Legislature(1997 - 1998)

02/24/1998 08:40 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
 SENATE BILL NO. 36                                                            
"An Act relating to transportation of public school                            
students; relating to school construction grants;                              
relating to the public school foundation program and to                        
local aid for education; and providing for an effective                        
date."                                                                         
                                                                               
                                                                               
Co-chair Sharp convened the meeting and reviewed the                           
expected schedule.  He did note that SB 173, Charitable                        
Gaming, would be held over until Thursday morning at 8:30                      
a.m.  Co-chair Pearce would be chairing the afternoon                          
meeting on Results-based Budgeting beginning at 4:30 p.m.                      
At 6:00 p.m. Thursday evening will begin public testimony on                   
SB 36, continuing for three hours, and will continue daily                     
until everyone has been given an opportunity to testify, up                    
through Saturday.  He said Senator Phillips would introduce                    
a new CS work draft and the drafter would go through it                        
section by section for the benefit of committee members and                    
the public.  Then the bill will be set aside so the                            
Department of Education can complete their runs on it as to                    
how the bill will affect the school districts throughout the                   
State and to do the fiscal notes.  After public testimony is                   
complete he said the committee would work on amendments and                    
have further discussions which probably would be on Tuesday                    
at 8:30 a.m.                                                                   
                                                                               
Senator Adams asked when the public could have their copy of                   
the new drafted CS.  Co-chair Sharp said it would be                           
available as soon as the committee adopted it for work                         
purposes, and further it would be available electronically.                    
                                                                               
Co-chair Sharp said copies were being made for the public to                   
follow along presently.                                                        
                                                                               
Senator Torgerson asked about the time limit on public                         
testimony or if it would be the regular three minutes.  Co-                    
chair Sharp said it was publicized for three minute                            
testimony but he could go a little longer for school                           
district testimony.                                                            
                                                                               
Co-chair Sharp cautioned the audience to be more orderly so                    
the committee could begin work on the bill.  In further                        
response to Senator Torgerson he said he would be somewhat                     
lenient in the taking of public testimony but he wanted                        
everyone to be able to testify and therefore would try to                      
hold to the three minutes limit so it would be a dependable                    
schedule.                                                                      
                                                                               
Senator Phillips, representing Senate District "L",                            
introduced proposed CSSB 36, which is an accumulation of                       
various bills.  He noted one correction to the work draft on                   
page 3, line 2, delete "three" and insert "four" so it would                   
read "...four mills...".  Senator Adams indicated this was a                   
bad change.                                                                    
                                                                               
Co-chair Sharp further reiterated that there would be no                       
teleconference testimony taken at this time.  This would be                    
"listen only".                                                                 
                                                                               
Senator Phillips continued and said that the Department of                     
Education would come up with its own analysis and hopefully                    
the numbers would be available to the committee and the                        
public by Thursday morning.  Then we can see the effects of                    
the bill on the various fifty-three school districts around                    
the State.  Mike Ford is available to review the bill                          
section by section                                                             
                                                                               
Senator Phillips said they had tried to accomplish three                       
main principles:  simplicity, equity and accountability.                       
They believe they reached those goals.  First, funding was                     
allocated per student rather than instructional unit value.                    
Second, the size adjustment in the formula was based on                        
individual schools instead of "funding" community.  Third,                     
the adjustment for geographical cost differences is based on                   
the 1998 McDowell Study of the actual cost of operating                        
schools, instead of household cost of living.  Number four                     
and five points are based on the equity equation.  Fourth,                     
requires local contribution from municipal districts at four                   
mill value, or one hundred percent of the district's State                     
support.  He noted that currently the limit is thirty-five                     
percent.  Fifth, the required local contributions for the                      
REAA's was set at the equivalent of four percent employment                    
tax.  This referred to those areas of the State that were                      
not contributing locally would now contribute something                        
towards the cost of education.  Sixth, the Regional                            
Educational Service Areas, or more commonly called REAA's                      
were established using the boundary proposals of the model                     
borough in the 1995 local boundary commission "model                           
boroughs boundaries report".  Seventh, category funding is                     
set at twenty percent State funding plus funding for                           
intensive needs.  The last point he made was that funding                      
for Statewide correspondence studies programs offered by the                   
districts was set at point six five times the ADM, same as                     
the State operated program.  He emphasized the three basic                     
principals that were being worked toward; simplicity, equity                   
and accountability.  It is believed that this bill achieves                    
those goals and it is understood that there may also be some                   
changes through the committee process.  The bill is a                          
starting point, however complicated; therefore making it                       
also complicated for the Legislature to deal with it.  It                      
was a good faith attempt at rewriting the foundation                           
formula, which he believed, along with others, was broken                      
and needed to be fixed.                                                        
                                                                               
Senator Adams gave the minority position regarding this bill                   
which he only received this morning.  He said one of the                       
problems with the McDowell Study was that it was flawed.                       
There were approximately ten disclaimers, making something                     
wrong with the study, and in using that study the bill was                     
considered flawed.  This bill would pit rural areas against                    
urban areas.  The study suggested shifts of education                          
resources from rural to urban.  There the economic tax base                    
and scales is good for that area.  Basically if the study is                   
looked at it relies on misinterpretation of the laws that                      
are presently on the books.  Also, there was the setting of                    
financial targets regardless of education needs and the                        
reality of education delivery system in Alaska.  The                           
particular study done by LB&A predetermines direction so the                   
study would favour urban over rural Alaska.  The public                        
needs to look at the study and then submit a list of                           
questions with regards to his statement just made and then                     
they can be responded to, whether he is correct or not.  He                    
noted Senator Phillips referral to simplicity, equality and                    
accountability.  Basically it has been forgotten the oath of                   
office that was taken.  Article XII, section 8, reads that                     
"The Legislature shall, by general law, establish and                          
maintain a system of public schools open to all children of                    
Alaska and may provide for other public education."  The                       
Legislature is summonsed to provide free public education.                     
Looking at, in particular section 14.17.410 (2), money is                      
taken away from a school district, which goes against the                      
grain of the Constitution.  That is not right.  If it is                       
done against a particular school district, which one is                        
next?  By the adoption of a committee substitute lawsuits                      
are being encouraged against the Legislature and the State                     
of Alaska.  Simplicity, equality and accountability are not                    
being reached in this bill.  However, it is a start.                           
Senator Adams continued, referring to the foundation task                      
force that was set up, it was not said that money should be                    
taken from one district and put into another.  Rather, it                      
was said there was inadequate funding available.  Sufficient                   
funds are available, for instance, from cigarette taxes.  He                   
continued his opposition this legislation but said he would                    
be happy to work with the chairman in coming up with                           
appropriate legislation.                                                       
                                                                               
Co-chair Sharp thanked Senator Adams.                                          
                                                                               
Mike Ford, Attorney, Legal Services, Legislative Affairs                       
Agency was invited to join the committee.  He said he would                    
give a brief overview of CSSB 36 (FIN) "F" and the                             
provisions contained therein.                                                  
                                                                               
Section 1:  Purpose section                                                    
                                                                               
Section 1:  Rewrite of the foundation formula                                  
                                                                               
14.17.300:  Establishes public school account and                              
provides the money can only be used for certain                                
purposes, public schools, community schools programs or                        
centralized correspondence study.                                              
                                                                               
14.17.400:  Provision that provides for funding for                            
school districts and specifies that funding is the                             
amount calculated under section 14.17.410.  The section                        
also provides for a pro rata reduction in State funding                        
if the amount appropriated is insufficient to meet                             
amounts authorized under this section.                                         
                                                                               
14.17.410:  Actual funding formula.  It provides that a                        
district is eligible for public school funding in an                           
amount equal to the sum calculated under (b) and (c) of                        
this section.  Subsection (b) breaks down what actual                          
public school funding consists of.  It consists of a                           
State share and local contribution and it provides for                         
how we determine what those two parts are.  The State                          
share actually consists of State support less local                            
contribution and ninety percent of Federal funds.                              
Following through subsection (b)(1) it contains the                            
elements necessary to calculate what each district will                        
receive in State funding.  Subsection (b)(2) is the                            
local contribution from city and borough school                                
districts, a four mill levy on taxable real and                                
personal property.  Subsection (b)(3) is a local                               
contribution from REAA's and that is the equivalent of                         
a four percent employment tax.  Subsection (c) is the                          
optional local contribution for city and boroughs.                             
That is set at an equivalent of a two mill tax levy or                         
twenty-three percent of the State share, whichever is                          
greater.  Subsection (d) describes the local                                   
contribution required of an REAA and what that consists                        
of.  That is an equivalent tax on services performed in                        
REAA's.  Subsection (e) provides that public school                            
funding cannot be provided to cities and boroughs who                          
don't make their local contribution.  Subsection (f)                           
provides similar provisions for REAA's.  If they fail                          
to make the local contribution then their State share                          
is reduced by the amount they fail to contribute.                              
                                                                               
14.17.420:  Funding provision for special needs and                            
intensive services funding.  He noted there was a blank                        
on line twenty-five, page four, and that was because it                        
had not been established what the number should be.                            
(a)(1) is special needs funding and (a)(2) is intensive                        
services funding.                                                              
                                                                               
14.17.430:  Funding for correspondence study.  The                             
provision breaks down correspondence into three                                
components:  State centralized correspondence study                            
program, Statewide correspondence study program and a                          
district correspondence study program.  It was all                             
under ADM funding.                                                             
                                                                               
14.17.440:  State funding for State boarding schools.                          
                                                                               
14.17.450:  New school size factor.                                            
                                                                               
14.17.460:  District cost factors.  This section also                          
required the department to monitor the cost factors and                        
to come back to the Legislature with proposed new cost                         
factors beginning in January 2001.                                             
                                                                               
14.17.470:  (contains a missing element)  It will be                           
the base student allocation, formerly known as the                             
instructional unit value.  This will be a key element                          
of the formula.                                                                
                                                                               
14.17.500:  Contains provisions that are in existing                           
law that should have been rewritten.  They are                                 
substantiatively the same as existing provisions of                            
law.                                                                           
                                                                               
14.17.500:  Concerns student count estimates when the                          
data is required to be reported to the department.                             
                                                                               
14.17.505:  Concerns fund balances limiting the                                
accumulation of fiscal year end fund balances by school                        
districts.                                                                     
                                                                               
14.17.510:  Provision which requires Community and                             
Regional Affairs to assess values in city and borough                          
districts.                                                                     
                                                                               
14.17.520:  Authority for the department in                                    
consultation with the Department of Labor to adopt                             
regulations necessary to calculate, determine, collect                         
or enforce the local contribution from REAA's.                                 
                                                                               
14.17.530:  Cap on administrative expenditures by                              
school districts.  The cap is $950/ADM multiplied by                           
the district cost factor.  It also provides a mechanism                        
for waiver of that cap at the discretion of the                                
commissioner or the board.                                                     
                                                                               
14.17.600:  Establishes student counting periods.                              
Those periods in which a district would count are                              
actual attendance and would report it to the department                        
for purposes of calculating how much State funding they                        
are entitled to.                                                               
                                                                               
14.17.610:  Established provisions for distribution of                         
State funding.  These two provisions are similar to                            
existing law.                                                                  
                                                                               
14.17.900:  Provides the Chapter 14.17 is not a debt of                        
the State.  It requires each district to operate under                         
a balanced budget and again provides for pro rata                              
reduction if amounts are insufficiently appropriated.                          
                                                                               
14.17.910:  Establishes restrictions concerning receipt                        
and expenditure of district money; requiring each                              
district to keep complete financial records, providing                         
that the public school funding is for general                                  
operational purposes of the district.                                          
                                                                               
14.17.920:  Authority for the department to adopt                              
regulations that are necessary to implement the                                
chapter.                                                                       
                                                                               
14.17.990:  Definition section.                                                
                                                                               
Section 3:  Technical amendment, as is sections 4, 5, 6                        
and 7.                                                                         
                                                                               
Section 8:  Provision requiring the reorganization of                          
REAA's into areas that are identified in the local                             
boundary commission report, entitled:  "Model Borough                          
Boundaries".   Actually, they are reorganized into                             
educational service areas and an educational service                           
area will constitute a new REAA.                                               
                                                                               
Section 9:  Adds additional authority to an REAA school                        
board and allows them by resolution to request                                 
organization into a municipality.                                              
                                                                               
Sections 10, 11, 12 and 13:  Technical amendments.                             
                                                                               
Section 14:  Changes existing law to allow a school                            
district to implement a ten-year teacher lay-off plan                          
if State support decreases in a fiscal year by three                           
percent or more or from one fiscal year to the next by                         
three percent or more.                                                         
                                                                               
Section 15:  Technical amendment.                                              
                                                                               
Section 16:  Amends existing law on when a district has                        
to provide transportation for exceptional children to                          
qualify that to transportation has to be provided to                           
all children in the district.                                                  
                                                                               
Section 17:  Adds new language regarding special                               
education service agency to allow a pro rata reduction                         
in funding if amounts appropriated are insufficient.                           
                                                                               
Sections 18, 19, 20, 21 and 22:  Technical amendments.                         
                                                                               
Section 23:  Amends a provision that concerns child                            
care facility grants.  Because there is no longer                              
instructional unit allotments the child care grant                             
provision is now tied into the same percentage as                              
funding under 14.17.460.                                                       
                                                                               
Section 24:  Repealers necessary to implement the bill.                        
                                                                               
Section 25:  Delayed repealer concerning reorganization                        
of REAA's.                                                                     
                                                                               
Section 26:  Transitional funding provision.  It                               
basically holds districts harmless for the upcoming FY                         
year 1998.  In 1999 it reduces the hold harmless to                            
fifty percent; in the third year you're into the new                           
system.                                                                        
                                                                               
Section 27:  Deals with regulations providing that                             
existing regulations are consistent and remain in                              
effect.  Other regulations are nulled.  It also                                
requires the Department of Education to define by                              
regulation the term "school".  And that term, of                               
course, is essential to many of the elements of the                            
formula.                                                                       
                                                                               
Section 28:  Provides a two year transition period for                         
the local contributions from REAA's.  First year that                          
it takes effect would be a one percent contribution.                           
The second year would be a two percent and then the                            
third transition year would go to the full percent.                            
                                                                               
Section 29:  Specifies when the first new proposed cost                        
factors would be required to be submitted to the                               
Legislature.                                                                   
                                                                               
Section 30:  Transition section for the base student                           
allocation.  Those numbers are not available yet, but                          
they will be anticipated to be a two year transition                           
process through the full base student allocation.                              
                                                                               
Section 31:  Requires for purposes of 14.17.450, which                         
is calculation of school funding elements, that a                              
school smaller than ten ADM is calculated into the                             
largest school in the district.                                                
                                                                               
Section 32:  Provision that requires new REAA school                           
board elections once the REAA's have been reorganized.                         
                                                                               
Sections 33 and 34:  Effective dates.                                          
                                                                               
Senator Adams asked Mr. Ford to go back to page three and                      
explain (2) and (3) again.  Basically, (2), the way it's                       
read is not to exceed one hundred percent.  He asked if this                   
was correct.                                                                   
                                                                               
Mr. Ford responded that under paragraph two, lines one                         
through six, if a city or borough school district did not                      
make a contribution then they potentially are not going to                     
get their support because of subsection (e), which says no                     
support if contribution is not made.  Under paragraph three,                   
which is the REAA contribution, if they fail to make their                     
contribution, then under subsection (f) the amount by which                    
they fail to contribute is taken out of their State share.                     
                                                                               
Senator Adams asked if the State share was equivalent to                       
four percent employment tax on people in unorganized areas?                    
                                                                               
Mr. Ford indicated that was correct.                                           
                                                                               
Senator Adams said they were not segregating but rather tax                    
an area without the rest of the State?  To discriminate?                       
                                                                               
Mr. Ford said the bill provided for local contributions from                   
all districts, cities and boroughs as well as REAA's.  The                     
contribution in an REAA is the equivalent of a four percent                    
employment tax.                                                                
                                                                               
Senator Adams asked if in one of his rural villages that                       
isn't an organized borough and one makes twelve thousand                       
dollars they would have to pay four percent of that money?                     
                                                                               
Mr. Ford said that if it met the definition of compensation                    
for services as is calculated is how one will be paying.                       
                                                                               
Co-chair Sharp asked if there were any more questions for                      
Mr. Ford.                                                                      
                                                                               
Senator Phillips MOVED CSSB 36 draft as a working document.                    
Senator Adams objected.                                                        
                                                                               
Senator Adams said he objected to this committee substitute                    
because rural Alaska, including the North Slope Borough,                       
already bears the impact of resource development of its oil,                   
timber and fish.  While most of the wealth flows from this                     
area into the general fund and then into the urban areas,                      
what really is happening is an attempt to reallocate funding                   
or redistribute tax revenues from one community to another's                   
school district.  That is not the answer to this                               
legislation.  He said that robbing one school district to                      
serve another is wrong.  He asked what other school district                   
would be next.  Equity was mentioned in the presentation.                      
Measuring this on a per capita basis is heavily                                
discriminating against rural Alaska.  Local rural areas and                    
rural governments should be expected to pay for urban                          
population group.  Rural Alaska also has a high delivery of                    
education and needs.  Those that he represents in rural                        
Alaska do not need to be taxed the four percent tax.                           
Basically, adequate funding within the State coffers to take                   
care of areas that have overcrowding and over enrollment,                      
such as in the urban centers.  Rural Alaska would like to                      
help out, but one school district should not be pitted                         
against another.  This does not do what the majority of                        
people want to do as far as simplicity, equality and                           
accountability.  He noted for the record that his objection                    
was maintained.                                                                
                                                                               
Co-chair Sharp asked the roll call be taken and the                            
Secretary did so, showing a vote of 5 - 1  (Parnell,                           
Phillips, Torgerson, Pearce, Sharp; yea) (Adams; nay)                          
(Donley; absent) adopting  CSSB 36 (FIN) "F" version as the                    
working document before the committee.  Co-chair Sharp said                    
his intent was to set the bill aside until the committee had                   
actual figures to work with to analyze to see the effect of                    
the legislation.  The runs would be made available upon                        
request.  Senator Phillips asked that the runs be made                         
available to all LIO offices around the State as well.  Co-                    
chair Sharp concurred.                                                         
                                                                               
Richard Cross, Deputy Commissioner, Department of Education                    
was invited to join the committee.  He said the runs would                     
be made available via electronic transfer as soon as                           
possible.  He said they hoped to work into this evening and                    
have runs available by Thursday.  However, they needed some                    
additional guidance from the committee because there were                      
blanks in the bill.  He referred to page four, line twenty-                    
five there being a blank for the ADM multiplier.  The base                     
student allocation specified on page eight, line nine is                       
blank.  The transitional allocation on page twenty-one,                        
lines twenty-two and twenty-three are also blank.  If the                      
values are to be determined and if it is the intent of the                     
committee they must have some guidance of what the total                       
amount of spending that is intended to be allocated.                           
Otherwise they will show up Thursday with no numbers.                          
                                                                               
Co-chair Sharp indicated that the totals would be gotten                       
from Senator Phillips and Senator Wilken.                                      
                                                                               
Senator Phillips asked if the question was on the amount of                    
funding for this year.  Mr. Cross responded that if they                       
were being asked to back in numbers that had been done                         
before, however, they needed the amount of funding that is                     
going to be provided to the formula in order to accomplish                     
this.  Also, he received the bill only twenty minutes ago                      
and they may have some pretty significant questions about                      
how the transition language is supposed to work.  He asked                     
if staff would be made available to answer these questions                     
while reading this language so they would be sure of the                       
intent as opposed to making up their own theory.                               
                                                                               
Co-chair Sharp indicated that was corrected and asked Mr.                      
Cross and his staff to work in conjunction with Senator                        
Phillips and his staff to obtain the necessary information.                    
                                                                               
Senator Phillips requested an at ease.                                         
                                                                               
Senator Adams said it was important that the total amount                      
for education be made clear for this year.  Senator Phillips                   
indicated they would have an answer.  Senator Adams further                    
said there had been runs made to make the bill and those                       
favoured the urban areas.                                                      
                                                                               
Co-chair Sharp at approximately 9:30 a.m. said there would                     
be approximately a two minute at-ease.   He called the                         
Finance Committee back to order at approximately 9:45 a.m.                     
                                                                               
Richard Cross, Deputy Commissioner, Department of Education                    
was again invited to join the committee.  Senator Sharp                        
indicated to Mr. Cross that they would like them to use the                    
FY '99 adjusted numbers from the Governor's budget as a base                   
and go from there.  Mr. Cross reiterated his understanding.                    
Senator Phillips advised the amount was $631,677,700. and                      
that it would be used for now.                                                 
                                                                               
Senator Adams said that amount just as a base did not                          
include public transportation.  Senator Phillips concurred.                    
He said it also did not contain the single sites.                              
                                                                               
Senator Phillips asked Mr. Cross if that was enough                            
information to go by and Mr. Cross said he believed it was                     
sufficient.                                                                    
                                                                               
Co-chair Sharp at this point SET ASIDE CSSB 36 (FIN) and                       
said it would be taken up again at 6:30 p.m. on Thursday for                   
public testimony.  After a short pause on record Co-chair                      
Sharp indicated the committee would take up SCR 19,                            
Prototype School Design.                                                       
                                                                               

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