Part L
Education

Primary and Secondary Education

Teacher Incentive Programs and Enhanced Funding for Public Education

Salary enhancements for public school employees are typically decided and funded at the local level. However, the State provides considerable financial support to local school systems, with most of the funding having little if any restrictions. Public schools in Maryland receive on average about 42 percent of their funding from the State, with less affluent school systems receiving a greater share of funding from the State and more affluent school systems receiving a lower share. During the 2000 legislative session, the General Assembly decided to provide incentives to local school systems to increase teachers' salaries. Under the plan adopted, the local school systems will choose to enter into a partnership with the State to increase teacher salaries by 10 percent over the next two fiscal years to attract and retain teachers.

Senate Bill 810/House Bill 1247 (both passed) establish the Governor's Teacher Salary Challenge Program - Public School Funding Enhancement. Local boards of education are provided incentives to increase teachers' salaries and additional funds for other educational purposes. Local boards must provide at least a 4 percent salary adjustment to teachers in fiscal 2001 and 2002 to qualify for a portion of the State funding (percentage and wealth-adjusted components). The State will then provide an additional 1 percent salary match. The legislation establishes the Governor's Teacher Salary Challenge Program; provides for a personal property wealth base adjustment; and includes funding for academic intervention services and an additional $8 million for the Baltimore City Partnership. Exhibits 1 and 2 summarize the funding provided to each local board under the legislation.

Governor's Teacher Salary Challenge Program

The Governor's Teacher Salary Challenge Program provides an incentive to local boards of education to increase teachers' salaries in fiscal 2001 and 2002. Funding under the challenge program consists of five components: (1) percentage component; (2) wealth-adjusted component; (3) targeted component; (4) hold harmless component; and (5) transitional component. The program terminates after fiscal 2002.

The percentage component equals 1 percent of a local school system's teacher salary base in fiscal 2001 and 2 percent of the teacher salary base in fiscal 2002. The percentage component must be used to provide an additional 1 percent salary increase to teachers. The wealth-adjusted component is provided to local school systems with below average wealth. The targeted component is provided to local school systems with wealth per pupil below 75 percent of the State average. Funding for this component totals $5.3 million in fiscal 2001 and $10.6 million in fiscal 2002. The hold harmless component ensures that a local school system's current expense aid equals at least the amount received in the prior year. The transitional component for fiscal 2001 only totals $9 million in funding and is based on each county's proportionate share of retirement contributions made to the State in fiscal 2000. The total cost of the salary program in fiscal 2001 is $45 million but the State budget only includes $35 million. The remaining funds could be provided through a budget amendment. The legislation requires that the $9 million transitional component be funded in fiscal 2002 if not funded in fiscal 2001.

Personal Property Wealth Base Adjustment

Senate Bill 810/House Bill 1247 exclude manufacturing personal property subject to a tax credit from a county's assessable base for purposes of calculating State education aid. Under current law, for purposes of calculating State aid, the value of tax exempt property is excluded from a county's assessable base; however, the value of property to which a tax credit applies is included in the assessable base. Since both the current expense and compensatory aid formulas are partly based on local wealth, retaining the personal property that is subject to a tax credit within a county's wealth base makes that county relatively more wealthy than it otherwise would be if the personal property were subject to an exemption and were removed from the base.

Under current State law, personal property used in manufacturing is 100 percent exempt from property taxes, except in five counties (Allegany, Garrett, Somerset, Wicomico, and Worcester). Garrett, Wicomico, and Worcester counties provide a property tax credit against personal property used in manufacturing. Allegany County provides both a tax credit and a 25 percent exemption. The bills would treat tax credits and exemptions for manufacturing personal property in the same manner for purposes of calculating State education aid, which will result in a reallocation of State funding under the current expense and compensatory aid formulas.

Transitional Education Fund

Senate Bill 810/House Bill 1247 establish a Transitional Education Fund for the purpose of retaining the retirement reimbursement contributions from local school systems associated with positions funded from federal or State categorical programs for fiscal 2000, 2001, and 2002 (i.e., reimbursements made by the local school system to the State after June 30, 1999, but before July 1, 2002). The special fund would total approximately $16.5 million of fiscal 2000 reimbursements and $23 million of reimbursements for each of fiscal 2001 and 2002. The Transitional Education Fund will be used to implement the salary challenge program. The fund terminates at the end of fiscal 2002, and any fund balance at that time reverts to the general fund.

Baltimore City Partnership Funding

Under the terms of the 1996 consent decree between the city school system and the State, the city school board may request additional funds after the completion of the interim evaluation required under the decree and subsequent city school legislation (Chapter 105, Acts of 1997). The interim evaluation, performed by Metis Associates of New York City and completed in February 2000, concluded that the city school system had made reasonable progress in implementing reform and improving student achievement. The evaluation determined that overall financial resources available to the school system were not adequate and additional funding of $2,698 per pupil would be necessary to achieve adequacy. In December the city school system submitted a remedy plan totaling $49.7 million for instructional programs and $40 million for capital.

Senate Bill 810/House Bill 1247 require the Governor to include at least $8 million in additional funding in the fiscal 2001 and 2002 State budget for the Baltimore City Partnership. This $8 million as well as the salary challenge funds partially fund elements of the remedy plan. This amount is consistent with the additional $8 million for the Baltimore City Partnership in the fiscal 2001 State budget. The Governor is authorized to use Cigarette Restitution Funds for this enhancement.

Academic Intervention

Local school systems provide a variety of programs to supplement academic services for low-performing students, including before- and after-school sessions, school community centers, and recreational programs. Even with such services, thousands of children across Maryland lack the basic skills that are needed in today's challenging labor market. Approximately 58 percent (78,500) of students in first and second grade and 55 percent (111,000) of students in grades five through seven have been identified by the Maryland State Department of Education (MSDE) as needing academic intervention based on the student's reading skill.

Senate Bill 810/House Bill 1247 provide $19.5 million for intervention strategies to improve the outcomes for students by providing programs for students who are not performing at grade level. The Governor has included only $12 million in the fiscal 2001 State budget for this initiative, including $400,000 for MSDE administrative costs. The remaining funds could be provided through a budget amendment or in the fiscal 2002 State budget. The academic intervention grants shown in Exhibit 1 and Exhibit 2 are allocated according to MSDE's projection of the number of students needing services and a $70,000 start-up grant for each local school system.

Increased State Funding

The Governor's Teacher Salary Challenge Program - Public School Funding Enhancement potentially provides an additional $72.6 million to local school systems in fiscal 2001, of which $55 million is included in the fiscal 2001 State budget. An additional $17.6 million is not included in the fiscal 2001 State budget and therefore may not be available to local school systems. However, the Governor could fund the enhancements through a budget amendment. Under the legislation, the Governor is authorized to use money from the Cigarette Restitution Fund to finance the teacher salary increases, the academic intervention and support program, and the Baltimore City remedy obligations.

Exhibit 1
Governor's Teacher Salary Challenge Program - Public School Funding Enhancement (SB 810/HB 1247)
Potential Funding Enhancements in Fiscal 2001

County	Percentage Component	Wealth Adjusted Component	Targeted Component	Hold Harmless Component	Transitional Component	Subtotal	Personal Property Adjustment	Baltimore City Remedy	Academic Intervention	Total Funding	Per Pupil Funding
Allegany	$292,338	$92,228	$364,610	$0	$175,139	$924,315	$2,130,387	$0	$259,319	$3,314,021	$329
Anne Arundel	2,214,801	0	0	0	621,727	2,836,528	(242,006)	0	1,486,749	4,081,271	57
Baltimore City	2,908,552	1,412,816	3,464,489	129,232	2,581,914	10,497,003	(389,758)	8,000,000	3,374,748	21,481,993	225
Baltimore	3,367,598	0	0	0	1,244,053	4,611,652	(337,733)	0	2,033,327	6,307,245	63
Calvert	449,726	37,454	0	0	115,061	602,241	(41,410)	0	341,821	902,652	60
Caroline	149,686	67,479	188,848	0	100,986	506,998	(12,416)	0	181,642	676,224	130
Carroll	793,431	149,167	0	0	120,946	1,063,543	(64,601)	0	520,967	1,519,910	58
Cecil	455,710	123,269	530,711	0	161,271	1,270,961	(37,053)	0	354,630	1,588,538	108
Charles	593,810	109,970	0	0	161,571	865,350	(55,852)	0	526,116	1,335,614	63
Dorchester	152,405	42,910	170,420	0	96,946	462,680	(14,069)	0	179,397	628,009	133
Frederick	1,041,035	156,661	0	0	152,444	1,350,140	(88,630)	0	682,758	1,944,268	57
Garrett	143,275	31,870	0	173,416	119,223	467,783	12,371	0	169,851	650,006	135
Harford	1,062,234	193,380	0	0	180,247	1,435,862	(95,344)	0	697,316	2,037,833	55
Howard	1,483,593	0	0	0	157,541	1,641,134	(138,979)	0	761,191	2,263,346	54
Kent	88,641	0	0	0	49,211	137,852	(9,066)	0	105,629	234,415	89
Montgomery	5,149,634	0	0	0	1,188,395	6,338,030	(554,336)	0	2,224,454	8,008,148	65
Prince George's	3,685,605	832,279	0	0	818,020	5,335,904	(315,728)	0	3,364,698	8,384,874	68
Queen Anne's	191,454	0	0	0	79,764	271,218	(20,996)	0	193,946	444,169	68
St. Mary's	431,901	82,692	0	0	133,330	647,922	(39,112)	0	329,385	938,195	67
Somerset	95,679	39,750	103,293	0	93,479	332,201	(8,989)	0	143,618	466,831	164
Talbot	130,610	0	0	493,607	42,500	666,716	(21,396)	0	166,405	811,725	193
Washington	598,146	113,309	0	179,789	245,043	1,136,287	(53,287)	0	424,509	1,507,508	80
Wicomico	423,934	130,253	477,629	0	263,039	1,294,854	359,494	0	375,718	2,030,065	154
Worcester	218,717	0	0	45,766	98,150	362,634	43,536	0	201,803	607,973	93
Unallocated	0	0	0	0	0	0	0	0	400,000	400,000
Total	$26,122,513	$3,615,484	$5,300,000	$1,021,810	$9,000,000	$45,059,807	$5,025	$8,000,000	$19,500,000	$72,564,832	$91

Note: The percentage and wealth adjusted components are contingent upon local school systems providing teachers with a 4% cost-of-living increase.
Hold harmless component ensures that a local school system's current expense aid equals at least the amount received in the prior year.
Transitional component is based on each county's proportionate share of retirement contribution reimbursement to the State.
Academic intervention grants are allocated according to MSDE's projection on the number of students needing services and a $70,000 start-up grant per local school system.
Numbers may not total due to rounding.
Prepared by the Department of Legislative Services, April 2000

Exhibit 2
Governor's Teacher Salary Challenge Program - Public School Funding Enhancement (SB 810/HB 1247)

	Funded in the Fiscal 2001 State Budget					Not Funded in the Fiscal 2001 State Budget
County	Teacher Salary Challenge	Personal Property Adjustment	Academic Intervention	Baltimore City Remedy	Sub Total	Hold Harmless Component	Transitional Component	Academic Intervention	Sub Total	Total Funding Enhancements	Per Pupil Funding
Allegany	$749,176	$2,130,387	$177,810	$0	$3,057,373	$0	$175,139	$81,509	$256,648	$3,314,021	$329
Anne Arundel	2,214,801	(242,006)	876,782	0	2,849,577	0	621,727	609,967	1,231,694	4,081,271	57
Baltimore City	7,785,857	(389,758)	1,951,923	8,000,000	17,348,022	129,232	2,581,914	1,422,825	4,133,970	21,481,993	225
Baltimore	3,367,598	(337,733)	1,188,037	0	4,217,902	0	1,244,053	845,290	2,089,343	6,307,245	63
Calvert	487,180	(41,410)	224,792	0	670,562	0	115,061	117,030	232,091	902,652	60
Caroline	406,012	(12,416)	133,576	0	527,172	0	100,986	48,066	149,052	676,224	130
Carroll	942,597	(64,601)	326,808	0	1,204,804	0	120,946	194,159	315,106	1,519,910	58
Cecil	1,109,690	(37,053)	232,086	0	1,304,722	0	161,271	122,545	283,816	1,588,538	108
Charles	703,779	(55,852)	329,740	0	977,667	0	161,571	196,376	357,947	1,335,614	63
Dorchester	365,734	(14,069)	132,297	0	483,963	0	96,946	47,100	144,046	628,009	133
Frederick	1,197,696	(88,630)	418,941	0	1,528,007	0	152,444	263,817	416,260	1,944,268	57
Garrett	175,145	12,371	126,861	0	314,377	173,416	119,223	42,990	335,629	650,006	135
Harford	1,255,614	(95,344)	427,231	0	1,587,502	0	180,247	270,084	450,331	2,037,833	55
Howard	1,483,593	(138,979)	463,606	0	1,808,220	0	157,541	297,585	455,126	2,263,346	54
Kent	88,641	(9,066)	90,289	0	169,865	0	49,211	15,340	64,550	234,415	89
Montgomery	5,149,634	(554,336)	1,296,876	0	5,892,175	0	1,188,395	927,578	2,115,973	8,008,148	65
Prince George's	4,517,884	(315,728)	1,946,200	0	6,148,356	0	818,020	1,418,498	2,236,518	8,384,874	68
Queen Anne's	191,454	(20,996)	140,583	0	311,040	0	79,764	53,364	133,128	444,169	68
St. Mary's	514,592	(39,112)	217,710	0	693,190	0	133,330	111,676	245,005	938,195	67
Somerset	238,722	(8,989)	111,922	0	341,656	0	93,479	31,695	125,175	466,831	164
Talbot	130,610	(21,396)	124,899	0	234,112	493,607	42,500	41,506	577,613	811,725	193
Washington	711,455	(53,287)	271,879	0	930,046	179,789	245,043	152,630	577,462	1,507,508	80
Wicomico	1,031,815	359,494	244,094	0	1,635,403	0	263,039	131,624	394,662	2,030,065	154
Worcester	218,717	43,536	145,057	0	407,310	45,766	98,150	56,747	200,663	607,973	93
Unallocated	0	0	400,000	0	400,000	0	0	0	0	400,000
Total	$35,037,997	$5,025	$12,000,000	$8,000,000	$55,043,022	$1,021,810	$9,000,000	$7,500,000	$17,521,810	$72,564,832	$91

Note: A portion of the Teacher Salary Challenge funding is contingent upon local school systems providing teachers with a 4% cost-of-living increase.
*Hold harmless component ensures that a local school system's current expense aid equals at least the amount received in the prior year.
*Transitional component is based on each county's proportionate share of retirement contribution reimbursement to the State.
*Academic intervention grants are allocated according to MSDE's projection on the number of students needing services and a $70,000 start-up grant per local school system.
*$17.5 million not included in the fiscal 2001 State budget could be funded through a budget amendment.
Numbers may not total due to rounding.
Prepared by the Department of Legislative Services, April 2000

Early Childhood Education

Maryland provides several early education and intervention services to families, including prekindergarten programs, Head Start, and subsidized child care.

Senate Bill 793 /House Bill 1249 (both passed) establish the Judith P. Hoyer Early Child Care and Education Enhancement Program to promote school readiness through developing and expanding high quality, comprehensive, full-day early child care and education programs and family support services. The program is named after the late Judith P. Hoyer, wife of Congressman Steny H. Hoyer, who was very active in early childhood services throughout her life. Local school systems are eligible to apply for grants under the program. The Governor must include $7 million in the fiscal 2001 State budget for this program, as follows: $4.0 million for Judy Center Grants; $1.0 million for Early Child Care and Education Enhancement Grants to providers of early child care and education services who have voluntarily initiated and are actively seeking accreditation; $1.3 million for statewide implementation of MSDE's early childhood assessment system; and $700,000 to cover MSDE's administrative costs. The $7 million required under these bills is funded in the fiscal 2001 budget.

The Judy Hoyer Centers will establish full-service schools where students and families can receive a full range of services in one location. Currently there is one center located in Prince George's County. The center's program is located in a building owned and operated by the Prince George's County Public School System. The center provides before- and after-school care, Head Start and Even Start services, English proficiency classes, and family support services.

Senate Bill 869/House Bill 1284 (both passed) establish the Judith P. Hoyer Blue Ribbon Commission on the Financing of Early Child Care and Education. The commission must examine the costs and availability of funding for early child care and education. The commission's interim report is due by December 31, 2000, and its final report is due by December 31, 2001.

Senate Bill 750/House Bill 1172 (both passed) require the State Board of Education to distribute early childhood literacy grants each year to organizations that: (1) promote early childhood literacy during well child visits in health care settings; and (2) solicit corporate funding for promoting early childhood literacy. Organizations must use the grants to purchase books that are distributed to children at their semi-annual checkups with their pediatricians. The early childhood literacy grants provided for in the legislation are based on the Reach Out and Read initiative, a national program that seeks to make early childhood literacy an integral part of pediatric primary care. Pediatricians encourage parents to read aloud to their young children and give books to parents to take home at all pediatric check-ups from six months to five years of age. The program is based on the belief that reading aloud to children is the most important task that parents can do to help their children enjoy books and start school ready to learn.

Special Education Services

Under current law, the State and local boards of education are required to provide a free and appropriate public education to each child with a disability through the age of 20. House Bill 552 (passed) extends the time period during which a child is eligible to receive special education services to the end of the school year in which the child turns 21 years of age. As a course of practice, most local school systems provide services to these students through the end of the semester in which they turn 21. Therefore, most students turning 21 after the start of the second semester are already served until the end of the school year. In addition, eight local school systems already continue to provide special education services through the end of the school year for students who turn 21 during the first semester of the school year. These school systems include Anne Arundel, Baltimore City, Baltimore, Carroll, Cecil, Garrett, Harford, and Prince George's. This bill extends special education services to students who turn 21 before the start of the second semester in the remaining 16 local school systems.

Aid to Nonpublic Schools

After deferring previous requests for aid to the approximately 130,000 nonpublic school students in the State, the Governor included $6 million from the Cigarette Restitution Fund in the fiscal 2001 budget, specifying only that the funds could not be used for sectarian purposes.

In response, several pieces of legislation were introduced. House Bill 1057 (failed) would have established certain requirements for nonpublic schools to qualify for grants to purchase textbooks. House Bill 1194 (failed) would have made the funding contingent upon a statement from the Superintendent of Schools for the county in which a private school is located acknowledging that the county board has furnished textbooks and other instructional materials at no cost and in sufficient quantities for use in the public schools. House Bill 1354 (failed) would have established a task force to study the issue.

After much debate, the General Assembly left the funding intact, but attached restrictive budget bill language to the fiscal 2001 appropriation. The language specifies that the funding is to be used for the purchase of textbooks only, with a maximum distribution of $60 per eligible nonpublic school student for participating schools, except that at schools where at least 20 percent of the students are eligible for free or reduced price lunch program, the distribution will be $90 per student. To be eligible to participate, a nonpublic school must either be approved by or be registered with the State Board of Education, and not charge more tuition to a participating student than the statewide average per pupil expenditure. The statewide average per pupil expenditure was $6,945 in fiscal 1998. Based on a 2.7 percent projected annual increase, the average statewide per pupil expenditure will be approximately $7,500 in fiscal 2001. The language also outlines a process for the distribution, using Pennsylvania's program as a model.

Charter Schools

Legislation enacted in 1998 established a task force to recommend legislation that would allow Maryland public charter schools to qualify and compete for start-up funds under the Federal Charter School Grant Program. This grant program is open to states that have enacted a state law authorizing the granting of charters to schools. As Maryland currently has no authorizing legislation, the task force identified the provisions that should be contained in such a law. Senate Bill 543/House Bill 526 (both referred to interim study) included many of the recommendations of the task force. The legislation would have enabled local boards of education to authorize staff members, parents or guardians of public school students, and public institutions of higher education to establish public charter schools.

Technology in Maryland Schools

The Technology in Maryland Schools (TIMS) program, first funded in fiscal 1997, is a component of the Governor's Maryland Connected for Learning Initiative. Amid concern over the "digital divide," the fiscal 2001 budget includes additional funds for wiring schools for technology and for grants to schools for software, equipment, and professional development. In addition, the fiscal 2001 budget includes new funds to establish regional technology academies for teachers.

The State's fiscal 2001 school construction program currently includes

$9.4 million for 132 school wiring projects. Another 358 public schools in Maryland remain to be funded for wiring for technology. It is expected that another approximately $8 million will be allocated to wiring projects when the remainder of the fiscal 2001 school construction funds are allocated to specific projects in May 2000. In addition, the State plans to borrow, through a master lease arrangement with the Treasurer's Office, up to $25 million in fiscal 2001, and potentially again in fiscal 2002, to accelerate and enhance State support of school wiring for technology projects, with the goal of funding all the remaining schools in fiscal 2001 and 2002. The enhancements include increasing the percent of State funding, removing the cap based on size, and including the cost of required electrical work. For fiscal 2001, the debt service will be funded by the Cigarette Restitution Fund.

As part of TIMS, each school is eligible for $42,000 worth of equipment and $8,052 for software and professional development. The fiscal 2001 budget includes $10.3 million, mostly to cover lease payments from previous years.

Established in 1998, the Maryland Technology Academy is designed to provide teachers with intensive learning opportunities on the use of technology to impact student learning. The fiscal 2001 budget includes $250,000 in general funds for the academy, plus an additional $1.68 million from the Cigarette Restitution Fund to establish 20 regional programs, working through the eight regional professional development networks already in place.

Public School Buildings

Senate Bill 773/House Bill 745 (both passed) enable the New Baltimore City Board of School Commissioners to issue bonds to finance or refinance the acquisition, construction, or improvement of any public school facility in Baltimore City. The bills require passage of a resolution of approval by the Mayor and City Council of Baltimore before the school board can issue bonds. The bonds' maturity dates cannot exceed the useful life of the public school facility for which the bonds are issued or 15 years, whichever is less. The aggregate principal amount of bonds outstanding may not exceed $25 million, as of the date that the bonds are issued. Assuming a $25 million bond issuance, Baltimore City school expenditures could increase by $2.4 million annually for debt service. The bill creates a "sinking fund" into which the State Comptroller would deposit withheld State education aid in an amount equal to the debt service outstanding and unpaid on the bonds, from which the debt service will be paid.

With the enactment of this legislation, the Baltimore City School Board will be the only school board in Maryland authorized to issue bonds. For all other jurisdictions, the local government issues bonds for school construction. However, due to financial constraints the Baltimore City government is limited in the amount of bonds it can issue for school construction. A recent study of capital needs identified over $600 million of capital improvements for the Baltimore City Public Schools.

Senate Bill 894 (passed) authorizes the Board of Public Works to issue $9,828,000 in interest free "Qualified Zone Academy Bonds" and grant the proceeds to the Interagency Committee on School Construction to be used for the Aging School Program. Qualified Zone Academy Bonds were created by the federal government as a new type of debt instrument in the Tax Reform Act of 1997 to help finance certain types of education expenditures. Financial institutions, insurance companies, and investment houses are the only entities allowed to purchase the bonds, which provide for a federal tax credit instead of interest earnings.

A school is considered a "qualified zone academy" if it is located in an enterprise or empowerment zone, or at least 35 percent of the school's students qualify for free and reduced price meals. Maryland currently has 548 schools that qualify based on this criteria. Proceeds from the Qualified Zone Academy Bonds will be used for renovations or repairs to existing public schools. Pursuant to the legislation, the Board of Public Works will issue the Qualified Zone Academy Bonds, with the proceeds being distributed to eligible local school systems.

The United States Congress has authorized $400 million for the Qualified Zone Academy Bonds, which represents the first two years of a four-year program. Each state's allocation is based on the number of individuals residing in poverty. Maryland's current allocation totals $9.8 million through fiscal 2001; however, it is expected that Maryland will receive an additional $4 million allocation in fiscal 2002.

Senate Bill 711 (passed) establishes a Solar Energy Pilot Program to promote the use of solar energy systems in public school buildings. The Interagency Committee must provide grants to local boards to assist in implementing the use of solar energy systems in newly constructed or renovated school buildings. The fiscal 2001 State budget includes $250,000 for solar energy pilot projects in public schools. However, based on current technology, solar energy is more expensive than traditional energy sources. It is estimated that local school systems would only recover about 40 percent of the total cost to implement a solar energy system through lower utility expenses over the life of the system. In recent years, both Montgomery and Prince George's counties have employed solar energy technology in several school construction projects.

House Bill 217 (failed) would have established a task force to study sustainable school buildings through the implementation of energy efficient design and construction principles.

Local Boards of Education

House Bill 117 (passed) increases the salaries of the members of the Howard County Board of Education. The chairman's salary is increased from $11,000 to $14,000 and the other members' salaries are increased from $9,900 to $12,000. The Howard County Board of Education has five members elected for six-year terms. Board members previously received a salary increase in fiscal 1997 and 1999.

House Bill 699 (passed) provides each member of the Frederick County Board of Education with $3,000 annually in compensation and with health insurance benefits regularly provided to employees of the county board. In addition, the bill reduces the amount that board members receive for travel and other expenses, from $2,500 to $1,000 for board members and $1,500 for the board president.

House Bill 1105 (passed) increases the amount that members of the Queen Anne's County Board of Education receive for travel and other expenses, from $1,000 to $3,000 for board members and from $1,200 to $3,200 for the board chairman. The Queen Anne's County Board of Education has five appointed members who serve for a term of five years.

Senate Bill 252/House Bill 201 (both passed) require a question to be placed on the ballot in Worcester County at the November 2000 general election to determine the sense of the voters on the issue of changing the method of selecting school board members from appointment by the Governor to election by county voters. The seven members of the Worcester County Board of Education are appointed by the Governor for five-year terms.

House Bill 803 (passed) establishes a 16-member Montgomery County School Board Composition Task Force to study the composition, size, authority, and responsibilities of the Montgomery County Board of Education. The task force is required to submit written findings and recommendations in a final report to the Montgomery County Executive, the Montgomery County Senate and House Delegations, the Montgomery County Council, and the Montgomery County Board of Education by December 31, 2001.

Public School Holidays

Senate Bill 648/House Bill 415 (both passed) establish Presidents' Day as a public school holiday. The State has already designated several days as public school holidays including: Thanksgiving Day and the day after; Christmas Eve through January 1; Martin Luther King, Jr. Day; Good Friday and Easter Monday; Memorial Day; and primary and general election days. Adding an additional holiday to the public school calendar will not alter the number of days that schools are required to remain in session.

Libraries

The State operates three regional resource centers that provide coordination and services to libraries outside of the State's metropolitan areas. These services include consulting and training, cataloging and materials processing, regional databases, electronic magazine access, automated circulation and catalog systems, electronic networking, and rotating collections. The three regional resource centers are located in Salisbury (Eastern Shore), Charlotte Hall (Southern Maryland), and Hagerstown (Western Maryland).

Senate Bill 650/House Bill 1185 (both passed) alter the calculation of the State funding formula for regional resource centers beginning in fiscal 2002 by increasing the per capita grant amount from $1.70 to $3.50 in fiscal 2002, and by $0.50 per year through fiscal 2004. State funding will increase by $544,300 for the Eastern Shore Regional Resource Center, by $521,500 for the Southern Maryland Regional Resource Center, and by $408,800 for the Western Maryland Regional Resource Center in fiscal 2002.

Protecting Children from Obscene Materials

Access to child pornography and other obscene materials through on-line access to the Internet at public libraries is generating increasing concern in Maryland and throughout the nation. Only a few library systems in Maryland have installed filtering devices on its computers to protect children from obscene materials. Senate Bill 522 (passed) requires each county or board of trustees of a county library to adopt and implement policies and procedures to prevent minors from obtaining access through the library, by means of the Internet or other interactive computer service, to materials that are "obscene" or constitute "child pornography." These policies and procedures must be adopted by January 1, 2001. The State Superintendent of Schools must regularly monitor the county libraries to determine whether each library is complying with the required policies and procedures.

Higher Education

Operating Budget

State operating support for public colleges and universities in fiscal 2001 is $859 million, an increase of 10.8 percent; the State's private colleges and universities will receive $41.6 million in State support, an increase of 13.8 percent. Exhibit 3 illustrates the increase in State operating support for public higher education by institution.

Fiscal 2001 represents the first year of the application of the funding guidelines adopted by the Maryland Higher Education Commission (MHEC) in September 1999 in accordance with State law which requires "operating funding guidelines based on comparisons with peer institutions and on other relevant criteria" [Education Article

§10-207(5)]. In developing a proposed funding level for each institution within the University System of Maryland (USM), MHEC incorporated information on the amount of resources, students, facilities, and other relevant factors for identified peers, universities of similar size, program mix, and location. A university funded at its proposed funding guideline level would be receiving more State support than 75 percent of its identified peer institutions. Under the funding guidelines, the University System of Maryland proposed general fund support in fiscal 2001 is $906 million. Thus, in fiscal 2001, State support of the USM is 87 percent of the recommended funding guidelines.

Two public four-year institutions are not part of the University System of Maryland and are not funded with reference to the new funding guidelines this year: Morgan State University and St. Mary's College of Maryland. State support for Morgan State University in fiscal 2001 is $48 million, a 10 percent increase. MHEC and Morgan State University are continuing to work to identify appropriate peer institutions for the university as part of the funding guidelines for fiscal 2002. State support for St. Mary's College of Maryland is $13.5 million, approximately $500,000 more than required by the statutory funding formula for the college. The increased funds will be used to increase enrollment by 200 students over the next four years.

Community colleges receive $163 million in fiscal 2001, an increase of 16 percent. Funding for Baltimore City Community College also increases 16 percent, totaling $26.5 million.

Exhibit 3
State Operating Support for Public Higher Education
FY 2000 - 2001
$ in Thousands

Capital Budget

The fiscal 2001 capital program for all segments of higher education is $385.2 million including general funds, general obligation bonds, and academic revenue bonds. This includes $361.2 million for 50 projects associated with public higher education institutions, including community colleges. Another $24 million funds seven projects for private institutions. The use of the general fund surplus to increase the size of the capital program has resulted in the largest capital appropriation for higher education in State history. Fiscal 2001 is the first year of the administration's five-year, $1.2 billion program for capital construction in higher education. The Capital Improvement Program (CIP) shows $852.3 million in capital spending for higher education projects over the fiscal 2002 - 2005 period. Exhibit 4 shows the fiscal 2001 legislative appropriation for higher education capital and the funding anticipated in the CIP for fiscal 2002 - 2005. Exhibit 5 shows the fiscal 2001 allocation of capital expenditures by higher education institutions.

Exhibit 4
FY 2001 Legislative Appropriation and Out-Year Capital Funding
($ in Thousands)

Source: Department of Legislative Services and Fiscal 2001 Capital Improvement Program.

Exhibit 5
FY 2001 Allocation of Capital Expenditures by Higher Education Institutions
($ in Thousands)

The use of large amounts of general funds for higher education capital projects is relatively new. In fiscal 1999 and 2000, $12.3 million and $25.5 million was appropriated, respectively. The full funding of the $1.2 billion CIP depends largely on the availability of general funds in the near future. If the forecasted amounts of general fund revenues are not realized over the next few years, projects which have received funding for design could be delayed until general obligation bond funding becomes available.

Maryland Prepaid College Trust and Maryland College Investment Plan

The Maryland Higher Education Investment Program, also known as the Maryland Prepaid College Trust, is an off-budget independent State agency governed by a nine-member board. The program was established in 1997 to enhance the accessibility and affordability of a college education by providing for the prepayment of projected in-State tuition and mandatory fees at Maryland public colleges. Parents, grandparents, and other interested persons may purchase a contract based on current tuition and fee amounts. The program offers several tuition plans and payment options. If the beneficiary attends an in-State public college, the program will pay the actual costs of tuition and fees when the beneficiary matriculates. If the beneficiary chooses to attend a private or out-of-state college, the program will pay the weighted average of tuition and mandatory fees of the Maryland public colleges. The purchaser or beneficiary must be a resident of Maryland or the District of Columbia at the time that the purchaser enters

into the contract. The program operates in accordance with Section 529 of the Internal Revenue Code, which provides for Qualified State Tuition Programs (QSTPs).

Participants in the program receive favorable tax treatment. Earnings on a purchased contract are exempt from income taxation at the State level to the extent used for qualified higher education expenses. In addition, contributors may take an income tax subtraction modification for amounts contributed to an account. A contributor may deduct up to $2,500 each year per contract purchased until the full contribution amount has been allowed as a subtraction. At the federal level, earnings on a purchased contract are tax-deferred, and are taxed at the beneficiary's tax rate when the contract benefits are used for education expenses.

Participation in the program has not met expectations. After three enrollment periods, the program has approximately 5,000 participants, compared to an initial projection of 10,000.

Senate Bill 140/House Bill 11 (both passed) make a number of changes to the Maryland Prepaid College Trust and create the Maryland College Investment Plan in an effort to increase participation in college savings programs.

Changes to the Maryland Prepaid College Trust

Name Change: The legislation formally changes the name of the program to the Maryland Prepaid College Trust. The name Maryland Prepaid College Trust is already in use for marketing purposes.

Guarantee: The legislation creates a statutory guarantee for the program. If the current prepaid contract obligations of the program exceed the market value of program assets, at the request of the board, the Governor must include in the annual budget bill an appropriation sufficient to cover the shortfall. The General Assembly would retain the authority to decide whether to include the funds in the enacted budget. The program must repay any such appropriated amount to the State without interest in equal amounts in each of the next two fiscal years, subject to the rights of the program's contract holders. It is believed that the creation of a statutory guarantee will improve program participation by providing the public with an additional assurance of financial security.

Disclosure Requirements: The legislation requires the totality of the marketing efforts undertaken by the board to disclose that there is no guarantee that the earnings of assets invested in the program will generate enough money to cover the actual costs of tuition at the time of the beneficiary's enrollment in college. Under current law, any marketing efforts are required to include such a disclaimer. In addition, the legislation repeals a requirement that a notice declaring that the program is not backed by the State's full faith and credit be printed on each contract.

It is believed that the modification of these disclosure requirements could provide the program with greater flexibility in its marketing efforts, thereby improving program participation.

Other Changes:

• Contributors may be granted rebates in the event that program assets exceed liabilities by 30 percent or more, except under certain circumstances.
  


• The board may only adjust the terms of subsequent or current investment contracts to ensure continued actuarial soundness of the program in the event that the full amount of a shortfall was not appropriated as requested. Under current law, the board may make such an adjustment after each annual review of the comprehensive investment plan for actuarial soundness.
  


• The board may allow excess prepaid contract benefits due to receipt of scholarship, tuition remission, or early graduation to be used toward the payment of other Qualified Higher Education Expenses, a term defined in the Internal Revenue Code to include tuition, fees, books, supplies, and equipment required for college attendance, as well as certain room and board expenses for students who attend college at least half-time. Currently, program funds may only be used to pay tuition and fees.
  


• A nondiscounted refund may be made if the beneficiary graduates early from college. Under current law, a nondiscounted refund is only available in the event of scholarship, tuition remission, death, or disability.
  


• Funds may be transferred from the Maryland Prepaid College Trust to any other qualified state tuition program or from any other qualified state tuition program to the Maryland Prepaid College Trust, in accordance with federal law.

Creation of the Maryland College Investment Plan

Senate Bill 140/House Bill 11 create the Maryland College Investment Plan to allow contributions to an investment account established for the purposes of meeting the Qualified Higher Education Expenses of the designated beneficiary of the account. While the Maryland Prepaid College Trust is a defined benefit plan under which the contract benefits are based on tuition, benefits of the Maryland College Investment Plan are based solely on investment performance. Set payments are not required.

The Maryland College Investment Plan is to be administered, managed, promoted, and marketed by the Maryland Higher Education Investment Board in compliance with Internal Revenue Service standards for QSTPs. The board may outsource the administration, management, promotion, or marketing of the program. The program must reimburse the State for any start-up expenses paid by the State. There is no State residency requirement for participation. The assets and obligations of the program are not in any way guaranteed by the State. The board must adopt procedures to ensure that contributions to the program do not exceed the maximum amount allowed under federal law.

Tax benefits of the Maryland College Investment Plan are similar to those for the Maryland Prepaid College Trust. For further discussion of these tax benefits, see Part Q3 - Income Taxes of The 90 Day Report.

Student Financial Assistance and Scholarships

Maryland Teacher Scholarships

The Maryland Teacher Scholarship Program, which was implemented in fiscal 2000, is designed to increase the number of primary and secondary education teachers. To qualify for a scholarship under the program, a student must:

• be a Maryland resident;
  


• be accepted for admission as a full-time undergraduate student or be currently enrolled at a State institution of higher education as a full-time undergraduate student pursuing a course of study leading to a Maryland professional teacher's certificate;
  


• have earned a grade point average of at least 3.0 on a 4.0 scale; and
  


• agree to work as a public school teacher in the State after graduation for one year for each year that the scholarship was awarded or repay the funds received plus interest.

Senate Bill 205/House Bill 281 (both passed) increase the annual award amount for the Maryland Teacher Scholarship Program from $1,000 to $2,000 for a student enrolled at a two-year eligible institution and from $3,000 to $5,000 for a student enrolled in a four-year eligible institution. The legislation also permits a recipient of an Educational Excellence Award to also receive a Maryland Teacher Scholarship Award or a Maryland HOPE Scholarship Award.

As a result of the legislation, it is estimated that general fund expenditures for scholarship awards for the Maryland Teacher Scholarship Program, the Maryland Science and Technology Scholarship Program, and the Maryland HOPE Scholarship Program will increase by $3.8 million in fiscal 2001 to $16.7 million.

Maryland Dent-Care Program

Senate Bill 519/House Bill 543 (both passed) establish the Maryland Dent-Care Program, which provides higher education loan repayment assistance grants to Maryland dentists who demonstrate financial need and agree that at least 30 percent of their patients will be Medicaid enrollees. The program's purpose is to increase access to oral health services for underserved Medicaid recipients by increasing the number of dentists who treat that population. Grants may be awarded to up to five new participants each year, with a maximum of 15 participants in the program including participants receiving renewal grants. The maximum grant amount is $33,000 per year. A participant who fails to comply with the program's requirements must repay loan amounts received.

Community College Transfer Scholarship Program

Designed to assist community college students who are completing their associate degrees and transferring to a four-year institution, House Bill 476/Senate Bill 697 (both passed) establish the Community College Transfer Scholarship Program. This program is modeled after the HOPE Scholarship Program established in the 1999 session. Costs for the program are estimated at $4.2 million for fiscal 2002, increasing to $9.1 million for fiscal 2005. To qualify for a scholarship under the Community College Transfer Scholarship Program, an applicant must:

• be a Maryland resident;

• be a student at a Maryland community college;

• maintain a 3.0 grade point average while attending community college;

• have completed at least 60 credits at community college or have earned an associate's degree by the end of the semester in which the applicant plans to transfer to a four-year institution;

• be accepted for admission and intend to enroll in a degree program at a Maryland four-year private or public institution of higher education; and

• have an annual total family income of $80,000 or less.

The annual award amount is $3,000. An award may be used only for tuition and fees at a Maryland four-year private or public institution. A student must pledge to live and work in the State after completion of undergraduate studies for one year for each year that an award was received. A recipient may fulfill the employment obligation

out-of-state if the recipient was employed out-of-state at the time the recipient received the scholarship, continues employment with the same employer while receiving the scholarship, and continues employment with the same employer after completion of the recipient's undergraduate studies. A recipient who fails to fulfill program requirements must repay scholarship funds received plus interest.

Waiver of Tuition and Fees - Foster Care Recipients

Senate Bill 181 (passed) exempts certain foster care recipients from the payment of tuition and fees at public institutions of higher education. The legislation applies to individuals who reside in a foster care home in Maryland on or after their eighteenth birthday and individuals who resided in foster care as of their fourteenth birthday, but were adopted after that birthday.

To become eligible for the tuition waiver, a foster care recipient must be enrolled in a public higher education institution in an associate or bachelor's degree program by the time the recipient becomes 21 years old. A recipient must also file for federal and State financial aid each year. The waiver applies to any tuition and fees not covered by financial aid. The waiver is effective for five years or until the recipient is awarded a bachelor's degree, whichever occurs first.

Repayment Obligations

To assist in making the State scholarship programs with service obligations more attractive to students in Maryland, House Bill 152 (passed) eases the requirements for repayment by students who default on the service requirements of the programs. Under current law, the interest rate on the repayment obligation for scholarships that include a service obligation is the prime rate plus 2 percent. Currently, this interest rate is 11 percent and has proven to be a deterrent to students considering the State's HOPE Scholarship Program. Accordingly, this bill requires that the interest rate on repayment obligations for scholarships that include a service obligation be calculated at an interest rate equal to that of the federal Stafford loan, which currently is about 7 percent. The bill applies retroactively to any applicable scholarship recipient who is in good standing under the scholarship program as of July 1, 2000.

Retention of Unused Funds

House Bill 1231 (passed) provides that all State scholarship appropriations that are not used by the end of the fiscal year may not revert to the State treasury, but must be used to make awards to students under need-based scholarship programs during subsequent fiscal years and may not be used for administrative expenses.

Under current law, with the exception of the Educational Excellence Award Program, the Senatorial Scholarship Program, and the Delegate Scholarship Program, State scholarship appropriations that are not used by the end of the fiscal year revert to the State treasury. The Senatorial and Delegate Scholarships have separate provisions for unused funds.

Community Colleges

State Funding

Beginning with fiscal 2003, Senate Bill 89/House Bill 311 (both passed) increase the amount of supplemental unrestricted grants that are currently distributed to seven small community colleges. The legislation increases from $400,000 to $500,000 the amount of the unrestricted grant that is distributed to each of the following three community colleges: (1) Allegany Community College; (2) Garrett Community College; and (3) Hagerstown Community College. The bill also increases from $200,000 to $250,000 the amount of the unrestricted grant that is distributed to each of the following four community colleges: (1) Carroll Community College; (2) Cecil Community College; (3) Chesapeake College; and (4) Wor-Wic Community College.

Beginning in fiscal 2004, the grant amounts will increase by the same percentage as the percentage increase in funding per full-time equivalent student to the State four-year public institutions of higher education. The Maryland Higher Education Commission must periodically review the grant amounts to determine whether they are appropriate in light of specified factors.

The General Assembly passed legislation that authorized the current unrestricted grants in 1998 (Chapter 570). Under current law, these grants will terminate on June 30, 2002.

Tuition and Fees for Nonresident Students

High tuition charged to out-of-state students by the community colleges near the State's borders has impeded the ability of those community colleges to attract students and diminished the enrollments at those institutions in recent years.

House Bill 192 (passed) reduces the amount of tuition and fees that a local community college must charge to nonresident students. Under current law, colleges are required to charge out-of-state students the full cost of education (i.e., in-State tuition plus the State and local contributions per full-time equivalent student). The legislation also permits a community college board of trustees to waive the out-of-state fee and the out-of-county/region fee for a student who is employed by a business located in the county that supports the community college.

Regional Higher Education Centers

A regional higher education center includes participation from two or more institutions of higher education in the State and provides an array of higher education program offerings and multiple degree levels. The purpose of these centers is to provide Maryland citizens with access to affordable higher education programs in unserved and underserved regions of the State and to respond to needs of business and industry. There are five regional higher education centers in Maryland: the Downtown Baltimore Center, the Higher Education and Applied Technology Center in northeastern Maryland, the Shady Grove Educational Center in Montgomery County, the Southern Maryland Higher Education Center, and the Waldorf Center in Charles County. Two new centers have been proposed: the Eastern Shore Higher Education Center, expected to open in the fall of 2002, and the Hagerstown Educational Center, expected to open in the fall of 2001.

Under current law, the State's role in coordinating higher education centers is limited, although the Maryland Higher Education Commission (MHEC) does have some authority over the content of educational programs offered at regional higher education centers. During the 1999 interim, MHEC established a work group to consider policy issues relating to regional higher education centers. A proposal for policies and guidelines was presented to the Strategic Committee on the State Plan on November 17, 1999. Senate Bill 603 (passed) reflects the view that regional higher education centers should be more closely connected to statewide higher education planning and that consultation should be sought regarding how centers can best meet the educational needs of the region's residents.

Senate Bill 603 establishes the roles and responsibilities of MHEC in coordinating regional higher education centers and includes regional higher education centers in the Maryland Charter for Higher Education. The legislation requires each regional higher education center that requests or receives State financial support to submit a mission statement to MHEC. These mission statements must be approved by MHEC to ensure that they are consistent with the State Plan for Higher Education. To effectively coordinate the regional centers, MHEC is authorized to require submission of strategic plans and to ensure that courses and programs are within the scope of the approved regional higher education center's mission. In addition, the governing body of a regional higher education center must submit its annual operating budget and capital project requests to MHEC. The legislation authorizes MHEC to review proposals for capital projects and improvements proposed by regional higher education centers and develop and submit to the Governor and the General Assembly recommendations as to these projects.

Task Force to Study College Readiness for Disadvantaged and Capable Students

The Southern Education Foundation (SEF) has promoted educational equity and equality in education in the South for over 100 years. The organization published two comprehensive reports on the status of minorities in public higher education. The first report, called "Redeeming the American Promise" was published in 1995. It reported on the status of minorities in higher education in 12 of the 19 states (including Maryland) that at one time maintained dual "separate but equal" systems of higher education. SEF developed a follow-up report entitled "Miles To Go" in 1998 which analyzed the status of African Americans in higher education in all 19 states. The "Miles To Go" report indicated that Maryland has made significant progress in enhancing educational achievement and equality, however, there is much progress that still must be made.

As part of the SEF structure, the Maryland SEF Leadership Group, consisting of legislators, educators, and other policy makers, has been functioning for the past three years. The local group prepared a report called "Miles To Go in Maryland." This report measured the proportion of African-American middle school students who attain a baccalaureate degree and focused on key issues to increase the number of students that eventually receive a degree. The three issues are college readiness, teacher preparation, and financial aid.

"Miles To Go in Maryland" and a campaign action plan entitled "The Road Taken" recommend new initiatives for enhancing minority educational attainment. To conduct a complete review and study of these recommendations, House Bill 1091 (passed) establishes a 29-member Task Force to Study College Readiness for Disadvantaged and Capable Students. The task force must develop a comprehensive strategy to ensure that disadvantaged and capable students have adequate opportunities to successfully matriculate and graduate from institutions of higher education. The task force must submit an interim report to the Governor and the General Assembly in January 2001, and a final report in December 2001. The task force terminates on May 31, 2002.