Senate Bill 2332: MAEP Revisions

February 22, 2024April 12, 2024 Bill Tracker

Latest Action

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On April 9, the Senate declined to concur with the House’s changes to SB 2332, which included a strike-all amendment that replaced the original bill’s language with the INSPIRE Act.

Typically when a body votes not to concur with amendments to a bill, they invite conference on that bill. In the case of SB 2332, the Senate declined to concur but did not invite conference. Though the Senate could still technically revive SB 2332, we do not anticipate this. 

Following the Senate’s vote declining to concur with the House amendments to SB 2332, the House inserted the INSPIRE Act into SB 2693 via a strike-all amendment.

Explanation of the Bill

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Below is the analysis for SB 2332 as passed by the Senate. We have opted to retain this analysis, as it reflects the Senate school funding proposal—which will likely remain relevant in the coming weeks. This is not the current version of the bill, as amended and passed by the House (see “Latest Action). For an explanation of SB 2332, as amended by the House, please see the summary for HB 1453.

As passed by the Senate, Senate Bill 2332 would make a series of critical changes to the MAEP formula:

• Increase the local contribution cap from 27% of the operational cost¹ to 29.5%;
• Reduce the impact of the inflation rate applied to the base student cost;
• Remove a “hold-harmless” provision that prevents districts from receiving less funding than they did in 2002; and
• Introduce a temporary “hold-harmless” provision that prevents districts from receiving less funding in FY25 than they did in FY24. 

These changes would ultimately reduce the cost to “fully fund” MAEP, though they would impact districts in different ways. Additionally, SB 2332 would require that at least 90% of state contributions to MAEP be spent on instruction and that charter schools return, within 45 days, a prorated share of MAEP funds if a student enrolled in a charter school returns to the local district. It is unclear if this provision is intended to direct charter schools to return the money to the state or to the local district directly. Currently, although charter schools are funded based on their projected enrollment, they must already pay back to the state any funds for students not in average daily attendance throughout the school year. In other words, charter schools already have a reconciliation provision for state funds that requires them to pay money back for students who did not enroll or attend school or who transferred back to a school district (or other placement) and therefore did not attend the charter school. Therefore, it is unclear what additional effect this provision would have.

Inflation Adjustments

A key component of MAEP is the “base student cost” (BSC), which is the minimum amount required to provide each student with an adequate education according to the formula. In years in which the entire BSC is not re-calculated from scratch based on the process in law for doing so, the BSC is adjusted for inflation by multiplying the annual inflation rate (as determined by the State Economist) by 40% of the BSC, and then adding this figure to the BSC:

((Annual Inflation Rate) X .4(Old BSC)) + Old BSC = New BSC

Under SB 2332, there would be two changes to how inflation is considered when calculating the BSC. First, the 40% multiplier would be reduced to 25%, meaning that only one-quarter of BSC would be subject to the inflation rate adjustment. Second, a 20-year average of the inflation rate would be used instead of the annual inflation rate. The impact of this change would be different every year (depending on the annual rate of inflation), but in the short term this would result in using a somewhat lower rate (the 20-year average is 2.47%) than the current rate of inflation (3.4%).

To compare these changes, let’s examine how the “fully funded” FY24 BSC of $6,759.27 would be adjusted for inflation in FY25 under the current formula, and under the SB 2332 formula (without the inclusion of additional line items):

Current Formula	SB 2332
((.034) X .4($6,759.27)) + $6,759.27 =	((.0247) X .25($6,759.27)) + $6,759.27 =
$91.92 + $6,759.27	$41.74 + $6,759.27
FY25 BSC: $6,851.19	FY25 BSC: $6,801.01

As shown above, from FY24 to FY25, the changes to MAEP would result in a BSC increase that is less than half of that increase under the current formula. These calculations do not account for both the legislature not “fully funding” MAEP in FY24 (which would lower the BSC in practice) and additional line-items from FY24 (including $240.8 million for the 2022 teacher pay raise, which would increase the BSC in practice). However, these calculations demonstrate that, in most years, the amount required to “fully fund” MAEP would increase at a much lower rate under SB 2332, cutting the gap between what the legislature has appropriated in the past and what it would need to appropriate going forward to reach “full funding.”

Local Contribution Changes

Under MAEP, local districts are required to contribute a portion of annual funding. This contribution is the equivalent of 28 mills ($28 dollars of every $1,000 in assessed property value), unless the revenue generated from 28 mills exceeds 27% of the operational cost (see footnote 1). This is known as the 27% rule. Because some districts have much more property wealth than others, the 27% rule essentially allows property-rich districts to pay less than the cost of 28 mills for receiving a share of state funding for the operational cost.

Under SB 2332, districts would be required to contribute the equivalent of 28 mills unless that revenue exceeds 29.5% of the program cost, essentially changing the 27% rule to a 29.5% rule. This would increase the local contribution for some wealthier districts, meaning there would be less funding required from the state to “fully fund” MAEP. It is important to note here that this change to MAEP would only impact these wealthier districts. 

Hold-Harmless Provisions

MAEP currently includes a provision, § 37-151-7(3)(b), that effectively prevents districts from receiving a lower state share of their operational cost from MAEP than they received in 2002. Because most districts currently have larger student enrollments than in 2002 and because the overall BSC has risen in absolute dollars, this “hold-harmless” provision only impacts a handful of districts that have significantly smaller student enrollments than in 2002. SB 2332 would repeal this “hold-harmless” provision, effectively guaranteeing a decrease in state funds to affected districts. (As of last year, 10 districts still benefit from this provision.)

However, SB 2332 would provide a temporary “hold-harmless” provision for FY25 that would prevent these districts from receiving less state funding than they did in FY24, including any additional money received from the $240 million line-item for the 2022 teacher pay raise (in FY23 and FY24, additional funding from the 2022 teacher pay raise was included as a separate line-item from MAEP funding). However, the language does not include any additional state funding received from the extra $100 million that the legislature appropriated for schools as another separate line-item in FY24.

Between these two provisions, it is likely these districts would receive a similar amount of state funding for FY25 (we say similar because not including the $100 million will matter to these districts, though for some more than others). However, in years after FY25, all affected districts would receive money solely based on their average daily attendance, even if that amount is much less than the amount provided by MAEP in 2002. At the 2/22/24 Senate Education Committee meeting, Chairman Dennis DeBar stated that there are “about seven districts that would still lose money” under SB 2332, though we have yet to independently confirm this figure.

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 ¹ “Operational cost” refers to the base student cost multiplied by average daily attendance (with the high-growth addition, if applicable) plus the at-risk component minus the local contribution (and 2002 hold harmless, if applicable). It does not include the add-on programs, which are totally funded by the state and represent a significant portion of state funding to public schools.