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Impact Aid back on school funding agenda

Copyright © 2019 Albuquerque Journal

Jvanna Hanks, assistant superintendent of business services at Gallup McKinley County Schools, is continuing a decadelong dispute.

It’s an emotional one for her.

“It’s our priority to make sure our students who have seen generations of poverty get a chance, a real chance at succeeding,” she told the Journal, holding back tears.

The dispute is about Impact Aid, a federal funding stream for school districts that have a low property tax base because of tax exempt federal lands – like tribal lands – within their boundaries.

In New Mexico, districts that applied last year got about $78 million in Impact Aid.

The fight Hanks and other school district leaders are embroiled in at the state Capitol right now is how the state’s school funding formula treats this money. Currently, school districts get all of the federal Impact Aid, but the state then deducts most of the amount from the formula it uses to determine how much funding the district receives from the state.

Specifically, New Mexico’s formula calculates a program cost for all the school districts, then, for districts that receive Impact Aid, the state takes credit for 75 percent of the federal money and gives the district the difference.

Gallup’s 2017-2018 program cost was calculated at $85 million, but after subtracting 75 percent of its $30 million federal Impact Aid, the state gave it $63 million.

Similarly for Zuni, the district had a program cost of about $11 million, but it was appropriated just under $6 million from the state after the Impact Aid was taken into account.

Sen. George Muñoz, D-Gallup, left, and Sen. Clemente Sanchez, D-Grants

Senate Bill 170, cosponsored by Sen. Clemente Sanchez, D-Grants, and Sen. George Muñoz, D-Gallup, aims to phase out the use of Impact Aid reductions in a district’s formula funding.

It would reduce the amount of money the state can take credit for until none is taken by fiscal year 2022.

It doesn’t come without ripple effects.

Opponents are wary of a potential multimillion-dollar reduction in the amount of funding districts throughout the state receive if this bill passes as written.

Mirror bill House Bill 326 was derailed in the House Education Committee because of this concern.

Hanks and Zuni Public School District Chief Financial Officer Martin Romine are backing the proposal in the Senate, arguing districts should get the entire operational dollar amount calculated in the formula and should also be able to keep all of the Impact Aid they receive.

After all, the two point out, most school districts get operational funding from the formula – for things like salaries and day-to-day operations – and they also have bonding capacities and property taxes for capital projects: two separate streams of funding for what happens inside the classroom and for the classroom itself.

But Hanks and Romine say that doesn’t happen for districts that receive Impact Aid.

In a city like Albuquerque, residents and businesses pay a chunk of property taxes to go to the local school district, Albuquerque Public Schools. That money can be used for capital projects, technology and other expenditures within legal boundaries.

But for school districts like Zuni, only about two convenience stores, a grocery store and some utility equipment are taxed. The rest is federal land.

And only about 20 percent of Gallup’s land base is subject to property taxes, Hanks said.

“Essentially, we are having to leverage our operational funds to pay for capital needs because of loss of property tax, and we’re not able to raise those types of funds,” Hanks said.

This means the kids in districts like Zuni and Gallup don’t get the infrastructure and resources other districts get, she said.

From dirt sports fields to old buildings and out-of-date technology, Hanks and Romine say the funding issue creeps into academics.

The two stressed that if kids are cold due to dilapidated buildings or don’t have books, because operational money was used for construction, that’s an equity issue.

Facility funding disparities were at the center of a monumental lawsuit that changed the way the state funds school construction projects, the Zuni lawsuit.

Filed in 1998 by Zuni, Gallup-McKinley and Grants-Cibola county schools, a district court ruled the public school capital outlay funding system at the time was unconstitutional.

Years later and after the implementation of new systems, the districts in the lawsuit say there’s still a disparity, adding that the way Impact Aid is being handled by the state right now is fueling the problem.

The Zuni lawsuit trial is ongoing, and the districts are going back to court in May.

Hanks said if SB 170 passes, “that would go a long way to potentially resolving the lawsuit.”

Many from the Native American community, including Navajo Nation President Jonathan Nez, rallied behind SB 170, stressing that the majority of students affected by the Impact Aid dispute are Native American students.

But opponents of the bill say not accounting for Impact Aid in the funding formula will leave a $60 million hole in formula money, and it would result in a 2.3 percent reduction in the amount other districts get.

A fiscal impact report on the bill shows that in FY18, districts that receive Impact Aid got $78.2 million and the state took credit for $58.7 million.

That’s about $60 million the state would have to make up for if SB 170 moves forward.

Superintendents in Hobbs, Artesia and Taos have said they don’t support the bill, fearing how it will affect their districts’ funding.

“With Taos Municipal Schools, if we don’t get the backfill, if the $60 million gets taken out of the (formula) money, we are going to lose,” Superintendent of Taos Municipal Schools Lillian Torrez said, adding that if the bill passes then the state must find a way to make up for the gap.

Art Melendres, an attorney who represents APS, said the district does not support a phaseout either, saying it will “create winners and losers” among school districts.

Co-sponsor Sanchez told the Journal he and other legislators are working on a plan that would backfill the $60 million.

He said he couldn’t give specifics yet but it could possibly come from reserve funds. He also said past budgets have set aside up to $50 million planned for legal fees that he would propose using.

And Muñoz, the other sponsor, said the $60 million deficit could be an issue the state has to deal with even if the bill doesn’t become law.

“In the crossroads we are in, I’m going to tell my districts, if this bill fails, not to apply for Impact Aid. And you’re going to have to fill the money in anyway,” he told the Senate Education Committee.

This is not a new debate since bills of this nature have been proposed for years, Romine said, but they haven’t gone forward. He’s hoping that, with a new focus on education and more funding at the state level, the bill will get more traction.

SB 170 has already passed out of the Senate Education Committee and is headed to the Senate Finance Committee.


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