Legislature(2017 - 2018)CAPITOL 106
03/30/2018 08:00 AM House EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| HB406 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 406 | TELECONFERENCED | |
HB 406-SCHOOL FUNDING FOR CONSOLIDATED SCHOOLS
8:02:50 AM
CHAIR DRUMMOND announced that the only order of business would
be HOUSE BILL NO. 406, "An Act relating to the calculation of
state aid for schools that consolidate; relating to the
determination of the number of schools in a district; and
providing for an effective date."
8:03:14 AM
GEORGE ASCOTT, Staff, Representative Harriet Drummond, advised
that the House Education Standing Committee introduced HB 406 as
a companion bill to SB 216, a Senate Finance Committee bill. He
explained that this legislation will fix an unforeseen obstacle
to school districts that wish to consolidate due to shrinking
enrollment which results in a problematic sudden drop in state
funding. Currently, he offered, under the school size factor of
the foundation formula, school districts receive money based
upon the number of students enrolled per school. Schools with a
higher density of population receive less funding because they
can operate more efficiently and, he pointed out, temporary
additional costs are incurred when consolidating and changing
the number of people, transportation, curriculum, staffing, and
the physical aspects of moving. Consolidations would ultimately
save money for schools and the state, but an immediate decrease
in funding is problematic for school districts. He advised that
this legislation will solve this problem by allowing school
districts to adjust gradually to the reduction in funding over a
four year period, as follows: during the first two years of
consolidation, the school districts will receive full funding as
if they had not consolidated; the third year, school districts
will receive 66 percent of the difference between pre-
consolidation and post-consolidation; the fourth year, school
districts will receive 33 percent of the difference between pre-
consolidation and post-consolidation; and the fifth year, school
districts will be funded as intended under the completed
consolidation, and will operate from that point on with reduced
funding.
MR. ASOTT related that this bill would simply give school
districts the tools to consolidate, it does not force them to
consolidate, he explained, and it also addresses a separate and
unique problem faced by the community of Hooper Bay. Hooper Bay
has one single K-12 school, yet for funding purposes, it is
calculated to have two schools until the average daily
membership reaches 425 students, after which it will be
considered one single school by the formula. He advised that
the anticipated cost of the Lower Yukon School District is
roughly $700,000, even though their costs have actually
increased due to higher student numbers. He suggested that
other schools that may eventually encounter this problem would
be helped by HB 406.
8:06:07 AM
JONATHAN KING, Staff, Senator Natasha von Imhof, Alaska State
Legislature, offered a technical presentation on how HB 406
would work. He drew attention to the first slide of the
presentation, included in the committee packet, and pointed out
an error: AS 14.17.150(a) should read AS 14.17.450(a). He
explained that is Alaska Statute that contains the school size
factor adjustment.
MR. KING continued, as follows:
The school size ... adjustment, as Mr. Ascott noted,
is a component of our state education funding formula
contained in AS 14.17.410, and as you can see, this
factor ... has a curve to it. It's got those up-
slopes on the left-hand side and a downslope on the
right-hand side. And what our school funding formula
does is it tells our districts to take the average
daily membership, in other words the number of ...
counted students ... during the measurement period,
and, ... in part, to multiply them by the points on
this curve where they lie depending on the students.
And so, what you can see is that ... if you have 200
students, ... you go up from 200 down on the bottom,
you follow that up to the curve, you end up with a
multiplier of 1.4. If you have 1,000 students, your
multiplier is about 1. And so, as Mr. Ascott noted,
this is to adjust for the fact that smaller schools
tend to be less efficient - in terms of a per student
basis, in terms of costs - than larger schools.
However, while this encourages us to build smaller
schools and to provide more funding for smaller
schools, it also has the inverse effect which is that
the larger schools, they receive less funding.
8:08:40 AM
MR. KING turned to slide 2, titled "Effect of the School Size
Factor on Consolidation, Example 1," which read as follows
[original punctuation provided]:
If you flip the page from slide 1 to slide 2, I will
give you an example of what this means if you are a
school district of 1 to consolidate. So, the
distribution here, a blue dot, is actually the
distribution of a school in the Anchorage School
District. And, their school size factor as determined
by state statute in AS 14.17.450(a), and you'll see on
this slide, two green dots ... that have next to them
1.06755 and 1.05798. So, let us presume that we are a
school district and we have these two schools with 755
ADM and 798 ADM, with 1.06 and 1.05 represents their -
- the school size factor applied in formula. And, we
want to put this together, and just say that the
building -- the building housing the 798 students has
capacity to take on those 755 students. We're going
to create a combined school that is now equal to the
red dot on the right, which says 0.95; 1,553, that is
the combined school. And you can see that our cost
factor per student has shifted from 1.05 to 1.06 down
to 0.95. Well, for the district, this has an
immediate fiscal impact when combined, or a previous
combination, the state aid for those schools is equal
to about $11.8 million a year excluding any intensive
student factor that's a separate part of the funding
formula. But when we consolidate those two schools
because of the change in the school factor dropping to
0.95, that state aid drops down to $10.6 million. So,
that's a ten percent or $1.2 million drop in funding
from consolidation.
8:10:52 AM
In addition, in this case, because the Municipality of
Anchorage provides the maximum allowed under state law
for local state aid, the district would also lose
$0.27 million in local -- in a local funding match.
So the loss in terms of funding for the school
district is almost $1.5 million, $1.47 million. So,
for the school district, as they think about
consolidating these schools, they have to ask
themselves the question, are we going to save more
than $1.47 million -- are we going to save more than
$1.5 million. If we're not, then the accurate
consolidation is a net loss in terms of funding. So,
for school districts they can maximize their funding
by maintaining these smaller unconsolidated schools
even -- so, we're creating a disincentive for them to
put those schools together if that makes sense for,
you know, full financial and other reasons. There are
benefits to consolidating schools. Right now we have,
you know, special topic teachers that transit back and
forth between schools, there is lost time in
productivity in that transition. In addition, with
some smaller schools, they might be operating one
language at one school and one language in another
school and by putting them together we could offer the
two languages at both schools, just as an example.
So, there's a calculus that is going on here where the
current funding can create a situation where the
school is disincentivized to even consider
consolidation.
8:12:39 AM
MR. KING turned to slide 3, "Consolidation Example 2," and
continued his presentation. Slide 3 read as follows [original
punctuation provided]:
So, moving on to slide 3, this is -- this is an actual
example provided by calculator -- from a calculator
that the Anchorage School District provided to us that
we then modified.
And so, this is an elementary school example. So,
you'll see lines 1 through 6, in that grey bar, are in
a school district, say a school district had say 5
elementary schools between 320 and 375 students. And,
then you'll see lines 7 through 12 are when we get to
a post-consolidation where we've taken 5 schools and
we've reduced them to 4. So, if you just go all the
way to the right where it says "Total" on lines 1
through 6. You can see we start with 1,720 students
and we walk our way going through the line, through
the different elements of our school funding formula,
until we get to line 6 where you'll see a total on the
right of $15,069,525. That is the amount of state aid
for these 5 elementary schools in a pre-consolidation
mode. If a school district were to decide to
consolidate them into 4 schools, we would end up with
funding of $14.4 million. And, that's line 12, all
the way over to the right where it says, "Total." You
drop down to line 15, the smaller grey box in the
bottom left-hand corner, you'll see that under
consolidation, the school district loses about
$650,000 in state funding, then it loses another
$150,000 in local funding, and a small amount in the
Quality Schools Grant. So, the total loss in funding
is $798,000.
8:14:42 AM
Now, of course there is saving involved there in terms
of, you know, the fiscal plans and not having to
operate the fiscal plans, you would need one less
principal in this case. And, it turns out that when
you go through those calculations, that the amount of
saving of closing that school are less than that loss
of $647,000.
In addition, because you are going to have to change
school size boundaries, boundaries for those
individual schools to determine the home districts for
students, you're also going to have to add additional
busing because you are going to be creating slightly
larger districts. And that eats into those savings as
well. (Audio difficulties) walk all the way down
through this is that the district ends up in a
position of losing about $500,000 through the act of
consolidation. So, this is an immediate disincentive
for school districts even consider consolidation.
8:15:56 AM
MR. King turned to slides 4-7, "Expected State Savings Example
2, Continued," [which include year's 1-4 calculations] and
continued his presentation as follows:
So, on slide 4, we walk through what this looks like
in an aggregate fashion if HB 406 and the companion
bill were to pass. So, take the example that is on
the prior page, a district with a cost factor of 1,
which is the Anchorage district, consolidates 5
schools with 1,720 students into 4 schools. Total
state aid, pre-consolidation excluding intensive
services factor, it is $15.07 million a year. And you
can see that on the prior slide in line 6. They are
getting $15 million a year.
So, under HB 406, if you were to allow them to
consolidate, in the first two years they would receive
$15.7 million. So, instead of immediately stepping
down from $15.07 million to the $14.42 million, they
would stay at $15.07 million for those two years.
Allowing the school district time to figure out how to
generate the best efficiencies within those schools
and make this work for them.
In years 3,4, and 5, the state aid adjusts in equal
increments until it reaches that natural level, that
is the level underneath the existing funding formula
of $14.42 million for those 1,720 students. So, in
years 3, we end up with $14.85 million which is 66
percent of the distance or the difference between
$15.07 million and $14.42 million. The state treasury
then begins to save that $220,000 in that year.
In year 4, as we stepped out to 33 percent of the
difference between the pre- and post-consolidation
numbers, the state receives $430,000 or spends
$430,000 less. And in year 5, it (indisc.) back to
the existing funding formula and the state treasury is
spending $0.65 million. So that is the technical way
in which this would step down.
Slides 5, 6, and 7, are highly -- much more detailed
examples. It's the exact same example of what we were
doing before with the 5 schools going to 4 schools.
But this allows you to see exactly how the math works,
where the numbers would be pulled from, the bill line,
and how that calculation would work out. And, it
shows empirically that our funding pre-consolidation
and post-consolidation match one another, which is
intent of the bill.
8:19:48 AM
DEENA BISHOP, Superintendent, Anchorage School District, shared
that HB 406 is a "win-win" for the state, as well as the
Municipality of Anchorage and its education. There is not any
more money to be gained by HB 406, as its intent is to allow
school districts time to consolidate given the many aspects
school districts would experience through consolidation. She
advised that the largest costs in education are human resources,
as it should be, and she would continue to hire school staff to
work with students. The area of savings is in administration,
but the school districts would need an opportunity to scale
down. She explained that in Anchorage, approximately 45 percent
of its schools were built in the 1950s, 1960s, and 1970s, and
are approaching their life span prior to having major
maintenance or any kind of reconstruction. In the event the
committee was to consider HB 406, which strictly defines the
operational costs of a school, and then couple that with the
capital costs when the bond reimbursement program is reinstated
at the state level as well as local, that is an additional
significant savings, particularly to the Anchorage school
districts due to its many older schools. The members of this
committee who were school board members remember that for many
years there has been the request to find efficiencies, to look
at schools and neighborhoods, to determine what could be done,
she said. The math just never worked out with the formula, it
did not make sense, and she related that this conversation is
due to the capital costs incurred with the need to reduce
schools because many schools are up for major maintenance
activity. She remarked that this legislation is a win for our
state and a win for the people of Anchorage.
8:23:12 AM
CHAIR DRUMMOND requested a description of the capital costs.
MS. BISHOP responded that the operation of the school building
itself would need to be scaled down, but it would still have to
be heated until "we find out what we could do." Many years ago,
under House Bill 278, there was an intent to offer charter
schools, or other entities, to possibly use former school
buildings. The capital costs would include moving furniture
because renovations may be necessary, for example, this year a
school on base was shut down and the children were moved to four
schools. The school district's savings was used to perform some
capital improvements, such as, ADA improvements for students
with disabilities; additional fencing; rooms were brought back
to life that had been mothballed; and simply the capital costs
of getting classrooms ready.
8:25:17 AM
JIM ANDERSON, Chief Financial Officer, Anchorage School District
(ASD), advised that he was unsure he had more to add to this
committee.
8:25:59 AM
MARTIN STEPETH pointed out that the witnesses who spoke today
are from large districts. He noted that he comes from a small
district, but HB 406 could work for that district in a time of
transition. For many years, he said, the rural villages and
other villages have been consolidating, and this legislation
would also work for those villages. He pointed out that not all
villages are shrinking, some villages are growing. He advised
that out in the Pribilof Islands, "I know that the school on
paper right now in Saint George is shut down. But, in a couple
of years, I know for a fact that'll be back up and growing again
because there will be enough students there." The transitions
offered in HB 406 would help give time and ease into the
transition. He stressed that up until a few years ago this was
a growing state, but not any longer, these are real problems in
real time.
8:27:40 AM
CHAIR DRUMMOND, after ascertaining no one wished to testify,
closed public testimony on HB 406.
[HB 406 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 406 Additional Support ASD 03.29.2018.pdf |
HEDC 3/30/2018 8:00:00 AM |
HB 406 |
| HB 406 Support LYSD 03.29.2018.pdf |
HEDC 3/30/2018 8:00:00 AM |
HB 406 |