Legislature(1993 - 1994)

02/23/1993 03:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HB 85: PUBLIC SCHOOL FOUNDATION PROGRAM                                      
  Co-CHAIR BUNDE assumed the chair, announced the committee                    
  would hear HB 85, and noted that the meeting was being                       
  teleconferenced to Anchorage, Barrow, Bethel, Mat-Su, Nome,                  
  Sitka, Valdez, Soldotna, and Tok.                                            
  (Members present were Rep. Bunde, Toohey, Nicholia and B.                    
  Number 503                                                                   
  SUPPORT SERVICES, DEPARTMENT OF EDUCATION, testified in                      
  Juneau and provided an overview of HB 85.  He said he would                  
  briefly explain all elements, but would concentrate on the                   
  Alaska School Price Index (ASPI), which he said had                          
  generated lots of interest.  The ASPI is the department's                    
  attempt to update the current Area Cost Differential (ACD),                  
  designed to achieve an incremental increase in state school                  
  aide in accordance with the location-based differences in                    
  the cost of providing education.                                             
  (Rep. G. Davis returned at 3:42 p.m.)                                        
  MR. GUILEY referred to sections of the bill concerned with                   
  the vocational education (voc-ed) and talented and gifted                    
  (TAG) student programs, which he said were an attempt to                     
  provide a flat rate of funding per student based on a                        
  simplified formula.  He said the department intends to                       
  repeal regulatory requirements on plans of service,                          
  individual education programs and compliance monitoring, to                  
  eliminate the need for weighting classes, calculating                        
  student full-time equivalents and other administrative                       
  requirements, and to increase funding for voc-ed programs.                   
  Mr. Guiley said the bill includes "hold harmless" provisions                 
  whereby a district would not receive less than its FY93                      
  level of funding under the current law for three years,                      
  regardless of how the new basic need levels were calculated                  
  under the new foundation formula.  At the end of the three                   
  years, a section in the new law would take effect reenacting                 
  the ASPI based on the increase in cost of an education                       
  program, he said.                                                            
  MR. GUILEY referred to a section of HB 85 changing the due                   
  date of the student enrollment projection.  The current law                  
  requires schools to submit an enrollment estimate for the                    
  following year before the actual count of the current year's                 
  enrollment, which he said leads to awkward enrollment and                    
  budget revisions.  He mentioned a section of the bill which                  
  holds the districts harmless for any decreases in enrollment                 
  in one year by allowing them to use the current or prior                     
  year's enrollment, whichever brought it more money.  This is                 
  an effort to relieve the districts of having to plan their                   
  budgets without knowing their final enrollment count, which                  
  determines their foundation formula funding, he said.                        
  Number 530                                                                   
  MR. GUILEY handed out pie charts showing the components of                   
  the ASPI.  He stated that districts are concerned about the                  
  ACD because it is based on the cost of operating a                           
  household, not a school district.  The current index is                      
  based on information from 1983 and 1984, and has not been                    
  updated in statute since, though the original study was                      
  updated in 1988, he noted.  The ASPI committee arose from                    
  the Alaska 2000 finance committee, which felt it did not                     
  have enough time to fully consider the ADC, Mr. Guiley said.                 
  Another task force was formed, and charged with defining the                 
  types of expenditures necessary to deliver an educational                    
  program, then defining how to measure incremental cost                       
  increases over a base.  The committee established the base                   
  as the eight districts that now receive 1.0 in their ACD,                    
  and compared the types of educational program costs to the                   
  average of that base, he said.                                               
  MR. GUILEY said the components of the ASPI are:  certified                   
  salaries and benefits at 65 percent; non-certificated                        
  salaries and benefits at 20 percent; and non-personnel costs                 
  at 15 percent.  There are further breakdowns in each                         
  component, he said.  The ASPI is based on districts' audited                 
  average expenditures for 1989 and 1992.  Mr. Guiley stated                   
  that the changes in the price differential program adds                      
  $12.4 million to the total cost of the foundation formula in                 
  the first year.  That is due primarily to the increases for                  
  some districts over their current 1.0 classification, but                    
  also due to increases for other districts that had been held                 
  at lower amounts, and to increases for some single-site                      
  districts that had previously received single-site                           
  supplements.  He commented that the department would make a                  
  presentation the following day to the State Board of                         
  Education for final adoption of a table for single site                      
  REP. BUNDE said he had heard that the Anchorage and Mat-Su                   
  school districts would retain their classification at 1.0 of                 
  the ACD, which would nonetheless lose money under the                        
  proposal because they would have fewer units.  He asked how                  
  much districts that previously had multiple units would see                  
  their funding drop.                                                          
  MR. GUILEY said he believed Rep. Bunde was referring to the                  
  definition of "funding community."  The department intends                   
  to level the playing field and apply statutes and                            
  regulations consistently to all districts as the new                         
  foundation law takes effect, and to eliminate some of the                    
  funding communities previously approved as exceptions to                     
  existing regulations, Mr. Guiley said.  Eliminating those                    
  exceptions would not result in revenue losses, but would                     
  result in overall increases for Anchorage and Mat-Su school                  
  districts under the proposal.                                                
  REP. BUNDE said he may have gotten incorrect information.                    
  Number 597                                                                   
  REP. VEZEY asked why the proposal would result in a net                      
  increase in funding, when a new cost index should be revenue                 
  neutral.  He asked why the average cost would be greater                     
  than 1.0.                                                                    
  MR. GUILEY responded that the state school price index                       
  committee was charged first with defining educational                        
  expenditures, then developing a method of comparing the                      
  expenditures in 54 districts to a base.  Most past studies                   
  have arbitrarily assigned a base, sometimes Anchorage, he                    
  said.  The committee suggested that a better base would be                   
  the eight districts currently at 1.0, as that would allow                    
  each district to go higher on that scale if they could prove                 
  their costs were higher than the base, he said.                              
  TAPE 93-20, SIDE B                                                           
  Number 000                                                                   
  MR. GUILEY said seven districts are scheduled for increases                  
  above 1.0 under the new formula.  The formula was not                        
  designed to redistribute revenue, but to obtain defensible                   
  data to be used as a basis for comparison.  Though there was                 
  initially no discussion of preventing any district from                      
  taking funding cuts through a hold harmless provision, the                   
  commissioner decided during the process of developing the                    
  formula that districts should not face immediate cuts                        
  without the opportunity to reduce expenses to meet the new                   
  funding levels, Mr. Guiley said.                                             
  Number 023                                                                   
  REP. VEZEY asked if the new formula would not bring less                     
  money to any district.                                                       
  MR. GUILEY stated that was correct in terms of the                           
  foundation formula.  Some single site districts worried that                 
  the single site supplemental appropriations have been                        
  outside the foundation formula law, but the hold harmless                    
  provision concerns only the funding from the foundation                      
  formula, he said.  Some single site districts will see their                 
  total state funding receipts drop, but not the funding                       
  provided through the foundation formula.                                     
  REP. VEZEY explained the proposal results in a net increase                  
  in education funding, using the existing $61,000 per                         
  instructional unit.                                                          
  MR. GUILEY agreed, saying it would bring a $12.4 million                     
  increase in education funding the first year, or $9 million                  
  if the department ended the existing $3.4 million single                     
  site supplement built into the budget.  The amount of                        
  increase would drop as the hold harmless provisions phased                   
  out, he said.                                                                
  REP. VEZEY asked whether the new formula would penalize                      
  those school districts able to operate at lower costs by                     
  subsidizing the other, less-efficient districts.                             
  MR. GUILEY said the department did not intend to penalize                    
  efficient systems, but was trying to provide money with few                  
  strings attached, such as the flat-rate funding for voc-ed                   
  and TAG programs without compliance provisions.                              
  Number 081                                                                   
  REP. NICHOLIA asked whether the table the department planned                 
  to present to the State Board of Education the following day                 
  would reduce the single site districts' funding.                             
  MR. GUILEY commented that single site schools would not be                   
  funded at 100 percent under the proposal and might receive a                 
  supplement of $80,000 instead of $125,000 as in past years.                  
  He repeated that they would receive no less in foundation                    
  formula funds.  He said the department had not tried to                      
  force an index to provide current levels of funding, but to                  
  provide a defensible and justified formula.                                  
  Number 115                                                                   
  REP. NICHOLIA asked why the department wanted to change from                 
  ACD to the ASPI, and how it will benefit the state.                          
  MR. GUILEY responded that the department made the change to                  
  achieve revenue equality, and tried to do so by basing the                   
  cost differential plan on educational costs, not household                   
  costs.  He added that the costs were based on surveys of                     
  such costs in each district in 1989 and 1991, information                    
  much more up to date than the 1983 data now in use.                          
  Number 145                                                                   
  REP. NICHOLIA asked Mr. Guiley's definition of equity.                       
  MR. GUILEY said an Alaska 2000 committee was to have tried                   
  to define a basic quality education in Alaska.  He stated                    
  that 10 years ago, equity meant more money for everyone.                     
  The department is now trying to distribute revenue based on                  
  defensible data, he said.                                                    
  Number 170                                                                   
  REP. NICHOLIA asked Mr. Guiley to tell her the important                     
  components of Alaska 2000.                                                   
  REP. BUNDE interrupted, saying the question was quite broad,                 
  and the committee would discuss the components of Alaska                     
  2000 other than funding at another time.                                     
  Number 180                                                                   
  testified in favor of HB 85.  He said it is clear something                  
  is wrong with the foundation formula when the KPBSD reached                  
  the funding cap in 1989-90 and has remained there since, as                  
  he expects other districts to do in time.  He mentioned a                    
  long list of ways in which the funding cap was hurting the                   
  district:  a forced increase in the student-teacher ratio by                 
  three students two years ago, the forced absorption of 130                   
  additional students next year without new staff; the                         
  inability to buy new textbooks or equipment; and low                         
  (Rep. Nicholia departed at 4:01 p.m.)                                        
  MR. SWARNER said the changes in the ACD did not address the                  
  need for increases in the instructional unit value to meet                   
  inflation.  He expressed support for the changes in the TAG                  
  and voc-ed programs, which will cut paperwork, and the                       
  changes in enrollment estimates.  He concluded by saying the                 
  bill needs more consideration, and that the ASPI more                        
  accurately reflects educational costs than the ACD.  He                      
  disputed allegations that the new formula regards districts                  
  that pay teachers more than do other districts.                              
  Number 300                                                                   
  TOM BUZEK testified from Anchorage concerning the TAG                        
  portion of HB 85, opposing provisions that would give school                 
  boards discretion to fund TAG programs or not.  He said he                   
  favors current laws mandating that schools serve TAG                         
  students as special needs students.  The proposed budget                     
  allocates 4.5 percent to TAG programs, and he favored                        
  regulation to ensure the money is spent on TAG students. The                 
  budget for the Mat-Su school district's 1993-94 school year                  
  cuts TAG funding by half to approximately $300,000, while                    
  voc-ed funding would increase to $900,000, Mr. Buzek said.                   
  Without regulations mandating an independent, funded TAG                     
  program, he would prefer to see TAG remain under special                     
  needs programs, where it receives guaranteed funding, he                     
  Number 344                                                                   
  GIFTED ASSOCIATION, testified from Anchorage opposing HB 85.                 
  He wanted to retain guaranteed minimum funding for TAG                       
  student services.  While voc-ed and special education are                    
  guaranteed a minimum of one instructional unit under the                     
  bill, TAG funding is entirely set by administrative                          
  regulations to be developed by the Department of Education,                  
  he said.  Mr. Wetherell protested the diversion of already                   
  limited TAG funds to voc-ed programs.  TAG students only                     
  receive a maximum of three hours of advanced instruction per                 
  week, he said.                                                               
  DISTRICT, testified from Anchorage on HB 85, saying it would                 
  mean less money for the district.  He said the district                      
  counts on at least $61,000 per instructional unit to meet                    
  growing demands, and would support rewriting the foundation                  
  formula to be more equitable to Anchorage.  The ASPI would                   
  allow for less equitable distribution of funds, he said.                     
  Anchorage would receive $474,000 of the $12.4 million                        
  increase in funding under the ASPI.  The $12.4 million could                 
  increase the foundation formula to $62,000 per unit.  Each                   
  $1,000 increase in the unit value would mean $3.75 million                   
  more for Anchorage, compared to the $474,000 it would get                    
  under the ASPI.  Anchorage faces a projected deficit of up                   
  to $13 million, so the district needs all the help it can                    
  get, Mr. Wiget said.  He asked the legislature to rewrite                    
  the ASPI to make it more equitable to the Anchorage School                   
  Number 405                                                                   
  SCHOOL BOARDS, testified in Juneau in support of HB 85 as                    
  long as it is adjusted to better meet association concerns.                  
  He stated the association has long recognized the need to                    
  revise the foundation program to provide equity.  He said                    
  some districts may have received too much state money and                    
  others have not received enough because of where certain                     
  lines have been drawn.  Mr. Rose said the actual formula                     
  proposed by the Department of Education appears to represent                 
  a comprehensive review, but he questioned the data points.                   
  The association recommends placing the new formula in                        
  statute, not regulation, following final review to forestall                 
  lobbying against the department as it wrote regulations.                     
  According to Mr. Rose, the association recommended that the                  
  legislature consider annual adjustments to counter the                       
  effects of inflation.  The association also recommended                      
  dealing with as many problems, such as the single-site                       
  districts, as possible in the bill because of the difficulty                 
  of achieving reform.  Mr. Rose said the bill achieves a fair                 
  and equitable distribution of state resources and addresses                  
  many longstanding concerns.                                                  
  REP. BUNDE asked a clarifying question about the                             
  association's recommendations.                                               
  Number 468                                                                   
  CHAIR TOOHEY asked the purpose of a meeting scheduled for                    
  the following day.                                                           
  MR. ROSE said it was a meeting of the state Board of                         
  Education, at which the board would try to adopt a scale in                  
  connection with the ASPI.                                                    
  REP. BUNDE asked if the Association of Alaska School Boards                  
  had a position on funding of TAG programs.                                   
  MR. ROSE stated that the association members felt that the                   
  changes in voc-ed and TAG programs represented a tradeoff,                   
  and the advocates for each constituency would probably                       
  appeal to the committee on their own behalf.                                 
  Number 500                                                                   
  DISTRICT, testified in Juneau concerning HB 85, saying it                    
  did not provide for equitable distribution of the increase                   
  in funds.  He said he would support the bill if it did not                   
  cut funding for funding communities.  He argued that equity                  
  in state funding should be by program, not by distribution                   
  of funds, and that the changes under ASPI do not distribute                  
  the $12.4 million equitably.  The Anchorage and Mat-Su                       
  districts serve more than half the state's students, but                     
  receive only $1 million of the $12.4 million, because the                    
  bill removes the allowances for funding communities, he                      
  said.  The Kenai school district's funding communities are                   
  smaller than the Mat-Su district's, so the loss of funding                   
  communities hurts the Mat-Su district more. Further, when                    
  the new ASPI is applied to the districts, Kenai gains $1.2                   
  million, and Mat-Su gains $200,000, Mr. Sorensen said.                       
  MR. SORENSEN explained that when the Mat-Su district got new                 
  funding communities two years ago, they were built into how                  
  the district is run, and to pull them out would leave the                    
  district with a $4 million shortfall.  That deficit would                    
  make it impossible to maintain the district's comprehensive                  
  high schools, which could mean the loss of voc-ed, art or                    
  music programs for the resultant lower enrollments, he said.                 
  It would also mean the loss of 35 teachers and a total of                    
  60-90 employees, the addition of up to three students per                    
  class when some middle schools already have 35 students, he                  
  said.  According to Mr. Sorensen, the ASPI makes sense, but                  
  he asked the committee to retain funding communities.                        
  REP. VEZEY said he believed HB 85 and its guarantee against                  
  loss of funding was simply a way of increasing education                     
  MR. SORENSEN said it was difficult to tell which districts                   
  would win or lose over the long run under HB 85.  If there                   
  was a movement toward funding per child, then the larger                     
  districts could benefit over time.  Nome, for example, loses                 
  no money in the change, but might lose more over the long                    
  run by loss of its single-site supplements.                                  
  REP. VEZEY asked whether the ASPI is not a straight linear                   
  analysis based on a cook book of costs.                                      
  MR. SORENSEN said the numbers that went into the ASPI are                    
  good numbers, and the formula is defensible as an index of                   
  educational costs, and is a positive development.  He noted                  
  the combination with other issues makes the question of                      
  equity more complex.                                                         
  REP. VEZEY clarified his question, asking whether the ASPI                   
  was a straight comparative index, or whether there was any                   
  statistical adjustment for deviation from a norm or                          
  MR. SORENSEN said he could not respond and would rather                      
  defer to Mr. Guiley.                                                         
  REP. VEZEY said a straight index would reward districts that                 
  have not controlled their costs by allowing them a higher                    
  cost basis and not comparing them to more efficient                          
  Number 050                                                                   
  REP. B. DAVIS asked Mr. Sorensen whether he would be happy                   
  with HB 85 if his district retained funding communities as                   
  MR. SORENSEN answered yes.  In such a case the Mat-Su                        
  district would realize a $4 million increase in state                        
  funding, which would make him very happy.                                    
  REP. B. DAVIS asked Mr. Guiley why the funding communities                   
  were dropped.                                                                
  MR. GUILEY answered by saying the funding communities were                   
  dropped because they were exemptions to existing regulations                 
  that consider a unified city-borough a single funding                        
  community.  Anchorage has three funding communities, one                     
  each for Anchorage, Girdwood, and Eagle River, even though                   
  each area is part of a single city-borough, just as Juneau                   
  has a single funding community for all the schools in the                    
  city and borough of Juneau, he said.  In the areas outside a                 
  unified city-borough, as in the Mat-Su school district,                      
  funding communities are defined as a high school and all of                  
  the elementary schools that graduate students to that high                   
  school, Mr. Guiley said.  Incorporated cities within a                       
  borough, such as Wasilla or Palmer in the Mat-Su borough,                    
  are awarded a separate funding community, he said.  The                      
  department wanted to eliminate as many exceptions and apply                  
  the law consistently across the state, he concluded.                         
  Number 100                                                                   
  REP. B. DAVIS asked how much more HB 85 would cost if the                    
  exception were not removed and the funding communities for                   
  the Mat-Su district were left intact.                                        
  MR. GUILEY answered that the funding communities represent                   
  about $7.5 million, and the fiscal note for the bill would                   
  rise to a total of approximately $20.5 million in the first                  
  REP. B. DAVIS asked Mr. Guiley to explain how he could claim                 
  the bill had a "hold-harmless" provision when it appeared                    
  Anchorage and Mat-Su districts were losing money.                            
  MR. GUILEY responded by saying the "hold harmless" provision                 
  means that no district will receive less in net foundation                   
  formula funds in FY94, FY95 and FY96 than they did in FY93.                  
  He further stated that the Anchorage and Mat-Su districts                    
  are scheduled for increases in funding under the proposal.                   
  Hearing no further requests to testify, REP. BUNDE closed                    
  public testimony on HB 85, announced the bill would be held                  
  over for further study, and ADJOURNED the meeting at 4:43                    

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