Legislature(1995 - 1996)

04/11/1996 09:50 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                 
  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--!!!)"                    

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