Legislature(2001 - 2002)

04/03/2002 08:08 AM EDU

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 479-MINIMUM EXPENDITURE FOR INSTRUCTION                                                                                    
CHAIR BUNDE  announced that the  first item of  legislation would                                                               
be HOUSE BILL NO. 479, "An  Act relating to a minimum expenditure                                                               
for  the instruction  component in  a public  school budget;  and                                                               
providing for an effective date."                                                                                               
Number 0274                                                                                                                     
REPRESENTATIVE GUESS, Alaska State  Legislature, testified as the                                                               
sponsor of HB  479.  Representative Guess explained  that with SB                                                               
36  a minimum  expenditure for  the [instruction  component in  a                                                               
public  school  budget] was  placed  in  statute.   That  minimum                                                               
expenditure  was  70  percent.     However,  a  dispersed  school                                                               
district,  which   lacks  economies   of  scale,  has   the  same                                                               
requirement as  a dense school  district, which has  economies of                                                               
scale.  Therefore, a dense school  district should be able to put                                                               
more money into  the classroom.  She explained that  she used the                                                               
number of students  per school as the density  proxy.  Therefore,                                                               
if there are more students  per school, she believes [that school                                                               
district]   should  be   able  to   put  more   toward  classroom                                                               
expenditures.   Representative Guess  specified, "It  just [goes]                                                               
from the  70 [percent] and  [goes] up.  I  did not deal  with the                                                               
lower  part of  the 70  percent  scale."   She acknowledged  that                                                               
there is  controversy with regard  to whether 70 percent  [as the                                                               
minimum   expenditure   for   the   instruction   component]   is                                                               
CHAIR  BUNDE commented  that he  would appreciate  Representative                                                               
Guess' view with regard to  the appropriateness of the 70 percent                                                               
[for the minimum expenditure for the instruction component].                                                                    
REPRESENTATIVE GUESS remarked that  the legislature should tackle                                                               
energy.  She said that until  the energy costs for certain school                                                               
districts are addressed,  she didn't know [how]  to fairly assess                                                               
what   school   districts  are   able   to   use  for   classroom                                                               
expenditures.  She  pointed out that some school  districts use a                                                               
third of their  operating budget for energy  costs, and therefore                                                               
it's hard to assess anything else.                                                                                              
REPRESENTATIVE  WILSON asked  whether  [the minimum  expenditure]                                                               
should also take into account the rising cost of insurance.                                                                     
REPRESENTATIVE  GUESS said  that  part of  the  discussion is  in                                                               
regard to what should be part of the minimum expenditure.                                                                       
Number 0581                                                                                                                     
EDDY  JEANS,  Manager,  School Finance  and  Facilities  Section,                                                               
Education  Support Services,  Department of  Education and  Early                                                               
Development, noted that  he had provided the  committee with some                                                               
handouts.   Mr. Jeans said that  EED reported a zero  fiscal note                                                               
for HB 479 because the  department is already doing this process.                                                               
This legislation  simply changes  the percentage for  some school                                                               
districts.    He explained  that  the  spreadsheet based  on  the                                                               
current  budgeted expenditures  for instruction  illustrates that                                                               
39  school districts  would  have required  a  waiver under  this                                                               
proposed  provision this  year.   Under  the  current 70  percent                                                               
minimum expenditure requirement, there were  a total of 29 school                                                               
districts that required a waiver in fiscal year 2002.                                                                           
MR.  JEANS  related  his  belief  that  the  concept  to  require                                                               
districts to  direct more money to  instructional expenditures is                                                               
a good  concept.  The question  is whether 70 percent  or the new                                                               
recommended  percentage is  the appropriate  percentage.   As the                                                               
spreadsheets illustrate,  the percentages  recommended in  HB 479                                                               
would require  the department to review  and make recommendations                                                               
for  an additional  ten  school  districts.   He  noted that  the                                                               
department has  been heavily  questioned on  the 29  waivers that                                                               
were approved  this year.   However, Mr.  Jeans said  he believes                                                               
that  all the  school  districts are  making  progress, which  is                                                               
demonstrated through  a schedule [the department]  has circulated                                                               
throughout the  legislature.   Mr. Jeans  remarked that  he likes                                                               
the  concept  of   density  as  a  factor   in  determining  what                                                               
percentage districts have to put  toward instruction.  He pointed                                                               
out  that some  school  districts are  serving 10-15  communities                                                               
with 100  to 200  children in  each community.   There  are fixed                                                               
costs for  each facility in  each community.  Therefore,  it will                                                               
be difficult  for those  districts to ever  meet the  70 percent.                                                               
Mr.  Jeans  pointed  out  that   he  took  Representative  Guess'                                                               
proposal  and reviewed  what would  happen if  each category  was                                                               
reduced  by 5  percent.   By  a 5  percent  reduction, 13  school                                                               
districts would require a waiver.                                                                                               
Number 0810                                                                                                                     
CHAIR  BUNDE asked  if HB  479  is the  equal waiver  opportunity                                                               
MR. JEANS  responded that  he believes [HB  479] provides  a more                                                               
realistic view  of what districts  are able to  do.  With  the 70                                                               
percent minimum  expenditure, there  will always  be a  number of                                                               
school districts  that won't meet  the 70 percent.   Those school                                                               
districts  that don't  meet the  70 percent  have too  many fixed                                                               
costs  with too  small of  a student  population to  spread those                                                               
costs.   He pointed out that  there are a large  number of school                                                               
districts  in this  situation,  and they  aren't  just the  large                                                               
disbursed districts.   Some of the districts that  don't meet the                                                               
70 percent are small single-site  districts that have fixed costs                                                               
for the  facilities, the administration,  and the utilities.   If                                                               
HB 479 was  to move forward, Mr. Jeans  recommended the committee                                                               
consider decreasing these  percentages by 5 percent.   Although a                                                               
number of  school districts still  wouldn't meet the  65 percent,                                                               
there would be  quite a few districts that would  be close to the                                                               
65 percent.   He predicted that  those districts close to  the 65                                                               
percent  would  move to  the  65  percent with  the  department's                                                               
CHAIR BUNDE related his belief that  this is a new enough concept                                                               
that the bill shouldn't be moved forward today.                                                                                 
Number 0950                                                                                                                     
REPRESENTATIVE PORTER  inquired as to  how Mr. Jeans  viewed this                                                               
approach  as  related to  the  cost  differential study  that  is                                                               
MR. JEANS  stated his  opinion that the  two issues  stand alone.                                                               
The  cost differential  study will  make  adjustments for  school                                                               
districts for  fixed costs such  as increased heating costs.   As                                                               
districts   receive  that   adjustment  through   the  foundation                                                               
program, those  districts should  be able to  move closer  to the                                                               
minimum expenditure  requirement.  However, he  specified that he                                                               
wasn't saying that the 70 percent  along with the adoption of the                                                               
district cost factor  study would result in  everyone meeting the                                                               
70  percent.    He  related  his  belief  that  it  would  assist                                                               
districts in  moving toward that  goal [of 70 percent],  which he                                                               
believes to be positive.                                                                                                        
Number 1005                                                                                                                     
REPRESENTATIVE GREEN  surmised that the majority  of the children                                                               
are going to be in  school districts needing waivers under either                                                               
Mr. Jeans' or Representative Guess' concept.                                                                                    
REPRESENTATIVE  GUESS pointed  out  that  such [reasoning]  would                                                               
assume that in  the year lag, the school districts  don't rise to                                                               
the  minimum  expenditure required.    "We  are assuming  waivers                                                               
under the current  budget not under the effective date  as a year                                                               
away,  not  under  a  future  budget," she  pointed  out.    This                                                               
[legislation] pushes the larger  school districts, which she felt                                                               
hadn't  been  pushed  yet.    She said  she  didn't  assume  that                                                               
Anchorage, Fairbanks,  and Juneau  would request waivers.   Under                                                               
Mr.  Jeans' proposal  those [districts]  would have  to move  2-3                                                               
percent.   Representative Guess specified that  she hadn't viewed                                                               
HB 479 as a waiver equity bill.   With the 70 percent, the school                                                               
districts with  economies of scale  didn't have to look  at their                                                               
books, although she felt those  districts have the opportunity to                                                               
put  more money  into the  classroom.   Therefore, the  committee                                                               
should consider requiring such.                                                                                                 
CHAIR BUNDE said he didn't disagree.                                                                                            
Number 1147                                                                                                                     
REPRESENTATIVE WILSON  requested that  Mr. Jeans provide  a chart                                                               
specifying the  base pay in  the schools so that  [the committee]                                                               
can see  that those schools  paying the teachers less  can easily                                                               
meet the percentage requirement.                                                                                                
CHAIR  BUNDE  pointed out  that  the  more  a district  pays  for                                                               
teachers the  more money there  is in the classroom,  which would                                                               
make it easier for the 70 percent to be achieved.                                                                               
MR.  JEANS informed  the committee  that  the department  doesn't                                                               
readily have  the school districts'  salary scales  available and                                                               
thus it  would require quite a  bit of data gathering.   However,                                                               
based  on  the McDowell  study  from  which  the 70  percent  was                                                               
developed,  the study  concluded that  on average  there is  very                                                               
little if  any variance  in average  teacher salaries.   Although                                                               
the  more remote  rural districts  are paying  teachers a  higher                                                               
salary at  the entry level,  those teachers simply don't  stay in                                                               
the position very  long.  In large urban  districts, the teachers                                                               
stay for  a long  time and move  further up the  pay scale.   Mr.                                                               
Jeans  said that  he believes  HB  479 is  really addressing  the                                                               
fixed costs because  a small student population  disbursed over a                                                               
large area results in higher fixed  costs on a per student basis.                                                               
Therefore, the district wouldn't be  able to meet the percentage.                                                               
With a  more condensed  large population,  those fixed  costs are                                                               
smaller on a  per student basis and thus it's  easier to meet the                                                               
REPRESENTATIVE WILSON  explained that what she  was addressing is                                                               
that those schools  that pay less would  have difficulty reaching                                                               
the 70 percent.                                                                                                                 
Number 1319                                                                                                                     
JOHN ALCANTRA, Government  Relations Director, National Education                                                               
Association  - Alaska  (NEA-AK), announced  that NEA  supports HB                                                               
479.  Any  legislation that places more funding  in the classroom                                                               
is viewed as positive.                                                                                                          
Number 1385                                                                                                                     
DEBBIE  OSSIANDER,  Legislative  Chair, Anchorage  School  Board,                                                               
testified  via  teleconference.    Ms.  Ossiander  announced  the                                                               
Anchorage  School  Board's  opposition  to HB  479.    The  board                                                               
believes  that  HB  479  isn't a  realistic  approach  to  school                                                               
funding.   Ms.  Ossiander informed  the committee  that Anchorage                                                               
spends  approximately   78  percent  of  its   [funding]  on  the                                                               
instructional [expenditure] in  the classroom.  In  order to make                                                               
the  85 percent  [required under  HB 479],  the Anchorage  School                                                               
District would have to spend  over $22 million additional dollars                                                               
on  instruction.   If the  Anchorage  School District  eliminated                                                               
every administrative  post and every curriculum  support area and                                                               
left  only  the  instructional  expenditures  and  operation  and                                                               
maintenance,  the  district would  reach  the  85 percent.    Ms.                                                               
Ossiander pointed out the in-depth  review that school boards and                                                               
districts give  their annual budget  each year.  The  [board] has                                                               
tried  its  best to  place  as  many  dollars in  instruction  as                                                               
possible.  The [Anchorage School  Board] believes that it's doing                                                               
a good job.   Ms. Ossiander concluded by  reiterating the board's                                                               
opposition to HB 479.                                                                                                           
CHAIR BUNDE related that one of  the comments he receives is that                                                               
there are  too many people "in  the head shed" [in  the Anchorage                                                               
School District] and thus the  expenses are too high.  Therefore,                                                               
he  suggested that  perhaps [the  district/board] could  do be  a                                                               
better  job  of communicating  the  administrative  costs to  the                                                               
general public.                                                                                                                 
MS. OSSIANDER mentioned that they have  been working on that.  In                                                               
comparative studies of other large  districts in the country, she                                                               
believes  [the district/board]  does well  [in communicating  the                                                               
administrative costs].                                                                                                          
Number 1550                                                                                                                     
MIKE  FISHER,  Chief  Financial  Officer,  Fairbanks  North  Star                                                               
Borough   School  District,   testified  via   teleconference  in                                                               
opposition to HB 479.  Mr.  Fisher noted that the Fairbanks North                                                               
Star Borough  School District, a relatively  large district, does                                                               
enjoy  an economy  of scale.    That, along  with prudent  fiscal                                                               
management, enables the  district to meet and  exceed the current                                                               
70 percent  requirement, with which the  district philosophically                                                               
agrees.   Currently, about  76.8 percent  of the  Fairbanks North                                                               
Star  Borough  School  District's  budget  is  allocated  to  the                                                               
instructional component.   Increasing the instructional component                                                               
requirement to  85 percent is  unrealistic, he said.   Mr. Fisher                                                               
informed  the  committee  that  the  district  spends  about  $86                                                               
million on  the instructional  component and  $26 million  on the                                                               
noninstructional  component.   He pointed  out that  just because                                                               
something is  classified as a noninstructional  component doesn't                                                               
mean   that  it's   an  administrative   cost.     Most  of   the                                                               
noninstructional   costs  aren't   administrative   costs.     He                                                               
specified  that of  the district's  $26 million  noninstructional                                                               
component,  about $15  million is  operation and  maintenance and                                                               
about $11 million  is everything else.  Therefore, to  meet an 85                                                               
percent  instructional  component,  the district  would  have  to                                                               
shift over $9 million of  the $26 million noninstructional budget                                                               
to the  instructional budget.   Such action  would result  in the                                                               
elimination   of  every   central  office   department  and   all                                                               
noninstructional  support other  than operation  and maintenance,                                                               
which is impossible.  Such  cuts would include cutting the entire                                                               
school board,  the superintendent, the  assistant superintendent,                                                               
all  school secretaries,  all  property  insurance coverage,  all                                                               
student  testing  and  assessment, all  teacher  recruitment  and                                                               
hiring,   all  payroll   and  vendor   payment  processing,   all                                                               
accounting  and  financial   recordkeeping,  all  purchasing  and                                                               
warehousing,  and   all  student  records  and   data  processing                                                               
functions.  Mr. Fisher explained that  in order to obtain an idea                                                               
of  a district's  administrative overhead,  then one  must review                                                               
the indirect  cost rate.   Alaska's approved rate next  year will                                                               
be 4.3 percent.   Reduction in the noninstructional  areas are in                                                               
conflict  with   the  legislature's  increasing   impetus  toward                                                               
assessment, evaluation, and accountability.                                                                                     
Number 1743                                                                                                                     
CHAIR  BUNDE asked  if, in  fact, assessment  and testing  aren't                                                               
part of the instructional component.                                                                                            
MR.  JEANS related  his belief  that  assessment is  part of  the                                                               
instructional component, but he offered to double-check.                                                                        
REPRESENTATIVE WILSON  remarked that  it might be  interesting to                                                               
review what those schools meeting 70 percent actually fund.                                                                     
CHAIR BUNDE noted  the cost differential study  and the challenge                                                               
to have  a common  chart of  accounts that  would apply  for each                                                               
district.  Chair Bunde announced  that public testimony on HB 479                                                               
would be closed.  [HB 479 was heard and held.]                                                                                  

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