remember the initial intent of the bill to reduce carbon emissions. Investments in urban areas, public transit, and the Strategic Growth Council’s policies will go the furthest to achieve that goal. How California invests this money in the next five years will determine if the example is one for the rest of the nation to follow, or just a grand experiment.

Expenditure on water treatment and distribution in Minneapolis

by Kangkang Tong

Drinking water in Minneapolis is treated and distributed by the Minneapolis Water Treatment & Distribution Services (MWTDS). The service region of the MWTDS covers Minneapolis City and seven other cities, including New Hope, Crystal, Hilltop, Columbia Heights, Golden Valley, Edina, the MSP airport, as shown in Figure 1[1]. The water system in Minneapolis region has about 1,000 miles of mains, distributing 57 million gallons of water per day to 500,000 users[2]. The residential water use in Minneapolis accounts for up to 40% of the total water supply, while the commercial/industrial water use in the city of Minneapolis accounts for 38% of the total water supply2. The rest of the 22% water is supplied to suburban areas.

Figure 1. The areas covered by The Minneapolis Water Treatment & Distribution Services2

General operation budget for water supply and distribution is majorly funded by the Water Treatment and Distribution Services Fund. The revenue sources include sales/charges in Minneapolis and the revenue from the other seven suburban areas[3]. Water charges includes two parts: one is a charge for one unit water used (see Table 1[4]^,[5]) and the other is the fixed charge based on the total water and sewer amount in a family use or generated per month (Table 24^,5). The collected money is spent on the operation, system maintenance, and capital improvement of the water treatment and distribution system6.

The total expenditure on water treatment and distribution is shown in Figure 2[6]. The total expenses of water treatment and distribution were $83 million in 2009, and slightly decreased from 2009 to 2011. In recent two years, the expense is raising, with a budget of $90 million in 2015. The expenses of water treatment and distribution are majorly for operation and capital investment, and a small amount of money is used to pay for debts. The operation expense takes about 60% of the total expenditure on water. Capital investment is another major expense, accounting for 20% to 30% of the total expenses.

Figure 2 The expense on water treatment and distribution in Minneapolis (in 1,000 $). The ‘bg” means budget expense and the “fr” means the forecasted expenditure.

The total expenses on water treatment and distribution was budgeted $55 million in St Paul in 2015[7], which is 60% of Minneapolis’s budget for water treatment and distribution ($91 million in 2015). The amount of water supply does not change as much as the budget change, which proves that the water supply is not a superior good in the Twin Cities, when the physical amount is the measurement of demand.

Recommendations for Minneapolis water treatment and distribution are 1) water unit use rate should be changed based on the total use amount per month; and 2) the water fee for residential use, industrial use, and commercial/business should be distinguished.

Table 1. The water rate in Minneapolis and St. Paul (per billing unit: 100 cubic feet or 748 gallons)[8]^,[9]

	Minneapolis		St. Paul
Year	Water charge Per Unit	Outside City Water	Water charge Per Unit**
			Summer	Winter
2015	$3.37	$3.52	$2.52	$2.62
2014	$3.32	$3.47
2013	$3.29	$3.44

*Tax is combined MN State sales; City Sales; Transit; and Twins.
Residential properties are not charged sales taxes

**For the cities of Saint Paul, Falcon Heights, Lauderdale, Maplewood and West Saint Paul.
All other customers pay 20 percent more.

Table 2. Water Fixed Charges 2015 in Minneapolis and St. Paul

Minneapolis water fixed charge in 2015
Meter Size	5/8"	1"	1-1/2"	2"	3"	4"	6"	8"	10"	12"
Fixed Charge	$3/month	$7.5/month	$15/month	$24/month	$48/moth	$75/month	$150/month	$240/moth	$345/month	$990/month
St. Paul Water Service Base Fees*
Meter Size	Smaller than 1"	1"	1 1/2" (Residential)	1 1/2" (Commercial)	2"	3"	4"	6"	8"	10"
Fee per billing period	$12/quarter	$30/quarter	$60/quarter	$20/month	$32/month	$64/month	$100/month	$200/month	$320/month	$460/month

*: For the cities of Saint Paul, Falcon Heights, Lauderdale, Maplewood and West Saint Paul.
All other customers pay 20 percent more.

---

[1] Public Work. Who gets Minneapolis tap water? Minneapolis City Government. Mar 7, 2012. http://www.minneapolismn.gov/publicworks/water/water_suburbs_whogetsourwater

[2] Public Work. Minneapolis Water Facts. Minneapolis City Government. Feb 20, 2015. http://www.minneapolismn.gov/publicworks/water/water_waterfacts

[3] Finance Department. Section E. Fiscal Plan. City of Minneapolis. Dec 2014. http://www.minneapolismn.gov/finance/budget/2015adopted

[4] Public Work. Rate. Minneapolis City Government. Jan 9, 2015. http://www.ci.minneapolis.mn.us/utilitybilling/utility-billing_rates

[5] St. Paul Regional Water Service. Explanation of Water Charges. City of St. Paul. 2014 http://www.stpaul.gov/index.aspx?NID=5040

[6] Finance Department. Water Fund-(2011, 2012, 2013, 2014, and 2015). City of Minneapolis.

[7] Board of Water Commissioners. Budget 2015.City of St. Paul. July 08. 2014 http://mn-stpaul.civicplus.com/DocumentCenter/View/74970

[8] Public Work. Rate. Minneapolis City Government. Jan 9, 2015. http://www.ci.minneapolis.mn.us/utilitybilling/utility-billing_rates

[9] St. Paul Regional Water Service. Explanation of Water Charges. City of St. Paul. 2014 http://www.stpaul.gov/index.aspx?NID=5040