Legislature(2005 - 2006)CAPITOL 106

01/27/2005 11:00 AM EDUCATION

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11:03:54 AM Start
11:08:08 AM Overview: Public School Funding Program
11:40:31 AM HB73
11:55:41 AM HB1
11:57:12 AM HB18
12:21:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Overview: Funding Formula
Heard & Held
Heard & Held
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON EDUCATION                                                                            
                        January 27, 2005                                                                                        
                           11:03 a.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Chair                                                                                               
Representative Bob Lynn                                                                                                         
Representative Bill Thomas                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative Les Gara                                                                                                         
Representative Woodie Salmon                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Carl Gatto                                                                                                       
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 73                                                                                                               
"An Act increasing the base student allocation for state                                                                        
financing of public schools; and providing for an effective                                                                     
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 1                                                                                                                
"An Act relating to the base student allocation used in the                                                                     
formula for state funding of public education; and providing for                                                                
an effective date."                                                                                                             
     - HEARD AND HELD                                                                                                           
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 18                                                                                        
"An Act increasing the base student allocation used in the                                                                      
formula for state funding of public education; and providing for                                                                
an effective date."                                                                                                             
     - HEARD AND HELD                                                                                                           
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB  73                                                                                                                  
SHORT TITLE: INCREASE AMT OF BASE STUDENT ALLOCATION                                                                            
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/18/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/05       (H)       EDU, HES, FIN                                                                                          
01/27/05       (H)       EDU AT 11:00 AM CAPITOL 106                                                                            
BILL: HB   1                                                                                                                  
SHORT TITLE: INCREASE AMT OF BASE STUDENT ALLOCATION                                                                            
SPONSOR(S): REPRESENTATIVE(S) GATTO                                                                                             
01/10/05       (H)       PREFILE RELEASED 12/30/04                                                                              
01/10/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/10/05       (H)       EDU, HES, FIN                                                                                          
01/27/05       (H)       EDU AT 11:00 AM CAPITOL 106                                                                            
BILL: HB  18                                                                                                                  
SHORT TITLE: INCREASE AMT OF BASE STUDENT ALLOCATION                                                                            
SPONSOR(S): REPRESENTATIVE(S) WILSON                                                                                            
01/10/05       (H)       PREFILE RELEASED 12/30/04                                                                              
01/10/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/10/05       (H)       EDU, HES, FIN                                                                                          
01/12/05       (H)       SPONSOR SUBSTITUTE INTRODUCED                                                                          
01/12/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/05       (H)       EDU, HES, FIN                                                                                          
01/27/05       (H)       EDU AT 11:00 AM CAPITOL 106                                                                            
WITNESS REGISTER                                                                                                              
EDDY JEANS, Director                                                                                                            
School Finance                                                                                                                  
Department of Education and Early Development                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented an overview of the public school                                                                 
funding program; Presented HB 73 to the committee.                                                                              
ANNE KILKENNY                                                                                                                   
Wasilla, AK                                                                                                                     
POSITION STATEMENT:  Testified in support of HB 73.                                                                             
CODY RICE, Staff                                                                                                                
Representative Carl Gatto                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 1.                                                                              
STEVE BRADSHAW, Superintendent                                                                                                  
Sitka School District                                                                                                           
Sitka, Alaska                                                                                                                   
POSITION STATEMENT:   Testified  in support of  increased student                                                               
base allocation funds.                                                                                                          
BRUCE JOHNSON, Director                                                                                                         
Quality Schools/Quality Students Service (QS2)                                                                                  
Association of Alaska School Boards, AASB                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 18.                                                                             
MARY FRANCES, Executive Director                                                                                                
School Administrator's Association, SAA                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified  in support of  increased student                                                               
base allocation funds.                                                                                                          
MARY HAKALA, Coordinator                                                                                                        
Alaska Kids Count, AKC                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified  in support of  increased student                                                               
base allocation funds.                                                                                                          
ACTION NARRATIVE                                                                                                              
CHAIR  MARK   NEUMAN  called  the  House   Special  Committee  on                                                             
Education  meeting  to order  at  11:03:54  AM.   Representatives                                                             
Wilson,  Lynn, and  Salmon were  present  at the  call to  order.                                                               
Representatives Thomas  and Gara  arrived as  the meeting  was in                                                               
progress.  Representative Gatto was excused.                                                                                    
^OVERVIEW: PUBLIC SCHOOL FUNDING PROGRAM                                                                                      
11:08:08 AM                                                                                                                   
EDDY  JEANS, Director,  School Finance,  Department of  Education                                                               
and  Early   Development,  presented  the  handout,   within  the                                                               
committee  packet,  entitled,   "Public  School  Funding  Program                                                               
Overview,  Updated January  2005".   He  described  who pays  for                                                               
entitlements,  which  consist  of   the  following  three  areas:                                                               
required  local contribution  by  municipalities, federal  impact                                                               
aid dollars, and state funds.                                                                                                   
He referred to the five steps listed  at the top of page three of                                                               
the handout:                                                                                                                    
     We  start with  the school  size adjustment,  we adjust                                                                    
     that product  by the district cost  factor, we multiply                                                                    
     it  by the  district  cost factor;  in  step three,  we                                                                    
     increase  that   product  by  20  percent   to  provide                                                                    
     additional  resources for  special  needs programs  and                                                                    
     that  would be  your special  education, excluding  the                                                                    
     intensive  students.   The  severely  multi-handicapped                                                                    
     requires a  full-time aid student,  bilingual programs,                                                                    
     gifted  talented  programs, and  vocational  education.                                                                    
     The  next  step  is,  we add  the  adjustment  for  the                                                                    
     intensive  service  counts,  which  I  just  described,                                                                    
     students  that  would fall  into  that  category.   The                                                                    
     fifth   adjustment   is   for  students   enrolled   in                                                                    
     correspondence  programs.    And  as many  of  you  are                                                                    
     aware,  they're  funded  at  80  percent  of  the  base                                                                    
     student allocation.   That  gives us  what we  call the                                                                    
     district's adjusted  ADM and,  as I  mentioned earlier,                                                                    
     on  page 8,  those  calculations simply  move from  the                                                                    
     left  to the  right for  each school  district on  that                                                                    
     spreadsheet.    The  ADM  is   the  average  number  of                                                                    
     students  enrolled  during  the  20-day  count  period,                                                                    
     which ends the fourth Friday  in October and that's the                                                                    
     mandatory count established by law.   The first step is                                                                    
     to adjust  for school size; we  have to take a  look at                                                                    
     the number  of students that  are being served  in each                                                                    
     of  the  communities  and this  school  size  step  one                                                                    
     adjustment tells us that if  you're in a community that                                                                    
     is serving  10 to 100  students, we're simply  going to                                                                    
     take  that total  population, and  run  it through  the                                                                    
     school size adjustment table, as  one group.  If you're                                                                    
     in a  community that is serving  10-100 students, we'll                                                                    
     split  your student  population into  K-6 and  7-12 and                                                                    
     we'll  run those  two groups  through the  table as  if                                                                    
     you're operating  two separate  schools.  Once  you get                                                                    
     over 425  students, each  one of  your schools  in your                                                                    
     district    go    through    the    size    adjustment,                                                                    
     independently.   There  are a  couple of  exceptions to                                                                    
     that  rule  and  that  is,   if  you  have  alternative                                                                    
     programs  in your  community, you  have  to be  serving                                                                    
     more than  200 students for  that school to count  as a                                                                    
     separate  school   otherwise,  they're  added   to  the                                                                    
     largest school in the district  for the purpose of size                                                                    
     adjustment.  And,  if you have charter  schools in your                                                                    
     school  district,  you  have  to  have  more  than  150                                                                    
     students   for    those   schools   to    be   adjusted                                                                    
     independently.   On page 4,  Mr. Chairman, we  have the                                                                    
     size   table,  this   is  listed   in  Alaska   statute                                                                    
     14.17.450, and you  can see we have a  number of ranges                                                                    
     of student  population.   The first is,  10 to  20; you                                                                    
     get a flat  adjustment of 39.60.  The next  range is 20                                                                    
     to  30, 30  to  75, 75  to  150 and  you  can see  that                                                                    
     further down the table, there.   On the right hand side                                                                    
     of that  formula, I'd like  to show you,  real quickly,                                                                    
     within the  parens you can  see that we have  ADM minus                                                                    
     ... 20,  so if  you have a  student population  of more                                                                    
     than 20 students,  but less than 30,  what this formula                                                                    
     tells us,  is, let's say,  for example, it's 5,  or 25,                                                                    
     you would start  with 25 subtract 20, you  would have 5                                                                    
     left over, you would multiply  that times 1.62 and that                                                                    
     product would  be added  to 39.6  to get  your adjusted                                                                    
     ADM  for  school size  for  a  school of  25  students.                                                                    
     Looking at the  1.62, if you look down  that table, you                                                                    
     can  see   the  next  adjustment  is   1.49,  the  next                                                                    
     adjustment  1.27, and  this is  a  declining scale  for                                                                    
     economies  of  scale.   In  other  words, your  student                                                                    
     population gets larger, it's  more efficient to operate                                                                    
     that  school,  so this  is  our  size adjustment  on  a                                                                    
     declining scale.                                                                                                           
MR. JEANS explained  that after all of the  district schools have                                                               
been adjusted  in the size  tables, the product is  multiplied by                                                               
the  district  cost  factors  which are  set  in  Alaska  statute                                                               
14.17.460.  He  stated that [district cost  factors] are specific                                                               
to  school districts  and range  from 1.00  to 1.736.   This  new                                                               
product, he  said, is increased  by 20 percent for  special needs                                                               
and the final number is  adjusted for intensive service students.                                                               
He  described intensive  service  students,  "these students  are                                                               
counted on  the last day  of the count  period, and they  have to                                                               
have an  active IEP, Individual Education  Program, and receiving                                                               
services on the last day of  the count period.  Once again, these                                                               
are your  severely multi-handicapped students and  it's important                                                               
to point  out that  not are  they only  counted here  but they're                                                               
also counted in  the school, for the school  size adjustment, so,                                                               
it's not  just this one  component they're  in the base  and they                                                               
roll through as well."                                                                                                          
11:15:49 AM                                                                                                                   
REPRESENTATIVE GARA  inquired as  to the  changes in  the funding                                                               
formula for special or intensive needs students.                                                                                
MR. JEANS  explained that the regulations  clarify the definition                                                               
of intensive  students.  Although,  the regulation  requires that                                                               
each  intensive   child  have  a  full-time   aide,  some  school                                                               
districts did not interpret the regulation as such.                                                                             
In response  to Representative Thomas,  Mr. Jeans  clarified that                                                               
when the foundation statute was  amended under Senate Bill 36, in                                                               
1998, the  adjustment for special  needs students  was determined                                                               
to be 20 percent across the board.                                                                                              
REPRESENTATIVE  THOMAS  asked if  any  studies  or feedback  from                                                               
other districts indicate that the 20 percent is inadequate.                                                                     
MR. JEANS responded  that there have not been  any formal studies                                                               
to determine the appropriate percentage.   Senate Bill 36 passed,                                                               
directed  the  department,  through the  foundation  statute,  to                                                               
apply 20 percent to each district, he related.                                                                                  
REPRESENTATIVE  GARA related  that some  of the  school officials                                                               
have complained  that the regulation  has resulted in  less staff                                                               
available  for  special  needs  children.     He  asked,  "is  my                                                               
understanding  correct,  that  under  the  new  rule,  you  don't                                                               
qualify  as a  special needs  student for  purposes of  increased                                                               
foundation formula funding  unless you can show you  need a full-                                                               
time teacher aid?"                                                                                                              
11:18:59 AM                                                                                                                   
MR. JEANS clarified that [special  needs funding] is specifically                                                               
for  students under  the intensive  category, including  severely                                                               
multi-handicapped  children;  the  issue concerns  the  ratio  of                                                               
teacher aids  to intensive students.   He explained  that special                                                               
education staff are working with  school districts to assure that                                                               
they understand how this specific  provision is applied.  He said                                                               
that  [the department]  is currently  going  through a  statewide                                                               
audit  of  all intensive  students  and  is working  with  school                                                               
districts to clarify this issue.                                                                                                
11:20:00 AM                                                                                                                   
MR. JEANS turned  to page 5 and the correspondence  programs.  He                                                               
said that correspondence  students are funded at 80  percent.  He                                                               
     Once we  go through all  those calculations, we  end up                                                                    
     with  what  we  call the  district's  adjusted  average                                                                    
     daily membership.   And if  I could just jump  you over                                                                    
     to page 7,  real quickly, Mr. Chairman, you  can see we                                                                    
     use the  Nome school district  as an example,  they are                                                                    
     serving 809  students.  Once  we took them  through the                                                                    
     size adjustment  tables, they're adjustment  for school                                                                    
     size is 979.88,  you apply the district  cost factor of                                                                    
     1.319 to  come up  with $1,292.46.   Apply  the special                                                                    
     needs  factor  of  1.20,  gets  you  an  adjustment  of                                                                    
     $1,550.95.  They had three  students that qualified for                                                                    
     the intensive  services, the  adjustment there  is five                                                                    
     times, so that  product is $1,565; they  don't have any                                                                    
     correspondence  students.     The  district's  adjusted                                                                    
     average   daily  membership   is  $1,565.95;   we  then                                                                    
     multiply that times the  base student allocation, which                                                                    
     is currently set  at $4,576, to come up  with the basic                                                                    
     need  for that  school  district,  which is  $7,165,000                                                                    
     dollars.    Once we've  determined  the  need ...  it's                                                                    
     really  who  pays for  the  need,  and as  I  mentioned                                                                    
     earlier there's three  components: there's the required                                                                    
     local contribution,  the equivalent  of four  mills for                                                                    
     municipalities, federal  impact aid dollars,  which the                                                                    
     state  considers  90 percent  of  those,  and then  the                                                                    
     remaining is your state aid.   And so, Mr. Chairman, if                                                                    
     I can take you to page 9,  we can go ahead and use Nome                                                                    
     again, as the example, in  column B their basic need is                                                                    
     $7,165,000.    Their  required local  effort  $796,000.                                                                    
     The federal impact aid that  the state will consider is                                                                    
     $34,570.    So  the  remainder  is  the  state  aid  at                                                                    
     $6,334,000.   We also have  in the  foundation program,                                                                    
     what we  call the quality  school grant which  is above                                                                    
     the basic  foundation, $16  per adjusted  average daily                                                                    
     membership  and  districts  have   to  submit  a  grant                                                                    
     application   to  qualify   for  those   funds.     And                                                                    
     typically,  those are  for your  after school  remedial                                                                    
     type programs.                                                                                                             
MR. JEANS offered to answer questions from the committee.                                                                       
11:23:05 AM                                                                                                                   
REPRESENTATIVE WILSON  inquired as  to changes  associated within                                                               
the foundation formula.                                                                                                         
MR. JEANS  clarified that increasing the  base student allocation                                                               
increases the entitlement.  He said  that state aid will go up to                                                               
offset  that increase,  but that  required local  effort and  the                                                               
deductible  impact  aid won't  change.    He included  that  [the                                                               
department] has  a cap on  local contributions and  districts are                                                               
allowed  to contribute  23 percent  of  their basic  need in  the                                                               
current year.   He concluded,  "as you increase the  student base                                                               
allocation, what you're  also doing is increasing  the ability of                                                               
local municipalities  to contribute more  to schools, so  the cap                                                               
goes  up as  well, but  that doesn't  necessarily mean  districts                                                               
will receive more money."                                                                                                       
CHAIR  NEUMAN  inquired as  to  that  "23 percent"  being  spread                                                               
evenly across the  schools in that district or  targeted toward a                                                               
specific school.                                                                                                                
MR.  JEANS stated  that all  of  the state  aid is  discretionary                                                               
money and  it is up  to the local  school board to  determine how                                                               
those resources are allocated at the district level.                                                                            
REPRESENTATIVE THOMAS  inquired as  to increasing the  base needs                                                               
in the bill.                                                                                                                    
MR. JEANS replied that depends on what is in the bill.                                                                          
11:25:36 AM                                                                                                                   
REPRESENTATIVE GARA  inquired as  to quality schools  funding and                                                               
its source.                                                                                                                     
MR. JEANS  said that it is  a separate section in  the foundation                                                               
formula at  $16 per  adjusted ADM,  which is  in addition  to the                                                               
base student allocation.                                                                                                        
REPRESENTATIVE  GARA expressed  his understanding  that the  base                                                               
student allocation increased separately  from the allowable local                                                               
match, and as  the foundation formula increased,  the local match                                                               
requirement was also increased.                                                                                                 
MR. JEANS  stated that it will  increase on a one-year  delay for                                                               
three  school districts  where the  required local  effort is  45                                                               
percent of  basic need.   Those communities are the  North Slope,                                                               
Valdez, and  Skagway.  Mr.  Jeans explained further, ""that  if 4                                                               
mills of  your property  value exceeds 45  percent of  your basic                                                               
need, then  the state capture  required local contribution  at 45                                                               
11:27:05 AM                                                                                                                   
REPRESENTATIVE SALMON  referred to  page 9,  in the  handout, and                                                               
inquired  as to  whether the  money comes  from state  or federal                                                               
MR. JEANS replied:                                                                                                              
     Column C is  the required local effort, and  ... a zero                                                                    
     ...  represents  regional education  attendance  areas.                                                                    
     They are  not part  of a organized,  local municipality                                                                    
     required  to make  a local  contribution to  education.                                                                    
     The 100 percent that you  are referring to in column E,                                                                    
     is the  impact aid percentage.   And under  the federal                                                                    
     impact  aid law,  if you  don't have  a required  local                                                                    
     contribution  in  your  state funding  formula,  you're                                                                    
     allowed to consider  up to 100 percent  of a district's                                                                    
     federal impact  aid dollars.   So,  where you  see that                                                                    
     100  percent in  our state  law, it's  written that  we                                                                    
     will  deduct  90  percent  of  what  we're  allowed  to                                                                    
     consider  under the  federal law.   So,  if we  look at                                                                    
     Alaska Gateway,  you can see  they have  federal impact                                                                    
     aid,  $242,000  worth,  under  the  federal  law  we're                                                                    
     allowed to consider 100 percent  of those funds and so,                                                                    
     under column F, 90 percent  of the $242,000 is $218,000                                                                    
     and that gets  subtracted from basic need  in column B,                                                                    
     to arrive at your state aid in column G.                                                                                   
REPRESENTATIVE  SALMON asked  what determines  percentage amounts                                                               
for different boroughs.                                                                                                         
MR.  JEANS responded  that  the federal  impact  aid program  has                                                               
requirements  that include  looking at  requirements specific  to                                                               
the  funding formula  and comparing  that to  what districts  are                                                               
actually contributing.  He stated  that the ratio calculated must                                                               
be applied to  the federal impact aid dollars  because, under the                                                               
federal  impact aid  program, those  funds  are considered  local                                                               
resources.   For example, the Aleutians  East Borough contributes                                                               
60 percent  above the required  local effort, although  the state                                                               
only considers  40 percent of  its federal impact aid  dollars in                                                               
the  state funding  formula.   He  concluded,  "...our state  law                                                               
says, deduct  90 percent  of what  the federal  government allows                                                               
you to consider."                                                                                                               
REPRESENTATIVE  GARA  said he  does  not  understand the  factors                                                               
related to the  local contribution requirements.   He inquired as                                                               
to the affects on the local  contribution, if the 4 mill property                                                               
tax  part remains  static  year  to year  and  the community  has                                                               
rising property  evaluations.  He  inquired as to the  affects on                                                               
the local contribution.                                                                                                         
11:31:29 AM                                                                                                                   
MR. JEANS explained:                                                                                                            
     There   was  an   amendment  to   the  required   local                                                                    
     contribution  that  began  in fiscal  year  2002,  and,                                                                    
     basically, what  that requires the department  to do is                                                                    
     compare the current  year's full value to  a base year,                                                                    
     which  was  the  1999  full   values.    We  take  that                                                                    
     difference and  cut it  in half, and  we apply  that 50                                                                    
     percent  remainder  to  the  1999  evaluation  for  the                                                                    
     purposes  of  calculating  required  local  effort  for                                                                    
     municipalities.    So, I  call  it  the education  full                                                                    
     value  because  it's  not used  anywhere  else  in  the                                                                    
     state; we  get the  full value determinations  from the                                                                    
     state  assessors, Steve  Vansant, and  we have  to make                                                                    
     this  comparison  to  the  1999  base,  and  make  that                                                                    
     adjustment.   So, in essence, municipalities  that have                                                                    
     a rising property value are  only having to pay 4 mills                                                                    
     on 50 percent of that increase, from the 1999 base.                                                                        
CHAIR NEUMAN  asked for  clarification concerning  the references                                                               
to the changes in 1999.                                                                                                         
MR.  JEANS  stated  that  the  bill was  Senate  Bill  174.    He                                                               
explained   that  this   bill   provided   relief  for   specific                                                               
municipalities  and  required  the Department  of  Education  and                                                               
Early Development  to use  a calculation  that considers  only 50                                                               
percent  of  the property  value  increase  when determining  the                                                               
required local effort.                                                                                                          
REPRESENTATIVE  SALMON inquired  as to  the effects  of a  school                                                               
MR. JEANS said that there is school tax at present.                                                                             
REPRESENTATIVE  WILSON inquired  as to  increasing tax  bases and                                                               
the protocols associated for each following year.                                                                               
MR. JEANS replied:                                                                                                              
     What the law  requires us to do is always  look back to                                                                    
     the 1999 base.   So in, say, this year,  the value went                                                                    
     up $100,000,  what the  law requires us  to do  is only                                                                    
     consider  $50,000,  add  that  back to  the  base,  and                                                                    
     that's the full value that we  apply the 4 mills to, to                                                                    
     determine  the  required   local  contribution.    Next                                                                    
     year's values  will come out,  if it goes  up $150,000,                                                                    
     half of that  is $75,000, we add that to  the 1999 base                                                                    
        and that becomes the full value for determining                                                                         
     required local contribution.                                                                                               
11:36:08 AM                                                                                                                   
REPRESENTATIVE    WILSON   inquired    as    to   the    economic                                                               
responsibilities of  schools in  different areas,  with different                                                               
financial situations.                                                                                                           
MR.  JEANS informed  the  committee that  if  a municipality  has                                                               
increased  property values,  it  is held  harmless.   Communities                                                               
that  aren't showing  any  growth are  required  to contribute  4                                                               
mills at the same level they have in the past.                                                                                  
REPRESENTATIVE THOMAS asked about  Mt. Edgecumbe School, which is                                                               
a state run school, and how it gets aid.                                                                                        
MR. JEANS responded that Mt. Edgecumbe  is a state run school and                                                               
the  foundation law  has specific  direction, to  the department,                                                               
regarding  how to  calculate  [Mt. Edgecumbe's]  state  aid.   He                                                               
explained that what  this does is provide Mt.  Edgecumbe with the                                                               
revenue for  its instructional program.   Within the department's                                                               
budget  there  is  a  separate   component  for  the  residential                                                               
11:38:22 AM                                                                                                                   
REPRESENTATIVE  GARA   posed  a   situation  in   which  property                                                               
assessments  increase,  so  does  the  local  match  requirement.                                                               
Would such  a situation cause  the amount the  community receives                                                               
from the  state to decrease or  is an additional amount  of local                                                               
money required, he asked.                                                                                                       
MR. JEANS answered  that if the need stays the  same and property                                                               
values increase, state aid decreases.                                                                                           
HB  73-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                
CHAIR NEUMAN announced  that the next order of  business would be                                                               
HOUSE BILL NO. 73 "An  Act increasing the base student allocation                                                               
for  state financing  of  public schools;  and  providing for  an                                                               
effective date."                                                                                                                
11:40:31 AM                                                                                                                   
MR. JEANS  explained that HB  73 would increase the  base student                                                               
allocation for a two-year period.   The first increase would take                                                               
effect  in the  fiscal  year  (FY) 2006  budget  cycle and  would                                                               
increase the base  student allocation from $4,576 to  $4,880.  In                                                               
FY 07, the bill requires  a second adjustment that would increase                                                               
the  base student  allocation to  $5,190.   The first-year  costs                                                               
associated with  increasing the base student  allocation would be                                                               
$62 million for FY 06 and $64 million  for FY 07.  He mentioned a                                                               
fiscal note, included  in the committee packet,  for the military                                                               
youth academy,  and explained that  its funding is  tied directly                                                               
to the base  student allocation.  The fiscal note  shows that the                                                               
increased grant  would be $425,000  in FY  06 and $433,000  in FY                                                               
07.  Mr.  Jeans pointed out that the  governor's funding proposal                                                               
does  have  a  companion  bill,  HB  65,  which  would  make  the                                                               
appropriations for K-12 support.                                                                                                
REPRESENTATIVE  WILSON inquired  as to  how the  increased amount                                                               
was determined.                                                                                                                 
11:42:54 AM                                                                                                                   
MR.  JEANS explained  that the  increased contribution  of school                                                               
districts  to  Public  Employee's Retirement  System  (PERS)  and                                                               
Teachers' Retirement  System (TRS) will be  $38 million statewide                                                               
and  the  governor  wanted  to  provide  additional  funding  for                                                               
ongoing operational costs.   Therefore, [the department] averaged                                                               
the  Anchorage Consumer  Price  Index (CPI)  for  the last  three                                                               
years  and  came up  with  2.47  percent.   This  percentage  was                                                               
applied to  the foundation program,  and the cost  associated was                                                               
$24 million.  The total amount summed $62 million.                                                                              
REPRESENTATIVE WILSON asked what happens if a school loses ADM.                                                                 
MR. JEANS  stated that if  a school  has fewer students,  it will                                                               
receive   fewer  dollars   and  staffing   adjustments  will   be                                                               
REPRESENTATIVE  THOMAS inquired  as  to  Anchorage's $10  million                                                               
shortfall, and the proposed increase request.                                                                                   
MR. JEANS  clarified that the Anchorage  initial budget shortfall                                                               
was $30  million of which  the governor's proposal  would provide                                                               
$20 million.  He stated that  this was the starting point and the                                                               
numbers have yet to be refined.                                                                                                 
11:46:28 AM                                                                                                                   
REPRESENTATIVE GARA  described his  involvement in  attempting to                                                               
figure out the impact of  the governor's budget on various school                                                               
districts.   He said the  preliminary assessments show  that many                                                               
school  districts  are  somewhat  held  harmless  by  the  budget                                                               
compared to  last year.   He asked, "What  is causing so  many of                                                               
these school districts still to fall behind?"                                                                                   
MR. JEANS  replied that this is  a product of the  budget process                                                               
at the local  level in trying to determine  the district's needs.                                                               
The  governor's  budget  proposes   to  increase  the  foundation                                                               
program, to  offset the  increases for  PERS/TRS, and  provide an                                                               
almost 2.5 increase for operational costs.                                                                                      
REPRESENTATIVE GARA  stated that  he would  like to  do something                                                               
more  than just  hold schools  harmless to  where they  were last                                                               
year.   Last year schools were  held harmless to the  prior year,                                                               
when they essentially  lost money. He said that he  would like to                                                               
add staff  in a way  that could  make a meaningful  difference to                                                               
schools.   He asked  if the  administration would  consider that.                                                               
He  also  asked  if  Mr.   Jeans  could  provide  some  suggested                                                               
efficiencies to control cost growth.                                                                                            
MR. JEANS said that he could not respond.                                                                                       
11:50:12 AM                                                                                                                   
ANNE KILKENNY stated that there  are different needs in different                                                               
districts because  of the  adjustments that are  not made  in the                                                               
foundation formula.   The foundation  formula only makes  four or                                                               
five adjustments.  She said  that the foundation formula does not                                                               
make adjustments  where student enrollment is  decreasing and so,                                                               
the  cost  per student  increases.    The aforementioned  is  the                                                               
situation in  Kenai.   She related  situations in  which property                                                               
values rise  and cause local  required contributions  to increase                                                               
but this, in turn, decreases  state contributions, as is the case                                                               
in Anchorage.   Therefore, certain  areas have greater  need than                                                               
MS.  KILKENNY  discussed  that  schools  that  are  designed  for                                                               
specific numbers  of students cannot operate  efficiently or cost                                                               
effectively if  the student  populations rise.   She  provided an                                                               
example in the Mat-Su Valley,  and noted that even the governor's                                                               
proposal may be inadequate for  the Mat-Su Valley.  She expressed                                                               
her belief that,  "a refinement of the  Anchorage school district                                                               
budget would mean  a diminishment of the quality  of education in                                                               
that district  as it would in  the Mat-Su, as it  would in Kenai,                                                               
as it  would in  Ketchikan, Petersburg,  North Slope  burrow, and                                                               
every other district that has  indicated that even the governor's                                                               
proposal is inadequate for this  simple maintenance of the status                                                               
[HB 73 was held over.]                                                                                                          
HB   1-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                
CHAIR NEUMAN announced  that the next order of  business would be                                                               
HOUSE BILL NO. 1 "An Act  relating to the base student allocation                                                               
used in  the formula for  state funding of public  education; and                                                               
providing for an effective date."                                                                                               
11:55:41 AM                                                                                                                   
CODY RICE,  Staff to Representative  Carl Gatto,  sponsor, stated                                                               
that HB 1 represents a $13  increase over the current year's base                                                               
student allocation;  the total number  would then  become $4,589.                                                               
He  clarified   that  this  number  does   not  include  PERS/TRS                                                               
adjustments in the base allocation.                                                                                             
CHAIR  NEUMAN   upon  determining  there  were   no  comments  or                                                               
questions, announced that HB 1 would be held.                                                                                   
HB  18-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                
CHAIR NEUMAN announced that the final order of business would be                                                                
SPONSOR SUBSTITUTE FOR  HOUSE BILL NO. 18 "An  Act increasing the                                                               
base student allocation used in  the formula for state funding of                                                               
public education; and providing for an effective date."                                                                         
11:57:12 AM                                                                                                                   
REPRESENTATIVE WILSON,  sponsor, expressed her belief  that it is                                                               
essential  to  attract  and  retain  the  most  highly  qualified                                                               
teachers and support  staff in order to provide  the best program                                                               
offerings  for students.   She  explained  that costs  associated                                                               
with  operating  schools  are increasing  and  teachers  have  no                                                               
control  over the  regulation of  these  expenses.   Furthermore,                                                               
although teachers have to assume  greater responsibilities due to                                                               
NCLB  standards,   they  are   not  receiving   monetary  awards.                                                               
Therefore,  it is  imperative that  the legislature  increase the                                                               
student  allocation.    This  bill  would  increase  the  student                                                               
allocation by  $325 dollars  per student.   She related  that she                                                               
has  received letters  from around  the state  which have  stated                                                               
that the  governor's bill would  not allocate  sufficient funding                                                               
for securing basic  needs, such as rehiring  current teachers for                                                               
the coming school year.  She  reviewed some of the specific needs                                                               
of specific districts.                                                                                                          
12:00:50 PM                                                                                                                   
REPRESENTATIVE  LYNN   requested  a  spreadsheet   comparing  the                                                               
similarities and differences between HB 1, HB 18, and HB 73.                                                                    
REPRESENTATIVE THOMAS  inquired as  to the effects  of increasing                                                               
quality school grants.                                                                                                          
MR. JEANS replied  that quality schools funding  is separate from                                                               
the foundation program base funding  which is discretionary money                                                               
to allocate  as the school board  sees fit.  The  quality schools                                                               
grants require that the district  submit an application, tell how                                                               
it's  going to  use those  funds to  improve student  performance                                                               
achievement and  require follow-up  reports and assessments.   He                                                               
explained  that although  an increase  in  quality schools  grant                                                               
doesn't allow an increase in  the local contribution, an increase                                                               
in the base student allocation  will increase the allowable local                                                               
REPRESENTATIVE  SALMON asked  if the  department had  established                                                               
what the  school district's needs are  this year.  He  noted that                                                               
it  seems  that  things  are  always  based  on  Anchorage.    He                                                               
expressed the need  to concentrate on the small  schools in rural                                                               
12:05:37 PM                                                                                                                   
MR.  JEANS  said the  school  districts  haven't been  polled  in                                                               
regard to their fiscal desires.   He pointed out that the formula                                                               
makes adjustments for  the size of the  student population within                                                               
communities,  and  there is  more  funding  provided for  smaller                                                               
student  populations and  smaller  schools.   He  said there  are                                                               
adjustments  with the  regional  cost differentials  that are  to                                                               
assist in  offsetting the regional cost  differences of providing                                                               
education. In  the end, when the  money is put into  the formula,                                                               
he  said,  those adjustments  are  being  considered through  the                                                               
other factors in the funding formula itself.                                                                                    
REPRESENTATIVE   SALMON  asked   if   the   formula  takes   into                                                               
consideration the location of the schools.                                                                                      
MR.  JEANS  replied yes,  and  restated  that the  regional  cost                                                               
factor takes into account the  varying regional cost factors.  In                                                               
further  response  to  Representative   Salmon,  he  stated  that                                                               
increasing  the   base  student   allocation  should   be  making                                                               
adjustments for those increased costs such as higher fuel costs.                                                                
12:09:04 PM                                                                                                                   
STEVE  BRADSHAW, Superintendent,  Sitka  School District,  opined                                                               
that he  has serious concerns  related to increased  demands with                                                               
special education.   He explained  that these students  have high                                                               
needs  that  require  multiple special  assistants.    The  costs                                                               
involved, he said, are extremely  high.  He mentioned the demands                                                               
of NCLB  standards and  opined that  the [Sitka  School District]                                                               
has  made  great  leaps  forward  in  the  education  of  Alaskan                                                               
children  but  more  manpower  is required.    He  expressed  his                                                               
frustration  in  finding  the quality  of  teachers  demanded  by                                                               
statute and not  being able to offer them competitive  wages.  He                                                               
stated  his   appreciation  of   the  governor's   proposal,  but                                                               
explained that it will not meet his school district's needs.                                                                    
He stated:                                                                                                                      
     We've already  started the  budget process;  we'll have                                                                    
     to cut  $200,000.   That means,  four teachers  in this                                                                    
     district.   If  I  take  four of  the  teachers at  the                                                                    
     bottom of the pay scale,  it will cost me four teachers                                                                    
     to get through  next year.  I can't afford  to cut four                                                                    
     teachers;  I've  already cut  about  13  over the  last                                                                    
     three years.  So, any effort  that you can make to help                                                                    
     us in the  situation would be greatly  appreciated.  We                                                                    
     can get  the job done,  we can educate every  child and                                                                    
     not leave any  child behind, but I  need specialists in                                                                    
     the classroom  to help my  teachers, not only  my kids,                                                                    
     but  my teachers  in instruction  in reading,  writing,                                                                    
     and math.   I know you've got a tough  year in front of                                                                    
     you, I  appreciate your efforts,  and we just  need the                                                                    
     help, so thank you.                                                                                                        
REPRESENTATIVE THOMAS  pointed out  that Sitka is  considered the                                                               
same base  as Anchorage  and inquired  as to  the impact  loss of                                                               
MR.  BRADSHAW stated  that the  cost  of living  and the  housing                                                               
costs in  Sitka are high, but  fuel costs in Southeast  are lower                                                               
than in other  parts of the state.  He  expressed his belief that                                                               
the Southeast cost factor should be adjusted.                                                                                   
12:14:50 PM                                                                                                                   
BRUCE JOHNSON, Association of Alaska  School Boards, (AASB), said                                                               
that on  behalf of  AASB, he  wanted to  thank the  committee for                                                               
taking this issue seriously.   The governor's bill is a wonderful                                                               
starting point, he said.  He  explained that AASB is working with                                                               
member districts to look at some  of the impacts of a $62 million                                                               
increase and  what it  might take  to offer  the same  program as                                                               
this  current year  plus appropriate  changes relevant  to recent                                                               
mandates.   He emphasized that AASB  would not shy away  from the                                                               
accountability  portion  and  that  many of  these  measures  are                                                               
helpful in moving ahead.                                                                                                        
12:17:22 PM                                                                                                                   
MARY  FRANCES,  Executive  Director,  Alaska  Council  of  School                                                               
Administrators, ,  related that the association  is supportive of                                                               
any bill that increases the  student base allocation.  She stated                                                               
that "SAA"  is trying  to decide  on a  specific request  for the                                                               
student base  allocation.   She pointed out  that after  years of                                                               
flat funding  and increased inflation,  it has been  difficult to                                                               
compensate  each  year.    Therefore,   "SAA"  looks  forward  to                                                               
continued incremental improvement.                                                                                              
MARY HAKALA, Coordinator, Alaska  Kids Count (AKC), described AKC                                                               
as  a  grassroots  lobbying  effort   organized  by  parents  and                                                               
community members supporting public education.   She said this is                                                               
a statewide network of over 500 individuals.  She explained that                                                                
AKC  establishes its  goals dependent  on  what involved  parents                                                               
determine  is  needed  in  schools.     She  related  that  AKC's                                                               
priorities this  year are  to increase  foundation funding.   She                                                               
expressed that  although AKC  appreciated the  governor's initial                                                               
increase proposal,  it does  not bring  the schools  into "status                                                               
quo funding".   She  said that school  programs have  suffered in                                                               
the past,  due to the lack  of sufficient funding, and  AKC would                                                               
like to see a direction change.                                                                                                 
[HB 18 was held over.]                                                                                                          
There being no  further business before the  committee, the House                                                               
Special Committee on Education meeting  was adjourned at 12:21:00                                                             

Document Name Date/Time Subjects