Legislature(2007 - 2008)HOUSE FINANCE 519

03/28/2007 01:30 PM House FINANCE


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01:41:25 PM Start
01:42:47 PM HB 137 WAS SCHEDULED BUT NOT HEARD.
01:44:24 PM HB168
01:55:48 PM HB218
03:29:47 PM HB72
04:07:37 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 72 SCHOOL DISTRICT COST FACTORS TELECONFERENCED
Heard & Held
*+ HB 218 AEROSPACE DEVELOPMENT CORP. DIVIDEND TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 137 SENIOR FISHING/HUNTING/TRAPPING LICENSES TELECONFERENCED
Scheduled But Not Heard
+= HB 168 LAND TRANSFERS ALASKA RR & DOTPF TELECONFERENCED
Moved Out of Committee
HOUSE BILL NO. 72                                                                                                             
                                                                                                                                
     An Act relating  to the district cost factors  for state                                                                   
     funding of public education;  providing for an effective                                                                   
     date by repealing the delayed  effective date of sec. 6,                                                                   
     ch. 41, SLA 2006; and providing for an effective date.                                                                     
                                                                                                                                
3:24:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MIKE CHENAULT,  SPONSOR, stated that HB 72 was                                                                   
written  to enact  the cost  differential  factors for  State                                                                   
school funding.   HB 72 implements  100% of the  Institute of                                                                   
Social and Economic Research (ISER)  Study.    He stated that                                                                   
if the  ISER numbers are correct,  it would mean  $10 million                                                                   
dollars a  year for the  Kenai District.   The lack  of those                                                                   
funds has caused a terrible discrepancy.                                                                                        
                                                                                                                                
Co-Chair  Chenault commented  his school  district was  being                                                                   
unfairly   represented   by  the   current   available   cost                                                                   
differential numbers.  He addressed  some items that would be                                                                   
lost in  his school  district's funding  which were  not met.                                                                   
                      th                                                                                                        
His district is  the 4  largest in the State &  while they do                                                                   
have many  elementary schools,  they do not  have a  nurse or                                                                   
drug prevention  specialists.  Kenai has smaller  schools but                                                                   
also  has a  larger land  mass.   Since  SB 36  was put  into                                                                   
effect, the  district is in drastic  need.  He hoped  that HB
72  would provide  an effort  to  move forward  & offered  to                                                                   
answer questions of the Committee.                                                                                              
                                                                                                                                
3:29:47 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer pointed  out that  Anchorage is  used as  the                                                                   
base level  to determine the  Base Student Allocation  (BSA).                                                                   
He  inquired if  the  legislation passed,  would  Anchorage's                                                                   
funding be reduced.  Co-Chair  Chenault responded that if the                                                                   
BSA was  raised with  an increase  to the cost  differential,                                                                   
then Anchorage  would  not be  affected.  If  the funds  were                                                                   
taken  from the  current cost  base  and no  new monies  were                                                                   
added, then Anchorage would be reduced.                                                                                         
                                                                                                                                
Representative   Gara  addressed   a   lack  of   achievement                                                                   
occurring  in the Anchorage  schools.   After basic  courses,                                                                   
the  elective options  are grim.    The needs  in big  school                                                                   
districts are  not as bad  as the other  & that  he supported                                                                   
moving forward  to address cost  differentials.  He  asked if                                                                   
HB 72  was implemented and the  PERS/TRS rate was  paid down,                                                                   
would all school district's BSA be at $77 million dollars.                                                                      
                                                                                                                                
Co-Chair Chenault  replied that  it would  depend on  how the                                                                   
numbers  were   moved  around.    If  the   Public  Employees                                                                   
Retirement  System/Teacher's   Retirement  System  (PERS/TRS)                                                                   
issues  were  addressed,  then  the  larger  districts  would                                                                   
receive  more  by moving  the  funding outside  the  formula.                                                                   
Currently, with  the funding  inside the foundation  formula,                                                                   
the   numbers   are   dispersed   according   to   the   cost                                                                   
differential.   He objected  to that  model, commenting  that                                                                   
the numbers  should change.   He  encouraged that the  entire                                                                   
concept be addressed including the PERS/TRS issue.                                                                              
                                                                                                                                
3:33:38 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  informed  those waiting  online  that  there                                                                   
would be no  public testimony at this meeting.   He indicated                                                                   
that an arranged  time and date would be selected  to discuss                                                                   
the matter.                                                                                                                     
                                                                                                                                
Representative  Thomas  commented  he represented  12  school                                                                   
districts  and thought  the bill  could  provide millions  of                                                                   
dollars  for the past  eight years.   Over  that period,  the                                                                   
total amount was over $90 million dollars.                                                                                      
                                                                                                                                
Vice Chair  Stoltze looked  forward to continued  discussion.                                                                   
He  realized it  was  not an  option  for some  small  school                                                                   
districts,  while  the  larger  ones like  Kenai,  have  more                                                                   
                                  stnd                                                                                          
options.    He  represents  the  1   and  2   largest  school                                                                   
districts  in  the State.    He  questioned the  options  for                                                                   
districts  smaller than  Kenai, who opt  for smaller  schools                                                                   
and the "trade-offs" associated with those choices.                                                                             
                                                                                                                                
3:39:08 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  advised  that smaller  schools  were  the                                                                   
District's  choice  with four  high  schools.   The  distance                                                                   
between  those  schools is  vast;  some are  75-miles  apart.                                                                   
They  could consolidate  but the  parents want  to see  their                                                                   
children at schools closer to  home with less traveling time.                                                                   
Smaller distances build community  and not having the funding                                                                   
has  made   the  school  district   more  responsible.     He                                                                   
guaranteed that there are no excess  dollars in that district                                                                   
& congratulated  his borough.   The  community has  funded to                                                                   
the cap  allowed.  He urged  raising the BSA,  stressing that                                                                   
his district should no longer be penalized.                                                                                     
                                                                                                                                
3:44:32 PM                                                                                                                    
                                                                                                                                
Representative  Nelson   added  her  gratitude   to  Co-Chair                                                                   
Chenault for  the bill.  She pointed  out that ¾ of  the ISER                                                                   
study  would  amount to  $72.5  million  dollars.   The  full                                                                   
implementation of  the ISER study would be a  little over $97                                                                   
million  dollars.   She encouraged  school  districts to  put                                                                   
forward  their additional  energy costs  since the study  was                                                                   
commissioned.   The air study  was released in 2003  based on                                                                   
2002 prices.   The ISER study  was released in 2005  based on                                                                   
2004 prices.   She  thought that  the "loaf"  had grown  even                                                                   
more.   When SB 36  was written, the  price of crude  oil was                                                                   
$12.31 dollars  per barrel,  and today it  is at  $57 dollars                                                                   
per barrel.                                                                                                                     
                                                                                                                                
Co-Chair Chenault  said he could not speak to  the fuel issue                                                                   
& pointed out that the other ¼  of the loaf was placed in the                                                                   
operating budget.  He realized  that fuel & energy costs have                                                                   
increased throughout the State.                                                                                                 
                                                                                                                                
Representative Kelly  inquired if there was an  option to cap                                                                   
some districts.   He worried about  a double jump.   Co-Chair                                                                   
Chenault  addressed   capping,  noting  that  the   bill  was                                                                   
introduced  at 100% of  the ISER  Study.   The number  is not                                                                   
known as they have not been able  to settle on what should be                                                                   
considered.   He hoped to get  100% but did not know  if that                                                                   
was the  correct number.   The  process is  intended to  help                                                                   
districts  address their  cost  factors and  PERS/TRS; it  is                                                                   
hoped to  settle upon  a number  to provide school  districts                                                                   
with the opportunity to move forward.                                                                                           
                                                                                                                                
3:50:19 PM                                                                                                                    
                                                                                                                                
Representative  Kelly   stated  for  the  record   that  some                                                                   
districts are  too small for  the funding that  they receive.                                                                   
He voiced serious concern with  future increased funding, yet                                                                   
agreed that the current system is not adequately working.                                                                       
                                                                                                                                
3:51:57 PM                                                                                                                    
                                                                                                                                
EDDY  JEANS,  DIRECTOR,  SCHOOL  FINANCE,  EDUCATION  SUPPORT                                                                   
SERVICES,  DEPARTMENT  OF EDUCATION  AND  EARLY  DEVELOPMENT,                                                                   
offered to answer questions on  the fiscal note or queries on                                                                   
how the State got to where it is.                                                                                               
                                                                                                                                
Co-Chair Meyer addressed the BSA  and how those numbers would                                                                   
affect Anchorage.                                                                                                               
                                                                                                                                
Mr. Jeans observed  that one would have to go  back to SB 36,                                                                   
in which the McDowell Group made  it clear that those numbers                                                                   
were based on the manner that  school districts were spending                                                                   
at that time.  The McDowell Group  recommended that the issue                                                                   
be  revisited in  a couple  years.   The Legislature  assumed                                                                   
that burden  and commissioned the  study and then  asked ISER                                                                   
to  do  a  peer  review.   Based  on  the  peer  review,  the                                                                   
Legislature took those recommendations  & asked ISER to rerun                                                                   
the numbers.   There  were two  areas of  great concern,  the                                                                   
first being how  the air group calculated the  energy portion                                                                   
of the index.   They used  a lot of criteria  for adjustment.                                                                   
ISER recommended  going back to the financial  statements and                                                                   
using  what  the  districts are  currently  spending  as  the                                                                   
measure.  He noted that the largest  component was addressing                                                                   
the teacher compensation component.   ISER recommended making                                                                   
an   adjustment  for   longevity,   experience  and   teacher                                                                   
turnover.                                                                                                                       
                                                                                                                                
3:56:13 PM                                                                                                                    
                                                                                                                                
Mr.  Jeans noted  that in  the  peer review,  ISER was  clear                                                                   
about  the adjustments  that were  needed.   The  Legislature                                                                   
paid for those  adjustments.  Everyone thought  they went too                                                                   
far the other way,  which he agreed with.  Mr.  Jeans pointed                                                                   
out  frustration  with the  cost  differentials.   The  total                                                                   
package needs to  be a complete rewrite.  He  did not support                                                                   
a 100% cost  differential as the correct formula.   He looked                                                                   
forward to a dialogue on the issue.                                                                                             
                                                                                                                                
3:57:34 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  reiterated  concerns  and  worried  about  a                                                                   
possible cut to  Anchorage.  Mr. Jeans explained  that if the                                                                   
cost differentials  were adopted and not funded,  there would                                                                   
be  redistribution and  Anchorage  would  get less;  however,                                                                   
funding  the cost  differentials, Anchorage  would not  loose                                                                   
any funding.  It  will be a correction to the  formula, which                                                                   
needs to be made.                                                                                                               
                                                                                                                                
3:58:24 PM                                                                                                                    
                                                                                                                                
Representative   Joule   referenced  teacher   salaries   and                                                                   
questioned the benefit of offering  a single bargaining unit.                                                                   
Co-Chair  Meyer  interjected  that  was  not  an  appropriate                                                                   
question  at this  time.  Mr.  Jeans added  that some  states                                                                   
have a  built in a  salary schedule the  State is  willing to                                                                   
pay and that anything  beyond that is picked up  at the local                                                                   
level.                                                                                                                          
                                                                                                                                
3:59:27 PM                                                                                                                    
                                                                                                                                
Representative Gara  requested a chart indicating  the affect                                                                   
to each school  district if the bill were passed.   Mr. Jeans                                                                   
offered  to  provide   that.    Co-Chair  Meyer   agreed  and                                                                   
suggested  several different  scenarios  shown  in the  chart                                                                   
with the  PERS/TRS outside and  then one with it  included in                                                                   
the formula, one  with the cost differential  implemented and                                                                   
then not funded.                                                                                                                
                                                                                                                                
Representative Kelly questioned  the Department's legislative                                                                   
efficiencies.    Mr. Jeans  noted  the Statute  requires  the                                                                   
Department  to  look  at cost  differentials  and  then  make                                                                   
recommendations  to  the  Legislature.   The  Department  has                                                                   
requested funds to  do that; the Legislature  elected to take                                                                   
on the task to define cost differentials.   He said he sat on                                                                   
the  Legislative Budget  &  Audit (LBA)  Subcommittee,  which                                                                   
defined the areas.                                                                                                              
                                                                                                                                
Representative  Kelly asked if  the Department's  methodology                                                                   
would  reflect  less than  100%  of  the application  to  the                                                                   
formula.   Mr. Jeans said  he did not  believe the  100% ISER                                                                   
cost differentials  were the real numbers nor  did he believe                                                                   
that those  were the accurate  differentials, and  thought it                                                                   
was less.                                                                                                                       
                                                                                                                                
4:02:58 PM                                                                                                                    
                                                                                                                                
Representative   Hawker  mentioned   the  amount  of   public                                                                   
testimony taken during the LBA  Committee and concerns voiced                                                                   
by adopting  the ISER results.   Mr. Jeans agreed that  was a                                                                   
fair representation.                                                                                                            
                                                                                                                                
4:04:29 PM                                                                                                                    
                                                                                                                                
PEGGY  COWAN,  SUPERINTENDENT   OF  SCHOOLS,  JUNEAU  BOROUGH                                                                   
SCHOOLS, CITY &  BOROUGH OF JUNEAU, stated that  the proposed                                                                   
legislation  is critical  to the Juneau  School District  and                                                                   
Juneau  students.  The  Juneau community  funds education  to                                                                   
the maximum allowed  & looks to the Legislature  for measures                                                                   
of adequacy  and fairness.   Since  1998, everyone  has lived                                                                   
with the rates established in  SB 36, loosing ground in terms                                                                   
of educational programs provided.   The ISER study may not be                                                                   
perfect but the  SB 36 rates are flawed.  She  urged that the                                                                   
Legislature take action.  Each  community has different needs                                                                   
& educational funding should do the same.                                                                                       
                                                                                                                                
4:06:37 PM                                                                                                                    
                                                                                                                                
Vice  Chair   Stoltze  requested  information   on  what  the                                                                   
bargaining units have obligated  their legislators to do.  He                                                                   
worried how  the request  would fit  into the overall,  State                                                                   
budget priorities.                                                                                                              
                                                                                                                                
HB 72 was HELD in Committee for further consideration.                                                                          

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