Legislature(2011 - 2012)CAPITOL 106

02/17/2012 08:00 AM House EDUCATION


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08:08:24 AM Start
08:08:50 AM Superintendent Presentation: Fairbanks North Star Borough School District
08:35:06 AM HB313
09:48:58 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation by Superintendent Pete Lewis, TELECONFERENCED
Fairbanks Northstar Borough
*+ HB 313 STUDENT COUNT ESTIMATES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 HB 313-STUDENT COUNT ESTIMATES                                                                             
                                                                                                                                
8:35:06 AM                                                                                                                    
                                                                                                                                
CHAIR DICK  announced that the  final order of business  would be                                                               
HOUSE  BILL NO.  313,  "An  Act relating  to  student counts  and                                                               
estimates  for  public  school  funding;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
The committee took an at-ease from 8:35 a.m. to 8:36 a.m.                                                                       
                                                                                                                                
8:36:24 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ERIC  FEIGE, Alaska State  Legislature, introduced                                                               
HB 313,  paraphrasing from the  sponsor statement, which  read as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     Our school  districts need effective tools  to plan and                                                                    
     budget for  the education  of our  children.   Under HB
     313 - subject to  the hold harmless provisions, changes                                                                    
     in  the   Base  Student  Allocation  [BSA],   or  other                                                                    
     legislative  changes  -  districts   will  be  able  to                                                                    
     complete  the  budget  process and  determine  staffing                                                                    
     levels earlier,  eliminate unnecessary  layoff notices,                                                                    
     and  execute   employment  contracts  to   improve  the                                                                    
     stability of the education climate in the state.                                                                           
                                                                                                                                
     The  purpose of  the bill  is to  base the  funding for                                                                    
     each school  district in the  state on the  count under                                                                    
     A.S.  14.17.600 for  the preceding  fiscal  year.   For                                                                    
     example,  the  count  conducted in  October  2012  will                                                                    
     establish the  funding level for  the district  for the                                                                    
     2014 Fiscal Year [FY].                                                                                                     
                                                                                                                                
     The  new  funding formula  will  not  change the  "hold                                                                    
     harmless"  clause   currently  in  existence.     If  a                                                                    
     decrease in enrollment of five  percent or more occurs,                                                                    
     the  district will  continue to  receive funding  based                                                                    
     upon  the  Average  Daily  Membership  [ADM]  plus  the                                                                    
     75/50/25 percent  addition over  the next  three years.                                                                    
     Other provisions of the  foundation formula will remain                                                                    
     as well.                                                                                                                   
                                                                                                                                
     If a district  has an actual increase  in student count                                                                    
     of  greater than  five percent,  this legislation  will                                                                    
     require   the  Department   of  Education   to  provide                                                                    
     supplemental funding  to the  district for  the current                                                                    
     fiscal year  equal to Average Daily  Membership for the                                                                    
     current year.   For example, if the  October 2013 count                                                                    
     is  five percent  larger than  the October  2012 count,                                                                    
     the  Department will  provide  supplemental funding  to                                                                    
     the  district  for  Fiscal  Year   2014  equal  to  the                                                                    
     increase in  the Average  Daily Membership  between the                                                                    
     October 2012 count and the October 2013 count.                                                                             
                                                                                                                                
     The new funding method will  implement with the FY 2014                                                                    
     year.   Thus, the count  conducted in the fall  of 2012                                                                    
     will provide the funding level  for both FY 2013 and FY                                                                    
     2014, subject to the hold harmless provisions.                                                                             
                                                                                                                                
     An  important  consideration  in this  legislation  is,                                                                    
     except for  Fiscal Year 2014, the  actual funding given                                                                    
     a  district will  not change,  only the  timing of  the                                                                    
     funding.                                                                                                                   
                                                                                                                                
8:40:13 AM                                                                                                                    
                                                                                                                                
MICHAEL PASCAL,  Staff, Representative  Eric Feige,  Alaska State                                                               
Legislature,  suggested  that the  concept  and  base numbers  be                                                               
considered  prior to  determining what  may occur  in a  specific                                                               
fiscal year.   He emphasized  the need to provide  districts with                                                               
advance  BSA funding  to  allow for  appropriate  planning.   The                                                               
problem of basing the funding  on existing student counts is that                                                               
it  does not  allow  for  advance budgeting;  you  can't count  a                                                               
student  until enrollment  is realized.   However,  if the  count                                                               
system is  based on  a previous year's  adjustments can  be made.                                                               
He  opined  that  large enrollment  changes  would  represent  an                                                               
anomaly and could be adjusted for over a period of years.                                                                       
                                                                                                                                
8:43:00 AM                                                                                                                    
                                                                                                                                
DUNCAN WARE,  Superintendent, Delta Greely School  District, said                                                               
the process of funding could  be improved by applying the current                                                               
student count to  the coming year and allow  for forward funding.                                                               
He opined  that budgeting by  guess work could be  eliminated and                                                               
stability  provided, by  enacting this  change.   Three questions                                                               
rule a  district's budgeting process:   1) how many  students are                                                               
expected, 2)  how much will be  received per student, and  3) the                                                               
actual   enrollment   number   based  on   the   October   count.                                                               
Eliminating  the  October variable,  and  using  a solid  number,                                                               
which could then be adjusted for  in a planned manner, during the                                                               
next  budget cycle,  would  provide a  confidence  level that  is                                                               
currently  lacking,   he  said.    Teacher   retention  would  be                                                               
positively affected,  as non-tenured personnel would  not need to                                                               
be  put on  notice every  March 15th,  and await  notification of                                                               
retention  or layoff;  provided on  the  last day  of the  school                                                               
year.   During this  limbo time,  teachers seek  other positions,                                                               
and  the  ripple  effect  is   felt  throughout  the  school  and                                                               
community.     The   district  risks   losing  highly   qualified                                                               
personnel, and everyone involved is impacted.                                                                                   
                                                                                                                                
8:47:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  inquired whether  it is more  important to                                                               
have  a  fixed  attendance  number to  apply  to  the  foundation                                                               
formula,  or to  know what  the formula  amount will  be, pending                                                               
legislative approval.   Further, he asked for clarity  on how the                                                               
BSA would  be established, applied, and  adjusted.  Specifically,                                                               
he questioned  whether a  district with  a current  enrollment of                                                               
nine  thousand  realizing  a four  percent  increase,  about  360                                                               
students, could  absorb the  associated costs  without additional                                                               
funding for the year.                                                                                                           
                                                                                                                                
8:48:14 AM                                                                                                                    
                                                                                                                                
MR. WARE  said the primary budget  question is based on  the BSA,                                                               
and that is  what currently dictates the funding level.   He said                                                               
removing  the  BSA  variable would  be  beneficial  for  planning                                                               
purposes,  even  if the  funding  remained  flat.   Regarding  an                                                               
increase in  the actual  ADM, he  said it is  a matter  of scale.                                                               
The  grade level  distribution of  students  entering the  system                                                               
would  play an  important  part,  as it  may  not require  hiring                                                               
additional teachers.                                                                                                            
                                                                                                                                
8:51:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA  noted that  access to  the road  system is                                                               
helpful, but  the cost and  accessibility of  fuel is one  of the                                                               
major factors  in communities today.   Many families  relocate as                                                               
winter  sets in  and  fuel becomes  unavailable or  unaffordable.                                                               
She asked if HB 313 accounts for this type of variable.                                                                         
                                                                                                                                
MR. WARE responded that it  could be beneficial to small schools,                                                               
as the funding  would be based on the previous  year's count.  If                                                               
the enrollment were  to drop below state  minimums, funding would                                                               
still  be   received,  operations  could  be   continued,  and  a                                                               
strategic plan could be created, he opined.                                                                                     
                                                                                                                                
8:54:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE asked  whether public  aid funds  are fully                                                               
expended each year, or is it possible to realize a surplus.                                                                     
                                                                                                                                
MR. WARE said  that each budget has fluidity,  and excess funding                                                               
is  placed  in a  reserve  account.    He reported  that  reserve                                                               
balances are currently at about 7.8 percent.                                                                                    
                                                                                                                                
REPRESENTATIVE FEIGE  asked if a  limit is imposed on  the amount                                                               
that can be retained.                                                                                                           
                                                                                                                                
MR.  WARE answered  that  the  cumulative must  be  less than  10                                                               
percent.                                                                                                                        
                                                                                                                                
8:55:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON noted  that HB  313 changes  the method                                                               
for counting  students, and  directed attention  to page  8, line                                                               
31, which read [original punctuation provided]:                                                                                 
                                                                                                                                
     d) Part-time students shall be  included in the student                                                                    
     count data  and in accordance with  regulations adopted                                                                    
     by  the department.   (e)  When reporting  a district's                                                                    
     ADM,  a  part-time  student  who  is  a  correspondence                                                                    
     student may not  be counted as more  than one full-time                                                                    
     equivalent student.                                                                                                        
                                                                                                                                
REPRESENTATIVE  P.  WILSON  asked  if  the  Delta  Greely  School                                                               
District has  correspondence students, and whether  this language                                                               
would effect a change in the status quo.                                                                                        
                                                                                                                                
MR.  WARE answered  that the  district  does have  correspondence                                                               
students, and  they are  currently counted at  80 percent  of the                                                               
BSA, as long as  they are enrolled for four or  more credits.  He                                                               
opined that the change would not have a major impact.                                                                           
                                                                                                                                
REPRESENTATIVE P.  WILSON clarified  that the language  would not                                                               
propose to  increase the correspondence  count to 100  percent of                                                               
the BSA.                                                                                                                        
                                                                                                                                
MR. WARE said no.                                                                                                               
                                                                                                                                
8:57:16 AM                                                                                                                    
                                                                                                                                
CHAIR DICK asked  the logic and origin for using  five percent as                                                               
the critical variable rather than three or eight percent.                                                                       
                                                                                                                                
MR. PASCAL  indicated that  the current  hold harmless  clause is                                                               
established  at  five  percent, thus,  existing  statute  it  was                                                               
adopted for  inclusion in HB  313.   To a follow-up  question, he                                                               
explained the current hold harmless  clause, which provides that,                                                               
if a school  district loses five percent of  their students based                                                               
upon the  adjusted student  count for the  schools, in  the first                                                               
year following the loss, only  25 percent of the expected funding                                                               
is retained by the state; 75  percent is received by the district                                                               
in order to continue operating and  then declines for each of the                                                               
next four  years, if enrollment  does not increase, with  a final                                                               
result of zero funding.                                                                                                         
                                                                                                                                
8:59:40 AM                                                                                                                    
                                                                                                                                
CHAIR  DICK  noted  that  the   bill  contains  a  provision  for                                                               
supplemental  funding,  and  asked  for clarity  on  the  funding                                                               
source.                                                                                                                         
                                                                                                                                
MR. PASCAL deferred to legal  counsel, and stated his belief that                                                               
funds would be appropriated from the supplemental budget.                                                                       
                                                                                                                                
9:01:21 AM                                                                                                                    
                                                                                                                                
MR.  PASCAL   continued  to  explain  the   considerations  being                                                               
scrutinized  to ensure  that every  school district  will benefit                                                               
from the proposed legislation,  including the foremost advantages                                                               
of funding stability and staff retention.                                                                                       
                                                                                                                                
9:02:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE interjected  the  importance of  retention,                                                               
and asked  committee members to  consider staff changes  in their                                                               
offices  and  the  disruptive  effects  that  are  inherent  with                                                               
turnover.                                                                                                                       
                                                                                                                                
9:03:48 AM                                                                                                                    
                                                                                                                                
MR.  PASCAL pointed  out that  the first  seven pages  of HB  313                                                               
primarily  contain the  necessary conforming  language.   He then                                                               
turned to  page 8, line  4, to point  out where new  language has                                                               
been inserted to  change the hold harmless clause.   Moving on to                                                               
line  21,  he  paraphrased  the  language  which  read  in  part:                                                               
"determination of  its state aid  for the succeeding  fiscal year                                                           
following the  count period".  Thus,  he said the count  that was                                                           
conducted  this  fall would  be  used  for the  following  year's                                                               
funding.  The hold harmless clause is  set at five percent.  If a                                                               
district's  enrollment  increases  by   five  percent,  or  more,                                                               
funding will be  provided from the supplemental  budget, equal to                                                               
the increase in the adjusted ADM  for the fiscal year.  He opined                                                               
that  for many  school districts,  such as  Delta Greely,  a five                                                               
percent increase,  representing 50-60 students, unless  they were                                                               
all entering one  grade level, may or may not  result in the need                                                               
for additional staff.  Finally,  the changes beginning on line 28                                                               
include new subsections  to allow adjustments to  the count based                                                               
upon existing  statutes, and  to eliminate  the possibility  of a                                                               
part-time  or correspondent  student  being counted  twice.   Mr.                                                               
Pascal   referred  to   the  committee   packet  handout   titled                                                               
"Statewide Average  Daily Membership Fiscal Year  1988-2011," and                                                               
said  it  is important  to  note  that  the enrollment  has  been                                                               
primarily  flat for  the last  10  years.   Considering that  the                                                               
state  has an  overall  stable student  enrollment  may make  the                                                               
process easier,  he opined.   He then  directed attention  to the                                                               
second page of  the handout, to explain the  two charts comparing                                                               
equal  percentage  increases  and   decreases  as  applied  to  a                                                               
hypothetical ADM.  The charts cover  a six year period from FY12-                                                               
FY18, and calculate totals for  the current and proposed methods,                                                               
with  the  resulting  differences,  to  illustrate  the  proposed                                                               
budgeting and funding scheme.   He finished reviewing the charted                                                               
totals,  and  said an  issue  may  arise  if  the ADM  follows  a                                                               
constant  increase, as  a district  would experience  a continued                                                               
budget  shortfall.   However,  ADM decreases  would  result in  a                                                               
district being ahead  each year.  The districts would  need to be                                                               
prepared to handle continued increases.                                                                                         
                                                                                                                                
9:12:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CISSNA questioned the  downside of the scheme, and                                                               
asked:                                                                                                                          
                                                                                                                                
     Who's  holding the  bag? ...  Somebody  is keeping  the                                                                    
     debt a little  longer. ... The state  actually winds up                                                                    
     giving  more  ...  longer,  and  ...  there's  probably                                                                    
     interest ... that comes into this picture.                                                                                 
                                                                                                                                
MR.  PASCAL responded  that earned  interest on  reserve accounts                                                               
was not  scrutinized for the  purposes of the presentation.   The                                                               
focus of the  bill is to stabilize the situation.   A fiscal note                                                               
is attached for  review, but the direct answer to  who is holding                                                               
the bag is that, he said, "It depends."                                                                                         
                                                                                                                                
9:14:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE  added  that  the   level  of  scale  is  a                                                               
variable, and  also where the enrollment  changes occur; however,                                                               
the total  state education  appropriation remains  the same.   He                                                               
noted  that a  district experiencing  a high  rate of  growth may                                                               
have more of  a challenge to cover costs.   He reminded that some                                                               
districts, such as  Delta Greely, are allowed to retain  up to 10                                                               
percent of budget overages to  create a reserve from the surplus.                                                               
Municipalities  will often  retract surplus  school funding,  but                                                               
that is another matter to be considered, he suggested.                                                                          
                                                                                                                                
9:16:44 AM                                                                                                                    
                                                                                                                                
CHAIR DICK  cautioned that some  districts may benefit,  but some                                                               
may  not, and  asked  whether the  Association  of Alaska  School                                                               
Boards  (AASB) and  the school  superintendents association  were                                                               
consulted, along with EED, during the bill drafting process.                                                                    
                                                                                                                                
MR. PASCAL  assured that various  educational entities  have been                                                               
approached; however, feedback is  still being received.  Concerns                                                               
are  being scrutinized  and complications  are under  discussion,                                                               
but the comments have primarily been positive.                                                                                  
                                                                                                                                
9:19:13 AM                                                                                                                    
                                                                                                                                
MR. PASCAL  moved to the  third page  of the handout,  with three                                                               
similar   charts  illustrating   further  examples   of  possible                                                               
outcomes, again  comparing the current  and proposed  methods and                                                               
the  differences.   The end  result in  all scenarios  is similar                                                               
under  either method.    He  said the  first  year represents  an                                                               
adjustment year,  and strategies will  need to be  identified for                                                               
initiating  the  program  while providing  appropriate  financial                                                               
support to districts.                                                                                                           
                                                                                                                                
[A  brief conversation  ensued to  ascertain the  relationship of                                                               
the theoretical numbers presented in the charts.]                                                                               
                                                                                                                                
9:26:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRUITT said  in the  Anchorage area  school ADM's                                                               
may  fluctuate by  as  much as  500, and,  applying  that to  the                                                               
example ADM of $5,680, that represents  $2.8 million.  In a given                                                               
year, the enrollment swings could  represent millions of dollars,                                                               
and he asked for further  information on how large districts will                                                               
be handled.                                                                                                                     
                                                                                                                                
MR.  PASCAL  said  the  larger  districts  have  been  a  concern                                                               
regarding  how  to minimize  the  impacts,  and the  dialogue  is                                                               
continuing.  He  pointed out that Anchorage is  allowed to retain                                                               
10 percent of their total budget,  and if a three or four percent                                                               
increase  were to  occur,  it  would only  require  that a  small                                                               
portion of the reserves be  used to cover enrollment increases in                                                               
the first year.                                                                                                                 
                                                                                                                                
REPRESENTATIVE PRUITT opined  that the district may  not create a                                                               
reserve  with any  surplus, but  rather apply  it to  an existing                                                               
need.  He cautioned against  the presumption that a district will                                                               
reserve surplus funding.                                                                                                        
                                                                                                                                
9:29:43 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE reiterated  that  the municipalities  often                                                               
retract  the surplus  funds.    He offered  examples  of how  the                                                               
percentage   points  could   be  manipulated   to  mitigate   the                                                               
situation, and  further, suggested that statute  could be amended                                                               
to restrain municipalities and allow  districts to retain surplus                                                               
funding.                                                                                                                        
                                                                                                                                
9:31:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CISSNA offered  that  the politics  of size  does                                                               
have  an impact.   A  question  of what  part health  plays in  a                                                               
community is  easily answerable in a  small area, but in  a large                                                               
community it  is more difficult  to answer.   She noted  that the                                                               
arrival  of a  student into  a  small school,  following the  ADM                                                               
count, may present a burden, while  in a larger school it may not                                                               
represent a significant impact.                                                                                                 
                                                                                                                                
9:34:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON stated  his understanding  that the  basic                                                               
premise is to provide funding security; however, he said:                                                                       
                                                                                                                                
     The  question ...  for  the districts  is:   Is  budget                                                                    
     security  on how  many  kids you  had  last year,  more                                                                    
     important than getting the actual  money paid to you to                                                                    
     educate the number of students  you have this year. ...                                                                    
     I  think  that's  the philosophical  difference  and  I                                                                    
     think  we're going  to  have to  hear  from ...  school                                                                    
     districts on that.                                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  pointed out that intensive  needs students                                                               
are budgeted  at 13  times the  basic BSA.   Thus,  one intensive                                                               
needs  student arriving  or  leaving an  area  would represent  a                                                               
major funding  factor in  a school budget,  and he  asked whether                                                               
that  cost   scenario  has  been   factored  into   the  proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
MR.   PASCAL,  regarding   the  philosophical   premise,  agreed.                                                               
Budgeting  for a  subsequent year,  via  a method  arrived at  by                                                               
basing funding  on a  previous year's ADM,  while not  creating a                                                               
negative impact on  the delivery of education due to  a change in                                                               
the student  count, poses a question;  particularly for districts                                                               
experiencing a  steady increase  in the  ADM.   He said  the same                                                               
amount will  be budgeted but the  question of when the  funds are                                                               
received represents  the major difference;  similar to  a savings                                                               
account  that  pays quarterly  versus  monthly.   Addressing  the                                                               
question of intensive  needs funding, he said it  is being worked                                                               
on with  the department.   Finally, he  pointed out that  EED has                                                               
provided  a  fiscal  note,   which  represents  the  supplemental                                                               
funding.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  referred  to  the  charted  examples  and                                                               
suggested  that the  percentages  be lowered  from  five to  two,                                                               
which could then provide an increase in each projected year.                                                                    
                                                                                                                                
MR. PASCAL  agreed, and indicated that  it is a matter  of scale,                                                               
with districts being affected differently by a changed ADM.                                                                     
                                                                                                                                
9:41:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  asked  if  there would  be  a  reason  to                                                               
maintain  the  current hold  harmless  clause,  if this  bill  is                                                               
adopted.                                                                                                                        
                                                                                                                                
MR.  PASCAL said  perhaps not.   However,  given the  impact that                                                               
cutting a  teacher position may  represent in a  small community,                                                               
he opined that it's still a good clause to have in place.                                                                       
                                                                                                                                
REPRESENTATIVE  FEIGE interjected  that some  districts are  tied                                                               
into multi-year  contracts with  teachers, which  would influence                                                               
how a diminished ADM might be handled.                                                                                          
                                                                                                                                
REPRESENTATIVE SEATON pointed out  that the current hold harmless                                                               
clause stipulates a  reduction to 75 percent of the  BSA, and the                                                               
proposed legislation  continues funding at 100  percent, based on                                                               
the previous year.                                                                                                              
                                                                                                                                
MR. PASCAL concurred  and said, "We're one year  behind under the                                                               
proposed formula.   So they still  need to be paid  for that year                                                               
the student was actually counted."                                                                                              
                                                                                                                                
REPRESENTATIVE SEATON  referred to  the bill page  7, line  8, to                                                               
review  the  language,  and  request  a  chart  for  illustrative                                                               
purposes.                                                                                                                       
                                                                                                                                
REPRESENTATIVE FEIGE agreed, and said  a chart would help clarify                                                               
the proposed concept, and said that  one would be provided to the                                                               
committee.                                                                                                                      
                                                                                                                                
MR. PASCAL  noted that  the idea  for HB 313  was suggested  by a                                                               
school  administrator  and the  intent  is  for  it to  help  all                                                               
districts.                                                                                                                      
                                                                                                                                
[HB 313 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB 313 Sponsor Statement.pdf HEDC 2/17/2012 8:00:00 AM
HB 313
HB313-EED-ESS-2-14-2012.pdf HEDC 2/17/2012 8:00:00 AM
HB 313