Legislature(2003 - 2004)

03/04/2004 09:02 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SPONSOR SUBSTITUTE FOR SENATE BILL NO. 1                                                                                   
     "An Act relating to the base student allocation used in the                                                                
     formula for state funding of public education; and providing                                                               
     for an effective date."                                                                                                    
                                                                                                                                
                                                                                                                                
This was  the first  hearing for  this bill  in the Senate  Finance                                                             
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken stated  this bill "increases the student  dollar in                                                             
our  base  student  allocation  in  our  foundation   formula."  He                                                             
remarked, "all  of us have  heard the school  bell; it's  rung" and                                                             
that that this legislation  is the start of addressing  the need of                                                             
adequate funding for education.                                                                                                 
                                                                                                                                
AMENDMENT #1: This amendment increases  the base student allocation                                                             
from the existing $4,169 currently provided in AS.14.17.470 and the                                                             
$4,263 amount proposed in the bill, to $4,576.                                                                                  
                                                                                                                                
Co-Chair Green moved  for adoption and commented that  although she                                                             
supports this legislation, this  amendment would be an improvement.                                                             
                                                                                                                                
AT EASE 9:05 AM / 9:06 AM                                                                                                       
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Co-Chair Green noted this amendment would increase the base student                                                             
allocation, and result in an approximately  $82 million increase to                                                             
the foundation  funding formula distributed  across the  state over                                                             
the FY 04 budget year.                                                                                                          
                                                                                                                                
Senator  Bunde asked  the  increase per  student  over the  current                                                             
funding amount.                                                                                                                 
                                                                                                                                
Co-Chair Green replied $407.                                                                                                    
                                                                                                                                
Senator Bunde asked the reason for this amount of increase.                                                                     
                                                                                                                                
Co-Chair  Green relayed  concerns expressed  regarding funding  for                                                             
each school district, along with  the unanticipated increased costs                                                             
of the Public Employees  Retirement System (PERS) and  the Teachers                                                             
Retirement System  (TRS) and increased insurance expenses  of up to                                                             
ten percent,  which  the school  districts could  not control.  She                                                             
shared that she has received comments  from some districts that she                                                             
has never before heard from, that despite efforts to control costs,                                                             
increased funding  for these expenses  are necessary. She  informed                                                             
that this funding increase would  allow districts to budget for the                                                             
next two years.                                                                                                                 
                                                                                                                                
Senator Bunde  remarked that his was  "well aware" of  the PERS/TRS                                                             
"problem" but expected  it should be funded separately  rather than                                                             
"lock it in" to the base student allocation. He supported utilizing                                                             
the earnings  reserve fund for these  expenses. He also  noted that                                                             
although this  increase would eliminate  the budget deficit  of the                                                             
Anchorage  School District,  it would also  increase the  allowable                                                             
local  contribution.  He  characterized   this  proposal  as  "good                                                             
news/bad news."                                                                                                                 
                                                                                                                                
Co-Chair Green hoped that most of the districts that have requested                                                             
the  legislature solve  the funding  problem  understand that  this                                                             
proposed increase would increase the local funding limits and allow                                                             
districts to increase  local contributions. She remarked  that this                                                             
would  allow  community  members  to "participate"  in  the  fiscal                                                             
situation  of their school  districts. She  also expressed  that no                                                             
funding increases would be requested  the following year, given the                                                             
total  increase  of  the  foundation   funding  formula  and  funds                                                             
generated locally.  She predicted  this increase would  address the                                                             
PERS/TRS situation  for one to  two years, although she  understood                                                             
that a  multiple year  solution of  five to  twenty years would  be                                                             
required. She  remarked that this  increase should convey  that the                                                             
legislature is accepting  responsibility and that local  government                                                             
taxpayers and citizens should also accept responsibility.                                                                       
                                                                                                                                
Senator  Bunde pointed  out  that 24  districts  would not  provide                                                             
increased local  contributions because  they make no  contributions                                                             
currently.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  commented  that  some  school  districts  do  not                                                             
contribute  to  the  education  expenses  in  their  community  and                                                             
therefore  those  districts  would   not  receive  increased  local                                                             
funding.                                                                                                                        
                                                                                                                                
Senator  Hoffman  asked  if  the intention  is  that  the  PERS/TRS                                                             
expenses  would be  addressed within  the  base student  allocation                                                             
funding, and whether this funding  would be sufficient according to                                                             
school districts' estimates. He  understood from meetings with some                                                             
school  district   representatives   that  this  funding   plus  an                                                             
additional one-time allocation is necessary.                                                                                    
                                                                                                                                
Co-Chair  Green  shared  that  the  funds   indicated  by  district                                                             
representatives as  necessary for the PERS/TRS and  other increases                                                             
would be provided  for in the amendment.  She predicted  that these                                                             
funds would be adequate for most of the larger school districts but                                                             
qualified  that some smaller  districts could  have an anomaly  and                                                             
require a different solution. She  stated that this amendment would                                                             
provide  funding necessary  for the PERS/TRS  increased expense  in                                                             
those districts she addressed.                                                                                                  
                                                                                                                                
Senator  Hoffman  pointed  out  this   funding  increase  would  be                                                             
statutory and does  not address the operating budget.  He asked how                                                             
this proposal compares  to Governor Murkowski's budget  request and                                                             
his plans, noting that the Governor  has announced he would support                                                             
a draw from the CBR of no more than $400 million for FY 05 and that                                                             
the  legislature  must  generate  an  additional  $200  million  in                                                             
revenue,  while  this  amendment  would  increase  the  budget  $82                                                             
million.  Senator Hoffman  asked if  the intent  would be that  the                                                             
legislature would increase the  amount of revenue generated to $282                                                             
million,  or  reduce  other  appropriations   to  accommodate  this                                                             
increase. He recalled the Governor's  comments to the Conference of                                                             
Alaskans emphasizing his adamancy about dramatic budget reductions.                                                             
Senator Hoffman asked  Co-Chair Green if the intent  is to meet the                                                             
Governor's expectation  of withdrawing  no more than $400  from the                                                             
CBR.                                                                                                                            
                                                                                                                                
Co-Chair  Green  replied that  this  amendment  this is  the  first                                                             
portion  of  the  budget process  and  represents  an  $88  million                                                             
increase  for education.  She anticipated  that the Governor  would                                                             
support this  funding increase because  he supports education;  she                                                             
anticipated "great cooperation".                                                                                                
                                                                                                                                
Senator Hoffman supported the concept of this amendment; however he                                                             
countered  that the  Governor  also supports  operating  government                                                             
without withdrawals from the CBR.  He pointed out that the governor                                                             
has a "red  pen" i.e. authority to  exercise the line item  veto on                                                             
appropriation  legislation   and  has  the  final  say  unless  the                                                             
legislature overrides the veto with a three-quarters majority vote.                                                             
Senator Hoffman  remarked this  is a high  standard. He  emphasized                                                             
that he supports  education funding  but needed assurance  from Co-                                                             
Chair  Green that  the governor  would  also support  an  increased                                                             
budget and not exercise  the line item veto authority  to limit the                                                             
CBR draw to $400 million.                                                                                                       
                                                                                                                                
Co-Chair Green reiterated  this is the first portion  of the budget                                                             
process  and that  more would  be known  in the  coming weeks.  She                                                             
informed that she has been in discussions with the Governor.                                                                    
                                                                                                                                
Senator Hoffman asked if Governor Murkowski exercised the line item                                                             
veto, whether  the legislature would  "take a stance"  and override                                                             
those vetoes.                                                                                                                   
                                                                                                                                
Senator Hoffman  agreed with this  increased funding for  education                                                             
and  that  it  should  be  appropriated   before  the  end  of  the                                                             
legislative  session, provided that  the Senate Minority's  goal to                                                             
spend monies from the CBR as a last option is achieved.                                                                         
                                                                                                                                
Senator  Bunde noted  he has heard  this amendment  would cost  $82                                                             
million and also $88 million and asked the correct amount.                                                                      
                                                                                                                                
Co-Chair Wilken stated  that the cost of SB 1, as amended  would be                                                             
$82 million.                                                                                                                    
                                                                                                                                
Co-Chair  Wilken  removed  his  objection  and  the  amendment  was                                                             
ADOPTED.                                                                                                                        
                                                                                                                                
Co-Chair Wilken noted those present to testify to this bill.                                                                    
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
AT EASE 9:23 AM / 9:23 AM                                                                                                       
                                                                                                                                

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