Legislature(1997 - 1998)
04/09/1997 09:04 AM Senate HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 146 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS
Number 364
CHAIRMAN WILKEN announced that SB 146 was the final order of
business before the committee. Chairman Wilken passed the gavel to
Vice Chair Leman.
VICE CHAIR LEMAN noted that testimony beyond the sponsor's
statements would not be taken today.
SENATOR WILKEN noted that there were packets which contained SB 146
and other relevant data. SB 146 is a result of the testimony taken
on CSSB 36(HES). Senator Wilken said that SB 146 is an alternative
to CSSB 36(HES). Senator Wilken then began an overview of the
packet (See Attachment A). The front cover of the packet
illustrates the four pieces of the pie of public school funding to
which everything in the packet relates. Senator Wilken noted the
sponsor statement in the packet which contains the following quote
by Bill Demerest, "Long-term solutions create short-term
difficulties". On page 5 of the packet there is a map delineating
the organization of the state with regard to school districts.
Senator Wilken pointed out that 14 percent of Alaska's students are
located in 70 percent of the school districts. Perhaps, that is a
problem in the current foundation. Page 6 defines the four pieces
of the pie as well as the components to the piece of the pie.
Senator Wilken noted that adjusted ADM is a cumulative
multiplication factor of the size, area cost differential, and
single site. Page 7 begins an analysis of which the majority is a
repealer.
Senator Wilken directed the committee to page 25 regarding assessed
value per ADM which is the heart of SB 146. Page 26 contains a
graphic disparity of wealth between the boroughs in Alaska. The
following page graphically applies the assessed value per student.
The basic element of SB 146 is that if a government has the ability
to pay for its educational needs, then that is done and at the per
student level. Senator Wilken pointed out that the graph on page
27 illustrates that the North Slope Borough School District has the
capacity of about $6.8 million assessment per student to fund the
district's educational needs. The average in true ADM is $400,000
assessed value per year. The assessed value is relevant in that it
is determined by the free market. It rises and falls in relation
to the overall wealth of the state as well as a district's ability
to pay. On page 28, the assessed value with the adjusted ADM tends
to narrow the numbers. For example, on this graph the North Slope
Borough School District has the capacity for $2.6 million per
student and the average ADM falls to $300,000.
Number 438
Senator Wilken directed the committee to the required local effort
portion. If an area is organized the required local effort is 3
mills of the assessed value or 100 percent of the state support,
whichever is less. Therefore, every government in Alaska will pay
3 mills of its assessed value, except for the North Slope Borough
which will be required to pay about 1.8 mills of its assessed
value. The REAA gross wage tax is addressed on pages 29-31.
Senator Wilken noted that all the numbers are run with a three
percent gross payroll tax collected quarterly through the
Department of Revenue. Page 31 illustrates the amount of wealth in
1995 in the amount of gross wages created in the REAAs.
Senator Wilken noted that there is a transition period during which
there is money available in the first year. The 1997 numbers
essentially apply to 1998. Page 33 lists those school districts
that are negatively effected. By the year 2002, the new formula
would be in full effect. Senator Wilken pointed out that the
assessment normalization component had been added in response to
testimony regarding the effects to programs and students. He noted
that an amount must be assumed in order to equalize. Assessment
normalization essentially takes money from the districts with the
ability to create more wealth and places it in the communities
which lack the ability to create wealth. Senator Wilken explained
that the money is accumulated according to a districts pro-rata
share of the assessed value of the state. For example, Anchorage
has about 42 percent of the state's assessed value which translates
into a contribution of 42 percent of the three mills. The money is
taken out based on head count. Since Anchorage has 31 percent of
the adjusted ADM in Alaska, Anchorage only takes 31 percent of the
money while contributing 42 percent. If a district's assessed
percent and adjusted ADM are the same, then that district would
receive as much as it contributes. If a district's assessed value
is greater than the adjusted ADM, then that district would be a net
donor. If a district's assessed value is less than the adjusted
ADM, that district would gain through the formula. Senator Wilken
stressed that the North Slope Borough School District is not
included in that because the North Slope is already paying for its
educational needs.
The summary tables are located on pages 39-42. Senator Wilken
suggested that placing the Combined State Support on page 40 beside
the Assessed Value column on page 41 allows viewing of the new
formula start to finish. The information on page 42 regarding
state support with the 3 mill normalization per ADM assumes the
following: 1.5 percent student growth each year for the next five
years, a 3 percent wage tax generating $15 million from the REAAs,
and a 3 mill normalization. The ADMs increase and decrease in
almost every district for different reasons. Those districts that
experience a decrease should review the district's categorical
funding under the existing formula versus the proposed formula.
Districts with a decrease should review the number of sites in the
district with regard to the two units front loading; the greater
the sites in a district, the more front loading is experienced.
The new formula does not have a front loading component as the old
formula. A district experiencing a decrease should also review the
value of the individual school district as it relates to the value
of other school districts.
Senator Wilken directed the committee to page 38, the effects of
normalization. As the 3 mill rate is approached the greater amount
is collected from the wealthier communities and distributed to the
less wealthy communities. The higher the mill rate the more money
is accumulated to be divided up. Senator Wilken noted it is a
political call, someone will have to determine where the sliding
scale starts and stops. The differences between the current
formula and the proposal are located on pages 35 and 36.
VICE CHAIR LEMAN asked if the committee had any questions.
Number 524
SENATOR ELLIS acknowledged that the proposed formula would not
consider the PL874 money. Is there a way to calculate the greatest
potential disparity between per capita distribution to a student in
the wealthiest and the poorest school districts? Is there a way in
which to assess the existing formula versus the proposed formula in
regards to potential disparity? Senator Ellis said that he was not
advocating consideration of PL874 money. SENATOR WILKEN did not
know, but offered to work on that question. Senator Wilken asked
if that would be measured on ADM or adjusted ADM. SENATOR ELLIS
said he would have to think about that.
SENATOR ELLIS inquired as to the reactions of various groups on
SB 146. SENATOR WILKEN characterized SB 146 as receiving cautious
optimism; it is a place to begin. Senator Wilken expected to hear
some concerns, but the proposed formula no longer glosses over the
structural problems in Alaska regarding how education is funded.
Over the last month, there have been some excellent pro and con
discussions on the proposal. Senator Wilken indicated that there
was a fairly good basis of support.
SENATOR ELLIS asked if there had been consideration of SB 11 when
developing SB 146. There is a cumulative impact of that and SB 146
and other related legislation; was SB 11 factored into the
operational funding being proposed? SENATOR WILKEN replied no.
SB 11 is now in Senate Finance where the percentage is back down to
50 percent. Senator Wilken believed that these efforts can only
help people feel better and perhaps loosen the purse strings with
regard to building schools statewide.
Number 576
SENATOR ELLIS noted that the University of Alaska Board of Regents'
request for remedial education and developmental education through
the foundation formula or other funding sources is not included in
SB 146. Senator Ellis hoped the committee would review that
request and the accompanying issues. SENATOR WILKEN believed that
everyone was concerned with the University's comments that some
entering students need remedial education before beginning college.
SENATOR WILKEN hoped that SB 146 would be held.
TAPE 97-37, SIDE B
In response to an inquiry about receiving testimony, VICE CHAIR
LEMAN announced that no testimony would be taken today, but written
testimony would be accepted. SB 146 will be held. Hearing no
further questions, Vice Chair Leman returned the gavel to Senator
Wilken.
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