Legislature(1995 - 1996)

04/23/1996 03:04 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 CSSB 244(FIN) am - STATE AID TO EDUCATION                                   
 CO-CHAIR BUNDE announced the first order of business to come before           
 Number 088                                                                    
 RICHARD CROSS, Deputy Commissioner, Department of Education, said             
 first he would point out the differences between the original                 
 Senate Bill 244 and the Committee Substitute before the committee.            
 The Committee Substitute has an amendment which reimburses the                
 Anchorage pupil transportation at the same level as the contractor            
 rate.  He noted this was not in the original bill.  The Department            
 of Education had provided a fiscal note which showed the impact of            
 changing that rate of reimbursement for the Anchorage School                  
 District.  That fiscal note reflects increased costs of $1.992 for            
 FY 97.  The fiscal note also indicates a potential cost for FY 96             
 which is speculative, but he would explain that for the committee.            
 Section 8 of the legislation specifies the Act would take effect              
 immediately and should the Governor sign the bill prior to July 1,            
 1997, then potentially it could impact and require a proration of             
 this year's transportation funding because the entitlement to the             
 Anchorage School District figured under this year's schedule would            
 be $2,050,243.  He commented that is one substantive change between           
 the original Senate Bill and the Committee Substitute.  The                   
 Committee Substitute also contains an amendment on portables, which           
 says that portables will not count into the space when used in                
 figuring unhoused students.  It is current practice of the                    
 department to not count that space now so the amendment would not             
 change their practice.                                                        
 MR. CROSS said the Committee Substitute increases the deductible              
 PL-874 from Regional Education Attendance Areas (REAA) from 95                
 percent in the original bill which would have started in FY 97 and            
 kicks it in this year at 96 percent.  He noted that both bills give           
 a payment to REAAs of $500 per instructional unit in order to meet            
 disparity.  He said the Committee Substitute contains a hold                  
 harmless provision and explained the Senate Finance Committee                 
 amended the bill to have it take effect this year in order to                 
 minimize the cost of the $500 instructional unit to the REAAs.  In            
 the original bill, next year the department had planned to pay out            
 the $500 payment, but in effect, recover it by increasing the                 
 deductible PL-874.  The Senate amendment kicks that system in this            
 year rather than next year.  Under the original bill, the method of           
 accomplishing that was to get a $1.2 million appropriation in order           
 to cover that $500 payment and did not increase the deductible.  So           
 the Senate Finance Committee put in a hold harmless provision so              
 any district that would lose money as a result of that 96 percent             
 deductible and then $500 payback would not in fact lose money, but            
 would be held even.                                                           
 Number 380                                                                    
 MR. CROSS stated the original bill allowed the Department of                  
 Education to adjust the $500 allotment to make sure that disparity            
 was met if such an adjustment should be necessary; the Committee              
 Substitute does not allow for that.  The original bill funded                 
 single sites through the formula program; the Committee Substitute            
 does not.  The Committee Substitute sunsets the provision for the             
 public school foundation formula on June 30, 1997, which the                  
 department interprets as meaning there would be no funding formula            
 after June 30, 1997, unless and until a new one was adopted.  The             
 effective dates are different and the fiscal notes are different.             
 The fiscal note for SB 244 of $311 million does not include the               
 transportation fees.  He commented those are essentially the                  
 differences between the original Senate Bill and the Committee                
 Substitute and he and members of the department were available to             
 answer questions.                                                             
 Number 458                                                                    
 CO-CHAIR BUNDE referred to the hold harmless provision and asked              
 Mr. Cross if he knew which districts and how much money was                   
 MR. CROSS invited Eddy Jeans from the department to join him at the           
 witness table.                                                                
 Number 493                                                                    
 EDDY JEANS, Project Assistant, School Foundation, School Finance,             
 Department of Education, explained the hold harmless section                  
 basically keeps districts at the level they would have been funded            
 in FY 96 had this legislation not passed.  He directed the                    
 committee's attention to the schedule attached to the fiscal note             
 and said there were nine districts that would qualify for the hold            
 harmless provision.  In other words, the hold harmless provision              
 ensures that these districts do not lose any funding in FY 96.                
 CO-CHAIR BUNDE questioned if the loss wouldn't occur in FY 97.                
 MR. JEANS explained that some districts will experience some loss             
 in FY 97 and noted the previously mentioned schedule indicated a              
 $20,000 increase.  He continued to explain the bracketed amounts              
 on the schedule indicate the state aid those districts would lose             
 in FY 97.  Essentially, the hold harmless provision is because the            
 districts already have their budgets established for the current              
 year and it would be difficult for them to make the adjustment in             
 the current year.                                                             
 Number 598                                                                    
 CO-CHAIR BUNDE commented he thought it would be cheap insurance to            
 change the effective date so it doesn't become effective until July           
 MR. CROSS pointed out the problem with changing the effective date            
 to July 1 for Sections 3, 4 and 5 is that the Senate Finance                  
 amendment took the mechanism the department was suggesting for next           
 year and wanted to implement it a year earlier in order to not                
 incur the full $1.2 supplemental cost in the budget.  Therefore,              
 some aspect of the bill has to be retroactive in order to enable              
 the department to deduct the PL-874 at 95 percent and return the              
 $500 payment to make the adjustments for this year.  In order for             
 that mechanism to work, there would have to be retroactivity.                 
 CO-CHAIR BUNDE said, "So we have good news and bad news.  If they             
 wanted to take a look at it as figuring into this year's -- you               
 said if it takes effect before July 1, districts on the pupil                 
 MR. CROSS said in his opinion, the cleanest way to accomplish that            
 would be to amend Section 8, not the retroactive part of it.                  
 CO-CHAIR BUNDE responded that was what he was referring to -                  
 amending Section 8 to read July 1.                                            
 Number 731                                                                    
 REPRESENTATIVE CAREN ROBINSON asked what the thinking was on                  
 Section 6?                                                                    
 MR. CROSS responded that Section 6 was added in the Senate Finance            
 Committee and he didn't want to characterize the author's intent              
 except to say there was a clear message they wanted a new formula;            
 they wanted this to be a temporary fix, not a permanent fix.                  
 REPRESENTATIVE NORM ROKEBERG arrived at 3:16 p.m.                             
 REPRESENTATIVE ROBINSON asked where the department was at in terms            
 of getting ready for a new formula.                                           
 MR. CROSS replied that Commissioner Holloway had met all last week            
 with the State Board of Education and he, Mr. Jeans and Dr. Elliott           
 would be meeting with the commissioner later that day.  He added              
 that an aggressive schedule had been set to adopt a new formula and           
 the department expects the Governor will submit a new formula in              
 legislation in January 1997.                                                  
 REPRESENTATIVE ROBINSON asked what happens if that time line wasn't           
 MR. CROSS responded that either existing legislation would have to            
 modified and extended or there have been years where there has been           
 no "funding formula" and there's been a temporary measure for                 
 continuing funding for districts from one year to the next.                   
 REPRESENTATIVE AL VEZEY arrived at 3:17 p.m.                                  
 CO-CHAIR BUNDE observed the State Board of Education worked long              
 and hard this past summer to rewrite the formula and stopped when             
 they got to making the hard decisions.  This will encourage the               
 board to get to the hard decisions and keep going.                            
 Number 915                                                                    
 REPRESENTATIVE GARY DAVIS said it was his understanding that the              
 amendment on the pupil transportation has added a $2 million fiscal           
 note to the bill.                                                             
 MR. CROSS said that's correct; it has added a nearly $2 million               
 fiscal note for FY 97 and potentially a fiscal note for FY 96 of              
 REPRESENTATIVE DAVIS observed that was approximately a $4 million             
 additional funding request this legislation would require as it               
 stands now.                                                                   
 MR. CROSS replied yes.                                                        
 REPRESENTATIVE DAVIS asked what happens if the funding isn't                  
 provided and the legislation passes as it is written.                         
 MR. CROSS stated the department would prorate the transportation              
 program and that proration would result in a proportional deduction           
 to all school districts in the state that have transportation                 
 Number 983                                                                    
 CO-CHAIR BUNDE asked if it would be fair to say the $4 million is             
 somewhat close to the $4 million originally cut from pupil                    
 transportation in the Governor's proposed budget.                             
 MR. CROSS replied it would be fair to say that if the original cut            
 was $4 million, but he didn't have that number readily available.             
 CO-CHAIR BUNDE thought it was in the ball park.                               
 Number 1027                                                                   
 VERNON MARSHALL, Executive Director, NEA-Alaska, said that NEA-               
 Alaska feels it is a tremendous and important obligation that                 
 Alaska educate all its children and that public schools have a                
 responsibility to accept all children and educate them to the best            
 of their opportunity.  In order to do that, funding is necessary              
 and NEA-Alaska has been an advocate for additional funding for                
 schools.  He said NEA-Alaska has some general concerns about the              
 formula, but it is their feeling that what makes the formula anemic           
 many times is the fact that funding isn't adequate and then local             
 governmental units don't pass that funding on to local school                 
 districts so that children benefit.  NEA-Alaska is concerned that             
 single site school districts have been omitted from CSSB 244(FIN)             
 which they believe is a cost of about $3.2 million in the scheme of           
 a $850+ million budget program for schools.  It is NEA-Alaska's               
 belief that single sites should be a priority; there are kids that            
 exist in those single sites who need to be taken care of.                     
 MR. MARSHALL said that NEA-Alaska feels that federal disparity is             
 an issue that needs to be addressed.  Their concern is that if it             
 is not addressed, it will have a negative impact through proration            
 on all children in the state by actually having the effect of                 
 reducing the instructional unit by approximately $2,000.  At a time           
 when schools are attempting to prepare kids for the challenges of             
 the new century, it is critical to upgrade and modernize facilities           
 relative to not only the books they read but the technology as well           
 and not the time to jeopardize funding.  He expressed concern with            
 the section that deals with June 30, 1997.  He said he understood             
 what happened in Michigan, having received some reports about the             
 "Michigan experience."   He thought Alaska given its uniqueness,              
 had a better approach to dealing with the whole issue of the whole            
 formula and as he understood, the State Board of Education was                
 carefully looking at the formula, entertaining proposals and ideas            
 and hopefully developing a process that is designed to involve                
 everyone in terms of identifying deficiencies if they exist, and              
 ways to deal with the formula that best meets the educational needs           
 of kids.  That process is taking place and NEA-Alaska feels that              
 sunsetting the formula raises the apprehension of a lot of people.            
 He wasn't trying to be paranoid, but he felt it is important that             
 schools be assured of some stability.  He didn't necessarily                  
 understand the history of the past when somehow schools were taken            
 care of when provisions sunsetted, but he thought there was a                 
 statement of state policy that everyone needed to be concerned                
 about.  He encouraged the committee to remove the section and take            
 a look at single site school, the disparity and the sunset                    
 provision.  NEA-Alaska believed those issues should be addressed              
 and removed.                                                                  
 Number 1271                                                                   
 CO-CHAIR TOOHEY asked Mr. Marshall if he had been involved in the             
 meetings that took place during the summer?                                   
 MR. MARSHALL responded that he was involved in some of the meetings           
 as an observer, not as a participant of the committee.  He did have           
 an opportunity to follow and hear much of the report.                         
 CO-CHAIR TOOHEY asked if Mr. Marshall was of the opinion that the             
 State Board of Education could have come up with an answer.                   
 MR. MARSHALL replied the committee had a tremendous amount of work            
 to do and he didn't know that they were given the resources and the           
 time to get the job done.  He believes the committee could come up            
 with an answer; however, he felt that probably some polarization              
 did take place during the process of the meetings, but in his                 
 opinion that could have been overcome.  He contended if that group            
 or another group is empowered and charged with the responsibility,            
 and given the time and support they could come up with an answer.             
 Number 1328                                                                   
 CO-CHAIR BUNDE said as an interested observer, he would                       
 characterize the end result of what was accomplished.  Basically              
 the committee came up with three possible solutions:  1) status               
 quo, hope for a miracle; 2) change the formula, hope for a miracle            
 by an infusion of a lot of money; and 3) change the formula and               
 live within the current budget which means there would be clear               
 winners and losers in various school districts.  The decision                 
 didn't go forth is because two of them were not viable options and            
 the third was not comfortable.                                                
 MR. MARSHALL thought the committee had addressed a couple of                  
 issues.  He said one was the formula fix for single site school               
 districts and the other was to minimally address the problem of us            
 not addressing the federal disparity issue.  He thought that was              
 put in place primarily because of changes on the federal level.               
 CO-CHAIR BUNDE understood the State Board of Education planned to             
 continue their quest and it is a high priority.  He asked if there            
 were any other questions for Mr. Marshall.  Hearing none, he                  
 invited Lorraine Ferrell to testify at this time.                             
 Number 1440                                                                   
 LORRAINE FERRELL, Vice President, Anchorage School Board (ASB),               
 said she particularly wanted to address Section 1 of CSSB 244(FIN)            
 amended.  She testified in support of Section 1 which corrects a              
 disparity in transportation reimbursement that the Anchorage School           
 District has been living with for quite some time.  This particular           
 section would reimburse the ASB 100 percent for their district-run            
 route, as well as their contracted routes.  This is important to              
 the ASB because currently they are funding that portion which is              
 not state funded out of their operating budget.  As times get                 
 tighter, they believe they could find better uses for this                    
 particular operating money, especially since every other district             
 in the state gets 100 percent reimbursement on their                          
 transportation.  She encouraged the committee to keep Section 1 in            
 the bill and eliminate the disparity that's been particularly aimed           
 at Anchorage for many years.                                                  
 Number 1529                                                                   
 REPRESENTATIVE DAVIS asked how long the disparity had been in                 
 MS. FERRELL said she couldn't answer in the exact number of years,            
 but it had been quite awhile.  She thought originally the disparity           
 was put into place when there was such a difference in compensation           
 for contracted drivers versus district drivers.  Now that those two           
 are pretty much in alignment, there is no reason to not fund both             
 at 100 percent.   She noted there is no contractors other than                
 Laidlaw Transit that could provide this service to the students of            
 the Anchorage School District.  She explained they were caught                
 between a rock and a hard spot; they continue to run routes on                
 their own to put them in a favorable position to be able to                   
 negotiate the contracted routes with Laidlaw.                                 
 Number 1568                                                                   
 REPRESENTATIVE DAVIS inquired to what degree had the disparity been           
 addressed in the legislative process.  He noted this was the first            
 time he had heard of it.                                                      
 MS. FERRELL believed it was just one of those "sleepers" that                 
 happened, and no one noticed it or realized that it was continuing            
 to go forward.  It came up in a review of their transportation                
 dollars so the Anchorage School District requested it be brought              
 before the legislature to be equalized.                                       
 CO-CHAIR BUNDE asked if there were other questions of Ms. Ferrell.            
 Hearing none, he asked if there was further public testimony on               
 CSSB 244(FIN) am.                                                             
 REPRESENTATIVE ROBINSON asked the Department of Education to                  
 explain how this language impacts the other school districts in the           
 Number 1620                                                                   
 JAMES ELLIOTT, Director, School Finance, Department of Education,             
 introduced Bill Wright, Administrator of the Pupil Transportation             
 Program who would provide some background on the difference between           
 the Anchorage contract routes and their district-run routes.                  
 Number 1644                                                                   
 BILL WRIGHT, Administrator, Pupil Transportation Program,                     
 Department of Education, said the effect of this amendment without            
 additional funding, will result in about another 5 percent                    
 proration of the program.  Each district will receive 5 percent               
 less funding.                                                                 
 REPRESENTATIVE ROBINSON confirmed that all the school districts               
 except Anchorage would receive 5 percent less.                                
 MR. WRIGHT responded that Anchorage would be prorated as well and             
 would receive 5 percent less.                                                 
 REPRESENTATIVE VEZEY stated he was confused as to why this wording            
 would avoid or not avoid a proration.                                         
 MR. WRIGHT asked Representative Vezey to repeat his question.                 
 REPRESENTATIVE VEZEY inquired if there was a proration if the                 
 appropriation is less than the expenses.                                      
 MR. WRIGHT responded affirmatively.                                           
 REPRESENTATIVE VEZEY commented that was a certain formula under               
 existing statute, but it changes under the proposed language.                 
 MR. WRIGHT said that was true.  He added that if the department               
 bases their budget on what they estimate to be the total                      
 entitlement, but receive less money than what they need to fully              
 fund the districts, everyone would be prorated equally.                       
 REPRESENTATIVE VEZEY asked if equally meant on a per dollar basis             
 or per student basis?                                                         
 MR. WRIGHT responded per dollar basis.                                        
 REPRESENTATIVE VEZEY affirmed it would be a straight across the               
 board per dollar basis proration.                                             
 MR. WRIGHT said the department reimburses under the pupil                     
 transportation program on an actual cost basis.  It depends on                
 their contracted daily rates, so that amount changes over the year            
 based on whether buses are added and (indisc.) changes, so this is            
 the department's best guess right now as to what their full funding           
 level is going to be.  However, during the year that amount can go            
 REPRESENTATIVE VEZEY asked how the proposed amendment to the                  
 statute change the formula?                                                   
 MR. WRIGHT responded it increases Anchorage's entitlement by                  
 approximately $1.2 million, so unless the department receives                 
 additional funding to cover that, their estimated entitlement in              
 the budget is $1.9 short.                                                     
 REPRESENTATIVE VEZEY remarked the wording could just as well read,            
 "The Anchorage School District is entitled to more money."                    
 MR. WRIGHT confirmed that.                                                    
 CO-CHAIR BUNDE asked if there were further questions or testimony?            
 Number 1774                                                                   
 REPRESENTATIVE ROKEBERG asked if the $500 REAA in Section 4 related           
 to the disparity problem?                                                     
 MR. ELLIOTT responded it was of a different type than the busing.             
 REPRESENTATIVE ROKEBERG said he was referring to the federal                  
 disparity definition and asked why it occurred.                               
 MR. ELLIOTT explained that the federal government changed the                 
 Number 1795                                                                   
 REPRESENTATIVE DAVIS recalled the discussion last year about the              
 non-counting of students housed in portables and said in his                  
 opinion they should be counted.  He asked Mr. Elliott to refresh              
 his memory regarding the reasons for the students not being                   
 MR. ELLIOTT understood that prior to this year, districts that had            
 students in portable classrooms were not counted as unhoused for              
 the purposes of requesting money to build facilities.  He noted the           
 department has grappled with the issue of unhoused students in                
 portable classrooms through the bond reimbursement grant review               
 committee that was set up under SB 7 which passed in 1993.  The               
 department grappled with the issue for better than a year and were            
 unable to resolve the issue, but the department, based on its own             
 interpretation, this year has left it up to districts as to whether           
 to count those students as housed or unhoused.  This amendment, as            
 it is written, doesn't do anything different than what the                    
 department is doing.  It did hurt Anchorage about a year ago,                 
 because when they made their submission to the department many of             
 students they had in portables were not counted as unhoused and               
 therefore, did not qualify for needed space.                                  
 Number 1853                                                                   
 CO-CHAIR BUNDE explained the students in portables were considered            
 adequately housed.  This amendment says they are not adequately               
 REPRESENTATIVE VEZEY expressed curiosity about how the Anchorage              
 School system works and inquired if they own their own buses.                 
 MR. WRIGHT explained the Anchorage district-operated purchase their           
 own buses.  They are the largest district-operated transportation             
 system in the state; the next largest is Barrow.                              
 REPRESENTATIVE VEZEY inquired how many buses the Anchorage district           
 MR. WRIGHT replied about 81.                                                  
 CO-CHAIR TOOHEY believed there were also Laidlaw-contracted buses.            
 MR. WRIGHT stated that Anchorage was unique in that they have                 
 district-operated and contracted within the same community.  He               
 believed that Laidlaw operates 158 buses in the community and the             
 district operates about 81.                                                   
 Number 1910                                                                   
 CO-CHAIR BUNDE asked if it would be a fair statement that the                 
 district started out with a busing program, owned some buses and              
 had employees, but as things grew they chose to contract.                     
 MR. WRIGHT commented he didn't know if it started out with just the           
 district and then went to contracting or if they both can about at            
 the same time.                                                                
 Number 1927                                                                   
 REPRESENTATIVE VEZEY asked if there was an evaluation of which                
 service was more cost effective.                                              
 CO-CHAIR BUNDE commented that unfortunately the representative from           
 the Anchorage School Board had departed, but he recounted that her            
 testimony had been that by providing their own, they set a base and           
 provide competition with the only vendor that provides this service           
 so they can keep the bids down.                                               
 MR. WRIGHT mentioned a study done in the early 1980s that compared            
 the district-operated with the contractors; comparing the rates and           
 the services.  That's when the district-operated rate of                      
 reimbursement was established which was 66.83 percent.  Since then,           
 that has just been carried over.                                              
 REPRESENTATIVE VEZEY inquired 66.83 percent of what.                          
 MR. WRIGHT responded 66.83 percent of what it actually cost them to           
 operate the district-operated program.  It includes the                       
 transportation director, the purchase of the buses, drivers, etc.             
 REPRESENTATIVE VEZEY inquired if that was to equate it to the cost            
 of contracting for the services.                                              
 MR. WRIGHT responded yes, because to contract it is much cheaper              
 than the district operating their own buses.  He added if you look            
 at it on a per student reimbursement on a per bus on a per mile               
 basis, to contract it is always cheaper than what the district can            
 operate it for themselves.  He was aware that a study had just been           
 completed by an accounting firm in Anchorage that compares the two            
 operations; however, that study has not been released.                        
 CO-CHAIR TOOHEY asked if Mr. Wright had any figures available from            
 that study?                                                                   
 MR. WRIGHT responded no, because it hadn't been released yet.                 
 Number 2004                                                                   
 CO-CHAIR BUNDE asked if there were further questions or anyone else           
 wishing to testify.  Hearing none, he closed public testimony.                
 Number 2017                                                                   
 CO-CHAIR TOOHEY offered an amendment to Section 8 to have this Act            
 take effect July 1, 1996.                                                     
 CO-CHAIR BUNDE asked if the department would like to comment on the           
 Number 2039                                                                   
 MR. CROSS said the amendment would change the fiscal note to only             
 include $1.9+ million for FY 97 for pupil transportation.                     
 CO-CHAIR BUNDE inquired if the fiscal note for FY 97 is $1.992                
 million as it stands now.                                                     
 MR. CROSS confirmed that.                                                     
 CO-CHAIR BUNDE asked if there was some possibility that the fiscal            
 note could have gone up, but this amendment would keep it at $1.992           
 MR. CROSS clarified the amendment would eliminate the potential of            
 the current year fiscal impact of $2,050,243.                                 
 Number 2071                                                                   
 REPRESENTATIVE ROBINSON asked Mr. Cross to put it in simple terms -           
 - was it good or bad?                                                         
 MR. CROSS remarked it depends on the point of view.  He said if you           
 believe that the 66.23 percent rate for reimbursement of the school           
 transportation program in Anchorage is unfair and that 100 percent            
 is fair, then they're only getting half-a-loaf and with this                  
 amendment and they're getting it corrected prospectively, but not             
 for this year.  It is predicated on the belief that that                      
 reimbursement is inappropriate and that Anchorage is entitled to a            
 higher rate.                                                                  
 Number 2111                                                                   
 CO-CHAIR BUNDE, speaking to the amendment, agreed he would like to            
 see the 100 percent reimbursement, but in the spirit of compromise            
 we change prospectively and it cuts the fiscal note for this year             
 in half.                                                                      
 CO-CHAIR BUNDE asked if there was any objection to Amendment 1.               
 Hearing none, Amendment 1 was adopted.                                        
 Number 2185                                                                   
 REPRESENTATIVE VEZEY proposed Amendment 2.  As a defender of the              
 private sector, Amendment 2 clarifies that the reimbursement of the           
 transportation costs would be on a daily cost comparison basis                
 rather than a level basis which tests will indicate that was to be            
 the same percentage of total cost.  This amendment would take it              
 back to the basis of if a municipality wishes to provide its own              
 transportation, it will be reimbursed at the lower unit cost                  
 available through the contracting.  He made a motion to adopt                 
 Amendment 2.                                                                  
 CO-CHAIR BUNDE objected to Amendment 2.                                       
 REPRESENTATIVE DAVIS understood Amendment 2 would return to the               
 status quo, as it had been in the past 5-10 years.                            
 Number 2208                                                                   
 MR. WRIGHT responded it would not return to the status quo.  He               
 said currently they are reimbursed on a percentage of their actual            
 cost instead of on a daily rate per bus which is how the contracts            
 are reimbursed.                                                               
 CO-CHAIR BUNDE recalled that Mr. Wright had previously testified              
 that the daily rate of the contractor is unknown at this point, so            
 adopting this amendment would say the district would be reimbursed            
 MR. WRIGHT interjected the department knows what the daily rates              
 are for the contracts, but they don't know what it is for the                 
 district-operated portion.                                                    
 CO-CHAIR BUNDE understood that Mr. Wright had testified that a                
 comparison had just been done and the audit showed the contract               
 daily rates, but not the district rates.  He asked if that was Mr.            
 Wright's testimony?                                                           
 MR. WRIGHT said yes, the contracts are on a daily rate.  The review           
 that was done compared the two operations but he didn't believe it            
 established a daily rate for the district-operated.                           
 Number 2246                                                                   
 REPRESENTATIVE DAVIS recollected the testimony of Ms. Ferrell had             
 been that she felt the costs were getting fairly even, although $2            
 million is not quite too even.                                                
 CO-CHAIR BUNDE pointed out it was important to remember that                  
 currently the Anchorage School District is reimbursed at 66 percent           
 of actual cost; it's not 66 percent of the private operator.  They            
 are not reimbursed at the private level, but rather 66 percent of             
 the actual cost.  He added that it's not sure what 66 percent of              
 the actual cost to the district is compared to the private                    
 Number 2286                                                                   
 REPRESENTATIVE ROBINSON was under the impression that this                    
 amendment brought it back to where it was originally.                         
 MR. WRIGHT commented it's extremely close; much closer than what              
 the first amendment does, but he couldn't say what the impact is of           
 reimbursing the district at the contracted daily rate.                        
 Number 2307                                                                   
 REPRESENTATIVE VEZEY clarified that Amendment 2 simply says that if           
 a public agency wants to compete with the private sector, they can            
 do that.  They will be reimbursed but only at the same cost that we           
 can contract for and receive the service.  He couldn't say how that           
 compares with the existing system but it does say there will not be           
 two unit costs for pupil transportation.                                      
 TAPE 96-44, SIDE B                                                            
 Number 001                                                                    
 REPRESENTATIVE BRICE said, "Considering the fact that currently not           
 fully funding student transportation - at least on our side of the            
 budget, that's still sort of nebulous as to what's happening there,           
 but what this does is it ensures that my district doesn't get                 
 brought down based on the old language.  There's not a transfer of            
 funds -- not as great of a transfer of funds."                                
 MR. WRIGHT said he couldn't answer that at this time because he               
 didn't know what the effect of reimbursing the district is at the             
 same rate as the contractor.  He added it would certainly be less             
 than the $1.9 million indicated on the original fiscal note.                  
 REPRESENTATIVE ROBINSON asked if the existing language was removed            
 on page 1, lines 8-12, would bring it back to the status quo?                 
 MR. WRIGHT responded that removing the original amendment would               
 bring it back to the status quo.  He added the department had met             
 with representatives from the Anchorage School District and have              
 agreed to revisit the issue of what their percent reimbursement is            
 for the district-operated.                                                    
 CO-CHAIR BUNDE remarked that Ms. Ferrell would be returning to give           
 more specific information about Anchorage.  He asked how many                 
 school districts own their own buses.                                         
 MR. WRIGHT guessed about 15 districts operated their own buses, but           
 they are typically 1 or 2 bus operations.  Usually when it gets               
 above that level, districts choose to contract it out.                        
 CO-CHAIR BUNDE asked if these were all small cities or districts?             
 MR. WRIGHT responded yes.                                                     
 CO-CHAIR BUNDE asked if the Fairbanks district owned any of their             
 own buses?                                                                    
 MR. WRIGHT replied no, they contract.                                         
 Number 112                                                                    
 REPRESENTATIVE DAVIS had spoken with the Kenai School District who            
 indicated they have their own in-house busing in Seward.  He                  
 explained the core contract for the central peninsula area is                 
 geographically conducive to a contract where Seward being separated           
 from the central peninsula would boost the contract price per bus             
 because of the distance between the central area.  He didn't know             
 how many buses were involved, but Seward had probably 800-1000                
 students, so there would be a number of buses in Seward.  It was              
 also indicated that the district preferred that because they have             
 something to compare when the contract prices come in.  If they               
 come in under their in-house price, then it is beneficial.  Also,             
 it had been alluded to that Mat-Su had some of their own buses and            
 he assumed probably the same rationale would apply; if there are              
 remote areas that don't fit into the central core, it would                   
 increase the contract price.                                                  
 MR. WRIGHT said Representative Davis was correct in that the Kenai            
 School District does operate the buses in Seward, they also have              
 other contracts through other contractors within the district.  The           
 Seward operation has about eight buses he believed.  He noted that            
 Mat-Su owns their own buses, but they use them for activity trips;            
 they are not reimbursed by the state.  All their state reimbursed             
 to/from school transportation is contracted by Laidlaw.                       
 CO-CHAIR BUNDE announced that Lorraine Ferrell was back and advised           
 her of the discussion of an amendment that would allow                        
 reimbursement only to the daily cost level; in other words to the             
 contracted cost.  He noted that questions had been raised about how           
 that would impact Anchorage, being the biggest owner of their own             
 busing system.                                                                
 Number 214                                                                    
 MS. FERRELL said the Anchorage School District would prefer to have           
 it reimbursed on a per route basis or a daily basis rather than the           
 cost per hour basis.                                                          
 CO-CHAIR BUNDE noted it would be on a daily basis, but what it                
 amounts to is that Anchorage would get reimbursed for the amount              
 they pay the private contractor Laidlaw, and not for the amount it            
 costs the district to run their buses.                                        
 MS. FERRELL said the Anchorage School District would not agree with           
 that amendment.                                                               
 CO-CHAIR BUNDE remarked he assumed that, but he was trying to get             
 an idea of the amount of the impact.                                          
 MS. FERRELL said it would take $1.9 million to bring it up to                 
 CO-CHAIR BUNDE stated this was different and explained that the               
 Anchorage School District gets reimbursed at 66 percent now and it            
 would take $1.9 million to bring that up to 100 percent.  He said             
 what we are doing is comparing now the cost of the 100 percent cost           
 of Anchorage owned buses as compared to the Laidlaw buses.  This              
 amendment would reimburse the Anchorage School District at the rate           
 paid to Laidlaw per day.  He asked Ms. Ferrell if she had an idea             
 of what it costs per day to run an Anchorage bus as opposed to what           
 it costs per day to run a Laidlaw bus.                                        
 MS. FERRELL thought there were individuals in the audience that               
 could answer that question.                                                   
 CO-CHAIR BUNDE commented that no one has been able to provide the             
 answer.  The bottom line is it costs the Anchorage School District            
 more to run the district-owned buses per day than it costs to run             
 a Laidlaw bus per day.  He noted that Ms. Ferrell had testified               
 earlier the district maintained the city portion in order to                  
 provide competition to Laidlaw, because she felt that without                 
 competition Laidlaw prices would go up.                                       
 MS. FERRELL said yes, there would be a 15 percent increase                    
 immediately in the cost of busing if the school district's busing             
 was eliminated.                                                               
 CO-CHAIR BUNDE inquired if that was 15 percent not just because               
 there would have to be more Laidlaw buses.                                    
 MS. FERRELL interjected it would be an overall increase of 15                 
 percent to the cost of busing because the competition has gone                
 away.  There would then be a sole source or a monopoly.                       
 Number 334                                                                    
 REPRESENTATIVE VEZEY offered that he had been around the public               
 procurement process for approximately 24 years and the competitive            
 marketplace will step in and will fill the gap.  He noted if there            
 was any validity to what was being said, the federal government               
 would build its own airplanes just to keep contractors in line, but           
 they learned a long time ago not to try to compete with the private           
 sector.  The competition with the opportunity to make a dollar is             
 a far stronger incentive than anything the district can do by                 
 threatening them with a couple of buses that probably costs the               
 district 50 percent more per hour to operate.                                 
 MS. FERRELL believed there was a rather unique situation in Alaska            
 in that Laidlaw has systematically bought out all the other bus               
 companies, so she didn't think there was much chance another bus              
 company would come in and establish a competitive market.                     
 REPRESENTATIVE VEZEY said the marketplace seems to belie that fact.           
 Laidlaw has bought out other companies simply because they have               
 underbid them.  He commented there was no shortage of people                  
 bidding on busing contracts in Fairbanks.  The incentive behind the           
 profit motive cannot be underestimated; it is tremendous.                     
 CO-CHAIR TOOHEY asked if Ms. Ferrell had any idea of the                      
 approximate amount of the annual contract for Laidlaw?                        
 MS. FERRELL said she didn't have that figure available at this                
 time.  She offered to provide the information at a later date.                
 REPRESENTATIVE DAVIS agreed with Representative Vezey regarding               
 competition.  He made reference to the Kenai School District and              
 said a couple of years ago Mayflower came in and outbid Laidlaw,              
 and Laidlaw eventually bought them out.  He didn't think there were           
 any laws that dictate that Laidlaw will be the only bidder in                 
 Anchorage, and perhaps in a couple years there will be competition.           
 Number 485                                                                    
 CO-CHAIR BUNDE noted Amendment 2 was before the committee and an              
 objection had been raised.  A roll call vote was taken.  Voting in            
 favor to adopt Amendment 2 were Representatives Vezey, Davis,                 
 Brice, Robinson and Toohey.  Voting against Amendment 2 were                  
 Representatives Rokeberg and Bunde.  Co-Chair Bunde announced CSSB
 244(FIN) was tabled.                                                          

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