Legislature(1993 - 1994)
01/21/1993 01:32 PM House FIN
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* first hearing in first committee of referral
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HOUSE FINANCE COMMITTEE
January 21, 1993
1:32 p.m.
TAPE HFC 93-6, Side 1, #000 - end.
TAPE HFC 93-7, Side 1, #000 - end.
TAPE HFC 93-7, Side 2, #000 - #555.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 1:32 p.m.
PRESENT
Co-Chair Larson Representative Hoffman
Vice-Chair Hanley Representative Martin
Representative Brown Representative Navarre
Representative Foster Representative Parnell
Representative Grussendorf Representative Therriault
Co-Chair MacLean was absent from the meeting.
ALSO PRESENT
Representative Ulmer; Representative Bundy; Representative
Brice; Representative Davies; Jerry Covey, Commissioner,
Department of Education; Mike Maher, Deputy Commissioner,
Department of Education; Allan Barnes, Executive Director,
Postsecondary Education Commission; Gary Bader, Director,
Administrative Services, Department of Education; Duane
Guiley, Finance Director Department of Education; Jerome
Komisar, President, University of Alaska; Wendy Redman, Vice
President, University of Alaska; Brian Rogers, Vice
President, University of Alaska; Marsha Hubbard, Director of
Budget, University of Alaska; Marshall Lind, Chancellor,
University of Alaska Southeast; Joan Wadlow, Chancellor,
University of Alaska Fairbanks; Donald Behrend, Chancellor,
University of Alaska Anchorage.
SUMMARY INFORMATION
AGENCY BUDGET OVERVIEWS: DEPARTMENT OF EDUCATION
UNIVERSITY OF ALASKA
hb55#
HB 55 FY 94 OPERATING BUDGET & LOAN PROGRAMS
JERRY COVEY, COMMISSIONER, DEPARTMENT OF EDUCATION provided
members with an overview of the Department of Education's
budget (Attachment 1). He reviewed functions of the
Department of Education as listed on page 1, Attachment 1.
He observed that the Department has 380 employees.
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Commissioner Covey discussed issues that the Department has
focused on during the past year. He noted that the Alaska
2000 Education Initiative has been a major focus. He
emphasized that the Initiative has been crafted to eliminate
controversy. The Department has attempted to gain a broad
support for the Initiative. During FY 93 the Department
surveyed school districts to determine their needs, cut
travel by 25 percent, reviewed the Alaska report card
process and made significant progress on the chart of
account issue.
Commissioner Covey emphasized that the State of Alaska has
taken a leadership role in fulfilling the mandates of the
Americans with Disabilities Act.
Commissioner Covey stated that the Department has been
working on setting standards for student performance as part
of the Alaska 2000 Education Initiative. He emphasized the
importance of performance standards. He assured members
that standards will reflect the cultural and ethnic
diversity of students. He asserted that Alaskan children
can achieve world class standards.
Commissioner Covey highlighted the Department of Education's
FY 94 budget. He noted that the FY 94 budget is below the
FY 93 authorized level by $6.8 million dollars, including
Postsecondary Education. Under the current foundation
formula there will be a $18.6 million dollar increase to
cover expanded enrollment. There is a 3 percent statewide
growth in student enrollment. Impact Aid will increase by
$1.2 million dollars. The Department projects the need for
a $6.4 million dollar supplement. School debt retirement is
down by $28 million dollars. Pupil transportation is down
$2.6 million dollars. Funding for pupil transportation will
require proration of transportation costs to districts.
There is an increase of $25.0 thousand dollars for the
Professional Teaching Practices Commission to address
increased legal fees.
Commissioner Covey reviewed the legislative package for the
Department of Education. Commissioner Cover discussed an
omnibus bill containing five components. The components
are: Phase-in to a 200 day school year, transfer funds from
the Education Trust Fund to the School Improvement Fund,
establish District Advisory School Boards, establish Tenure
Review Committees and fund a charter school.
Commissioner Covey explained that the second bill would
revise the foundation formula for education. Changes will
be made to the area cost differential for school funding.
The gifted and talented program, and vocational education
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will be deregulated. The Department of Education is
recommending a spending cap for gifted and talented of 4.5
percent of the student enrollment. Funding would be reduced
by $4.5 million dollars. This money would be added as
additional funding to support Vocational Education. He
explained that school districts will be held harmless under
this proposal. The hold harmless proposal would quarantee
school districts that their funding will not be less than
the previous year. This will allow school districts to
plan their school year at a minimum level. He emphasized
that enrollment is increasing.
Commissioner Covey continued to discuss legislative
proposals affecting the foundation formula for education.
The Department of Education is proposing to phase-in, over
the next four years, a local contribution for each school
district's operating expense. Funding communities within
the foundation formula will also be addressed in the
Department of Education's proposed legislation.
Commissioner Covey discussed legislative proposals affecting
the Department of Education's capital improvement projects.
The Department is proposing to change their categories for
funding. Standardized building codes for school districts
and REAA's will be established. Preventive maintenance will
be emphasized.
ALLAN BARNES, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION discussed the functions of the Commission. He
noted that Commission functions include: Consumer
protection, institutional authorization and the Student Loan
program. The Commission also works with the Student Loan
Corporation. Two members of the Postsecondary Education
Commission sit on the Student Loan Corporation Board. The
Corporation manages a $500 million dollar loan portfolio.
Mr. Barnes noted that the Commission's FY 93 authorized
budget was $8.6 million dollars including two RPL's by the
Legislative Budget and Audit Committee. In 1992, the
Commission handled 7,000 new loans. The loan staff ratio in
1990 was 3,000 to 1. In 1993 the loan staff ratio is 4,400
to 1. He stated that the loan default rate is approximately
7 percent annually. Over 10 years the accumlative loan
default rate is approximately 12 percent. The national
average for default of student loans is 20 - 22 percent.
The Commission has been able to attach approximately 6,000
permanent fund dividend checks. The Commission is
requesting a capital budget appropriation to improve their
technology.
Representative Navarre noted that pupil transportation
affects the State disproportionately. He asked if the
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Department of Education has prepared a fiscal note detailing
the cost of a phase-in to a 200 day school year.
Commissioner Covey replied that the Department of Education
is looking at non-traditional alternatives which would
reduce the cost. The current daily operating expense for K
- 12 is $3 million dollars. Representative Navarre
suggested that decreasing the pupil/teacher ratio is a
higher funding priority than extending the school year.
Representative Navarre asked if the overall reduction
presented by the Department of Education included the
reduction of school debt reimbursement.
MIKE MAHER, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF EDUCATION clarified that the $27.8 million
dollar reduction in school debt reimbursement has not been
factored into the Department's overall budget request. This
reduction is a non general fund decrement. There is a $15.5
million dollar net general fund increase in the Department's
budget.
Representative Martin expressed his concern with the number
of school districts and superintendents. He noted that
there are 19 superintendents with higher salaries than the
Governor. Representative Martin noted that the Legislative
Budget and Audit Committee concluded that consolidation of
school districts could result in a $6 million dollar
savings.
Representative Martin discussed the Student Loan
Corporation. He voiced his concern with the default rate.
Mr. Barnes noted that during the mid 1980's the default rate
was 24 percent. He emphasized that the current accumulative
rate of default on student loans is 12 percent. He compared
this to the national rate of 22 percent.
Representative Hanley observed that constituents are having
difficulty with their loan accounts.
(Tape Change, HFC 93-7, Side 1)
Mr. Barnes agreed that there have been difficulties with the
accounting system. He further detailed the problems the
Postsecondary Commission have encountered. He assured
members that problems should be straightened out by June 30,
1993. Co-Chair Larson noted that constituents in his
district have also had difficulties with the Commission's
accounting system.
Representative Ulmer asked the Commissioner to summarize
costs associated with increased enrollment and legislation
proposed by the Department of Education. Commissioner Covey
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noted that proposed revisions to the foundation formula
would result in an increase of approximately $11.6 million
dollars. This includes $3.2 million dollars for single site
districts. The net affect of the Governor's proposed
legislation would be a $8.2 million dollar increase. The
$3.2 million dollars for single site districts will not be
included under the Governor's proposal. Co-Chair Larson
pointed out that the Administration is proposing to transfer
a portion of the Education Trust Fund to offset increased
cost to the foundation formula for education. There is $8
million dollars in the Education Trust Fund.
Commissioner Covey could not detail the cost of extending
the school year. He emphasized that the cost of advisory
boards would vary by district. Representative Ulmer
clarified that the omnibus bill contains $4.5 million
dollars for district grants which represents 50 percent of
the Education Trust Fund. Commissioner Covey agreed and
stated that increased enrollment will cost $18.6 million
general fund dollars.
Representative Hoffman noted the need to improve standards
in rural Alaska. He emphasized the lack of access to
library materials. He stressed that rural students are not
entering or graduating from college in sufficient numbers.
He emphasized the need to provide rural students with a
"level playing field". Commissioner Covey agreed with
Representative Hoffman. He added that expectations of
achievement for rural students must be equal to what is
expected of urban students.
Representative Therriault asked if the need for additional
staff in Postsecondary Education will decrease as the loan
volume decreases. Mr. Barnes agreed that staff demands
should decline by FY 97. Mr. Barnes expects a 30 percent
increase in loans and repayment over the next three years.
Approximately 7 - 9 thousand loans will be added to the
portfolio.
Representative Brown emphasized the need for education
technology to increase quality and efficiency of education
in the State of Alaska. Commissioner Covey concurred.
Representative Brown noted that students cannot learn
technological skills without the accompanying equipment.
Co-Chair Larson announced that the House Finance Budget
Subcommittee on the Department of Education will consist of
Representatives Larson, James, Bunde, Willis and B. Davis.
UNIVERSITY OF ALASKA
JEROME KOMISAR, PRESIDENT, UNIVERSITY OF ALASKA, provided
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members with a summary of the Board of Regents FY 94 budget
request (Attachment 2). Commissioner Komisar read written
testimony to the Committee (Attachment 3).
Co-Chair Larson expressed his concern that the Governor's
Executive Order 81 does not include funding for the
Aerospace Corporation or applied research at the University
of Alaska Anchorage.
Representative Martin observed that the State of Alaska has
been successful in attracting new students. He emphasized
the need to upgrade courses. He expressed concern with
public perception that the Legislature has not been generous
to the University of Alaska.
Representative Martin questioned Commissioner Komisar about
the University of Alaska's program receipts. Commissioner
Komisar assured him that program receipts are carefully
monitored. He observed that an unexpected increase in
tuition resulted in a request for increased program receipt
authority. He interjected that the University of Alaska is
continuing to seek additional federal receipts.
Representative Martin discussed the University of Alaska
merger. Commissioner Komisar agreed that the success of the
University of Alaska merger will be discussed during
subcommittee hearings.
Representative Navarre asked if researchers are required to
teach classes. Commissioner Komisar replied that
researchers are not required to teach classes but that the
majority share classroom responsibilities. Members
requested further information regarding the breakdown of
staff and teaching responsibilities.
Representative Navarre asked Commissioner Komisar how he
planned to compensate for increased health care costs.
Commissioner Komisar stated that the University of Alaska is
considering options. Employees may be required to pay a
portion of their health care costs. The mental health
policy for university employees will be revamped. A charge
for dependents will be initiated.
(Tape Change, HFC 93, Side 2)
Representative Ulmer asked for an explanation of the
University's decision to provide employees with a three
percent cost-of-living increase. Commissioner Komisar
observed that university employees did not receive raises
for several years during the 1980's. He emphasized that
during this time the University had difficulty acquiring
staff. In 1989 the Board of Regents established a policy to
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assure a minimum cost-of-living increase of 3 percent. He
discussed the need to attract and retain qualified
personnel.
Representative Ulmer questioned the Commissioner regarding
the University of Alaska Southeast's classroom capital
project request. Commissioner Komisar noted that completion
of the classroom would allow the campus to meet the
responsibilities that it now faces. Although the Board of
Regents supports the request it is not included in the
Governor's CIP legislation.
Representative Therriault asked if the University has been
able to replace senior faculty with qualified individuals.
Commissioner Komisar replied that they have been able to
fill positions with qualified persons. He noted that the
academic market place is advantageous to the University at
the present time.
Representative Bundy agreed that there is more talent than
positions available. He suggested that more emphasize be
placed on hiring teachers. Commissioner Komisar discussed
faculty turnover.
Representative Parnell relayed concerns by students
pertaining to the University's accreditation. He noted that
the full-time to part-time teaching ratio is low.
Commissioner Komisar assured him that the University's
accreditation is not threatened. He agreed that the number
of full-time teachers needs to be increased. He stressed
the importance of expanding course selection. He suggested
that courses may be shared between campuses by utilizing
available technology.
DONALD BEHREND, CHANCELLOR, UNIVERSITY OF ALASKA ANCHORAGE
(UAA) clarified that 68 percent of the faculty at UAA are
part-time. Thirty-two percent of UAA teachers are full-
time. He noted that this represents a reversal of most
secondary education institutions. He emphasized that UAA is
seeking $3.5 million dollars to hire additional faculty.
This increase would result in a two percent increase in
full-time positions.
Co-Chair Larson noted that the FY 93 cost-of-living increase
was not included in the University of Alaska's budget.
Commissioner Komisar clarified that the FY 93 increase was
aurgumented by a raise in tuition. He interjected that a FY
94 increase would have to be accompanied by additional
general fund support.
Representative Hoffman expressed concern that rural campuses
have not been included in the decision making process.
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Commissioner Komisar felt that rural campuses had been
involved in the budget process.
JOAN WADLOW, CHANCELLOR, UNIVERSITY OF ALASKA FAIRBANKS
further discussed the extended budget process and
involvement of rural campuses. She emphasized that the
University relies on criticism by students regarding their
needs. Representative Foster echoed frustration felt by the
North-Northwest campus, in Nome, regarding the attention
given to rural campuses.
Co-Chair Larson asked for information regarding sponsored
programs. Commissioner Komisar noted that sponsored
programs are paid for by groups other than the State.
Sponsored programs are not paid for by general funds. They
are self supporting.
Co-Chair Larson asked if the University of Alaska will be
seeking bonds to cover deferred maintenance through the
Alaska State Housing Authority. Commissioner Komisar stated
that the potential for bonding is still being discussed.
The bond would be paid off over a period of time through
general fund allocations in capital projects legislation.
There would be an obligation to the General Fund. Co-Chair
Larson noted that future legislatures would be obligated.
Representative Brown asked what is the increase to the
University of Alaska's budget. Commissioner Komisar stated
that there is a $5 million net general fund dollar increase.
MARSHA HUBBARD, DIRECTOR OF FINANCE, UNIVERSITY OF ALASKA
referred to page 2, Attachment 2. She observed that the
Governor did not select which projects would be funded. He
approved all of the $20 million dollar requests. Then gave
an unallocated reduction of $16 million dollars. There is a
net increase of $4.981.0 million general fund dollars. The
Board of Regents has not determined how the increase will be
spent. She noted that other funding sources are also shown
on page 2, Attachment 2.
Representative Brown noted that a ten percent increase is
expected in tuition. She asked how the University of Alaska
compares to other institutions. Commissioner Komisar noted
that the University of Alaska is in the middle nationally.
Members discussed whether projects should be prioritized by
the Board of Regents or the Legislature. Members did not
reach a consensus.
Co-Chair Larson announced that the House Finance
Subcommittee on the University of Alaska consists of
Representatives Martin, Bunde, Phillips, Davies and Ulmer.
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ADJOURNMENT
The meeting adjourned at 3:35 p.m.
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