Transparency-Shedding Light on Government Activities II: The Hidden LD 1 Cost-Shift

Read the full report | In the spring of 2005, the Legislature passed LD 1, which promised to ease property tax burdens by increasing the state’s share of K-12 spending statewide. While the state did increase its financial commitment to education, it also shifted much of the funding for a number of education programs from the state to local school districts. Since LD 1 was enacted, local property tax payers have been asked to pay for more than $120 million worth of Department of Education programs that were previously paid for with 100 percent state funding.

Findings:

• In Fiscal Year 2005, prior to the passage of LD 1, nearly $40 million worth of “Adjustments and Miscellaneous Costs” within the Education Department’s General Purpose Aid to Education account were funded with 100 percent state funding.

• LD 1 contained language which allowed the Department of Education to split the funding for many of these programs between state and local sources. Since then, the Department has shifted additional programs into this shared account. If current budget proposals are enacted, by the end of Fiscal Year 2009 local school districts will have paid more than $120 million for their share of “Adjustments and Miscellaneous Costs” that were 100 percent state funded before LD 1 was enacted.

• These cost shifts have remained a popular budget-cutting strategy for the Department of Education because they allow the state to not only cut its own General Fund budget, but also to artificially increase its own share of General Purpose Aid for schools, and allow it to claim, falsely, that it is keeping General Fund budget growth under the LD 1 growth caps.