Legislature(2019 - 2020)CAPITOL 106

04/15/2019 08:00 AM EDUCATION

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08:02:19 AM Start
08:03:13 AM Presentation: Why is Education So Costly in Alaska? by the Institute of Social & Economic Research
09:41:30 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Why is Education so Costly in TELECONFERENCED
Alaska? by the Institute of Social & Economic
Research
+ Bills Previously Heard/Scheduled TELECONFERENCED
-- Teleconference <Listen Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE EDUCATION STANDING COMMITTEE                                                                             
                         April 15, 2019                                                                                         
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Harriet Drummond, Co-Chair                                                                                       
Representative Andi Story, Co-Chair                                                                                             
Representative Grier Hopkins                                                                                                    
Representative Chris Tuck                                                                                                       
Representative Tiffany Zulkosky                                                                                                 
Representative Josh Revak                                                                                                       
Representative DeLena Johnson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION:  WHY IS EDUCATION SO COSTLY IN ALASKA? BY THE                                                                     
INSTITUTE OF SOCIAL & ECONOMIC RESEARCH                                                                                         
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAYNA JEAN DEFEO PhD, Director                                                                                                  
Center for Alaska Education Policy Research                                                                                     
Institute of Social and Economic Research                                                                                       
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation                                                                       
entitled, "What drives the cost of education in Alaska?" dated                                                                  
4/15/19 and answered questions.                                                                                                 
                                                                                                                                
MATTHEW BERMAN PhD, Professor of Economics                                                                                      
College of Business and Public Policy                                                                                           
Institute of Social and Economic Research                                                                                       
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Answered questions  during  a  PowerPoint                                                             
presentation  entitled, "What  drives  the cost  of education  in                                                               
Alaska?" dated 4/15/19.                                                                                                         
                                                                                                                                
ALEXANDRA (LEXI) HILL                                                                                                           
Education Policy Researcher                                                                                                     
Institute of Social and Economic Research                                                                                       
University of Alaska Anchorage                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Answered questions  during  a  PowerPoint                                                             
presentation  entitled, "What  drives  the cost  of education  in                                                               
Alaska?" dated 4/15/19.                                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:02:19 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  ANDI   STORY  called   the  House   Education  Standing                                                             
Committee  meeting  to order  at  [8:02  a.m.].   Representatives                                                               
Drummond,  Johnson, Hopkins,  Revak,  Zulkosky,  Tuck, and  Story                                                               
were present at the call to order.                                                                                              
                                                                                                                                
^Presentation:   Why  is Education  so Costly  in Alaska?  By the                                                               
Institute of Social & Economic Research                                                                                         
  Presentation:  Why is Education so Costly in Alaska? By the                                                               
            Institute of Social & Economic Research                                                                         
                                                                                                                              
8:03:13 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY  announced the only  order of business would  be a                                                               
presentation by  the Institute of  Social and  Economic Research,                                                               
(ISER),  College of  Business and  Public  Policy, University  of                                                               
Alaska Anchorage (UAA).                                                                                                         
                                                                                                                                
The committee took an at-ease from 8:03 a.m. to 8:06 a.m.                                                                       
                                                                                                                                
8:06:01 AM                                                                                                                    
                                                                                                                                
DAYNA  JEAN  DEFEO PhD,  Director,  Center  for Alaska  Education                                                               
Policy   Research,  ISER,   UAA,  informed   the  committee   her                                                               
colleagues  at the  Institute for  Social  and Economic  Research                                                               
(ISER) collaborated  with her  to answer  the questions  posed on                                                               
the  cost of  education in  Alaska.   Because the  aforementioned                                                               
questions  are  complicated by  the  costs  of school  employees'                                                               
benefits  and the  cost  of energy,  she said  she  may defer  to                                                               
experts  whenever appropriate  (slide  2).   Dr. DeFeo  presented                                                               
slide 3,  which was  an outline of  the presentation,  noting the                                                               
presentation  includes  limited   data  on  student  achievement.                                                               
Slide 4  listed the  context of the  presentation:   130,000 K-12                                                               
public school students,  22 percent indigenous -  with a majority                                                               
of indigenous  students in  rural areas -  and a  high homeschool                                                               
population of 10 percent; over  500 public schools, mostly state-                                                               
funded, with students distributed across  the state, many of whom                                                               
attend school in rural and remote areas of Alaska.                                                                              
                                                                                                                                
8:09:03 AM                                                                                                                    
                                                                                                                                
CO-CHAIR DRUMMOND  questioned whether the data  distinguishes the                                                               
homeschool population  served through  charter schools  and local                                                               
school    districts   from    the   population    of   individual                                                               
homeschoolers.                                                                                                                  
                                                                                                                                
DR. DEFEO offered to provide  further information in this regard.                                                               
She  returned  attention  to  slide 4,  noting  the  state  funds                                                               
schools with ten  or more students and about  twelve schools have                                                               
closed  in the  past ten  years;  furthermore, the  state has  no                                                               
Bureau  of  Indian  Education  (BIE),   U.S.  Department  of  the                                                               
Interior, or Tribally operated public  schools, which affects the                                                               
state's revenues related  to education.  Dr. DeFeo  said there is                                                               
a  lot  of  diversity  in   Alaska,  which  challenges  aggregate                                                               
comparisons of averages due to  small sample sizes; small samples                                                               
present methodological difficulties when  interpreting data.  For                                                               
example,   Alaska's  exceptionality   is   demonstrated  in   its                                                               
education system  by its use  of specific standards,  rather than                                                               
the  National  Assessment  of  Educational  Progress  (NAEP),  to                                                               
measure  achievement.   She cautioned  Alaska's specific  testing                                                               
may  not compare  to data  from  other states  that use  national                                                               
standards, and she  gave an example (slide 5).   Dr. DeFeo turned                                                               
to  the question  of education  funding:   65 percent  from state                                                               
funding,  22 percent  from  local funding,  and  12 percent  from                                                               
federal  funding, which  has not  changed since  1991.   Although                                                               
federal revenue  is limited by the  lack of BIE schools  to serve                                                               
indigenous  students, the  state receives  federal grants,  local                                                               
contributions  -   with  the  exception  of   Regional  Education                                                               
Attendance  Areas (REAAs)  - ,  and other  small revenue  streams                                                               
from investment earnings and in-kind services (slides 6 and 7).                                                                 
                                                                                                                                
REPRESENTATIVE  HOPKINS  asked   for  typical  education  funding                                                               
percentages in other states.                                                                                                    
                                                                                                                                
8:14:22 AM                                                                                                                    
                                                                                                                                
MATTHEW BERMAN  PhD, Professor of Economics,  College of Business                                                               
and Public  Policy, ISER, UAA, said  "Alaska is ... in  the upper                                                               
tier but  ... it's not at  the top." For example,  100 percent of                                                               
the   schools  in   Hawai'i  are   state  funded,   although  the                                                               
percentages vary greatly by state.                                                                                              
                                                                                                                                
DR.  DEFEO continued,  explaining general  fund (GF)  spending is                                                               
based  upon  the  base  student   allocation  (BSA)  set  by  the                                                               
legislature  and  applied to  the  school  foundation formula  to                                                               
determine actual spending.   She provided a short  history of BSA                                                               
and the school foundation formula  and pointed out community cost                                                               
differentials have not been updated since 2005 (slide 8).                                                                       
                                                                                                                                
REPRESENTATIVE  ZULKOSKY  questioned whether  cost  differentials                                                               
were applied to the foundation formula prior to 2002.                                                                           
                                                                                                                                
8:17:23 AM                                                                                                                    
                                                                                                                                
LEXANDRA ("LEXI")  HILL, Education Policy Researcher,  ISER, UAA,                                                               
was unsure of specific cost  differentials that may have been "in                                                               
play  prior  to  2002";  however,  she said  at  that  time,  the                                                               
structure  of   the  formula  changed   to  incorporate   a  cost                                                               
differential that was based on  research reported by the American                                                               
Institutes for  Research (AIR).   She  expressed her  belief cost                                                               
differentials were applied before 2002.                                                                                         
                                                                                                                                
CO-CHAIR  DRUMMOND  asked  for   information  on  the  ISER  cost                                                               
differential updates to which Dr. DeFeo referred.                                                                               
                                                                                                                                
DR. DEFEO  clarified ISER developed community  cost differentials                                                               
in  2015 which  were  never implemented;  ISER  is not  presently                                                               
working on updates.                                                                                                             
                                                                                                                                
REPRESENTATIVE   TUCK  recalled   in  2007   a  joint   education                                                               
legislative  taskforce recommended  an increase  to BSA  of $200,                                                               
which was  reduced to  $100; further,  there were  adjustments to                                                               
the  special  education  multipliers.    He  characterized  these                                                               
changes to BSA as a "benchmark moment."                                                                                         
                                                                                                                                
DR.  DEFEO  advised  there  were   two  requests  to  update  the                                                               
community  cost   differentials,  one  of  which   was  from  the                                                               
Association of Alaska School Boards (AASB).                                                                                     
                                                                                                                                
CO-CHAIR DRUMMOND  added the  Municipality of  Anchorage Assembly                                                               
also seeks [updates]; she asked  what ISER would require in order                                                               
to undertake updates of the cost differentials.                                                                                 
                                                                                                                                
DR. DEFEO cautioned updating the  cost differentials may increase                                                               
benefits  to   some  communities  and  districts,   but  decrease                                                               
benefits to  others; an  ISER study  of cost  differentials would                                                               
need to  be mandated by the  legislature and not instigated  by a                                                               
particular district or city to ensure the report is nonpartisan.                                                                
                                                                                                                                
8:22:24 AM                                                                                                                    
                                                                                                                                
MS. HILL  advised a  study by ISER  to update  cost differentials                                                               
was  estimated  to cost  $130,000-$150,000  [and  would take  six                                                               
months to complete].                                                                                                            
                                                                                                                                
CO-CHAIR DRUMMOND  related the Anchorage Assembly  reserved about                                                               
$140,000  to contribute  to the  cost of  a study  - without  the                                                               
expectation of  any benefit  to the municipality  - and  that the                                                               
study is  needed.  She  urged "to  begin this process,  no matter                                                               
who pays for it - ISER needs to do it ...."                                                                                     
                                                                                                                                
DR. DEFEO  restated the request  to ISER must have  broad support                                                               
from a variety  of [school] districts, the  legislature, and/or a                                                               
large, statewide organization.                                                                                                  
                                                                                                                                
REPRESENTATIVE HOPKINS  returned attention  to slide 8  and noted                                                               
BSA has  increased about  8 percent  in the  last ten  years, not                                                               
adjusted for inflation; he asked  whether the increases have kept                                                               
up with inflation.                                                                                                              
                                                                                                                                
DR. BERMAN said  [an 8 percent increase] is  less than inflation;                                                               
on  average, prices  in Alaska  have risen  less rapidly  than in                                                               
other states,  but have risen more  than 8 percent over  the past                                                               
ten years.  He pointed out the  data presented on slide 8 is from                                                               
the 2015-2016  school year  because more  recent federal  data is                                                               
unavailable.  He  opined, in the past three or  four years, other                                                               
states  have  been  spending  more   than  Alaska.    Dr.  Berman                                                               
described a slow  decline; however, the percentage  is unknown at                                                               
this time.                                                                                                                      
                                                                                                                                
8:26:23 AM                                                                                                                    
                                                                                                                                
DR. DEFEO returned  to the presentation and  explained the school                                                               
foundation formula starts with BSA  and makes three categories of                                                               
adjustments for  differences amongst  schools:  school  size, the                                                               
district  cost  factor,  and   further  adjustments  for  certain                                                               
programs such  as vocational and  career and  technical education                                                               
and homeschools.   The aforementioned adjustments  are similar to                                                               
that  of  other states.    At  the  time of  distribution,  total                                                               
education  funds  include  federal  payments in  lieu  of  taxes,                                                               
required local  contributions, and hold harmless  provisions, and                                                               
exclude extra  local contributions.  She  stated average [Alaska]                                                               
2016  per pupil  school  spending was  $17,510  and compared  the                                                               
average cost [of public education]  to the cost of private school                                                               
tuition in  Anchorage:   Pacific Northern  Academy -  $13,815 per                                                               
year; Anchorage Montessori elementary  school - $10,700 per year.                                                               
Dr. DeFeo  advised private school populations  differ from public                                                               
schools  in  that  private school  populations  may  not  include                                                               
students with  intensive special education needs.   Daycare costs                                                               
in Anchorage average  $1,000 a month (slide 10).   Slide 11 was a                                                               
graph comparing all states' [and  Washington, D.C.] 2016 spending                                                               
per  pupil,  according to  the  U.S.  Census Bureau  2016  Annual                                                               
Survey of School System Finances, which ranked Alaska sixth.                                                                    
                                                                                                                                
8:29:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON questioned whether  the U.S. Census Bureau                                                               
survey indicates  "the 54  percent versus the  76 percent  of the                                                               
[costs] that goes into the classroom ...."                                                                                      
                                                                                                                                
DR. DEFEO directed attention to  the seven categories of expenses                                                               
shown on  the graph.   She cautioned  school budgets may  not fit                                                               
into seven categories.                                                                                                          
                                                                                                                                
REPRESENTATIVE JOHNSON observed there  is a disagreement over the                                                               
percentage  of  funds directed  to  classrooms  and asked,  "[Has                                                               
ISER]  looked into  what really  is considered  classroom expense                                                               
...?"                                                                                                                           
                                                                                                                                
CO-CHAIR STORY  referred to a  recent presentation by  the Alaska                                                               
Association of  School Business  Officials (ALASBO),  which broke                                                               
down Alaska's education budget into different categories.                                                                       
                                                                                                                                
CO-CHAIR DRUMMOND  added ALASBO uses the  Department of Education                                                               
and Early  Development (EED) chart  of accounts; she  pointed out                                                               
the graph  indicates about two-thirds  of spending  - instruction                                                               
employee  salaries,  instruction employee  benefits,  instruction                                                               
staff support, and  pupil support - go into  the classroom, which                                                               
does not support an estimate of 54 percent.                                                                                     
                                                                                                                                
DR. DEFEO  offered to  provide a more  detailed breakdown  of the                                                               
expenses  that  are  shown  on   the  graph;  in  fact,  for  the                                                               
presentation, ISER  looked at  instruction employee  salaries and                                                               
instruction employee benefits because  those expenses "tend to be                                                               
a topic of conversation in this state."                                                                                         
                                                                                                                                
8:33:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ZULKOSKY   surmised  there  is   also  discussion                                                               
related to  ISER's choice of  the sources of information  used to                                                               
compare the  cost of education.   She suggested ISER  provide the                                                               
committee with  the rationale behind  its choice of  data sources                                                               
that  have provided  data  that  is not  in  alignment with  data                                                               
previously presented  to the committee.   Representative Zulkosky                                                               
acknowledged  the differences  may be  explained because  certain                                                               
data  is  reported  by  a   research  institution  versus  school                                                               
business officials.                                                                                                             
                                                                                                                                
DR. DEFEO remarked:                                                                                                             
                                                                                                                                
     We  pulled  these for  this  presentation  alone.   So,                                                                    
     these are  not the numbers  that we've used in  some of                                                                    
     our other  calculations.   I would  also add  that this                                                                    
     chart sort  of nicely  breaks down spending  into seven                                                                    
     categories, but  ... the total  length of the bar  - if                                                                    
     we  were to  focus on  that  - the  $17,510 per  pupil,                                                                    
     should  end up  being the  same across  these different                                                                    
     accounting systems.   ...  What's nice  with the census                                                                    
     data  is   that  [it]  ...   allows  us  to   do  these                                                                    
     comparisons between  states with a little  bit more ...                                                                    
     context than just straight up numbers.                                                                                     
                                                                                                                                
DR. DEFEO further  explained ISER seeks to look at  $17,510 - the                                                               
total  cost  of  spending  - and  report  how  Alaska's  spending                                                               
compares to the  U.S. average.  She summarized slides  12 and 13:                                                               
1. There  is a high  cost of living  in rural Alaska  which skews                                                               
the  statewide average;  2.  In urban  Alaska,  living costs  are                                                               
higher  than  the  U.S.  average.     Slide  14  illustrated  the                                                               
community cost differentials developed by ISER in 2005.                                                                         
                                                                                                                                
8:36:40 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TUCK  returned   attention  to   slide  13   and                                                               
questioned  whether  ISER compared  costs  in  Anchorage and  the                                                               
Matanuska-Susitna (Mat-Su)  region with more costly  remote areas                                                               
of Alaska.   Also,  the [jurisdictions] listed  on slide  11 that                                                               
have  average  spending  higher  than  Alaska's  -  Vermont,  New                                                               
Jersey, Connecticut,  the District  of Columbia,  and New  York -                                                               
are heavily populated compared to  Alaska and he surmised, due to                                                               
economies of scale,  the cost per pupil should go  down for those                                                               
[jurisdictions].    Representative Tuck  said  he  would like  to                                                               
compare costs in New York with those in Anchorage.                                                                              
                                                                                                                                
DR. DEFEO deferred to Dr. Berman.                                                                                               
                                                                                                                                
DR.  BERMAN  was   unsure  of  the  exact  [cost   per  pupil  in                                                               
Anchorage].   He stressed the  averages include certain,  but not                                                               
all, expenditures;  for example,  the $17,510  average represents                                                               
current spending,  including spending the school  districts incur                                                               
that  is  not  directly  related to  instruction,  but  does  not                                                               
include debt service and capital  outlays, thus average costs can                                                               
vary  from district  to district.   Further,  to be  precise, the                                                               
committee should  request ALASBO  to explain  the details  of its                                                               
report; he  noted the U.S.  Census Bureau  survey is sent  to all                                                               
school  districts  each  year,  collects data  from  all  of  the                                                               
states,  and  divides revenues  and  expenditures  into the  same                                                               
categories.    He  offered  to provide  the  actual  numbers  for                                                               
Anchorage after reviewing the data.                                                                                             
                                                                                                                                
REPRESENTATIVE TUCK  affirmed his  request for the  cost averages                                                               
in Anchorage and Mat-Su.                                                                                                        
                                                                                                                                
8:40:37 AM                                                                                                                    
                                                                                                                                
DR. BERMAN, in response to  Co-Chair Drummond, confirmed that the                                                               
U.S. Census  Bureau survey  collects and  makes available  to the                                                               
public data from every school district in the nation.                                                                           
                                                                                                                                
CO-CHAIR  DRUMMOND surmised  the  Alaska  average includes  every                                                               
school district in Alaska.                                                                                                      
                                                                                                                                
DR. BERMAN indicated  yes; however, Mt. Edgecumbe  High School is                                                               
not  in a  school district  but is  supported by  state education                                                               
funding.                                                                                                                        
                                                                                                                                
8:42:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON cautioned  the committee  has conflicting                                                               
data from the  census bureau and from EED; in  fact, EED reported                                                               
Alaska spends  the highest  amount in the  nation, per  pupil, in                                                               
the classroom.   She related the census bureau  chart of accounts                                                               
differs slightly from state data  in that the healthcare cost for                                                               
teachers is  not included  in the [census  bureau survey]  but is                                                               
included in  EED reporting.   Representative Johnson  opined this                                                               
disparity  is  relevant  to   the  committee's  understanding  of                                                               
education costs.                                                                                                                
                                                                                                                                
DR.  DEFEO  pointed  out  the  graph  of  spending  on  slide  11                                                               
[provided  by the  census bureau]  includes instruction  employee                                                               
benefits,  which   would  reflect   healthcare  benefits.     She                                                               
clarified the  presentation is focused  on total  spending rather                                                               
than  the proportion  spent on  instruction  versus other  costs.                                                               
She returned  attention to slide  14 which  illustrated community                                                               
cost differentials and  pointed out in a significant  area of the                                                               
state's  geography,  ISER  estimated  costs  at  more  than  [150                                                               
percent]  above those  of Anchorage;  in  other areas,  estimated                                                               
costs were  between [121-150 percent]  above costs  in Anchorage.                                                               
Returning attention  to [the  graph of  expenses provided  by the                                                               
census bureau] she said ISER  weighted the cost multiplier across                                                               
the  state to  that of  Anchorage,  failing to  adjust for  small                                                               
school  sizes,  which  put Alaska's  average  total  spending  at                                                               
$14,592,  and ranks  the state  twelfth, not  sixth, relative  to                                                               
other [jurisdictions]  (slide 15).   Further, after  adjusting to                                                               
the  Anchorage cost  of living  index at  23.8 percent,  Alaska's                                                               
education  spending  is  within  $219, per  pupil,  of  the  U.S.                                                               
average (slide 16).                                                                                                             
                                                                                                                                
8:46:52 AM                                                                                                                    
                                                                                                                                
DR.  DEFEO addressed  the components  that  comprise the  $17,510                                                               
average cost per  pupil (slide 17).  She related  higher costs in                                                               
Alaska  are not  due  to higher  per-pupil  teacher salaries,  or                                                               
extra contributions to  retirement systems, but are  due to small                                                               
schools,  healthcare costs,  energy costs,  and geographic  costs                                                               
(slide 18).   Slide 19  was a  graph [of information  provided by                                                               
the  U.S.  Census Bureau  2016  Annual  Survey of  School  System                                                               
Finances]  which  illustrated   per-pupil  teacher  salaries  and                                                               
indicated Alaska ranks fourteenth  in the nation; after adjusting                                                               
to  [the Anchorage  cost of  living index]  Alaska ranks  twenty-                                                               
third.   When  adjusted to  the U.S.  average, the  proportion of                                                               
Alaska's education  budget that  goes to  teacher salaries  is 23                                                               
percent below the average.   Turning attention to factors that do                                                               
contribute to higher  costs in Alaska, Dr. DeFeo  noted there are                                                               
443 "regular" schools in Alaska,  excluding schools such as those                                                               
within correctional facilities,  and in 2017, 58 -  13 percent of                                                               
schools in  the state - enrolled  fewer than 25 students,  and 34                                                               
schools enrolled between 26 and  50 students; in fact, 21 percent                                                               
of  the schools  in  Alaska  are very  small.    Further, the  58                                                               
smallest schools are spread across  22 school districts, most are                                                               
accessible only  by air, many  serve low-income students  and are                                                               
more costly to  operate.  The schools are  located in communities                                                               
with a  higher cost of living,  do not benefit from  economies of                                                               
scale  for capital  costs,  have small  classes,  and high  staff                                                               
turnover   (slide  not   provided).       An   additional  factor                                                               
contributing to high costs in Alaska  is the cost of  healthcare,                                                               
which is the highest in the nation.                                                                                             
                                                                                                                                
8:51:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ZULKOSKY  returned  attention to  the  factor  of                                                               
small schools and  asked Dr. Defeo to provide  historical data on                                                               
why Alaska  is legally obligated  to fund the operation  of small                                                               
schools.   She  said it  is important  to understand  the context                                                               
surrounding why Alaska's obligation exists.                                                                                     
                                                                                                                                
DR. DEFEO offered to provide  an article which reviews "the Moore                                                               
settlement."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REVAK  asked  what  type of  healthcare  plan  is                                                               
provided to EED employees.                                                                                                      
                                                                                                                                
DR.  DEFEO  said   state  public  employees  are   on  the  state                                                               
healthcare system.                                                                                                              
                                                                                                                                
CO-CHAIR  STORY expressed  her  understanding [healthcare  plans]                                                               
vary by district.                                                                                                               
                                                                                                                                
DR. DEFEO, in further response  to Representative Revak, said she                                                               
did  not know  if the  "Alaska care  plan" was  available to  EED                                                               
employees and  offered to provide further  information related to                                                               
EED healthcare plans.                                                                                                           
                                                                                                                                
REPRESENTATIVE  REVAK surmised  a  good healthcare  plan may  cut                                                               
costs.                                                                                                                          
                                                                                                                                
CO-CHAIR DRUMMOND said, "Dr. DeFeo,  I don't believe your numbers                                                               
include  the department  of education  figures, is  that correct?                                                               
Your numbers here  are only including school  districts. ... [The                                                               
numbers in  the presentation including] healthcare  costs, all of                                                               
that stuff,  is all about  school districts  - this is  not about                                                               
the department of education."                                                                                                   
                                                                                                                                
DR. DEFEO said absolutely.                                                                                                      
                                                                                                                                
REPRESENTATIVE JOHNSON remarked:                                                                                                
                                                                                                                                
     ...  my understanding  is that  the  [EED] ...  numbers                                                                    
     have  another component,  maybe it  is something  to do                                                                    
     with administration, that goes  into their numbers for,                                                                    
     to get  the 76  percent going  into [the]  classroom as                                                                    
     opposed to the census data  saying that 54 percent goes                                                                    
     into  the  classroom.    Twenty-two  percent  disparity                                                                    
     between Alaska's [EED] presentation  and ... the census                                                                    
     is a  big disparity.   ...  I got a  sense of  what the                                                                    
     chart  of accounts  were that  they  pulled the  census                                                                    
     numbers from,  the chart of  accounts that  they pulled                                                                    
     the  [EED]  numbers  from.    ... If  we  could  get  a                                                                    
     breakdown of  where [EED] gets their  numbers and where                                                                    
     the  ... census gets  their numbers, so we can actually                                                                    
     compare apples to apples in  this discussion ... we can                                                                    
     speak intelligently to those kinds of questions.                                                                           
                                                                                                                                
CO-CHAIR  STORY offered  to schedule  future meetings  to clarify                                                               
the  aforementioned discrepancy  and  to  discuss the  healthcare                                                               
costs and plans in various school districts.                                                                                    
                                                                                                                                
8:56:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  suggested [the committee review]  the census                                                               
bureau survey questions for comparison.                                                                                         
                                                                                                                                
DR. DEFEO directed  attention to slide 21,  noting benefits costs                                                               
in  Alaska  are fourth  highest  in  the nation;  however,  after                                                               
adjustments, instruction benefits costs  are 11 percent above the                                                               
national average.   She advised  the effect of  increasing prices                                                               
in healthcare on a fixed  budget puts downward pressure on wages,                                                               
therefore,   Alaska  has   difficulty  competing   for  teachers.                                                               
Another factor contributing to high  education costs in Alaska is                                                               
the cost  of energy:   energy is  expensive and variable  so fuel                                                               
costs  more in  remote places;  costs fluctuate,  which restricts                                                               
the  negotiation of  fuel prices;  Power Cost  Equalization (PCE)                                                               
does not benefit  school districts in areas  where electricity is                                                               
subsidized  for households;  buildings are  heated regardless  of                                                               
the  number of  students (slide  22).   In  response to  Co-Chair                                                               
Drummond, she said the cost of  energy is included in the "other"                                                               
category on the previous graph, as is transportation.                                                                           
                                                                                                                                
8:59:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  has heard  because  schools  can be  the                                                               
largest consumer  of fuel in  certain communities, if  the school                                                               
overpays for fuel,  that drives up the cost of  fuel for the rest                                                               
of the community.                                                                                                               
                                                                                                                                
9:00:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK opined  an anchor  tenant brings  costs down                                                               
because increased volume enables bulk shipping.                                                                                 
                                                                                                                                
[Due  to  recording difficulties,  a  portion  of the  audio  was                                                               
lost.]                                                                                                                          
                                                                                                                                
DR. DEFEO continued to opportunities  revealed by ISER's existing                                                               
research.   She  noted many  of the  big costs  of education  are                                                               
beyond education policy, such as  healthcare and operating costs;                                                               
in reality,  "it just costs  more to be  here."  When  looking at                                                               
policy, teacher salaries present  one opportunity [to cut costs];                                                               
however, she  cautioned teacher salaries are  critical to student                                                               
achievement  outcome  objectives,  the  ability  to  recruit  and                                                               
retain teachers,  and the  ability to  compete with  other states                                                               
for  teachers  (slides 23  and  24).    Further, there  is  ample                                                               
research linking teacher salaries to teacher quality (slide 25).                                                                
                                                                                                                                
REPRESENTATIVE  ZULKOSKY  returned  attention  to  slide  24  and                                                               
suggested  another  policy  opportunity  is  funding  for  school                                                               
districts.   In a manner  similar to the challenge  of [providing                                                               
appropriate]  teacher   salaries  in  order  to   ensure  [school                                                               
districts  employ]  quality  teachers,   she  said,  "not  having                                                               
reliable  funding from  the legislature  creates a  very volatile                                                               
environment for recruitment and  retention of their employees and                                                               
so I ...  note that is a policy opportunity  that's not reflected                                                               
here."                                                                                                                          
                                                                                                                                
9:04:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOPKINS returned  to  slide  19 which  indicated,                                                               
after cost  of living adjustments, Alaska's  teacher salaries are                                                               
23 percent  below the national  average.  He recalled  a previous                                                               
ISER study  reported training a  new teacher costs  an additional                                                               
$21,000 on  top of their  salary; he questioned  whether lowering                                                               
teacher   salaries  would   negatively  impact   recruitment  and                                                               
retention.                                                                                                                      
                                                                                                                                
DR. DEFEO, in response to  Representative Zulkosky, said the list                                                               
of policy opportunities [on slide 24] is not an exhaustive list.                                                                
                                                                                                                                
[Due  to  recording difficulties,  a  portion  of the  audio  was                                                               
lost.]                                                                                                                          
                                                                                                                                
DR.  DEFEO,  in  response  to  Representative  Hopkins,  said  in                                                               
addition to  the cost of  training a new  teacher, the loss  of a                                                               
teacher is  the loss  of his/her skill;  in fact,  research shows                                                               
the growth  and effectiveness  of a  teacher is  exponential over                                                               
the first five years of his/her teaching experience.                                                                            
                                                                                                                                
REPRESENTATIVE  HOPKINS questioned  whether  ISER  can report  on                                                               
when teachers typically retire from the school system.                                                                          
                                                                                                                                
DR. DEFEO remarked:                                                                                                             
                                                                                                                                
     ...  we're at  an  interesting point.    I think  we're                                                                    
     about 15 years out, so  we're at the point where people                                                                    
     ...  can't  move  if  they're  in  the  old  retirement                                                                    
     system.   And people who  are about the same  spot, but                                                                    
     on  the new  system,  have that  opportunity.   So,  we                                                                    
     would, it  presents a nice  opportunity to  really look                                                                    
     at, far enough  out, when these things  really start to                                                                    
     affect peoples'  decisions to stay or  go, we're poised                                                                    
     to do that research ....                                                                                                   
                                                                                                                                
9:07:37 AM                                                                                                                    
                                                                                                                                
DR.  DEFEO,  in  further response  to  Representative  Zulkosky's                                                               
previous question, said ISER was  asked to report on what happens                                                               
when  teachers get  pink slips  due  to uncertain  budgets:   how                                                               
issuing pink  slips affects teacher retention,  morale, and long-                                                               
term  planning.   She  continued  to  slide 25  and  acknowledged                                                               
Alaska  has  a  teacher  turnover problem  for  several  reasons:                                                               
fewer students  are enrolling in  education programs,  thus there                                                               
are fewer teachers available; 80-85  percent of Alaska's teachers                                                               
are hired from the Lower  48; Alaska faces strong competition for                                                               
teachers  from  other states;  Alaska  must  attract teachers  to                                                               
high-needs  schools and  retain  them; Alaska  must attract  good                                                               
teachers.   She said Alaska  also needs to address  principal and                                                               
superintendent turnover.                                                                                                        
                                                                                                                                
DR.  DEFEO  advised,  in 2015,  ISER  calculated  Alaska  teacher                                                               
salaries were about  "15 percent below where they  should be, and                                                               
so the  right salary that any  teacher needs is going  to vary by                                                               
community and by the working  conditions there."  In fact, ISER's                                                               
model -  which was  never implemented -  reflected a  116 percent                                                               
difference  between the  highest and  lowest recommended  teacher                                                               
salaries.   Although the ability  to attract and  retain teachers                                                               
is linked to salary, other  research found working conditions are                                                               
a  bigger  predictor  of  teacher  turnover  than  salary.    She                                                               
concluded reducing turnover is an  opportunity to reduce cost and                                                               
also  improve  the  performance  and  productivity  of  teachers;                                                               
maintaining tenure is also a cost savings (slide 26).                                                                           
                                                                                                                                
REPRESENTATIVE HOPKINS said he would  like further information on                                                               
how tenure  saves school districts  money and asked  for examples                                                               
of working conditions that would affect teacher retention.                                                                      
                                                                                                                                
DR. DEFEO related  working conditions include the  quality of the                                                               
leadership in the school, the  relationship between the community                                                               
and the school, class size,  workload, and housing conditions for                                                               
teachers.  She  offered to provide studies related  to tenure and                                                               
working conditions.                                                                                                             
                                                                                                                                
REPRESENTATIVE TUCK  said working  conditions would  also include                                                               
respect  for teachers,  which  would fall  into  the category  of                                                               
community  and   school  relationship.     He  gave   an  example                                                               
illustrating the  "national trend" of not  treating teachers with                                                               
the  respect  they deserve  -  or  paying the  compensation  they                                                               
deserve - but relying on their passion to teach.                                                                                
                                                                                                                                
CO-CHAIR  DRUMMOND  advised  working conditions  in  a  community                                                               
include  access to  the Internet,  which  is also  a problem  for                                                               
schools,  healthcare   facilities,  and  other   entities;  young                                                               
teachers [and  others] far from home  seek to stay in  touch with                                                               
their  families.   She  asked  whether  ISER has  researched  the                                                               
effect of [the lack of]  broadband access in rural communities in                                                               
Alaska,  its  high cost,  and  how  limited access  has  affected                                                               
schools and employee retention for all employers.                                                                               
                                                                                                                                
DR. DEFEO  said she is aware  that [the lack of  Internet access]                                                               
is significant  to those who  seek to provide  distance education                                                               
to  remote  and rural  communities;  an  ISER study  reported  on                                                               
feelings  of  isolation,  but she  was  unsure  whether  Internet                                                               
access was surveyed.                                                                                                            
                                                                                                                                
MS. HILL  said Internet access  was not specifically part  of the                                                               
aforementioned  survey; however,  Internet use  and mobile  phone                                                               
Internet  use has  changed notably  in the  five years  since the                                                               
survey.   In addition,  ways in which  "digital natives"  use the                                                               
Internet  have  changed,  and  she  offered  to  review  research                                                               
[albeit outdated] on  broadband access in rural  Alaska, and more                                                               
recent work in  the Canadian Arctic.  In further  response to Co-                                                               
Chair  Drummond, she  explained digital  natives refers  to young                                                               
people  who  have  grown  up  using the  Internet  and  thus  are                                                               
accustomed  to  adopting  the  latest  improvements  in  Internet                                                               
technology.                                                                                                                     
                                                                                                                                
[Due to recording  difficulties, a portion of the  audio was lost                                                               
from 9:19 a.m. to 9:21 a.m.]                                                                                                    
                                                                                                                                
9:21:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK returned  attention  to slide  26 and  asked                                                               
whether teacher salaries - that are  shown to be about 15 percent                                                               
below where they  should be - include total  compensation or just                                                               
salary.                                                                                                                         
                                                                                                                                
DR. BERMAN clarified "just salary"  because during the study ISER                                                               
reviewed  contracts  for  individual school  districts,  each  of                                                               
which paid  for healthcare  in a different  way, thus  ISER could                                                               
not include  the value of  benefits; if the study  were repeated,                                                               
ISER  would seek  to include  healthcare benefits.   He  recalled                                                               
housing was included in the study.                                                                                              
                                                                                                                                
DR. DEFEO  returned to Representative Johnson's  earlier question                                                               
related  to  reducing fuel  costs.    She  said a  [cost  saving]                                                               
opportunity may be to establish  state-negotiated fuel prices and                                                               
remove  the  cost of  fuel  from  the education  funding  formula                                                               
(slide 27).                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ZULKOSKY  questioned whether  the  aforementioned                                                               
opportunity had been vetted by  affected rural hub communities or                                                               
remote rural school districts.                                                                                                  
                                                                                                                                
DR. DEFEO said ISER previously discussed this concept.                                                                          
                                                                                                                                
[Due to recording difficulties a portion of the audio was lost.]                                                                
                                                                                                                                
REPRESENTATIVE  ZULKOSKY asked  Ms. Hill  whether the  suggestion                                                               
about the  state negotiating fuel  prices and removing  fuel from                                                               
the  foundation  formula  had   been  vetted  with  rural  school                                                               
districts.                                                                                                                      
                                                                                                                                
MS. HILL  stated the  suggestion [that  the state  negotiate fuel                                                               
prices] was made  a couple of years ago by  ALASBO as a potential                                                               
area of  cost savings.   The suggestion  to remove fuel  from the                                                               
foundation formula has not been  vetted with school districts nor                                                               
has it been formally proposed by ISER.                                                                                          
                                                                                                                                
REPRESENTATIVE ZULKOSKY remarked:                                                                                               
                                                                                                                                
     As  a   representative  for  a  rural   district,  like                                                                    
     District 38,  which is largely  a rural hub as  well as                                                                    
     remote rural  community, when it comes  to the delivery                                                                    
     of  fuel  every  spring  that's  done  through  private                                                                    
     industry, which  is largely an unregulated  industry in                                                                    
     Alaska,  in   my  preference   as  a   legislator  that                                                                    
     represents  a  rural district  would  be,  in terms  of                                                                    
     considering opportunities,  are there  opportunities to                                                                    
     find some regulations that ...  can be put forward to a                                                                    
     very  volatile  market  instead  of  holding  down  our                                                                    
     school  districts  in  proposals  that  have  not  been                                                                    
     vetted?  I guess I would  put that forward ... in terms                                                                    
     of   having   a   broader  conversation   about   [how]                                                                    
       controlling community costs in rural Alaska is not                                                                       
     necessarily being driven by state government but by a                                                                      
     very volatile market ....                                                                                                  
                                                                                                                                
DR. DEFEO  acknowledged more research  is needed as  the previous                                                               
ISER  studies were  done for  specific purposes  and are  offered                                                               
only as a starting point for  discussion.  She continued to slide                                                               
29  and cautioned  short-term reduced  spending without  complete                                                               
understanding  is likely  to  harm  student achievement  outcomes                                                               
because school  districts must struggle to  absorb spending cuts,                                                               
without increasing class sizes and laying off teachers.                                                                         
                                                                                                                                
9:28:00 AM                                                                                                                    
                                                                                                                                
CO-CHAIR STORY remarked:                                                                                                        
                                                                                                                                
     [In the] Juneau School District,  ... 90 percent of our                                                                    
     costs are  personnel costs,  and so,  when you  look at                                                                    
     reducing costs,  ... there's not  as many things  to go                                                                    
     to that [don't] affect personnel in some way.                                                                              
                                                                                                                                
DR. DEFEO agreed  a blanket reduction in  district budgets almost                                                               
invariably results in teacher layoffs or in larger class sizes.                                                                 
                                                                                                                                
[Due  to  recording difficulties,  a  portion  of the  audio  was                                                               
lost.]                                                                                                                          
                                                                                                                                
9:29:09 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ZULKOSKY  appreciated data that is  presented with                                                               
objectivity.   She  restated  that the  state's  obligation -  in                                                               
terms  of equitable  funding for  education across  Alaska -  was                                                               
missing  from   the  presentation;   further,  she   assured  the                                                               
committee  rural   hub  communities  and  remote,   rural  school                                                               
districts understand  the context  and background  of all  of the                                                               
issues  discussed, [the  acknowledgement of  which] was  also not                                                               
reflected in the presentation.                                                                                                  
                                                                                                                                
9:31:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK noted  he  would seek  support  for an  ISER                                                               
study to update community cost differentials.                                                                                   
                                                                                                                                
CO-CHAIR STORY asked whether ISER  would release its presentation                                                               
to the public in any form.                                                                                                      
                                                                                                                                
DR. DEFEO  said the slides,  after some corrections, can  be made                                                               
available on ISER's website.                                                                                                    
                                                                                                                                
9:34:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOPKINS noted  the presentation  did not  include                                                               
individual cost  drivers within BSA  such as federal  impact aid;                                                               
for  example,   how  federal  impact  aid   [negatively]  impacts                                                               
districts across Alaska because it  does not fully cover students                                                               
living on [military] bases.                                                                                                     
                                                                                                                                
DR. DEFEO deferred to Dr. Berman.                                                                                               
                                                                                                                                
DR. BERMAN advised there are  two basic sources of federal impact                                                               
aid:  1. student dependents  of active duty military; 2. payments                                                               
in lieu  of taxes for  federal land.   He was unsure  exactly how                                                               
federal impact aid affects school districts.                                                                                    
                                                                                                                                
REPRESENTATIVE  HOPKINS   expressed  his   understanding  federal                                                               
impact  aid pays  a certain  percentage  of the  cost to  educate                                                               
[students  of military  parents]  and military  families pay  any                                                               
applicable local or state taxes.                                                                                                
                                                                                                                                
DR.  BERMAN  acknowledged  federal  impact  aid  is  based  on  a                                                               
national  formula  and  the  revenue  would  vary;  for  example,                                                               
Anchorage and  Kodiak may have differing  tax bases.  He  said he                                                               
did not have a deep understanding of the issue.                                                                                 
                                                                                                                                
REPRESENTATIVE  HOPKINS asked,  "How does  the local  revenue and                                                               
local contribution  impact this, these calculations,  compared to                                                               
other states around the nation?"                                                                                                
                                                                                                                                
DR.  BERMAN explained  every state  does something  different; in                                                               
Alaska, there is a local  required contribution in the foundation                                                               
formula  that  can  be  supplemented, to  a  limited  degree,  by                                                               
individual political subdivisions.   Other states accomplish this                                                               
in  different ways;  he  pointed out  the  local contribution  to                                                               
total education funding in Alaska is  22 percent, which is a much                                                               
smaller percentage than in some states.                                                                                         
                                                                                                                                
REPRESENTATIVE HOPKINS surmised in  other states school districts                                                               
have the authority  to tax their residents and  raise revenue for                                                               
schools.                                                                                                                        
                                                                                                                                
DR. BERMAN  advised, in  Alaska, borough  schools and  schools in                                                               
unified  municipalities such  as Anchorage,  are included  in the                                                               
overall  local  tax  system;  however,   in  most  states  school                                                               
districts are independent of local governments and have their                                                                   
own taxes - generally property taxes - that are separate from                                                                   
city government or county taxes.                                                                                                
                                                                                                                                
9:41:30 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Education Standing Committee meeting was adjourned at [9:41]                                                                    
a.m.                                                                                                                            
                                                                                                                                

Document Name Date/Time Subjects
ISER Presentation Resources Links.pdf HEDC 4/15/2019 8:00:00 AM
Ed costs in Alaska 4.14.pdf HEDC 4/15/2019 8:00:00 AM