Legislature(2007 - 2008)CAPITOL 106
02/13/2007 03:00 PM House HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
|---|---|
| Start | |
| HB120 | |
| Overview: Community Health Centers | |
| HB97 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 120 | TELECONFERENCED | |
| *+ | HB 97 | TELECONFERENCED | |
HB 97-APPROP: K-12 EDU; PERS/TRS LIABILITY CHAIR WILSON announced that the next order of business would be HOUSE BILL NO. 97, "An Act making appropriations for state aid to public schools, centralized correspondence study, and transportation of pupils; and providing for an effective date." 3:52:18 PM EDDY JEANS, Director, School Finance and Facilities Section, Department of Education and Early Development (EED), presented HB 97, the governor's education funding bill, on behalf of the administration. This bill would fully fund the foundation program and the pupil transportation program at $918 million and $53 million, respectively. Full funding refers to the statutory requirement to fund the base student allocation (BSA), which is $5,380 per student for fiscal year 2007 (FY 07), he explained. Section 1 of the bill calls for an appropriation of $395 million from state general funds (GF) to the public education fund. Section 1 also appropriates $32 million to the EED for distribution to school districts, state boarding schools, and centralized correspondence programs. This amount includes $20 million in federal impact aid funds and $12 million in public school trust funds. Section 2 proposes distribution of $24 million to the EED, to then be distributed to school districts in the same amount they received in FY 07 for cost factor adjustments. The EED will calculate how much each district generated this year, and that will be the grant amount under this bill for FY 08. 3:56:26 PM REPRESENTATIVE WILSON queried whether the aforementioned grant amounts are related to the number of students. MR. JEANS explained that the grant amount is not based on student numbers; it is based on what amount the school district received in cost factor adjustments in FY 07. For example, if a school district received $150 thousand in FY 07 due to cost factor adjustments, it will receive that same grant amount for FY 08. REPRESENTATIVE WILSON noted that with this approach schools will receive the same amount for district cost factors regardless of whether they have gained or lost students. MR. JEANS confirmed that the grant amounts under Section 2 do not take student numbers into account. Section 3 provides $11 million from the GF to the EED. This is then distributed as grants to each school district in the same amount as received in FY 07 for school improvement grants. He explained the sum of $11 million will be distributed to school districts on a per- capita basis. The number of students is multiplied by the sum of $81 to arrive at the amount to be distributed for school improvement grants. 3:58:11 PM REPRESENTATIVE NEUMAN asked whether the Anchorage school district will receive a grant for school improvement costs in Section 3, as it will not receive any of the $24 million cost factor adjustment funds in Section 2. MR. JEANS agreed that the Anchorage school district would not receive funds under Section 2, but would receive funds on a per capita basis under Section 3. He reminded the committee that when funds are distributed on a per capita basis, the larger districts receive more funds as they have more students. He then explained that Section 4 appropriates funds to the school districts' retirement funds for the employees covered under the Public Employees' Retirement System (PERS). These amounts, which are detailed in Section 4(b), will show up as a credit in each district's name, and the districts can apply their payments against their credit. Once the credit amount is used up, the districts will be required to start making payments to their PERS liabilities, he explained. He clarified that these amounts will be distributed directly into the retirement system, will be "outside the funding formula," and will appear as a credit for each district. The dollar amounts listed in Section 4(b) are based on retirement and benefit estimates for the increased contributions required by the PERS system, he explained. He reminded the committee there is a difference between the Teachers' Retirements System (TRS) and the PERS. Under PERS, the contribution rate varies from district to district, which is why HB 97 is structured as it is. 4:00:40 PM REPRESENTATIVE NEUMAN asked whether it was correct to characterize the $170.450 million of Section 4(c) and the $36.9 million of Section 4(b) as intended to fully fund additional increases to the PERS\TRS that are expected to be imposed on the school districts. MR. JEANS confirmed that the aforementioned representation is accurate. He went on to explain that Section 4(c) applies to the TRS system and proposes to appropriate $170 million into that system. Because the funding rates for the TRS are uniform for all school districts, it is possible to make one lump-sum deposit. Currently the Alaska Retirement Management Board (ARMB) has indicated that employer contribution rates for the TRS will rise from 26 percent in FY 07 to 54 percent in FY 08. Mr. Jeans said that the EED is working with the Department of Administration (DOA) to return the TRS contribution rate for FY 08 to 26 percent if the legislature makes the appropriations set forth in HB 97. He indicated that the governor's bill will keep the TRS' funding rates at 26 percent, adding that a 12 percent contribution rate would require an additional $78 million payment into the pension fund liabilities. 4:04:40 PM MR. JEANS explained that Section 5 of the bill makes a statement that the appropriations to the public education fund in Section 1(a) are intended to capitalize the fund; therefore those funds will remain in the public education fund for future use, assuming it is not depleted. 4:05:53 PM REPRESENTATIVE ROSES relayed his understanding that the public education fund was created to build up reserves in sufficient amounts to allow forward funding of education needs for up to two years, thereby easing school districts' budget decisions. He asked whether the appropriations in HB 97 are to come out of that fund. MR. JEANS explained that the payments for the foundation program and pupil transportation do come out of the public education fund and do not require future legislative appropriation. He noted that the public education fund was structured to provide the forward funding described by Representative Roses, but that HB 97 only appropriates enough money to meet the needs of school districts for FY 08. He estimated that there is currently $500 million in the public education fund. When asked how long it will take to build the public education fund up to sufficient levels to forward fund education for two years, he opined that is a policy choice of the legislature. For example, he said that if the legislature had $1 billion, it could appropriate it to this fund to achieve a fund balance sufficient to forward fund education for two years. 4:08:41 PM REPRESENTATIVE ROSES set forth his understanding that funding for education is not a bondable expense. However, it may be possible for the state to issue bonds to cover its unfunded pension obligations. This is currently being considered by the legislature. He said that the ability to issue bonds to help defray pension obligation expenses may free up additional money, perhaps as much as $370 million, for education funding. 4:10:14 PM REPRESENTATIVE NEUMAN reviewed the various funding categories of HB 97 and noted it does not include local contribution or school construction and maintenance amounts. MR. JEANS said the bill appropriates approximately $608 million. Combined with the $500 million already in the public education fund, the total appropriations to support education foundation funding, pupil transportation, and the PERS/TRS obligations total approximately $1.1 billion. CHAIR WILSON opined that this is a lot of money, but the future of the state is based on how the children of the state are educated. 4:13:41 PM REPRESENTATIVE FAIRCLOUGH asked about the anomaly of funding the PERS/TRS through the general fund instead of using outside funding. She opined that this method may give the impression that funding to schools is not being increased because the funds are going directly into retirement funds. MR. JEANS stated that his understanding of the aforementioned point is that the funds appropriated directly to the DOA will not be reflected in the budget as education dollars. He assured the committee that the EED will include those amounts when reporting its educational expenses to the federal government. He did address the problem that the public will not see this as an appropriation to education because it is not being appropriated directly into education foundation formula funds. However, the method proposed in HB 97 appropriates funds directly into the retirement accounts, which allows the state to start investing the money immediately and get a better return, he said REPRESENTATIVE ROSES referenced his past experience writing education grants at the university level and warned that this funding approach may result in unintended consequences. He explained that one litmus test for grant qualification is what percentage of funds spent on education are for salary and benefits. If benefits are over-inflated due to payments into the PERS/TRS, school districts may not be able to qualify for some grants; which is a serious and unintended consequence of running it through the formula "as a pass-through." 4:16:23 PM REPRESENTATIVE FAIRCLOUGH followed up by stating that it may be this legislature's policy that the state addresses the issue of unfunded pension liabilities. She further indicated it may be better to have a 12 percent average employer contribution rate for the reasons Representative Roses mentioned, as well as to make it clear that the state is "stepping up to the plate" to make sure promised retirement benefits are funded. MR. JEANS estimated that in FY 06, the total K-12 and post- secondary education budget, appropriated from general funds, was $1.023 billion; the governor's budget request for FY 07 is about $1.236 billion. He reminded the committee that comparisons are not very accurate because changes in the foundation program require local areas to increase their school funding, while the state will decrease its share of funding. He explained that for the past fiscal year, the state contributed $90 million to school construction, and that this year's budget relies on that amount, in addition to the $1.2 billion referred to above. 4:21:05 PM CHAIR WILSON said she believes many schools have maintenance and construction needs they cannot fund. MR. JEANS agreed that there are schools throughout Alaska with construction and maintenance needs. In response to a prior observation, he explained that school districts do not need to hire an engineer to make an application for construction funding to the state, although he noted that detailed applications may result in a higher ranking on the state's construction priority list. REPRESENTATIVE ROSES asked whether the governor's education bill proposes any additional increases in education funding from last year, aside from the PERS/TRS contributions that will be paid directly to the DOA. MR. JEANS answered no. CHAIR WILSON confirmed that the funding amounts in HB 97 would give the school districts the "very same ...as they got last year". She followed up by asking whether the schools could be characterized as "going backwards," if they receive the same amount of funds as the previous year, especially in light of higher fuel and insurance costs, and possibly higher enrollments. MR. JEANS agreed that this is a fair generalization. 4:24:14 PM JOHN ALCANTRA, Government Relations Director, NEA-Alaska [National Education Association - Alaska], opined that the $24 million in Section 2 and the $11 million in Section 3 of the bill are positive steps and he recognized that the TRS system needs $170 to keep the school district contribution amount at 26 percent. He said that the bill actually cuts funding for school transportation, and reminded the committee that transportation costs are paid on a per student basis even though it costs as much to transport one child in a bus as to transport ten. There is no additional funding in this bill to cover increased costs of inflation. When education is funded at the same amount as the prior year, it actually cuts funding due to inflation factors, he said. He noted that the 13,000 members of NEA- Alaska are willing to work with the governor and legislature on school funding issues. 4:28:50 PM MR. ALCANTRA responded to a query about changes in student population by stating he believes that there has been a loss of 2,300 students in the K-12 population; this may result in a loss of about $20 million in education formula funding for K-12. If an individual district has a student population increase, it will receive additional money per student for transportation. He noted that districts receive the same amount of money per student regardless of actual transportation costs in their area. 4:30:26 PM REPRESENTATIVE NEUMAN asked whether the NEA has any position on how to increase the amounts allocated to education. MR. ALCANTRA replied that NEA-Alaska takes numerous positions at its yearly convention, but opined that it is not NEA-Alaska's position to tell the legislature how to fund education needs. He went on to say that it is important to keep working to address the needs caused by many years of inadequate education funding. He suggested, in response to a question, that the BSA should be driven upward beyond inflation. 4:34:33 PM REPRESENTATIVE NEUMAN reminded the committee that the legislature has worked very hard the last few years to increase the educationa funding. 4:34:58 PM JIM SCHWARTZ, Member, Petersburg School Board, City of Petersburg, told the committee that his district greatly appreciated the funding it received last year. However, he reminded the committee that his district does not receive a multiplier under the education funding formula. He stated that the Petersburg school district is very much on the edge of being able to adequately fund its schools and explained that the loss of timber receipt funds has negatively impacted his district. CHAIR WILSON asked how Petersburg has accommodated for the lack of a multiplier in the past. 4:39:14 PM MR. SCHWARTZ replied that since 1998, when Senate bill 98 was passed, Petersburg has received timber receipts to supplement its school funding. Despite these additional funds, the school district has had to make significant cuts to its budget over the last few years. Over six teacher positions have been lost, and teachers are working "on a shoestring," often with no aides or breaks. 4:41:23 PM REPRESENTATIVE ROSES asked Mr. Schwartz' opinion of what the likely teacher loss will be for his district if education funding went through as proposed in HB 97. MR. SCHWARTZ replied that would be difficult to answer, but it would mean a cut of $850,000 on top of increased salary and energy costs. REPRESENTATIVE ROSES expressed his belief that Petersburg's situation is similar to that of Wrangell's. He said that under his calculations, the significance of flat funding on small districts is huge, noting that the effects are similar to Anchorage having to lay off as many as 500 teachers. 4:43:48 PM CHAIR WILSON relayed that she has heard concerns from some school systems that may not be able to operate without additional funds. She stated her belief that districts are facing serious budget issues related to the past 20 years of flat funding. 4:46:13 PM MR. SCHWARTZ referred to recent news reports regarding the Anchorage school district cutting library aide positions. He explained that this is not an option for Petersburg, as there are no library aides. The Petersburg school district has reached crisis mode. He commented that it "almost makes sense" to have a semester long school year, rather than having a "terrible program" for a full year; however, he opined that the state is not ready to allow this. Despite these difficulties, the Petersburg elementary school was honored for academic achievement under the federal No Child Left Behind Act of 2001. CHAIR WILSON announced that HB 97 would be held in committee.
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