Legislature(1993 - 1994)
02/23/1993 03:00 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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. Davis.) Number 503 DUANE GUILEY, DIRECTOR, DIVISION OF EDUCATION FINANCE AND 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 support. 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 DICK SWARNER, EXECUTIVE DIRECTOR OF BUSINESS MANAGEMENT FOR THE KENAI PENINSULA BOROUGH SCHOOL DISTRICT (KPBSD), 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 salaries. (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 said. Number 344 DENNIS WETHERELL, PRESIDENT OF THE MAT-SU TALENTED AND 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. LARRY WIGET, LEGISLATIVE LIAISON TO THE ANCHORAGE SCHOOL 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 District. Number 405 CARL ROSE, EXECUTIVE DIRECTOR OF THE ASSOCIATION OF ALASKA 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 ELL B. SORENSEN, SUPERINTENDENT OF THE MAT-SU SCHOOL 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 funding. 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 standard. 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 districts. Number 050 REP. B. DAVIS asked Mr. Sorensen whether he would be happy with HB 85 if his district retained funding communities as well. 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 year. 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 p.m.