Legislature(2001 - 2002)

04/24/2001 02:24 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HOUSE BILL NO. 105                                                                                                           
                                                                                                                                
      An Act relating to the base student allocation used in                                                                    
      the formula for state funding of public education; and                                                                    
      providing for an effective date.                                                                                          
                                                                                                                                
 REPRESENTATIVE  GARY  STEVENS  noted  that  Alaska's   Public                                                                  
 Education Funding  Formula  is  based on  a  specific  dollar                                                                  
 amount  per  student.    The  base  student  allocation   was                                                                  
 established in 1998  as $3,940 per student  and has not  been                                                                  
 increased since that time.   HB 105 increases the allocation                                                                   
 by $101 dollars.                                                                                                               
                                                                                                                                
 Representative  Stevens  advised  that  during  the  past  14                                                                  
 years, inflation has had  an impact on public school  funding                                                                  
 and that the purchasing  power of the general fund education                                                                   
 dollars have slowly eroded over time.  Although, the  State's                                                                  
 contribution to  the 53  school districts  has increased  54%                                                                  
 since FY88, the  effect of  annual inflation,  as well as  an                                                                  
 increase in student  enrollment, has  negated the growth  and                                                                  
 the  purchasing  power  of   the  student  dollar  has   been                                                                  
 diminished.                                                                                                                    
                                                                                                                                
 Representative Stevens  pointed out  that  the public  school                                                                  
 foundation program has lost  13.9% on a student dollar  basis                                                                  
 since FY88 due to the cumulative effect of annual inflation.                                                                   
 HB 105 proposes to recoup some of that loss.                                                                                   
                                                                                                                                
 Representative Stevens commented  that supporters of a  world                                                                  
 class educational system  for Alaska  must agree that,  while                                                                  
 at the same  time inflation is eroding  the purchasing  power                                                                  
 for the student  dollar, Alaskans are  asking public  schools                                                                  
 to take on more and more responsibility in three areas.                                                                        
                                                                                                                                
      ·         First, many parents today regularly drop off                                                                    
                their children at school early in the  morning                                                                  
                and  pick   them  up  after   work.     School                                                                  
                personnel  today provide  not  only classroom                                                                   
                instruction for these students but also  offer                                                                  
                the  emotional,  social,  and  moral   support                                                                  
                needed before and  after regular school  hours                                                                  
                at a level  unheard of  a generation ago.  The                                                                  
                increased time that  a child spends at  school                                                                  
                increases  the  responsibility  of  the  local                                                                  
                teachers and administrators.                                                                                    
      ·         Secondly, as performance standards and the                                                                      
                corresponding  assessments  become  a  reality                                                                  
                and   are  accepted   as   commonplace,   each                                                                  
                neighborhood  school  and  classroom  will  be                                                                  
                held more  accountable for  student learning.                                                                   
                Children    who    need    extra   innovative                                                                   
                instruction to master these standards  will be                                                                  
                identified    and    teachers    will    offer                                                                  
                appropriate remedial  learning opportunities.                                                                   
                The  added  tutoring  sessions  necessary  for                                                                  
                some  students  may  be  offered  within   the                                                                  
                regular school  day  or during  a Saturday  or                                                                  
                summer    school     program.    The     added                                                                  
                accountability  is   a  step   in  the   right                                                                  
                direction,  but   it  does  have  substantial                                                                   
                impact  on  the  financial  resources  of  our                                                                  
                local school districts.                                                                                         
      ·         Lastly, classroom teachers are on the                                                                           
                frontline with the  children and must be  held                                                                  
                accountable    for    their    learning    and                                                                  
                performance.   Alaska's young  people  deserve                                                                  
                to  be  taught  by  the  very  best   teachers                                                                  
                possible.    Alaska's  school  districts   are                                                                  
                faced with  the responsibility  of recruiting                                                                   
                and retaining  a highly  qualified work  force                                                                  
                at a time when  teachers are in short  supply,                                                                  
                which is not an  easy task.  The State has  an                                                                  
                obligation to provide adequate funding  to all                                                                  
                public  school districts  so that  all  school                                                                  
                districts   can  hire   and   retain   quality                                                                  
                teachers                                                                                                        
                                                                                                                                
 Representative Stevens  summarized that  public education  is                                                                  
 faced   with  the   unenviable   position-assuming    greater                                                                  
 responsibility with a  reduction in the  purchasing power  of                                                                  
 the student dollar.   Alaska  cannot continue  to ask the  53                                                                  
 school   districts    to    meet   all    these   additional                                                                   
 responsibilities   with  a   dwindling   budget,  therefore,                                                                   
 additional funding  is a necessity.   Representative  Stevens                                                                  
 stressed  that the  increase  of  $101  dollars  per  student                                                                  
 provided the legislation would assist local school districts                                                                   
 to meet, and hopefully exceed, the public's expectations  and                                                                  
 demands.                                                                                                                       
                                                                                                                                
 Representative Davies asked if the 30% inflation costs  would                                                                  
 be covered.  Representative Stevens stated that it would  not                                                                  
 and that it would be substantially less.                                                                                       
                                                                                                                                
 Vice-Chair Bunde  asked  if the  30% inflation  increase  had                                                                  
 been in the last ten  years.  Representative Stevens  replied                                                                  
 that the Anchorage  School district  had calculated  it.   He                                                                  
 added that  there is  no way  to determine  if  that was  the                                                                  
 correct amount, but  emphasized that it  was the amount  that                                                                  
 had been spent.                                                                                                                
                                                                                                                                
 Vice-Chair  Bunde  asked  how  many  schools  were receiving                                                                   
 classroom instruction  waivers so  that they  could put  that                                                                  
 money into  administrative  costs.    Representative  Stevens                                                                  
 recommended that the Department answer that question.                                                                          
                                                                                                                                
 Representative Whitaker  asked if  the 30%  inflation  factor                                                                  
 had  included  the  increase  in  contributions  from   local                                                                  
 property taxes.   Representative  Stevens did not  know.   He                                                                  
 reiterated  that the  figures  had  been  provided  from  the                                                                  
 Anchorage School district.                                                                                                     
                                                                                                                                
 Representative  Hudson  inquired  when  the  last  time   the                                                                  
 foundation  formula   increased.     Representative   Stevens                                                                  
 replied that since 1988, it has increased by 54%.                                                                              
                                                                                                                                
 Representative  Davies asked  the  funding  need  in  various                                                                  
 school districts.  Representative Stevens replied that  there                                                                  
 exists a  tremendous problem  in the  school  districts.   He                                                                  
 claimed  that  it  would  be  a  disservice  to  the   entire                                                                  
 profession.  Putting money  into the foundation formula  also                                                                  
 raises the  cap.    The cap  is  the amount  that  the  local                                                                  
 districts contribute  of their  own money  for  schools.   He                                                                  
 noted that districts are finding ways to circumvent  the cap.                                                                  
                                                                                                                                
 Vice-Chair  Bunde noted  that  not  all  schools  make  local                                                                  
 contributions.  Representative Stevens acknowledged  that was                                                                  
 true and  that  some  districts  receive  money  for  funding                                                                  
 outside State contributions.                                                                                                   
                                                                                                                                
 Representative Harris  pointed out that  the original  number                                                                  
 had been reduced and  referenced other legislation  regarding                                                                  
 the costs of running schools.  If that legislation becomes  a                                                                  
 reality, next  year education  would be  funded  at a  higher                                                                  
 level.  Representative  Harris noted  that he supported  that                                                                  
 legislation.   Representative  Stevens  stressed that  it  is                                                                  
 essential that a study be undertaken as additional costs  are                                                                  
 pending.                                                                                                                       
                                                                                                                                
 Representative Davies  believed that  it would  be easier  to                                                                  
 get  an   increase   if  the   base   had  been   built   up.                                                                  
 Representative Stevens responded that whatever help  could be                                                                  
 offered this year would be appreciated.                                                                                        
                                                                                                                                
 EDDY JEANS, MANAGER, SCHOOL  FINANCE AND FACILITIES  SECTION,                                                                  
 DEPARTMENT OF EDUCATION &  EARLY DEVELOPMENT, clarified  that                                                                  
 inflation has increased  30% over  the past ten  years.   The                                                                  
 Legislature has  increased the  base allocation  by only  5%.                                                                  
 The formula  self adjusts  for  the property  tax increases.                                                                   
 The minimum level  for the base student  allocation has  been                                                                  
 determined and the  minimum level of  revenue that districts                                                                   
 need to support  education.   That money  is divided  between                                                                  
 pots of  federal,  local  and state  dollars.    As  property                                                                  
 values increase,  if  the  base student  enrollment  is  held                                                                  
 constant,  then the  State  general  fund  requirement  would                                                                  
 decrease.   The base allocation  to school  districts over  a                                                                  
 ten-year period has only increased by 10%.                                                                                     
                                                                                                                                
 Representative Whitaker asked if there has been a one  to one                                                                  
 reduction in the ratio.  Mr. Jeans replied that was close.                                                                     
                                                                                                                                
 Vice-Chair  Bunde  asked  how  many  school  districts   were                                                                  
 currently requesting  money for waivers.   Mr. Jeans  replied                                                                  
 that was  the provision  which required  school districts  to                                                                  
 spend 70% of their  fund on instruction.   The districts  may                                                                  
 apply for  a waiver  from  the State  Board of  Education  if                                                                  
 there are  circumstances beyond  their control.   In  FY2001,                                                                  
 there were  24 school  districts applying  for  waivers.   In                                                                  
 many of  those school  districts, there  is  a dispersed  and                                                                  
 small population so many  sites are being operated with  high                                                                  
 operational  costs.   He  noted  that  all  24  waivers  were                                                                  
 granted.                                                                                                                       
                                                                                                                                
 Vice-Chair Bunde  questioned  how many  single  site  schools                                                                  
 with high overhead there were and how many schools districts                                                                   
 that makes  no local contribution.   Mr.  Jeans replied  that                                                                  
 there are  19  Regional Education  Attendance  Areas  (REAAs)                                                                  
 that do  not make  a local  tax appropriation  to education.                                                                   
 The Administration's  position has  always  been that  impact                                                                  
 aid is  in lieu of  property taxes.   Those  lands have  been                                                                  
 moved by federal action  from the tax  rules.  Even if  those                                                                  
 lands moved  into  boroughs,  most  of them  are  still  non-                                                                  
 taxable  and  would  be  used  to  offset  the  general  fund                                                                  
 requirements.  In response  to Vice-Chair Bunde comment,  Mr.                                                                  
 Jeans advised that those communities do not make a local  tax                                                                  
 contribution  for   their   schools  through   an  organized                                                                   
 government.  They make it through the federal government.                                                                      
                                                                                                                                
 Representative Davies asked  what the high operational  costs                                                                  
 are.    Mr.  Jeans  explained  that  those  costs  relate  to                                                                  
 economies  of scale.    Some  school  districts,  serve  many                                                                  
 communities.   There is one  community that  serves over  100                                                                  
 students.   They do  not have  the population  to spread  the                                                                  
 operational  costs over.    He noted  that  fuel  costs  have                                                                  
 increased over the past year.                                                                                                  
                                                                                                                                
 Representative Whitaker  referenced federal  impact  dollars.                                                                  
 Mr. Jeans explained that  they are called federal impact  aid                                                                  
 dollars and  they  are received  in  lieu of  local  property                                                                  
 taxes.  Those properties are non-taxable due to some  type of                                                                  
 federal intervention.  The  federal government has come  back                                                                  
 from their  own program  and  indicated that  they recognize                                                                   
 their  obligation   to   support  education   because   those                                                                  
 properties were moved  off the tax roles.   If those  regions                                                                  
 were  incorporated  into  boroughs,  those  properties  still                                                                  
 would not  be  taxable  and they  would  still  generate  the                                                                  
 federal dollars.                                                                                                               
                                                                                                                                
 Mr. Jeans pointed out that  the last student increase  amount                                                                  
 occurred in  1993 under the  instructional unit  method of  a                                                                  
 1.7% increase.  Over the  last ten years, that 1.7%  increase                                                                  
 plus the 3.3% amount under SB 36 provides the 5% increase.                                                                     
                                                                                                                                
 Representative  Davies  asked  if  any  urban  districts  had                                                                  
 received some of  the federal impact aid.   Mr. Jeans  stated                                                                  
 that there is only  six schools districts  in the State  that                                                                  
 do not receive the impact  aid.  Most of the urban districts                                                                   
 do.    In  the  military   installations  in  Anchorage   and                                                                  
 Fairbanks, the land is non-taxable and generates revenue.                                                                      
                                                                                                                                
 Mr. Jeans addressed  the cost differential  adjustments.   He                                                                  
 pointed  out  cost  differences   by  regions,  providing   a                                                                  
 comparable  program.   It  is not  about  adequate  level  of                                                                  
 funding.    Under  the  cost  differential,  there   will  be                                                                  
 shifting in money once the report comes out.  There  will not                                                                  
 be a large increase required as a result of that study.   The                                                                  
 number will adjust the way  that the money is distributed  in                                                                  
 the formula.                                                                                                                   
                                                                                                                                
 Representative Lancaster asked if it was expected that  there                                                                  
 would be an increase as a result of that.  Mr. Jeans  replied                                                                  
 that the increase  would be modest.   Through the foundation                                                                   
 program, a $665  million dollar program  in FY02 budget,  and                                                                  
 the portion  that makes  up the  cost differentials  is  less                                                                  
                                               th                                                                               
 than $70 million dollars.   That would be 1/10  of the  local                                                                  
 program.                                                                                                                       
                                                                                                                                
 SENATOR ROBIN TAYLOR  advocated that  the foundation  formula                                                                  
 should be increased.  He  recommended that there needs to  be                                                                  
 modifications and fine-tuning to that formula.  He commented                                                                   
 that this would  be the  best the Legislature  will see  this                                                                  
 year.  He noted that the  bill that he submitted would  raise                                                                  
 the formula  by $210  dollars per  student.   Senator  Taylor                                                                  
 stated that the bill provides  for less than half of what  is                                                                  
 necessary  to  adequately  fund  education.    He encouraged                                                                   
 members to move forward.                                                                                                       
                                                                                                                                
 In response  to  Representative  J.  Davies,  Senator  Taylor                                                                  
 advised that there are no nurses, no art and music programs,                                                                   
 and no physical education programs in the elementary  schools                                                                  
 in his district.   He stressed that  there is a disparity  in                                                                  
 the formula.   The  formula must  be adjusted  upward and  he                                                                  
 proposed that the bill would be a good compromise.                                                                             
                                                                                                                                
 SENATOR ALAN AUSTERMAN  voiced his  support for  HB 105.   He                                                                  
 stressed that the State  must put more money into education.                                                                   
 Funding has  not been  increased  for years  and it  is  long                                                                  
 overdue.  He  noted that he had  introduced legislation  that                                                                  
 provides for a  school head  tax to help  pay for education.                                                                   
 He offered to discuss that option.                                                                                             
                                                                                                                                
 CARL ROSE, EXECUTIVE DIRECTOR,  ASSOCIATION OF ALASKA  SCHOOL                                                                  
 BOARDS, JUNEAU,  voiced  support for  the legislation.    Mr.                                                                  
 Rose noted  that he had  served on  the Governor's Education                                                                   
 Task Force.  That Task  Force identified $34 million  dollars                                                                  
 that is needed to  "do the job".   He pointed out that  there                                                                  
 is one school district  in which 58  positions have not  been                                                                  
 filled. If  those  positions are  not  filled, they  will  be                                                                  
 filled with  substitutes who  are not  qualified.   He  asked                                                                  
 what the chances were that those kids would be able  to reach                                                                  
 the standards with substitute and unqualified teachers.                                                                        
                                                                                                                                
 Mr. Rose suggested that over a period of time, the State  has                                                                  
 been unable  to attract  and maintain  quality  teachers.   A                                                                  
 future cost model would not  reflect the ability to hire  and                                                                  
 maintain good teachers.  That  is where the grade is made  or                                                                  
 not.    Mr. Rose  voiced support  for increasing  the  number                                                                  
 back to the original $28  million dollars that was contained                                                                   
 in HB 105.   He  stressed that there  needs to  be a  broader                                                                  
 view, with a sound fiscal  long-range plan.  The State  needs                                                                  
 to broaden the  perspective for the future  for Alaska.   Mr.                                                                  
 Rose projected that with the current funding, education  will                                                                  
 "hit the wall"  in four to  five years.   He emphasized  that                                                                  
 $34 million dollars was a modest request.                                                                                      
                                                                                                                                
 Vice-Chair Bunde pointed out  there is a $600 million  dollar                                                                  
 fiscal gap.   He  stated  that whatever  is done  now,  those                                                                  
 children will have  to pay  taxes to fill  that gap.      Mr.                                                                  
 Rose responded that the future holds potential for increased                                                                   
 revenue.  The ability  for the State  to pay now and  dollars                                                                  
 to be leveraged out of  the earnings reserve, provide that  a                                                                  
 number of  options could  generate a  modest  rate to  offset                                                                  
 declining revenues  and  project  a better  picture  for  the                                                                  
 future.                                                                                                                        
                                                                                                                                
 PATRICK  HICKEY,   (TESTIFIED  VIA   TELECONFERENCE),   KENAI                                                                  
 PENNINSULA BOROUGH  SCHOOL  DISTRICT, KENAI,  voiced  support                                                                  
 for the legislation.                                                                                                           
                                                                                                                                
 Representative  Moses noted  that  he resented  the  fact  of                                                                  
 using the  "fiscal gap"  for not  supporting  the funding  of                                                                  
 education.  The State should be funding education properly.                                                                    
                                                                                                                                
 Representative Davies MOVED to ADOPT Amendment #1.   [Copy on                                                                  
 File].  Co-Chair Williams OBJECTED.                                                                                            
                                                                                                                                
 Representative  Davies explained  that  the  amendment  would                                                                  
 delete "$4,041" and insert "$4,091"  to Page 1, Line 6.   The                                                                  
 change would bring the State closer to the inflated number.                                                                    
                                                                                                                                
                                                                                                                                
 TAPE HFC 01 - 93, Side B                                                                                                     
                                                                                                                                
                                                                                                                                
 Co-Chair Williams agreed  with Representative Moses that  the                                                                  
 State should be  increasing the amount,  he however,  pointed                                                                  
 out the difficulty increasing  that amount would politically                                                                   
 cause at this time on the  Senate side.  He claimed that  the                                                                  
 "push" to increase the budget came from the public.                                                                            
                                                                                                                                
 Representative Croft questioned  with whom the House  Finance                                                                  
 Committee was  compromising  with.   He  stated that  if  the                                                                  
 House Finance  Committee agrees  that $150  dollars would  be                                                                  
 the proper amount,  then that  is the amount  that should  be                                                                  
 included  in the  bill  and  forwarded  to  the  other  body.                                                                  
 Compromise is an important  part of the legislative  process.                                                                  
 He pointed out that two Senators have already indicated  that                                                                  
 the number is too  low.  He  emphasized that the appropriate                                                                   
 number   should    be    placed   into    the   legislation.                                                                   
 Representative Croft added that the formula would generate  a                                                                  
 reduction to the State's contribution.                                                                                         
                                                                                                                                
 Representative Whitaker interjected that the Legislature  has                                                                  
 begun the negotiation  process.  He  acknowledged that  there                                                                  
 would be a compromise within any system.  He stated  that $20                                                                  
 million  dollars would  be  a  reasonable  number  given  the                                                                  
 circumstances.   Representative Lancaster  echoed sentiments                                                                   
 proposed by Representative Whitaker.                                                                                           
                                                                                                                                
 Vice-Chair  Bunde pointed  out  that  regardless  the  agreed                                                                  
 number, it would be impossible to satisfy all parties.                                                                         
                                                                                                                                
 Recess:        3:20 p.m.                                                                                                       
 Reconvene:     3:40 p.m.                                                                                                       
                                                                                                                                
 A roll call vote was taken  on the motion to adopt Amendment                                                                   
 #1.                                                                                                                            
                                                                                                                                
 IN FAVOR:      Davies, Moses, Croft                                                                                            
 OPPOSED:       Foster, Harris, Hudson, Lancaster, Whitaker,                                                                    
                Bunde, Williams, Mulder                                                                                         
                                                                                                                                
 The MOTION FAILED (3-8).                                                                                                       
                                                                                                                                
 Co-Chair Mulder  MOVED  to  ADOPT Amendment  #2,  the  Intent                                                                  
 Language. [Copy on File].                                                                                                      
                                                                                                                                
 Representative Davies  noted concern  that there  would be  a                                                                  
 separate accounting  attached.    Co-Chair  Mulder explained                                                                   
 that his intent  was to include  "outcome performance  based"                                                                  
 objectives.                                                                                                                    
                                                                                                                                
 Vice-Chair Bunde noted that there was other legislation  that                                                                  
 would call for a similar  report.  Co-Chair Mulder suggested                                                                   
 that both pieces of legislation could use the one report.                                                                      
                                                                                                                                
 Representative Davies  asked if  it was the  intent that  the                                                                  
 language be placed in statute.  Co-Chair Mulder replied  that                                                                  
 it was his  preference that  the language be  included in  an                                                                  
 intent section in the bill.   He added that either way  would                                                                  
 be okay  if  it was  attached.   There  being  NO OBJECTION,                                                                   
 Amendment #2 was adopted.                                                                                                      
                                                                                                                                
 Co-Chair Mulder MOVED  to report out of  Committee CS HB  105                                                                  
 (EDU) with individual recommendations,  the Letter of  Intent                                                                  
 and  with  the accompanying   fiscal  note.   Representative                                                                   
 Davies OBJECTED for a comment.   He stated that the  Minority                                                                  
 Caucus  believes  that  the  amount  proposed  was  too  low.                                                                  
 Representative  J. Davies  WITHDREW  his  OBJECTION.    There                                                                  
 being NO further OBJECTION, it was so ordered.                                                                                 
                                                                                                                                
 CS HB 105  (EDU) was  reported out  of Committee  with a  "do                                                                  
 pass" recommendation  and  with  a House  Finance  Letter  of                                                                  
 Intent and  a fiscal  note #1  by Department  of Education  &                                                                  
 Early Development dated 4/23/01.                                                                                               
                                                                                                                                

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