01/27/2005 11:00 AM House EDUCATION

HB  73-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                
                                                                                                                                
CHAIR NEUMAN announced  that the next order of  business would be                                                               
HOUSE BILL NO. 73 "An  Act increasing the base student allocation                                                               
for  state financing  of  public schools;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
11:40:31 AM                                                                                                                   
                                                                                                                                
MR. JEANS  explained that HB  73 would increase the  base student                                                               
allocation for a two-year period.   The first increase would take                                                               
effect  in the  fiscal  year  (FY) 2006  budget  cycle and  would                                                               
increase the base  student allocation from $4,576 to  $4,880.  In                                                               
FY 07, the bill requires  a second adjustment that would increase                                                               
the  base student  allocation to  $5,190.   The first-year  costs                                                               
associated with  increasing the base student  allocation would be                                                               
$62 million for FY 06 and $64 million  for FY 07.  He mentioned a                                                               
fiscal note, included  in the committee packet,  for the military                                                               
youth academy,  and explained that  its funding is  tied directly                                                               
to the base  student allocation.  The fiscal note  shows that the                                                               
increased grant  would be $425,000  in FY  06 and $433,000  in FY                                                               
07.  Mr.  Jeans pointed out that the  governor's funding proposal                                                               
does  have  a  companion  bill,  HB  65,  which  would  make  the                                                               
appropriations for K-12 support.                                                                                                
                                                                                                                                
REPRESENTATIVE  WILSON inquired  as to  how the  increased amount                                                               
was determined.                                                                                                                 
                                                                                                                                
11:42:54 AM                                                                                                                   
                                                                                                                                
MR.  JEANS explained  that the  increased contribution  of school                                                               
districts  to  Public  Employee's Retirement  System  (PERS)  and                                                               
Teachers' Retirement  System (TRS) will be  $38 million statewide                                                               
and  the  governor  wanted  to  provide  additional  funding  for                                                               
ongoing operational costs.   Therefore, [the department] averaged                                                               
the  Anchorage Consumer  Price  Index (CPI)  for  the last  three                                                               
years  and  came up  with  2.47  percent.   This  percentage  was                                                               
applied to  the foundation program,  and the cost  associated was                                                               
$24 million.  The total amount summed $62 million.                                                                              
                                                                                                                                
REPRESENTATIVE WILSON asked what happens if a school loses ADM.                                                                 
                                                                                                                                
MR. JEANS  stated that if  a school  has fewer students,  it will                                                               
receive   fewer  dollars   and  staffing   adjustments  will   be                                                               
necessary.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  THOMAS inquired  as  to  Anchorage's $10  million                                                               
shortfall, and the proposed increase request.                                                                                   
                                                                                                                                
MR. JEANS  clarified that the Anchorage  initial budget shortfall                                                               
was $30  million of which  the governor's proposal  would provide                                                               
$20 million.  He stated that  this was the starting point and the                                                               
numbers have yet to be refined.                                                                                                 
                                                                                                                                
11:46:28 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GARA  described his  involvement in  attempting to                                                               
figure out the impact of  the governor's budget on various school                                                               
districts.   He said the  preliminary assessments show  that many                                                               
school  districts  are  somewhat  held  harmless  by  the  budget                                                               
compared to  last year.   He asked, "What  is causing so  many of                                                               
these school districts still to fall behind?"                                                                                   
                                                                                                                                
MR. JEANS  replied that this is  a product of the  budget process                                                               
at the local  level in trying to determine  the district's needs.                                                               
The  governor's  budget  proposes   to  increase  the  foundation                                                               
program, to  offset the  increases for  PERS/TRS, and  provide an                                                               
almost 2.5 increase for operational costs.                                                                                      
                                                                                                                                
REPRESENTATIVE GARA  stated that  he would  like to  do something                                                               
more  than just  hold schools  harmless to  where they  were last                                                               
year.   Last year schools were  held harmless to the  prior year,                                                               
when they essentially  lost money. He said that he  would like to                                                               
add staff  in a way  that could  make a meaningful  difference to                                                               
schools.   He asked  if the  administration would  consider that.                                                               
He  also  asked  if  Mr.   Jeans  could  provide  some  suggested                                                               
efficiencies to control cost growth.                                                                                            
                                                                                                                                
MR. JEANS said that he could not respond.                                                                                       
                                                                                                                                
11:50:12 AM                                                                                                                   
                                                                                                                                
ANNE KILKENNY stated that there  are different needs in different                                                               
districts because  of the  adjustments that are  not made  in the                                                               
foundation formula.   The foundation  formula only makes  four or                                                               
five adjustments.  She said  that the foundation formula does not                                                               
make adjustments  where student enrollment is  decreasing and so,                                                               
the  cost  per student  increases.    The aforementioned  is  the                                                               
situation in  Kenai.   She related  situations in  which property                                                               
values rise  and cause local  required contributions  to increase                                                               
but this, in turn, decreases  state contributions, as is the case                                                               
in Anchorage.   Therefore, certain  areas have greater  need than                                                               
others.                                                                                                                         
                                                                                                                                
MS.  KILKENNY  discussed  that  schools  that  are  designed  for                                                               
specific numbers  of students cannot operate  efficiently or cost                                                               
effectively if  the student  populations rise.   She  provided an                                                               
example in the Mat-Su Valley,  and noted that even the governor's                                                               
proposal may be inadequate for  the Mat-Su Valley.  She expressed                                                               
her belief that,  "a refinement of the  Anchorage school district                                                               
budget would mean  a diminishment of the quality  of education in                                                               
that district  as it would in  the Mat-Su, as it  would in Kenai,                                                               
as it  would in  Ketchikan, Petersburg,  North Slope  burrow, and                                                               
every other district that has  indicated that even the governor's                                                               
proposal is inadequate for this  simple maintenance of the status                                                               
quo."                                                                                                                           
                                                                                                                                
[HB 73 was held over.]