Legislature(2001 - 2002)
03/28/2001 01:58 PM Senate HES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 94-EDUCATION FUNDING
SENATOR ROBIN TAYLOR, prime sponsor of SB 94, thanked Chairwoman
Green for her help on SB 94 and on education issues in general.
He noted a committee substitute to SB 94 was prepared that makes
major changes to accommodate concerns expressed at the last
hearing.
SENATOR DAVIS moved to adopt Version O as the working document
before the committee. There being no objection, the motion
carried.
SENATOR TAYLOR explained that Section 1 of Version O changes the
federal impact aid deduction from 100 to 95 percent. It adds a
provision for a specific allocation for school nurses so that
those districts without a school nurse will have one in the
future. It also adds funding for vocational education but
changes it from 3 percent of specific allocation multiplied
against the formula to 2 percent, with the other 1 percent
allocated for school nurses. He stated he has no objection to
changing those numbers, but he believes that vocational education
has been on the short end of the stick and needs to be emphasized
and improved. In addition, he pointed out none of the schools
within his Senate district have a school nurse.
Number 2334
VICE-CHAIR LEMAN referred to page 3, line 3, and asked about the
special needs factor change from 1.20 to .20.
SENATOR TAYLOR deferred to the drafters for an explanation. He
said that Section 2 merely makes the language changes necessary
to encompass Section 1. A portion of Section 1 that was of
concern to many is that it would require the North Slope Borough
to pay the same four mil minimum level that other school
districts in the state currently pay before they receive any
funding from the State of Alaska. This would have allowed for
significant additional revenues to be redistributed throughout
the formula to assist other districts. Based on conversations
and testimony, he reduced that from a four mil levy maximum
requirement to four mils or 100 percent of the local cost of
education, whichever is less. Existing law provides that the
local community would have to pay 45 percent of the total cost of
education. He stated:
So we've changed it from 45 to the full 100 percent,
but not taken any additional funds that would have been
generated. This leaves you short on the numbers within
these bills for education funding by about $21 million
of additional funding that would have been available to
help make sure no children were left behind any place
else in the state. As I said, Section 2 makes the
changes necessary to comply with Section 1. Section 3
merely adds the changes necessary to provide for a
specific allocation for nurses. Section 4 accommodates
both the nursing and vocational education and changes
the words from 'product' to 'number.' I assume that's a
linguistic change that was necessary for the
computation...
Section 5 requires a biennial study by the Department
of Education that will be submitted to the legislature
and establishes parameters from which the study must be
done. It says the Department of Education already has
significant auditing and numbers before it on what the
cost of education is and that they should use then
specific aspects of consumer price indexes and it lists
four or five different methods of determining that
information.
In other words, do you have to go out and find out what
it costs to do business in that district? What is the
cost of living, the cost of food, utilities,
transportation? Once they have done that and achieved
those objective numbers, they then establish the amount
of area cost differential for each community using
Anchorage as the base. It's the way our current formula
works but our current formula's never been adjusted in
14 years so, as a consequence, even though prices may
change, go up or go down in a given community, we have
no way of tracking that and every time we're told
they're going to do something about it - we've sat now
as a legislature for three years waiting for an
adequacy study to be completed. Well they completed
the adequacy study and the Governor's Task Force
reported to this committee at a very recent hearing -
and all of the comments on area cost differential were,
we can't figure it out and we don't know what it is,
but the current system is totally broke on area cost
differential and, as a consequence, we should do
another study. That will be the fifth study since I've
been in the legislature with no changes."
CHAIRWOMAN GREEN asked Senator Taylor if the kind of study he
envisions can be derived at by gathering information that is
currently available.
SENATOR TAYLOR said that is correct. He noted that most of the
information is available through Alaska's Department of Labor and
is currently used for labor contracts and other state government
areas that require a level of objectivity in the way funds are
allocated for geographic differentials.
SENATOR LEMAN pointed out the Consumer Price Index (CPI) is not
referenced in the bill and that he prefers the replacement
language because the CPI tends to overstate the actual increase
in costs by as much as 1.1 percent, according to the Michael
Boskin (ph) study. Part of the reason is that it does not
account for changes in the way people live that are more
efficient. He felt if the CPI is used, that increase will be
institutionalized.
SENATOR TAYLOR said DOEED has very good numbers; it audits every
single school district every year. It also has, through the
Department of Labor and federal entities, significant objective
evidence to turn to. He agreed that the CPI can overstate the
increase, but it is only 1 percent. If that is balanced against
the actual expenditures, he believes DOEED can come up with a
truer number of the actual cost that would not require an
increase in general funds but, instead, would require a
reallocation of funds. He felt the shifts would be subtle,
depending on the costs in each community, and would be readjusted
every two years. He pointed out that he selected two year
intervals to provide stability for budgeting purposes in case
dramatic shifts occurred. He stated this approach is better than
one that was politically set 14 years ago and has not been
changed since.
Number 2075
SENATOR WILKEN disagreed that the area cost differentials (ACD)
have not been changed in 14 years. He stated:
Senator Taylor now, twice, has discussed the fact that
the DCF - ACDs haven't been changed in 14 years.
That's not correct. They were changed under SB 36,
under the McDowell study. The McDowell study was
brought about by the fact that the prior ACDs that
Senator Taylor is speaking of were built in 1984. They
were done for a Department of Labor study. They
sampled 19 of our 40 election districts. That 1984
study - the Legislature was then under pressure in '85,
'86, and '87, and when the Legislature in '87 came up
with the formula that we changed three years ago, they
needed - what Senator Taylor is talking about - and
that was some sort of differential of living - cost of
living across Alaska. It took that Labor study in 1984
and they brought it to the bill that changed the
formula and made it an instruction unit formula in
1987. They then went further than that and they made
another adjustment at the committee table, politically,
to gerrymander the ACDs to the benefit of certain areas
of the state and then we lived under that system until
we changed the formula in 1997 or 1998.
So, to suggest that we haven't done anything in 14
years is not quite correct. When the Department went
out, under the McDowell study, the Department went out
to study the cost of living. What they found was that
across our 53 school districts there simply was a basic
requirement of accounting missing and that was a chart
of accounts that's uniform across the state of Alaska.
That surprised the McDowell study and they expressed
their surprise in the study and that has since launched
an effort over the last three years for the Department
to go out and, under regulation now, to have in place a
chart of accounts so that we can start to compare
across districts so that we can do what the Senator
wants, and that is to figure out what is the cost of
education so we can fairly compare 53 districts across
the state. That process isn't ongoing and I certainly
support that and I know Senator Taylor does too. I
want to make sure that - we haven't forsaken this issue
of ACDs but we have certainly found that we couldn't
rely on the data we had, nor could we rely on the
accounting system that was in place since 1987 and
we're certainly trying to correct that.
SENATOR TAYLOR said he agrees with Senator Wilken except that he
disagrees that this was a beneficial change to every district in
the state. He believes that with a new chart of accounts that
will be audited annually and plowing in the additional factors,
DOEED can determine what the numbers should be.
SENATOR WILKEN said, as everyone knows from what was done with SB
36, that this isn't that big of a project but it has to be valid.
He reminded Senator Taylor that the McDowell study verified that
80 percent of the budgets of school districts across the state
was used for wages, salaries, and benefits so that it is the 20
percent that has to be quantified. He pointed out there is a
difference between the cost of living and providing education in
an area. For example, some towns have 30 miles of road so gas
costs are low compared to a town with 4,000 miles of road.
SENATOR TAYLOR responded:
And I think all we're really talking about is providing
within the formula a mechanized way of accomplishing
this and having it done by the professionals and not
done by the politicians. It shouldn't wait for us to
make a decision here and then have that decision get
structured politically. These are kids. They shouldn't
be left behind and they're going to continue to be left
behind if we leave it up to the legislature to do this.
That's why my suggestion is, de-politicize this. Give
us some objective numbers. And I really don't care
what the formula is as long as it's a fair formula, and
[indisc.] accordingly. That's what we've provided in
this bill....
Number 1838
CHAIRWOMAN GREEN asked, "...are both of these ideas - the part
that went on in SB 36 and this type of (indisc.) - are they both
impacted by the same idea that we're not measuring necessarily
what it costs to live there but we're measuring what we have to
spend when we're there?"
SENATOR TAYLOR said it is both and that, in essence, they have to
look at what is truly the cost of education within that
community. He pointed out there are costs that are unique to
education and they need to be tracked. He informed the committee
that Commissioner of Education Marshall Lind ordered all school
districts to use the same chart of accounts in 1978 but we are
just now getting there.
SENATOR LEMAN asked how to compare what is being delivered in one
district with another because different districts do things
differently. He pointed out that some districts offer smaller
class sizes while others offer a computer station for each
student. He asked Senator Taylor if it is his intent that when
comparing from area to area, equivalent delivery of education is
compared.
SENATOR TAYLOR said it is. He repeated that he firmly believes
DOEED has the expertise to do that today because the department
has specialists who know what it should cost in a given
community. He said he has worked with the Department of Labor
and DOEED to try to come up with a series of qualifiers that
would provide objective numbers from which to create a worksheet.
Number 1623
SENATOR LEMAN pointed out another concern is that one school
district may have a different policy when it comes to negotiating
employee contracts. For example, if employee contracts account
for 80 to 85 percent of district costs, would there be some
standardization or oversight of that percentage. He cautioned
that if a district wanted to increase its area cost differential,
it could just negotiate higher contracts.
SENATOR TAYLOR said he has not attempted to address that because
those decisions are left to local control.
SENATOR TAYLOR continued describing SB 94. Section 6 provides for
a declining fund adjustment to allow for a gentle slope to
compensate for declining enrollments in school districts that are
suffering from a reduction in student population. He maintained
that the foundation formula provides well for increases in
student population but districts "fall off of cliffs" if their
enrollment declines. The legislature attempted to set percentiles
- a school had to lose more than 10 percent of its population
before it got help. That number was then reduced to five or
seven percent. He replaced the percentage with language that
says if school enrollment is declining, the school will receive
75 percent for that phantom child the first year, 50 percent the
second year, and 25 percent the third. That would provide three
full years to adjust contracts with educators. He indicated that
he is flexible on those numbers but his goal is to make a gentler
transition for schools.
Number 1450
SENATOR LEMAN asked if that mechanism will kick in if any decline
in enrollment occurs because the bill says the decline must be 4
percent or more.
SENATOR TAYLOR said his preference is to go to zero percent. He
continued explaining the bill. Section 7 sets the base student
allocation. His original bill included a $210 increase. Because
Senator Wilken, in SB 1, had a $145 increase he inserted $145 in
the committee substitute, but at one point he was going to leave
it blank and let the committee decide the best number. The
Governor's bill increases the allocation by $115. He added that
the fiscal notes increase the cost by $30 million if no revenues
are collected by requiring a higher percentage of pay from the
rich tax-base districts. He explained that if the federal aid
impact deduction was at 100 percent, about $12 to $13 million
would be added back into the formula and reduce the fiscal note
to about $20 million. He hoped for a $50 million increase but
because of the emotion surrounding the North Slope Borough issue,
he modified that amount for the sake of agreement.
SENATOR TAYLOR then explained that Section 8 contains the same
language. It changes the threshold level on what was called the
single site argument - it only impacts two districts, Wrangell
and Petersburg. He noted that is an arbitrary number and there
should probably be a better way of handling declining
enrollments.
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