Legislature(1995 - 1996)
04/11/1996 09:50 AM 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. Co-chairman Frank distributed a draft CSSB 244 (Fin) (9-GS2043\F, Ford, 4/4/96) and said the intent was to solve the disparity problem in a manner similar in concept to the department's proposal but to make it revenue neutral and applicable to FY 96. The draft does not include single- site districts, with the recognition that they will be dealt with as they have, in the past, through supplemental funding. A hold harmless provision within the bill ensures that no district will lose money this year because of the increase in the deduct from 90 to 96 percent. Co-chairman Frank voiced need for an updated fiscal note from the department, to accompany the bill. JAMES ELLIOTT, Acting Director, School Finance, Dept. of Education, came before committee. He advised of no opposition to the proposed draft with the exception of the single-site issue. The department has received several notifications from the federal government, in administrative appeals of Alaska's standing as an equalized state, that "They consider this to be a circumvention of the formula." Mr. Elliott expressed the department's preference for retention of single sites within the formula. Speaking to the new fiscal note, Mr. Elliott advised that hold harmless provisions for FY 96 would total $311.7. The cost for FY 97 should approximate $20.0. Senator Rieger voiced his understanding that, exclusive of the hold harmless, the bill "causes a $20.0 per year increase in foundation expense." Mr. Elliott concurred. Co-chairman Frank noted that the hold harmless cost of $311.7 for FY 96 reflects a one-time only cost. He further attested to the neutrality gained by increase of the deduct from 90 to 96 percent and reduction of FY 96 costs from $1.2 million to $300.0. In response to a question from Senator Zharoff regarding the single-site issue, Mr. Elliott explained that any 874 recipient district can challenge the department's standing as an equalized state. One is currently ongoing. The administrative law judge hearing the appeal noted that this appeared to be a circumvention of the formula and that it had been repetitive, year after year. An issue has not been made beyond that. Funding has been provided in this manner in the past, and the state still passed the disparity test. With single sites out of the formula, the state will continue to pass the disparity test. The department was attempting to place itself in the best position in case of subsequent challenges to Alaska's equalized standing. Senator Rieger voiced his understanding that the basic "change of shape of state aid because of this bill is to increase aid to districts which do not have a local contribution." Mr. Elliott concurred, advising that it provides an additional $500.00 per instructional unit. Further discussion of the disparity test and local contributions followed. Co-chairman Halford directed attention to Page 2, lines 17- 19, and questioned need for the bill in light of regulation authority within subsection (b). Mr. Elliott advised that the department does not currently have the authority provided by the subsection. Co-chairman Frank acknowledged that authority granted by the subsection appears to be broad and suggested that the subsection be removed in order to keep the issue of school funding within the legislative arena. He then formally MOVED to delete subsection (b). Senator Zharoff OBJECTED. Co-chairman Frank REMOVED his MOTION and MOVED instead for adoption of CSSB 244 (Fin). Senator Zharoff again OBJECTED, noting deletion of single- site schools. He then said he would withdraw his objection and offer reinstatement of single-site schools as an amendment. No further objection having been raised, CSSB 244 (fIN) was ADOPTED. Co-chairman Frank then replaced his MOTION for removal of subsection (b) at Page 2, lines 17-19. Mr. Elliott explained that authority provided by subsection (b) was the main purpose of "having the bill in the first place." It would give the department the ability to make necessary adjustments to ensure that the state meets the disparity test. The department presently has parallel authority to restrict or lower local contributions for cities and boroughs. That proved to be unpalatable for districts like Juneau, Ketchikan, and Kenai, which are at the cap. Provisions within subsection (b) are viewed as a mechanism by which the department could adjust the floor and the ceiling. Removal would entail a major change from what the department intended. Co-chairman Halford commented that the bill, as introduced by the administration, reflects a major change in existing law. Co-chairman Frank voiced his understanding that the $500.00 per instructional unit allotment would solve the problem for the current year. Mr. Elliott noted that the variable is the amount of local contributions. That will not be known until late in the spring. If there are no changes in local revenues, the $500.00 (the department's best estimate of what would be needed) should serve as a place-holder. Co-chairman Frank suggested that the subsection be removed, and, as the bill moves through the process and better numbers are available, the department notify the legislature if the $500.00 figure needs to be changed. Senator Zharoff voiced OBJECTION to the proposed amendment, advising that it appears to remove the "heart" of the administration's legislation. Co-chairman Halford called for a show of hands. The AMENDMENT was ADOPTED on a vote of 4 to 1. Senator Sharp said he continued to have difficulty with "the logic and the fairness of this application." He noted that the Alaska Gateway district will gain $25.0 (the average ADM is $9,178.00) while Annette Island (with an ADM of $4,100.00) loses $28.0. It appears that the lower the ADM, the more a district loses; the higher the ADM, the more a district gains. He suggested that the bill makes "a bad situation worse." Mr. Elliott explained that since Annette Island is part of a reservation, it receives over half of its budget as 874 funds. The Gateway district has very few federally-connected students. The $500.00 per instructional unit will mean that districts with a greater number of units will receive more money. Senator Sharp cited the reduction for the Lower Yukon District and the increase at Yukon Flats District as a further example of funding that does not make sense in terms of educating children. He expressed frustration over federal mandates and bureaucracy and suggested that the legislation adds "fuel to the fire." Discussion followed between Co-chairman Frank and Senator Sharp regarding elimination of the $1.2 million in supplemental funding, the $311.7 for FY 96 hold harmless, and the ongoing additional $20.2 commencing in FY 97. Co- chairman Frank shared in Senator Sharp's frustration regarding changes in funding for individual districts. He advised that the proposed bill "makes it somewhat revenue neutral in totality." He acknowledged that "It doesn't make it neutral with regard to each district." [Senator Phillips arrived at the meeting at this time.] Senator Sharp expressed need for development of a new foundation formula that is fair to all districts. Senator Zharoff said the proposed bill represents an opportunity to "take care of the single-site question" so that it is not raised year after year. He then offered Section 4 (single-site funding) from the original bill as an AMENDMENT to CSSB 244 (Fin). He noted support for the funding by the department, educational-related entities, and rural legislators. He then formally MOVED for adoption and requested unanimous consent. OBJECTION was raised. Senator Randy Phillips noted an opportunity within SB 7 to deal with the single site/duel site question. Co-chairman Halford called for a show of hands on adoption. The motion FAILED on a vote of 1 to 5. [Senator Donley arrived at the meeting at this time.] Co-chairman Frank MOVED for passage of CSSB 244 (Fin) with individual recommendations and a new Dept. of Education fiscal note to show costs of $311.7 in FY 96 and $20.0 "per year into the future." No objection having been raised, CSSB 244 (FIN) was REPORTED OUT of committee with the above- noted Dept. of Education fiscal note. Co-chairman Frank signed the committee report with a "do pass" recommendation. Co-chairman Halford and Senators Donley, Phillips, Rieger, and Sharp signed "no recommendation." Senator Zharoff signed, "No recommendation. (No single/dual sites--!!!)"