Legislature(1995 - 1996)
03/27/1996 01:50 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 244 An Act relating to state foundation aid and supplementary state aid for education; and providing for an effective date. Co-chairman Halford directed that SB 244 be brought on for discussion. RICK CROSS, Deputy Commissioner, Dept. of Education, came before committee accompanied by EDDY JEANS, School Foundation, School Finance, Dept. of Education. END: SFC-96, #55, Side 2 BEGIN: SFC-96, #56, Side 1 Mr. Cross referenced the 20 percent test that must be met to include $35 million in federal funds in the foundation. He further advised that SB 244 deducts 95 percent from REAAs as opposed to 90 percent of federal impact aid, but it also redistributes back a $500.00 unit value to ensure that the 20 percent disparity test is met. Senator Sharp asked how the bill would impact the current per student rate flowing to districts. Mr. Jeans said it would increase the per student allocation in some instances and decrease it in others. He noted that the legislature has traditionally provided supplemental funding for single- site school districts. He pointed to the current $1.2 million supplemental request and said that it is equivalent to a $500.00 allocation to REAAs, per instructional unit. The proposed bill would increase the impact aid deduct to offset that cost. Mr. Jeans next pointed to an accompanying fiscal note reflecting a net general fund increase of $224.0. Co-chairman Frank voiced appreciation for the department's attempt to develop an approach that is "somewhat neutral in terms of costs and revenues." He then asked how much of the cost is attributable to single sites and how much relates to the new allocation for disparity. Is that fully offset by the increased deduct, except for the $224.0? Mr. Jeans responded that the fiscal note does not address the single- site allocation because it is currently built into the department K-12 operating budget. Increase of the deduct from 90 to 95 percent saves the state slightly over $1 million. Single-site funding totals $3,149.0. In response to a further question from Co-chairman Frank, Mr. Jeans acknowledged disparity costs of $1.2 million in FY 96. Co-chairman Frank asked if the department considered increasing disparity to 97 or 98 percent to make it totally revenue neutral. Mr. Jeans explained that the increase from 90 to 95 percent was the recommendation of the foundation task force. That recommendation was forwarded to the state board of education, approved, and forwarded to the Governor's Office. Co-chairman Frank referenced resistance to supplemental funding and a movement to make SB 244 apply to the FY 96 allocation to produce a revenue neutral situation for FY 96 and the future. Mr. Jeans cautioned that the situation would not be revenue neutral for all school districts. A small number would be adversely impacted by that approach. The problem relates to the increase in the 5 percent deduct versus the $500.00 allocation. Mr. Jeans next directed attention to the three- column spread sheet attached to the fiscal note and explained the significance of each column. Senator Sharp noted that Anchorage receives $3,847.00 in state funds per student while other districts receive from $10,000.00 to $24,465.00. It appears that the proposed bill would increase that spread rather than provide a "true fix" for state aid. Mr. Jeans acknowledged that some districts would benefit from increased revenue per student. If those numbers were divided by the number of students served, the increase would "be very minimal on a per-student basis." Senator Sharp commented that all the increases would go to districts that are "probably a little bit above average already on ADM." Mr. Jeans acknowledged that might be true. Senator Sharp next asked about the effort to revamp the entire foundation formula. Mr. Cross said that the state board of education had met three times, as a committee of the whole, to work on the issue. Two more meetings are scheduled to work on a new foundation formula that will be significantly different from that before members today. Senator Rieger asked if disregard of 2 mills of local effort would achieve the same disparity numbers as those proposed in SB 244. Mr. Jeans explained that the disparity is caused by excess local contributions that districts are allowed to make over and above 4 mills. Lowering that to 2 mills would increase disparity. Local effort would have to be increased to lower disparity. Senator Rieger suggested that the excess could be taken off the top rather than from the required minimum. There are a variety of ways to come within federal guidelines. Senator Rieger next voiced his understanding that the state of Kansas, which is at 25 percent disparity, is planning to "take it to Congress and get the law changed rather than try to meet the 20 percent disparity." Mr. Jeans concurred in that understanding. Co-chairman Frank noted that it is difficult to increase dollars to districts that appear to be getting the most per student. He then asked if that results from a requirement that disparity be calculated in the same fashion as moneys are distributed. Mr. Jeans explained that the department could compute the disparity test on a per-pupil basis. That standard was computed and, excluding all exceptions allowed under federal law, it came out worse at 27 percent. Co- chairman Frank asked that computations be provided for committee review. Discussion followed concerning the possibility of changes at the federal level. Mr. Jeans explained that the impact aid program was reauthorized through 1999. The disparity drops to 20 percent for FY 98 and 99. Mr. Cross stressed that the administration believes the proposed bill is the best solution at this time, rather than for all time. Until the foundation is substantively changed, this is the best way to meet present rules. In response to a question from Co-chairman Halford regarding funding for pupil transportation, Mr. Jeans explained that transportation moneys are allocated to a special revenue fund outside of the disparity standard. Disparity is measured on the operating fund only. Capital and federal programs are also outside. Co-chairman Frank voiced his understanding that the single- site issue is separate from the disparity issue. Mr. Jeans concurred. He added, however, that the department would encourage inclusion of the single-site allocation within the foundation program. The federal government has taken note of the single-site appropriation outside of the foundation formula and has put the department on notice that it appears Alaska is creating an entitlement program, and the state's determination could be in jeopardy. WANDA COOKSEY, representing single-site school districts, came before committee and directed attention to file materials (copies on file in the master Senate Finance Committee file for SB 244). She explained that the formula in Sec. 4 is the formula the single-site school district consortium has requested for the last several years. It is also the formula used to determine the grant amount. Ms. Cooksey noted that there is no fiscal note relating to single-site funding because it does not involve new money. It is in the department budget. Co-chairman Halford asked for a list of single-site districts and the funding they receive. Ms. Cooksey directed attention to the attachment to the transmittal letter from the administration. In response to a question from Senator Zharoff, Ms. Cooksey said that the proposal was agreed to by all the single sites, the state board of education, the school board association, the school administrators association, and NEA. Co-chairman Halford noted that additional people who signed up to testify on the bill were no longer present and suggested that SB 244 be set aside pending their return.