Legislature(1999 - 2000)

04/12/2000 06:11 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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SENATE BILL NO. 290                                                                                                             
"An Act relating to state funding for transportation                                                                            
of public school students; and providing for an                                                                                 
effective date."                                                                                                                
                                                                                                                                
                                                                                                                                
PATRICK HICKEY testified via teleconference from Kenai to                                                                       
address Amendment #1, increasing the minimum percentage of                                                                      
school operating expenses to 80 percent from 70 percent,                                                                        
which was not offered. He requested that the Committee give                                                                     
the Association of School District Officials the                                                                                
opportunity to divide the "section 400" accounting                                                                              
component to reflect the shared classroom and                                                                                   
administrative duties of school principals.                                                                                     
                                                                                                                                
DAVE JONES, Director of Finance, Kodiak School District                                                                         
testified via teleconference from Kodiak to address his                                                                         
concerns with the fifty-fifty clause for reimbursement of                                                                       
increased pupil transportation costs. He said the Kodiak                                                                        
School District was a good example of why this would not                                                                        
work. He spoke about the minimum wage required to pay                                                                           
school bus drivers. He stressed the only way the district                                                                       
could cover the costs would be to take money from the                                                                           
classroom, which would be contrary to the intent of the                                                                         
formula funding program. He described the school district's                                                                     
efforts along with other districts to encourage competition                                                                     
to bring the costs down.                                                                                                        
                                                                                                                                
ELIZABETH BACOM, President, Petersburg School Board,                                                                            
testified via teleconference from Petersburg about her                                                                          
understanding that this legislation would apply to the Cost                                                                     
of Living Allowance (COLA) portion of the pupil                                                                                 
transportation contracts. She spoke of the hardship of                                                                          
declining funding due to declining enrollment and how this                                                                      
additional funding reduction would force the district to                                                                        
take money from the classrooms.                                                                                                 
                                                                                                                                
DARRYL HARGRAVES, Executive Director, Alaska Council for                                                                        
School Administrators testified in Juneau about the matter                                                                      
of fairness across the state. He remarked that most of the                                                                      
Committee members represented large school districts and                                                                        
that other smaller communities would have difficulties                                                                          
meeting the matching fund requirements. He stressed that                                                                        
the bus driver contracts were strictly negotiated following                                                                     
many requirements imposed by the Board of Education. He                                                                         
talked about the complexities of the contracts and the                                                                          
required routes.                                                                                                                
                                                                                                                                
SENATOR ROBIN TAYLOR thanked the Committee for including                                                                        
Section 3 in the bill. [Description forthcoming.]                                                                               
                                                                                                                                
Senator Wilken moved to adopt CS SB 290, 1-LS1555\N as a                                                                        
workdraft.                                                                                                                      
                                                                                                                                
Co-Chair Torgerson objected for an explanation.                                                                                 
                                                                                                                                
Senator Wilken detailed the changes made to the bill in the                                                                     
committee substitute as follows.                                                                                                
                                                                                                                                
Section 2 - provides that school district pupil                                                                                 
transportation costs eligible for state reimbursement                                                                           
are subject for following adjustments:                                                                                          
 (1) sets the funding level received by the school                                                                              
district for student transportation in FY 01 is                                                                                 
considered the limit for future reimbursement.                                                                                  
 (2) stipulates that costs resulting from new                                                                                   
school facilities, increased enrollment or imposed by                                                                           
state or federal law are excluded from the                                                                                      
reimbursement calculation                                                                                                       
 (3) allows the reimbursement limit to increase                                                                                 
each fiscal year by four percent or the Anchorage                                                                               
Consumer Price Index (CPU), whichever is less.                                                                                  
 (4) sets out the pupil transportation cost excess                                                                              
of the limit, shall be reimbursable by 50 percent.                                                                              
                                                                                                                                
Section 3 - addresses the 70-30 percent split of                                                                                
operating versus administrative expenditure issue. It                                                                           
clarifies the definition of the instructional                                                                                   
component for the purpose of determining the school                                                                             
district's operating budget's minimum expenditure for                                                                           
instruction. It sets out that expenditures for school                                                                           
administration, principals, assistant principals or                                                                             
other assistants employed to supervise administrative                                                                           
operations of a school bay not be considered                                                                                    
instructional expenditures.                                                                                                     
                                                                                                                                
Section 4 - lowers the Average Daily Membership (ADM)                                                                           
threshold upon which a school district can count a                                                                              
facility as a separate school from 750 to 450.                                                                                  
                                                                                                                                
Sections 5 and 6 - set out the effective dates                                                                                  
                                                                                                                                
Senator Phillips asked which communities are allowed under                                                                      
the provisions of Section 4.                                                                                                    
                                                                                                                                
EDDY JEANS, Manager, School Finance and Facilities Section,                                                                     
Education Support Services, Department of Education and                                                                         
Early Development, answered that Section 4 would apply to                                                                       
Delta Junction/Greely, Petersburg and Wrangell school                                                                           
districts.                                                                                                                      
                                                                                                                                
Senator Phillips asked if the legislature was not the                                                                           
"assembly" for delta junction                                                                                                   
                                                                                                                                
Mr. Jeans responded that he believed in essence, that was                                                                       
correct.                                                                                                                        
                                                                                                                                
Senator Phillips asked why the legislature could therefore                                                                      
not mandate that community to form its own borough by                                                                           
making school funding a contingency.                                                                                            
                                                                                                                                
Mr. Jeans responded that AS 14.17.905. Facilities                                                                               
Constituting a School., applies to school districts whether                                                                     
they are a municipality or a Rural Education Attendance                                                                         
Area (REAA). He stated that Section 4 of the committee                                                                          
substitute therefore establishes a threshold of how the                                                                         
department can determine how communities can make school-                                                                       
size adjustments.                                                                                                               
                                                                                                                                
Senator Phillips repeated his question of what was                                                                              
preventing the legislature from mandating Delta Junction to                                                                     
form a borough.                                                                                                                 
                                                                                                                                
Co-Chair Torgerson said Mr. Jeans was not the person to                                                                         
address that question. Co-Chair Torgerson stressed that                                                                         
certainly the legislature had the power to mandate                                                                              
boroughs.                                                                                                                       
                                                                                                                                
Senator Phillips said he had concerns with Petersburg and                                                                       
Wrangell paying for the services and Delta Junction not                                                                         
paying.                                                                                                                         
                                                                                                                                
Co-Chair Torgerson remarked he had concerns with the entire                                                                     
Section 4.                                                                                                                      
                                                                                                                                
Co-Chair Parnell asked if Delta Junction/Greely is the                                                                          
first unorganized area that would qualify for funding under                                                                     
this section.                                                                                                                   
                                                                                                                                
Mr. Jeans replied there were other REAA communities that                                                                        
would be affected by the Section 4 clause.                                                                                      
                                                                                                                                
Co-Chair Parnell commented that this was a much bigger                                                                          
issue than just this one school.                                                                                                
                                                                                                                                
Senator Adams addressed the language in Section 2 (4),                                                                          
"only 50 percent of these costs reimbursable under this                                                                         
section that are in excess of the sum calculated under (1)                                                                      
- (3) of this subsection shall be reimbursed to a school                                                                        
district." He asked if this bill increased the "floor" of                                                                       
pupil transportation by reviewing the CPI, which is not                                                                         
used in the foundation formula. He wanted to know if the                                                                        
differences had been calculated.                                                                                                
                                                                                                                                
Senator Wilken answered that figures had not been                                                                               
calculated.                                                                                                                     
                                                                                                                                
Senator Adams asked if therefore the increases were                                                                             
unknown.                                                                                                                        
                                                                                                                                
Senator Wilken replied that the floor would be the amount                                                                       
set in the FY 00 budget, which may change with the FY 01                                                                        
budget if the requested $5 million increase is funded.                                                                          
                                                                                                                                
Senator Adams wanted to see the figures because he thought                                                                      
the costs could be higher.                                                                                                      
                                                                                                                                
Senator Adams then asked if Section 3 applies to rural                                                                          
districts where some principals not only run the school but                                                                     
also teach courses.                                                                                                             
                                                                                                                                
Senator Wilken shared that there is a formula the                                                                               
department can use for small school districts to classify                                                                       
the principal as a working teacher. However, he said                                                                            
schools with more than 50 students would not qualify for                                                                        
this consideration because the principal or assistant is                                                                        
responsible for managing the school.                                                                                            
                                                                                                                                
Senator Adams spoke of fair and equitable funding for                                                                           
students. He noted Amendment #2 of the previous committee                                                                       
substitute and Amendment #6 for the current version, both                                                                       
of which he sponsored. These amendments he explained,                                                                           
address the issue that rural school districts receive only                                                                      
60 cents on the dollar. He referred to the McDowell study                                                                       
that showed teachers in rural districts were paid                                                                               
differently because of their high cost of living. He wanted                                                                     
the Committee to consider                                                                                                       
                                                                                                                                
Senator Wilken replied that he had not considered the first                                                                     
amendment when drafting this committee substitute and had                                                                       
only just seen the second.                                                                                                      
                                                                                                                                
Co-Chair Torgerson asked if the department had calculated                                                                       
the impact of Section 4 on the fiscal note.                                                                                     
                                                                                                                                
Mr. Jeans had and said the added cost would be                                                                                  
approximately $1,009,800. He noted that the department                                                                          
would be opposed to the changes in the committee substitute                                                                     
because of the requirement of SB 36 to evaluate the                                                                             
effectiveness of that bill and report back to the                                                                               
legislature with recommendations in 2001. Constant changes                                                                      
to SB 36 would make the assessments difficult, he asserted.                                                                     
                                                                                                                                
Senator Adams asked what the cost would be of the proposed                                                                      
Amendment #6 to "stop the eroding floor" and whether the                                                                        
department supports or opposes that amendment.                                                                                  
                                                                                                                                
Mr. Jeans replied that the erosion of the floor went from                                                                       
approximately $17 million in FY 99 to $15 million in 2000.                                                                      
The overall fiscal impact, he said would be the $15 million                                                                     
on the floor at this time. He said it would be hard to                                                                          
project how long it would take for that full amount to                                                                          
erode.                                                                                                                          
                                                                                                                                
In response to the question on the department's position on                                                                     
the amendment, Mr. Jeans repeated that the department would                                                                     
be opposed to any changes to the foundation funding formula                                                                     
as set by SB 36.                                                                                                                
                                                                                                                                
Senator Adams objected to the adoption of the committee                                                                         
substitute on two points. The first is the unknown costs of                                                                     
Section 2, and the second is the absence of the provisions                                                                      
of Amendment #6.                                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Green, Senator Donley, Senator Leman,                                                                         
Senator Wilken, Co-Chair Parnell,                                                                                               
                                                                                                                                
OPPOSED: Senator P. Kelly, Senator Phillips, Senator Adams,                                                                     
and Co-Chair Torgerson                                                                                                          
                                                                                                                                
The motion PASSED (5-4)                                                                                                         
                                                                                                                                
The committee substitute version "N" was adopted as a                                                                           
workdraft.                                                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair Torgerson established that the proposed amendments                                                                     
would not be offered. [Copies on file.]                                                                                         
                                                                                                                                
AT EASE                                                                                                                         
                                                                                                                                
Amendment #5: This amendment deletes, "principals" from                                                                         
page 2 line 21 of the committee substitute. The amended                                                                         
language in Section 3 reads as follows.                                                                                         
                                                                                                                                
 (1) "instructional component" means [INCLUDES]                                                                                 
expenditures for teachers and [FOR] pupil support                                                                               
services, but does not include expenditures for school                                                                          
administration or for assistant principals, or other                                                                            
assistants employed to generally supervise                                                                                      
administrative operations of a school;                                                                                          
                                                                                                                                
New Text Underlined [DELETED TEXT BRACKETED]                                                                                    
                                                                                                                                
Senator Green moved for adoption. Co-Chair Torgerson                                                                            
objected.                                                                                                                       
                                                                                                                                
Senator Green spoke to earlier discussions regarding the                                                                        
need for classroom supervisors to provide assessment on the                                                                     
teacher performance in the classroom. She stressed that if                                                                      
a principal position was removed she thought the progress                                                                       
of improved performance would go backward. While she did                                                                        
not think 100 percent of the principal salary should go to                                                                      
instruction, she thought that the portion of time spent on                                                                      
instructional duties should be accounted for accordingly.                                                                       
                                                                                                                                
Co-Chair Torgerson replied this was the reason for the 70-                                                                      
30 rule. He stated that this provision changed the intent                                                                       
back to the original SB 36 rather than the recent Board of                                                                      
Education regulation. He warned that if the percentages                                                                         
were constantly changed, the board would be unable to                                                                           
provide adequate assessments of the foundation formula-                                                                         
funding program.                                                                                                                
                                                                                                                                
Senator Wilken explained that there are two conflicts                                                                           
occurring at once. First, he said was the placement of the                                                                      
principal in the organizational structure of the school as                                                                      
a manager. However, he shared, the issue before the                                                                             
Committee is how the principal position is accounted for in                                                                     
the expenditures of the school district. He stated that                                                                         
only the accounting component is changed. He stressed that                                                                      
in order to follow the 70-30 requirement the procedures                                                                         
need to remain constant.                                                                                                        
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Green                                                                                                         
                                                                                                                                
OPPOSED: Senator P. Kelly, Senator Wilken, Senator                                                                              
Phillips, Senator Donley, Senator Leman, Senator Adams, Co-                                                                     
Chair Parnell, Co-Chair Torgerson                                                                                               
                                                                                                                                
The motion FAILED (1-8)                                                                                                         
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Amendment #6: This amendment deletes "transportation of"                                                                        
from the title on page 1 line 1. The amended language reads                                                                     
as follows.                                                                                                                     
                                                                                                                                
"An Act relating to state funding for public school                                                                             
students; relating to a minimum amount of expenditures                                                                          
by school districts for instruction; determining the                                                                            
facilities constituting a school for purposes of                                                                                
public school funding; and providing for an effective                                                                           
date."                                                                                                                          
                                                                                                                                
The amendment also inserts a new bill section on page 3,                                                                        
following line 8 with an effective date of July 1, 2000, to                                                                     
read as follows.                                                                                                                
                                                                                                                                
"Sec. 5. AS 14.18.490(d) is repealed."                                                                                          
                                                                                                                                
Senator Adams moved for adoption. Co-Chair Torgerson                                                                            
objected.                                                                                                                       
                                                                                                                                
Senator Adams expressed that all students, regardless of                                                                        
where they live, should receive the same amount of funding.                                                                     
He stressed this is the worst kind of discrimination.                                                                           
                                                                                                                                
AT EASE 6:43 PM / 6:47 PM                                                                                                       
                                                                                                                                
Senator Wilken made a statement about Senator Adams's                                                                           
comments regarding the color of one's skin that disturbed                                                                       
him. He said the intent of SB 36 was to instill fairness.                                                                       
He listed the several rural districts that actually                                                                             
benefited from the formula funding formula. He suggested                                                                        
that removing this floor would cause the funding mechanism                                                                      
to revert back to the previously flawed formula.                                                                                
                                                                                                                                
Senator Adams responded the school districts cited by                                                                           
Senator Wilken were short-funded beforehand and were only                                                                       
now starting to receive fair funding. He asserted that if                                                                       
Senator Wilken's explanation was so good, then the figures                                                                      
should be reversed and urban schools should receive 60                                                                          
cents on the dollar and rural schools receive the full                                                                          
dollar.                                                                                                                         
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Adams                                                                                                         
                                                                                                                                
OPPOSED: Senator Phillips, Senator Green, Senator Donley,                                                                       
Senator Leman, Senator Wilken, Co-Chair Parnell, Co-Chair                                                                       
Torgerson                                                                                                                       
                                                                                                                                
ABSENT: Senator P. Kelly                                                                                                        
                                                                                                                                
The motion FAILED (7-1-1)                                                                                                       
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Senator Green commented that she appreciated the efforts                                                                        
that went into this legislation. However she needed to                                                                          
understand the impact on those districts that did not have                                                                      
an opportunity to renegotiate their pupil transportation                                                                        
contracts before the floor was set. She referred to a                                                                           
survey that showed those that had negotiated new contracts                                                                      
had an advantage of several million dollars over those                                                                          
districts that had not yet renegotiated.                                                                                        
                                                                                                                                
Co-Chair Torgerson commented that the new committee                                                                             
substitute negated all the 50-50 efforts since it allowed                                                                       
for multiple adjustments. He noted that about the only item                                                                     
not accounted for was the COLA.                                                                                                 
                                                                                                                                
Senator Green did not understand it that way. She would                                                                         
prefer to be a district that had already renegotiated                                                                           
rather than one that had not yet done so.                                                                                       
                                                                                                                                
Co-Chair Torgerson stated that the costs of the new                                                                             
contracts would not be known, but if the total were for $7                                                                      
million, the state would be required to pay the $7 million.                                                                     
                                                                                                                                
Senator Donley wanted to see progress made towards the                                                                          
charter school problem, but he noted he did not have an                                                                         
amendment drafted to address this issue.                                                                                        
                                                                                                                                
Senator Adams restated his request for calculations from                                                                        
the department.                                                                                                                 
                                                                                                                                
Mr. Jeans responded that to calculate that would be very                                                                        
difficult and listed reasons why. He was able to say that                                                                       
the COLA increases in Anchorage had been less than four                                                                         
percent since 1982. This would make Senator Green's                                                                             
concerns mute, he stated.                                                                                                       
                                                                                                                                
Senator Adams asked if the witness could tell the Committee                                                                     
if the cost would be higher or lower than the Committee's                                                                       
calculation of $5 million.                                                                                                      
                                                                                                                                
Mr. Jeans could not predict exactly what the increases                                                                          
would be but that all current contracts contain COLA                                                                            
provisions. He noted that the Railbelt area districts had                                                                       
issued Requests for Proposal (RFP), which he thought, would                                                                     
bring down the costs by encouraging outside competition.                                                                        
                                                                                                                                
Senator Adams asked if that would be the case only if there                                                                     
was outside competition.                                                                                                        
                                                                                                                                
Mr. Jeans affirmed.                                                                                                             
                                                                                                                                
Senator Adams addressed Senator Green's concerns about the                                                                      
effective dates of contracts. He asked if expiring                                                                              
contracts would be taken care of because of the staggered                                                                       
effective dates of Sections 5 and 6.                                                                                            
                                                                                                                                
Mr. Jeans responded that Section 6 establishes FY 01 as a                                                                       
base year that any increases will be measured. If fiscal                                                                        
note of over $1 million accompanied the bill, he said, the                                                                      
entire pupil transportation would be fully funded at the                                                                        
Department of Education and Early Development's request and                                                                     
that would establish the base line for the future.                                                                              
                                                                                                                                
Senator Green asked if Mr. Jeans could assure her that                                                                          
those districts that have not yet renegotiated their pupil                                                                      
transportation contract would not be at a detriment.                                                                            
                                                                                                                                
Mr. Jeans answered that was correct, provided the Anchorage                                                                     
COLA did not exceed four percent over the term of the                                                                           
contract. If did go above four, he explained, the increase                                                                      
would be split 50-50 between the district and the state.                                                                        
                                                                                                                                
Co-Chair Torgerson clarified the COLA would be the only                                                                         
expense reimbursable under normal contract provisions and                                                                       
that increased enrollment would not be impacted.                                                                                
                                                                                                                                
Mr. Jeans stated that in his understanding of the committee                                                                     
substitute's language FY 00 would be established as the                                                                         
base year. He continued that if a district required                                                                             
additional routes or added a new school or increased                                                                            
student population would increase the base and set a new                                                                        
threshold for the following years. He qualified that, if                                                                        
this were not the case, he needed to know.                                                                                      
                                                                                                                                
Co-Chair Torgerson assured the witness that was the                                                                             
Committee's intent.                                                                                                             
                                                                                                                                
Senator Green spoke of the efforts made by some districts                                                                       
to combine their contracts with other districts to                                                                              
encourage competitive bidding. She would contend that after                                                                     
one or two years, the state would be back to having only                                                                        
one provider. She did not think this was a competitive                                                                          
arena and therefore, this approach was not a long-term                                                                          
solution.                                                                                                                       
                                                                                                                                
Mr. Jeans agreed that could be the result, but that by not                                                                      
making the step forward, the state was locking into the                                                                         
existing contractors. He relayed that in conversations with                                                                     
Outside contractors, he was told they could not break into                                                                      
the Alaska market with the small routes. Therefore, he                                                                          
stated, aligning these contracts makes the market more                                                                          
appealing to competitors.                                                                                                       
                                                                                                                                
                                                                                                                                
Tape: SFC - 00 #85, Side B    7:03 PM                                                                                           
                                                                                                                                
                                                                                                                                
Mr. Jeans continued that contracts must consist of more                                                                         
than 100 busses in order to make it worthwhile for Outside                                                                      
providers to enter the market.                                                                                                  
                                                                                                                                
Senator Green gave a scenario of high oil prices resulting                                                                      
in high fuel prices to operate the busses and asked if                                                                          
those increased costs were included in the price of the                                                                         
contracts                                                                                                                       
                                                                                                                                
Mr. Jeans answered that was his interpretation as well.                                                                         
                                                                                                                                
Senator Wilken moved to report CS SB 290, 1-LS1555\N from                                                                       
Committee with forthcoming Department of Education and                                                                          
Early Development fiscal note.                                                                                                  
                                                                                                                                
Senator Green objected.                                                                                                         
                                                                                                                                
Co-Chair Torgerson objected saying that while he would not                                                                      
prevent the bill from reporting out of Committee, he could                                                                      
not support Section 4. He stressed that he could not agree                                                                      
to a million-dollar increase to the operating budget                                                                            
already agreed upon by the legislature.                                                                                         
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Wilken, Senator P. Kelly, Senator                                                                             
Phillips, Senator Donley, and Co-Chair Parnell                                                                                  
                                                                                                                                
OPPOSED: Senator Adams, Senator Green, and Co-Chair                                                                             
Torgerson                                                                                                                       
                                                                                                                                
ABSENT: Senator Leman                                                                                                           
                                                                                                                                
The motion PASSED (5-3-1)                                                                                                       
                                                                                                                                
The bill was MOVED from Committee.                                                                                              
                                                                                                                                

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