Legislature(1995 - 1996)
04/23/1996 03:04 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 involved. 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 1. 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 transportation..." 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 met? 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 $2,050,000. 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 programs. 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 existence. 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 state. 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 up. 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 standard. 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 counted. 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 housed. 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 operates. 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 amendment. 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 million. 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 at... 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 operator. 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 parity. 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.