Legislature(2013 - 2014)SENATE FINANCE 532
04/08/2014 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB263 | |
| HB278 | |
| Presentation: Education Funding | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 278(FIN) am
"An Act increasing the base student allocation used in
the formula for state funding of public education;
relating to the exemption from jury service for
certain teachers; relating to the powers of the
Department of Education and Early Development;
relating to high school course credit earned through
assessment; relating to school performance reports;
relating to assessments; establishing a public school
and school district grading system; relating to
charter schools and student transportation; relating
to residential school applications; relating to tenure
of public school teachers; relating to unemployment
contributions for the Alaska technical and vocational
education program; relating to earning high school
credit for completion of vocational education courses
offered by institutions receiving technical and
vocational education program funding; relating to
schools operated by a federal agency; relating to a
grant for school districts; relating to education tax
credits; establishing an optional municipal tax
exemption for privately owned real property rented or
leased for use as a charter school; requiring the
Department of Administration to provide a proposal for
a salary and benefits schedule for school districts;
making conforming amendments; and providing for an
effective date."
1:55:27 PM
^PRESENTATION: EDUCATION FUNDING
1:55:27 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed the presentation, "Funding Public Education in
Alaska" (copy on file). He stated that the amount that each
school receives and the amount of money that the state
allocates for education were two different things.
Mr. Teal looked at slide 2, "C1: Statutory Base Student
Allocation (BSA)."
The BSA is sometimes used as a measure of K-12
funding. While the BSA is a major factor in K-12
funding, it is not a valid stand-alone measure because
the foundation formula includes adjustment factors
that have changed over time.
The formula for K-12 funding is:
Basic Need=Student Count (ADM) with Adjustment Factors
BSA
Mr. Teal highlighted slide 3, "C2: Converting Head Count to
Students that are Funded."
Adjustment factors - for school size, geographic needs
students, vocational education and others - have
changed over time, especially since FY 08.
Because funding depends on adjusted ADM (AADM), the
conversion from AND to AADM is a critical part of the
funding formula.
As shown in the graph, the student count (for funding
purposes) was 1.6 times the head count in FY 04. In FY
14, the student count (for funding purposes) was 1.6
times the head count.
Note that ADM has remained at roughly 130,000 over
time, but that AADM has increased from 210,000 to
247,000. At any given BSA, a higher AADM means more
money.
2:00:14 PM
Mr. Teal addressed slide 4, "CS: BSA Adjusted for Factor
Changes."
Mathematically, applying an adjustment factor to the
student count is identical to applying the factor to
the BSA.
$5,680*(1.9*130,000)=($5,680*1.9)*130,000
In this graph, the ADM-to-AADM adjustment factor has
been applied to the BSA.
The graph shows what the BSA would have been if the
factor for converting the ADM to AADM in FY 13 had
applied to all years.
The adjusted BSA in this graph can be used as a
starting point for comparing K-12 funding over time.
Mr. Teal spoke to slide 5, "C4: Adjusted BSA in FY 13
Dollars."
When comparing expenditures over time, adjusting for
inflation provides a more useful assessment of
effective funding levels.
In contrast to Graph 3, which showed constant
increases in the Adjusts GBSA since FY 08, this graph
shows that inflation has eroded the real value of the
Adjusted BSA since FY 11.
This graph is the base to which other state
expenditures for K-12 education are added. All
additional expenditures have been converted to a "BSA
equivalent" at the rate of approximately $100 BSA
increase for each $23 million spent.
Mr. Teal looked at slide 6, "C5: K-12 Expenditures per AADM
(in FY 13 $)."
Pupil transportation is a formula funded activity that
fell from a BSA equivalent of $321 in FY 04 to a low
of $263 in FY 12. It was boosted to $300 in FY 13.
2:04:33 PM
Mr. Teal highlighted slide 7, "C6: K-12 Expenditures per
AADM (in FY 13 $)."
One-time funding (distributed according to the
foundation formula) has often been used as an
alternative to formula increases.
Mr. Teal addressed slide 8, "C7: K-12 Expenditures per AADM
(in FY 13 $)."
Capital Budget grants are grants for items that would
normally be expected to be paid for with formula
funds.
They have increased substantially in recent years, as
they typically do when other funding is relatively
flat.
The FY 14 budget contains $21 million for capital
projects associated with student safety and security
enhancements or for fixed costs and energy relief to
smaller schools.
Mr. Teal looked at slide 9, "C8: K-12 Expenditures per AADM
(in FY 13 $)."
Department of Education and Early Development (DEED)
operating expenses for K-12 include state funds that
are awarded as grants to school districts.
This source of funding for school districts is
expected to increase because targeted grants provide a
way to achieve specific goals at a lower cost and with
greater certainty than increasing the BSA. Money
allocated via formula cannot be targeted to achieve
specific objectives.
Mr. Teal highlighted slid 10, "C9: K-12 Expenditures per
AADM (in FY 13 $)."
The state deposits money in retirement trust accounts
on behalf of school districts.
Although the money does not benefit employees directly
and cannot be used for other purposes, retirement
assistance is a cost of providing K-12 education.
Mr. Teal address slide 11, "C10: K-12 Expenditures per AADM
(in FY 13 $)."
The state pays a large portion of school construction
and major maintenance costs.
Although some argue that capital costs do not appear
"in the classroom", the costs are incurred by the
state as a necessary part of providing K-12 education.
Mr. Teal looked at slide 12, "General Fund Appropriation
for K12 Education." The slide displayed exactly what was
spent in dollars, which showed that education funding had
increased. He stressed that the student account was
declining, so the slide understated school funding on a per
student basis. He felt that increases to school funding was
in pace with inflation.
2:08:55 PM
Mr. Teal presented a spreadsheet titled, "FY 15
Projections--Converting Student Head Count to Adjusted ADM"
(copy on file). He stated that the formula on the
spreadsheet converted the student head count to adjust at
ADM. The spreadsheet addressed some federal and local
funding. He felt that the formula was not mathematically
complex, but every factor affected districts differently.
The policy decisions with education funding were always
complex. The politics of determining the allocated funds
per district was the difficult part of the process. The way
money was generated had little to do with how the money
must be spent. School districts were free to move money
around to different schools, and to spend money as they
wish. All of the levers in the formula work together, so
increasing one lever may have more of an impact in one area
than was anticipated.
2:13:43 PM
Co-Chair Meyer remarked that there had been discussion
regarding the formula. He wondered why the formula was such
that a student at a larger high school would not receive
the same amount of money as a student in a smaller high
school. Mr. Teal responded that education in a small school
was more expensive than the economies of scale. He
explained that there were various factors that went into
how the money was distributed.
Senator Olson shared that there were also extreme heating
costs in some smaller districts, which added to the
disparity in school district funds across the state.
Co-Chair Meyer wondered if there were some adjustments in
the cost of living differences in the various areas in 2008
or 2009. Mr. Teal replied in the affirmative. He stated
that there was an education task force that offered some
recommendations, which he believed were fully implemented.
2:18:29 PM
Senator Hoffman stressed that the other body removed some
cost of living differentials, so that provision was not in
the current version. Mr. Teal agreed. The provision would
have removed the top two brackets from the size factor,
which would have increased the student count in the larger
high schools. There would have been a gain of over 100
students in the student count, but he stressed that the
provision had been removed from the bill. He felt that
changing the formula without examining all aspects could
have unforeseen consequences. He announced that education
had changed, so the funding should also change.
Co-Chair Meyer felt that there had been consistent changes
to the funding formula since 1997. He stated that there had
been a local mil-rate adjustment, which reduced the amount
of municipality contributions. Mr. Teal agreed that the
mil-rate had recently changed. He stated that the reason
for the change was because the mil-rate was declining.
Therefore, the adjustment forced the mil-rate to remain at
a certain level.
Co-Chair Meyer wondered if the mil-rate was at 2.9. Mr.
Teal replied that the mil-rate was four full mils. Over
fifteen years it had dropped to 4.65, because there was a
limit on counting property value increases.
Co-Chair Meyer agreed that there should be discussion
regarding adjusting the formula at any level. He argued
that the larger schools faced greater problems than smaller
schools. He announced that some high schools in Anchorage
had armed police in the schools. Mr. Teal agreed.
Mr. Teal continued to discuss the spreadsheet. The slide
highlighted each district. The size factor affected
different districts in distinct ways. He remarked that the
Aleutian School had 31 students, but those students would
be counted as 79 students after they were considered in the
size formula. He stated that Anchorage would face a 10
percent increase in student size in the formula, because it
had larger schools so the size factor would not count them
as highly as the smaller schools. He addressed the
geographic factor in the formula, which was changed in
2006. The factor now compensated better for the differing
operating costs across the state. Anchorage was considered
the base, so it received no additional student count. The
highest geographic factor was 2.12, which meant that the
student count was basically doubled. He noted that the
Aleutians had a 1.9 factor, so their count would grow from
79 students to 154 students. The total impact would add
28,000 students to the formula at a cost of $160 million.
He looked at the special needs and career factors. He felt
that these factors were odd, because the purpose of the
various factors in the formula were meant to adjust for
differences from one district to another. The factors would
give each school the same amount. He felt that the special
needs factor could be removed, so the BSA could be
increased by 20 percent.
2:24:49 PM
Co-Chair Kelly wondered if an increase to the BSA would
have the same impact. Mr. Teal responded that BSA increase
would multiply students.
Co-Chair Kelly asked for further explanation. Mr. Teal
replied that there were 31 students in the Aleutian School.
After adjusting for size, the count changed to 79 students.
The geographic differential would then change the count to
154 students. Then there would be an addition of 20 percent
with the special needs factor, which would be to 184. He
stressed that multiplying the student count by the dollar
amount would have a greater impact than multiplying the
student amount.
Senator Dunleavy surmised that the special needs factor
could be eliminated and replaced with a BSA increase, which
would yield a similar result. Mr. Teal replied in the
affirmative.
Senator Dunleavy wondered if the special needs column was
retained for political reasons. Mr. Teal felt that the
summation was fairly accurate.
Senator Dunleavy asked why the column was retained. Mr.
Teal responded that he did not know. He explained that the
factors in the formula were designed to compensate for
differences.
Senator Dunleavy wondered if the following column could be
removed. Mr. Teal jokingly agreed.
Senator Dunleavy felt that other columns could be added,
but the results would remain the same at 2.0 or 1.5. Mr.
Teal replied that the formula was not as easy as simply
focusing on the BSA.
Senator Hoffman wondered how much the BSA would increase,
if the special needs factor was eliminated. Mr. Teal
replied that removing the special needs column would
decrease the funding by $198 million, which would allow for
an approximate BSA increase of roughly $1000.
2:29:28 PM
Senator Hoffman surmised that the removal of the column
would increase the BSA, while keeping the formula intact.
Mr. Teal replied in the affirmative and furthered that some
districts would lose money with the removal of the special
needs column. He stressed that all of the factors worked
together, but changing the formula affected the districts
differently.
Co-Chair Kelly stressed that removing the 20 percent, while
increasing the BSA would not be a good choice.
Co-Chair Meyer asked if Senator Dunleavy would like to
increase the BSA to $1000. Senator Dunleavy joked in
response.
Co-Chair Meyer wondered if the complex formula was the
reason that there was funding outside of the BSA. Mr. Teal
replied that the BSA was the easiest way to adjust the
formula, because every district would gain by the same
percent. Adjusting other factors would change the
percentage gains in each district.
Co-Chair Meyer wondered if special needs students were
counted as five times the BSA, and intensity students were
counted as up to 13 times the BSA. Mr. Teal responded that
the special needs students were previous calculated in the
same way that intensive students were counted. Intensive
needs students were inserted into the formula, which was
when the special needs column became 20 percent. Special
needs did not add a particular amount, but intensive needs
student was counted as 13 students, which increased
funding. He remarked that the Aleutian East School had
three intensive needs students, which counted as 39 total
students.
Senator Dunleavy queried the problem with the special needs
formula. Mr. Teal replied that he did not think there was a
problem
2:35:04 PM
Senator Dunleavy queried the problem with education
funding. Mr. Teal responded that the districts believe that
they were not receiving enough money.
Senator Bishop looked at the intensive needs column, and
wondered if the rural communities' intensive needs students
would be counted as 13 students. Mr. Teal responded that
intensive needs students would be counted as 13 students in
every community.
Co-Chair Meyer felt that the intensive needs students in
the larger schools received less money than the intensive
needs students in the rural schools. Mr. Teal responded
that it was all based on the end result in the formula,
based on the other factors.
Senator Hoffman remarked that all school districts were in
a position to change the funding. He remarked that heating
costs could not be cut across the state. Every district
faced elimination of teachers, which increased the class
size. He reiterated that it was a statewide problem. He
noted that the major maintenance and school construction
costs were separate issues, and should not be included in
the conversation of funding for students and teachers. He
also felt that capital improvements and grants should not
be included in the BSA funding consideration.
2:40:14 PM
Co-Chair Kelly noted that every district had an intensive
needs student counted as 13 students. He understood that
those students were then multiplied by 1.20. He asked for
further information on that factor. Mr. Teal replied that
Anchorage had 47,000, but up to intensive needs, it
increased to 63,000. Therefore, each Anchorage student
counted as close to 1.30 students.
Co-Chair Kelly asked how Aleutian East School compared to
the Anchorage School District. Mr. Teal replied that the
Aleutian East School increased six times.
Senator Dunleavy queried the solution. He wondered if an
inflation-proofed BSA was the answer.
Co-Chair Kelly interjected that Mr. Teal had offered his
opinion often in recent years. Mr. Teal stated that there
was not an easy solution to the education funding issue. He
understood that there were many people that were attempting
to education children, but the state had a large budget
deficit, which could not afford what the districts felt
they deserved.
2:45:54 PM
Co-Chair Meyer queried the vocational and technical
education factor. Mr. Teal replied that the factor was 1.5
percent for every district. It was not an adjustment
factor, but simply increased each student equally.
Co-Chair Meyer wondered if that included the home school
children. Mr. Teal replied that some home school students
were enrolled in school through partial correspondence. The
student could would be split for those students.
Co-Chair Meyer surmised that the schools were occasionally
audited. Mr. Teal agreed.
Mr. Teal continued to discuss the spreadsheet. He noted
that the correspondence student cost was approximately $49
million; and intensive needs costs cost $170 million. The
formula ended with the basic need of each student in the
state. He stated that the basic need was not a head count
multiplied by the BSA. The basic need was the head count
multiplied by all of the factors within the formula, and
then multiplied by the BSA. He stressed that the factors
differed by school districts, so each district did not
receive $680 per student. There were substantial variations
for each school districts.
2:53:42 PM
Mr. Teal remarked that the required local effort as a
percentage basic need varied greatly across the state. HE
stated that the Anchorage School District received 20
percent of funding from the basic need result. He stressed
that the local contribution was based on how much business
property was in the community relative to residential
property. A residential community would have a lower local
effort percentage, so the communities with higher oil
revenue received more local funds. Those communities had a
cap on their required local effort. The local effort
mattered because there was an offset dollar for dollar.
Mr. Teal addressed the Federal Impact Aid, but remarked
that there was little control over that aspect.
2:58:47 PM
Senator Hoffman queried the reason Alaska received Federal
Impact Aid. Mr. Teal responded that the Federal Impact Aid
had to do with payments in lieu of taxes. It was intended
for a federal presence on federal lands, like land on a
military base.
Senator Hoffman wondered if the federal land included
federal parks. Mr. Teal deferred to Commissioner Hanley.
Mr. Teal looked at comparison between FY 00 and FY 14,
regarding who was contributing to the education funding.
The slide showed that the basic need count declined,
correspondence students increased, and regular students
decreased. The basic need had increased by 70 percent, and
required local effort had increased by 53 percent, despite
the mil-rate decline. Federal Impact Aid had increased, but
was at an even lower rate. He stated that the state aid was
basic need minus required local effort minus Federal Impact
Aid and minus some other factors.
3:04:43 PM
Senator Bishop queried the number of people that understood
the education funding formula. Mr. Teal replied that
possibly 20 people understood the formula.
Co-Chair Meyer stressed that many people were not concerned
about where the funding was derived, rather that there was
any funding at all.
Co-Chair Kelly commented that he was the reason Mr. Teal
was receiving so much publicity in recent years.
Co-Chair Meyer stressed that education funding was a
difficult process, and asked for Commissioner Hanley's
comments
3:08:22 PM
MICHAEL HANLEY, COMMISSIONER, DEPARTMENT OF EDUCATION AND
EARLY DEVELOPMENT, felt that the presentation was well done
regarding adding funding to the formula and manipulating
the formula.
Co-Chair Meyer understood that the other body faced
difficult discussions regarding school sizes. He asked
about the issue of funding disparities between students of
different school sizes. Commissioner Hanley responded that
the MacDowell Group analyzed the data, and recognized the
differences of efficiencies between a large and a small
school. The analysis recognized a difference between a
school with 250 student size and 400 student size. He
stressed that the students were not valued at less than
one. He noted the column of the left of the spreadsheet,
which what the number of students, and as the funding moved
through the formula, the students became proxies which
recognized school size, geographic cost factors, and
intensive needs.
3:14:02 PM
Co-Chair Meyer remarked that the MacDowell Study was
conducted in 1997, so there were some antiquated results.
He wondered if there should be a new study. Commissioner
Hanley replied in the affirmative.
Co-Chair Meyer commented that the state contributed more
education funding when the mil-rate was adjusted, and the
state received no credit for that contribution. He wondered
if an adjustment back to raising municipal property taxes
would benefit the schools, without costing the state any
money. Commissioner Hanley responded that it would simply
shift the purchaser of education. He agreed that the state
did not receive credit for the mil-rate adjustment.
Senator Olson wondered if the foundation formula would be
advantaging the rural student. Commissioner Hanley asked
for clarification.
Senator Olson understood that the study may be outdated. He
felt that the current formula disadvantaged the rural
students, so much that a lawsuit pointed out that
discrepancy. He felt that the formula could be rewritten to
make those students equal to urban students. Commissioner
Hanley responded that the formula's intention was solely
equity. He felt that each component of the formula needed
to be examined, and possibly rewritten.
Senator Olson remarked that there had been an amendment to
Section 17. He queried Commissioner Hanley's opinion on the
amendment. Commissioner Hanley replied that there was an
important divide between the rural and urban districts. He
explained that he worked hard to settle those
discrepancies. He felt that the work was moving in the
right direction.
Co-Chair Kelly queried the impact on rural schools.
Commissioner Hanley replied that the funding was intended
for schools above 400 students. Once 400 students was met,
the funding was less.
Co-Chair Kelly queried what districts had decreased
funding. Commissioner Hanley responded that there was a
positive fiscal note. The districts did not have decreased
funding, but the schools would have been funded in the size
factor.
Co-Chair Kelly stressed that there was no money taken from
rural Alaska, or any school district. Commissioner Hanley
agreed.
Co-Chair Kelly stated that money was added to districts
that were counted as less than one. Commissioner Hanley
agreed.
CSHB 278(FIN)am was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB278 4 8 14 SFC FY14 ADM to AADM by district.pdf |
SFIN 4/8/2014 1:30:00 PM |
HB 278 |
| HB278 4 8 14 SFC K-12 Presentation.pdf |
SFIN 4/8/2014 1:30:00 PM |
HB 278 |