Friday, November 06, 2009

MoCo School Funding Dispute: A Way Out

The intense school funding dispute now raging between the Montgomery County government and the Maryland State Department of Education (MSDE) may be headed to court. But it does not have to go that far. There is real potential for a settlement that gives each party what it needs without giving either everything it wants. Here’s what a deal looks like.

What the County should give the State

MSDE is overseen by the State Board of Education, whose members are appointed by the Governor and in turn appoint the State Superintendent of Schools, Nancy Grasmick. One of the principal responsibilities of MSDE and the Board is to monitor state aid to public schools, now totaling $5.5 billion or 40% of the state’s general fund. State aid to local schools has gone up by 83% since the passage of the 2002 Thornton Act, a factor credited by many for the state’s number one public schools ranking by Education Week. But increases in state aid come with a catch: the recipient counties must not cut their own spending on their schools, a provision known as “maintenance of effort” (MOE). The Board is very protective of this requirement since it is a cornerstone of the state’s education policy.

After the Board rejected Montgomery County’s waiver request to excuse it from sending $79 million to its school district, the county responded by charging the schools $79 million for debt service on capital projects. At the Board’s request, Attorney General Doug Gansler issued an opinion denouncing the county’s move as “artificial.” The county has responded with strong language against the Board’s action and the Attorney General’s opinion and has threatened to sue.

The county must understand the Board’s position. It is the Board’s responsibility to enforce state aid requirements impartially across all counties. Montgomery was not singled out as the Board also rejected waiver requests from Prince George’s and Wicomico Counties. When Montgomery claimed in its request that the tax-limiting Ficker Amendment prevented it from raising revenues, the Board responded that local tax caps were no excuse for evading state law.

Montgomery’s leaders must also understand that a lawsuit would pit them against State Superintendent Nancy Grasmick, the ultimate survivor of state politics. Grasmick has friends in both parties across the state and thwarted an attempt by Governor O’Malley to eject her, a rare defeat for a Democratic Governor on a personnel matter. Grasmick’s political capital is also high because of the state’s number one schools ranking. Finally, Grasmick has a difficult relationship with MCPS Superintendent Jerry Weast, with each believing that they are the top school official in the state. She is a formidable opponent for any adversary and may prove too much for Montgomery’s leaders to handle.

For Grasmick, the Board and MSDE, this is more a matter of policy than money. The county must recognize their legitimate role in overseeing state aid and enforcing state law. County officials must cease their excessive rhetoric against the state, stop defending their budget gimmick that Gansler rejected and that would not stand much of a chance in court and promise to never do it again. All of this would allow the state to move towards responding to the county’s legitimate needs.

What the State should give the County

What so outrages Montgomery’s leaders is that the county has been a leader in local school funding for decades, a fact that has been ignored by the state during this dispute. In FY 2007, the county was third from the top in per capita spending on its schools.

Meanwhile, the county is third from the bottom in per capita state school aid among Maryland’s twenty-four jurisdictions.

Montgomery County residents pay billions for their own schools and hundreds of millions more for schools in other parts of the state every year. Indeed, the state’s financial structure has depended on huge transfer payments from Montgomery, Howard and other “wealthy” areas for decades. But Montgomery is not as rich as the state believes and its current budget crisis is real. After two bad budget years, the county is looking at another giant deficit that could total $410 million, and that is before any more state aid cuts. County employees are likely to go a second consecutive year with no cost of living increases. Layoffs and/or furloughs are a real possibility. If the state forces the county to transfer $79 million to the schools and adds penalties to that amount, it will force the county to either ravage its police, fire, planning and human services or endanger its bond rating. How can the state not see the county’s fiscal calamity as legitimate grounds for a waiver? And how is further budgetary mayhem in the state’s interest?

And so if the county concedes the State Board of Education’s role and promises to not repeat its discredited budget gimmick, the state should respond with a symbolic, non-monetary penalty. Precedent will be respected, the principles of the Thornton Act will be preserved and the General Assembly can revisit the circumstances under which maintenance of effort waivers should be granted during the next session.

This deal can happen and should happen. And if the parties cannot resolve the matter themselves, the Governor should step in. It’s time to shut up, sit down and work it out. Lord knows there will be more to fight about soon enough.