Legislature(2013 - 2014)HOUSE FINANCE 519

03/18/2014 01:30 PM FINANCE

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01:35:49 PM Start
01:36:14 PM HB278
02:50:40 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 18, 2014                                                                                            
                         1:35 p.m.                                                                                              
1:35:49 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:35 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Michael  Hanley, Commissioner,  Department of  Education and                                                                    
Early  Development; Diane  Blumer, Commissioner,  Department                                                                    
of  Labor  and  Workforce Development;  Elizabeth  Nudelman,                                                                    
Director,  School  Finances  and Facilities,  Department  of                                                                    
Education and Early Development.                                                                                                
HB 278    EDUCATION: FUNDING/TAX CREDITS/PROGRAMS                                                                               
          HB 278 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
HOUSE BILL NO. 278                                                                                                            
     "An Act increasing the base  student allocation used in                                                                    
     the  formula for  state  funding  of public  education;                                                                    
     repealing the secondary  student competency examination                                                                    
     and  related  requirements;  relating  to  high  school                                                                    
     course credit earned through  assessment; relating to a                                                                    
     college and  career readiness assessment  for secondary                                                                    
     students;  relating   to  charter   school  application                                                                    
     appeals  and program  budgets; relating  to residential                                                                    
     school   applications;  increasing   the  stipend   for                                                                    
     boarding   school   students;  extending   unemployment                                                                    
     contributions for  the Alaska technical  and vocational                                                                    
     education  program;  relating  to earning  high  school                                                                    
     credit for  completion of vocational  education courses                                                                    
     offered   by  institutions   receiving  technical   and                                                                    
     vocational  education  program   funding;  relating  to                                                                    
     education  tax credits;  making conforming  amendments;                                                                    
     and providing for an effective date."                                                                                      
1:36:14 PM                                                                                                                    
MICHAEL  HANLEY, COMMISSIONER,  DEPARTMENT OF  EDUCATION AND                                                                    
EARLY DEVELOPMENT, relayed that  he discussed the components                                                                    
of the  bill during the  previous meeting (HFIN  031714 1:33                                                                    
PM) on HB 278.                                                                                                                  
Representative Wilson requested  clarification regarding the                                                                    
components  of  the  bill. She  asked  the  commissioner  to                                                                    
explain  how the  programs in  the legislation  were changed                                                                    
from their  current practice and what  the expected outcomes                                                                    
Commissioner   Hanley  replied   that  the   charter  school                                                                    
proposal had  two components. Both components  were centered                                                                    
on  equity. Charter  schools  were administered  differently                                                                    
via  an Academic  Policy Committee  but were  public schools                                                                    
and deserved  equal treatment as traditional  public school.                                                                    
He  explained  that  one   component  authorized  an  appeal                                                                    
process  through  the  commissioner  of  the  Department  of                                                                    
Education  and  Early   Development  (DEED)  and  eventually                                                                    
through the  State Board  of Education  if a  charter school                                                                    
application  was denied  by the  school district.  The other                                                                    
component  clarified language  in statute  that the  funding                                                                    
for  charter  schools should  not  be  less than  the  funds                                                                    
generated by the number of  students in the same manner that                                                                    
the  funds  were generated  by  the  district. The  language                                                                    
specified that  the statute pertained to  special education,                                                                    
vocational education, and transportation.                                                                                       
Representative  Wilson  wondered  why charter  schools  were                                                                    
required  to have  teachers with  the  same requirements  as                                                                    
public schools. She hoped for increased flexibility.                                                                            
Commissioner   Hanley   addressed    the   requirement   for                                                                    
certificated and "highly  qualified" teachers were contained                                                                    
in  statute  and  regulation.  The  administration  believed                                                                    
students should  have the same  expectation of  quality. The                                                                    
issue  had  intentionally not  been  addressed  in the  bill                                                                    
because  public   school  teachers   were  expected   to  be                                                                    
certificated  and highly  qualified. He  noted that  charter                                                                    
schools  were an  alternative style  of education  but still                                                                    
remained public schools.                                                                                                        
Representative Wilson surmised that  a certified teacher did                                                                    
not necessarily  have to be in  a union. She wondered  why a                                                                    
qualified  teacher had  to be  hired out  of the  same union                                                                    
Commissioner Hanley  replied that the union  issue was dealt                                                                    
with on a local level  and part of its negotiated agreement.                                                                    
He  voiced  that  some  districts  did  not  have  unionized                                                                    
teachers,  but  many did.  Currently,  if  a charter  school                                                                    
wanted to hire  teachers outside of the  bargaining unit the                                                                    
school  needed to  obtain an  agreement  between the  school                                                                    
district, bargaining unit, and charter school.                                                                                  
Representative Wilson  desired the flexibility to  hire non-                                                                    
union    and   non-certificated    individuals   from    the                                                                    
professional, business, and  scientific communities to teach                                                                    
at charter  schools. She  wanted to  see the  most qualified                                                                    
people in the classrooms.                                                                                                       
Representative  Holmes discussed  the potential  significant                                                                    
financial impact  if a  charter school  was operated  by the                                                                    
State  Board of  Education due  to an  appealed denial  by a                                                                    
local school district. She asked  whether a preferred method                                                                    
would be  to force the  local school district to  accept the                                                                    
charter school. She asked for elaboration on the issue.                                                                         
Commissioner Hanley  answered that a school  district denial                                                                    
of a charter school application  must be provided in writing                                                                    
based on  fact and  law. He hoped  that the  provision would                                                                    
limit  the  number  of  overturned  denials  on  appeal.  He                                                                    
offered  that an  appeal  had never  come  before the  state                                                                    
board of education. The bill  authorized that a denial could                                                                    
be overturned  by the  commissioner or  board based  on fact                                                                    
and law. The  bill authorized that the state  board would be                                                                    
the school  board for the  charter school and  would operate                                                                    
similarly as a  local district and become  a separate school                                                                    
district.   The   state  board   would   have   to  hire   a                                                                    
superintendent and hire state employees.                                                                                        
Representative Holmes expressed  concerns regarding creating                                                                    
additional school districts when  currently over fifty state                                                                    
school  districts  were  in operation.  She  understood  the                                                                    
problematic nature  of the charter school  operating under a                                                                    
school district  that denied  its application.  She wondered                                                                    
how the transportation funding applied to charter schools.                                                                      
1:48:53 PM                                                                                                                    
Commissioner Hanley replied that  the provision was included                                                                    
by  the  House Education  Committee  and  was based  on  the                                                                    
recognition that  students generating  transportation should                                                                    
have  the opportunity  for  transportation. He  communicated                                                                    
that  charter   school  students   were  not   contained  in                                                                    
geographic   boundaries   like   traditional   schools   but                                                                    
transportation   should  be   provided.  He   provided  some                                                                    
examples   of   how   a  few   school   districts   provided                                                                    
transportation.  The  Anchorage  school district  picked  up                                                                    
students  on  current  routes  and  in  the  Mat-Su  parents                                                                    
dropped students off  at a hub or certain  location for pick                                                                    
up   by   school   transport.   The   bill   supported   the                                                                    
transportation mandate already contained in statute.                                                                            
Co-Chair Stoltze remarked that  a number of school districts                                                                    
were "intransigent" and  "did not want to  deal with charter                                                                    
schools" and  was the  reason the  issues were  addressed in                                                                    
the  legislation. He  did not  believe the  provisions would                                                                    
lead   to  new   school  districts   but  lead   to  further                                                                    
Commissioner  Hanley  agreed  that the  public  process  for                                                                    
appeal brought  "validity" to the issue  and would influence                                                                    
a more deliberative outcome.                                                                                                    
Representative Holmes  agreed that she wanted  the districts                                                                    
to improve its relationships with charter schools.                                                                              
Co-Chair Stoltze  believed that some districts  were hostile                                                                    
towards charter schools.                                                                                                        
Representative  Gara  asked   for  clarification  about  the                                                                    
percentage of Base Student  Allocation (BSA) funding charter                                                                    
schools  received. He  thought charter  schools received  80                                                                    
percent of the BSA instead of 100 percent.                                                                                      
Commissioner Hanley  replied that home school  students were                                                                    
funded at  80 percent  of the BSA  and that  charter schools                                                                    
were  funded  at  the  same  level  as  public  schools  and                                                                    
received 100 percent funding.                                                                                                   
Representative Gara  supported providing  transportation for                                                                    
charter schools.  He wondered whether  the provision  to add                                                                    
more  charter school  students  for transportation  diverted                                                                    
transportation  funding for  traditional  schools. He  asked                                                                    
whether  more students  would need  transportation with  the                                                                    
current  amount   of  funding  or  should   the  funding  be                                                                    
Commissioner  Hanley replied  that if  the district  was not                                                                    
providing  transportation  for  a charter  school  then  the                                                                    
provision would  "potentially divert funds or  resources" to                                                                    
create  equity as  opposed to  the disparity  that currently                                                                    
Representative  Gara did  not  want  to take  transportation                                                                    
away  from  students  that were  already  receiving  it.  He                                                                    
suggested  increasing the  funding  to  ensure all  students                                                                    
were   provided    transportation   and   asked    for   the                                                                    
commissioner's consideration of the issue.                                                                                      
Commissioner Hanley responded that  most of the eight school                                                                    
districts    that   contain    charter   schools    provided                                                                    
transportation  for charter  school  students. He  indicated                                                                    
that  the provision  applied to  the districts  that do  not                                                                    
provide  any  aspect  of transportation  services  but  were                                                                    
receiving transportation funds for  the charter students. He                                                                    
did not  believe the  situation warranted  additional funds,                                                                    
but  required   the  districts   to  provide   an  equitable                                                                    
distribution of services.                                                                                                       
Representative Gara asked for  clarity about the legislation                                                                    
creating  equity   for  charter  schools  in   the  area  of                                                                    
vocational education.                                                                                                           
Commissioner  Hanley answered  that the  bill clarified  but                                                                    
did  not change  current statutory  language that  specified                                                                    
that the funds  designated for charter schools  could not be                                                                    
less than the funds generated by the charter students.                                                                          
Representative Gara  reported that  there was a  federal law                                                                    
that only  applied to  foster youth  under a  certain income                                                                    
level that stipulated foster youth  should finish the school                                                                    
year  in  the original  school  when  placements changed  if                                                                    
feasible. He  discussed studies that showed  it was damaging                                                                    
for  foster children  who changed  schools  during the  year                                                                    
when  foster   placement  changed.  He  asked   whether  the                                                                    
commissioner  would support  an  amendment requiring  foster                                                                    
children to  stay in the  original school for  the remainder                                                                    
of the school year.                                                                                                             
Commissioner Hanley  replied that  it was  already occurring                                                                    
in Anchorage in  the Child in Transition program  but he was                                                                    
uncertain to what extent.                                                                                                       
Representative Gara agreed that it  was being worked on, but                                                                    
transportation was not  provided to all youths  only as many                                                                    
as the funding allowed.                                                                                                         
Co-Chair  Stoltze  cited   the  commissioners  remarks  that                                                                    
charter schools  received 100 percent funding.  He asked why                                                                    
some school  district retained 20  percent to 25  percent of                                                                    
its charter school's funding.                                                                                                   
Commissioner  Hanley replied  that charter  schools operated                                                                    
under  a  budget  contract with  the  school  district.  The                                                                    
school  district  retained  some   portion  of  funding  for                                                                    
services provided  by the district  for the  charter school.                                                                    
He  stated   that  "theoretically  they  should   be  funded                                                                    
Co-Chair Stoltze  wanted the record to  reflect that charter                                                                    
schools were not receiving 100 percent of the money.                                                                            
1:58:36 PM                                                                                                                    
Representative Thompson  wondered why  the bill  had removed                                                                    
the  SAT,   ACT,  and   career  readiness   assessment  exam                                                                    
Commissioner Hanley  did not  know the  intent of  the House                                                                    
Education  Committee.   He  reported   that  the   bill  had                                                                    
initially  included the  SAT  and ACT  tests,  but had  been                                                                    
removed  by  the  House   Education  Committee.  The  career                                                                    
assessment, WorkKeys remained an assessment option.                                                                             
Representative   Thompson  questioned   the  two   different                                                                    
definitions  of a  dual  credit  in the  bill.  He read  the                                                                    
definition on page 22, line 10:                                                                                                 
     "dual-credit student" means a secondary level student                                                                      
     in the state who simultaneously earns college and high                                                                     
     school credit for a course;                                                                                                
Representative  Thompson pointed  to  page  19, Section  24,                                                                    
which defined a dual credit as  a credit towards a career or                                                                    
vocational  certification.  He  asked why  one  referred  to                                                                    
college  and  one  referred   to  vocational  education.  He                                                                    
wondered if the bill contained two separate programs.                                                                           
Commissioner  Hanley  replied  that the  programs  were  not                                                                    
meant to be separate. The  programs were designed to allow a                                                                    
student  to receive  post-secondary and  high school  credit                                                                    
simultaneously  but  not  delineate  between  vocational  or                                                                    
college  education.  The  intent   may  not  be  clear;  the                                                                    
department was open to clarifying language.                                                                                     
Representative Thompson discussed  the charter school appeal                                                                    
process. He  related that the  original version of  the bill                                                                    
allowed the  commissioner to remand  the appeal back  to the                                                                    
school district  but the  House Education  Committee version                                                                    
authorized the state to operate  the school and the district                                                                    
could  subsequently appeal  to  get it  back.  He asked  for                                                                    
clarification about the changes.                                                                                                
Commissioner Hanley referenced page  6, lines 19 through 23,                                                                    
and   noted  that   the   commissioner's  options   remained                                                                    
unchanged.  The   commissioner  could  remand   the  appeal,                                                                    
approve the  charter school and  forward to the  state Board                                                                    
of   Education,  or   uphold  the   decision  to   deny  the                                                                    
application.  He voiced  that  the  provision the  Education                                                                    
Committee  added  was  that a  charter  school  approved  on                                                                    
appeal would be operated by the state Board of Education.                                                                       
Co-Chair  Stoltze surmised  that the  school districts  were                                                                    
strongly motivated to keep the  students in its district for                                                                    
the benefit of the student count.                                                                                               
Commissioner Hanley replied in the affirmative.                                                                                 
Representative Thompson pointed to  education tax credits in                                                                    
the bill and noted that  insurance premium taxes and oil and                                                                    
gas  property and  production taxes  were  not included.  He                                                                    
wondered why some were excluded.                                                                                                
Commissioner Hanley  answered that the tax  credits remained                                                                    
the  same  based  on  the  current  tax  statutes,  but  the                                                                    
eligibility for the  credits changed. He could  not speak to                                                                    
the change.  He deferred the  question to the  Department of                                                                    
Revenue (DOR).                                                                                                                  
Representative  Thompson communicated  that eligibility  for                                                                    
education tax credits was extended  to multiple tax programs                                                                    
in  statute that  included:  corporate  income tax,  fishery                                                                    
business and  resource landing  tax, insurance  premium tax,                                                                    
title  insurance premium  tax, mining  license tax,  and oil                                                                    
and gas production and property  tax. He reiterated that not                                                                    
all of the credits were identified in the bill.                                                                                 
Commissioner  Hanley restated  that he  needed clarification                                                                    
from DOR.  He indicated that  the intent of the  tax credits                                                                    
was to foster private partnerships with public education.                                                                       
Representative  Guttenberg  questioned  the  charter  school                                                                    
appeal  process.  He  asked  what  the  standards  were  for                                                                    
approval  or  denial of  a  charter  school application.  He                                                                    
cited  page 6,  line  19 that  allowed  the commissioner  to                                                                    
remand  the  appeal  back  to the  local  school  board  for                                                                    
further  review.  He  noticed  that a  time  limit  was  not                                                                    
designated for the remand. He asked for clarification.                                                                          
Commissioner  Hanley answered  that the  local school  board                                                                    
had  sixty days  to  make a  decision in  order  to avoid  a                                                                    
denial by  delaying. He  indicated that on  page 5,  line 22                                                                    
the appeal must  be filed within 60 days of  a denial and if                                                                    
approved  by  the  commissioner   the  application  must  be                                                                    
forwarded to  the state board  within 30 days found  on page                                                                    
6, line 2.                                                                                                                      
Representative  Guttenberg   wondered  if  a   timeline  was                                                                    
necessary  if the  commissioner remanded  the appeal  to the                                                                    
local  school   board  in  order   to  avoid   delaying  the                                                                    
Commissioner Hanley supported the  idea. He wanted to ensure                                                                    
the  process was  concise and  would  determine whether  the                                                                    
current   language  regarding   timelines  applied   to  the                                                                    
remanding provision.                                                                                                            
Representative Guttenberg  asked for additional  examples of                                                                    
why a  school board would  deny an application.  He wondered                                                                    
what the standards were.                                                                                                        
Commissioner Hanley replied that  the standard was broad. He                                                                    
furthered  that local  school boards  had requirements  that                                                                    
charter schools  were expected to  meet. A denial  was based                                                                    
on a "finding of fact" that  the charter school did not meet                                                                    
the local criteria.                                                                                                             
Representative  Guttenberg cited  page 18,  Section 22  that                                                                    
discussed  reporting [expenditure  and performance  report].                                                                    
He  had heard  over the  years  that the  type of  reporting                                                                    
required was  difficult and wondered how  "successfully" the                                                                    
reporting was done in the past.                                                                                                 
Commissioner Hanley  replied that  the provision  applied to                                                                    
the Technical  Vocational Education  Program (TVEP)  and was                                                                    
under  the Department  of  Labor  and Workforce  Development                                                                    
2:10:38 PM                                                                                                                    
Representative  Guttenberg referred  to  the TVEP  reporting                                                                    
requirements  and the  department's ability  to compile  the                                                                    
information regarding:  the number of students  who had jobs                                                                    
one  year after  leaving  the program,  the  median wage  of                                                                    
former   participants,   and   the   percentage  of   former                                                                    
participants who obtained jobs  related to training received                                                                    
under  the   program.  He  wondered  how   successfully  the                                                                    
department had tracked the individuals.                                                                                         
DIANE   BLUMER,  COMMISSIONER,   DEPARTMENT  OF   LABOR  AND                                                                    
WORKFORCE DEVELOPMENT, replied  that the department provided                                                                    
a  report to  the legislature  each year.  She related  that                                                                    
obtaining  the   information  from  some  of   the  regional                                                                    
training   centers  proved   challenging.  The   legislation                                                                    
allowed DOL to reduce  funding for regional training centers                                                                    
that   were  not   tracking  or   meeting  the   performance                                                                    
standards, which allowed a more rigorous reporting process.                                                                     
Vice-Chair Neuman  wondered whether  the commissioner  had a                                                                    
basic  understanding  of  the   funding  for  technical  and                                                                    
vocational  training  programs   that  originated  from  the                                                                    
unemployment  insurance  compensation.  He  remembered  that                                                                    
the  intent  of  the  program   was  to  retrain  unemployed                                                                    
Alaskans in  new skills to  reenter the workforce.  He asked                                                                    
for clarification.                                                                                                              
Commissioner  Blumer responded  that  his understanding  was                                                                    
basically correct and reported that  the intent was to train                                                                    
people  with  employable  skills  to make  sure  they  could                                                                    
obtain work or upgrade skills for sustainable employment.                                                                       
Vice-Chair  Neuman   referenced  Section  24   that  defined                                                                    
"articulation  agreement." He  asked for  an explanation  of                                                                    
the definition.                                                                                                                 
Commissioner  Blumer  explained  that the  articulation  was                                                                    
between  the regional  training center  and the  high school                                                                    
and allow for simultaneous  dual credits while attending the                                                                    
training center.                                                                                                                
Vice-Chair  Neuman asked  whether  the  training center  had                                                                    
accreditation from the state board  or DOL for certain skill                                                                    
sets related to math or other subjects.                                                                                         
Commissioner Blumer answered in the affirmative.                                                                                
Vice-Chair Neuman  asked how the  state measured  the skills                                                                    
against grade level standards for the accreditation.                                                                            
Commissioner Hanley replied  that the articulation agreement                                                                    
between   the  two   entities  covered   the  criteria   for                                                                    
accreditation of  dual credits  for both institutions.   The                                                                    
articulation  agreement  ensured   that  the  students  will                                                                    
receive the credit in their  public school after attending a                                                                    
training program.                                                                                                               
Vice-Chair  Neuman  referred  to   the  summary  of  changes                                                                    
titled:   "Summary  of   Individual   Components  and   HEDC                                                                    
Amendments  to  CSHB 278  (N)"  (copy  on file)  related  to                                                                    
Section 37 and read:                                                                                                            
     Section 37  repeals Section 3,  ch. 91, SLA  2010 which                                                                    
     will remove the sunset date  and that will allow Alaska                                                                    
     to  continue  to  seek  federal  grants  for  providing                                                                    
     start-up funds for new charter schools.                                                                                    
Vice-Chair Neuman  noted that Section 37  in the legislation                                                                    
repealed Section  3 without further  language. He  asked for                                                                    
further clarification.                                                                                                          
Commissioner  Hanley   clarified  that  a   federal  program                                                                    
potentially provided funds for  charter school start-ups but                                                                    
the federal  funds for the  program was  never appropriated.                                                                    
The  program was  due to  sunset  in the  current year.  The                                                                    
language was  suggested by Representative Kito  to allow the                                                                    
sunset date to continue with  the knowledge that funding was                                                                    
contingent  upon the  federal government  funding the  grant                                                                    
Vice-Chair Neuman wondered whether  the funds were reflected                                                                    
in operating budget.                                                                                                            
Commissioner Hanley replied in the negative.                                                                                    
Vice-Chair Neuman asked  for clarification regarding Section                                                                    
39 that applied to the high school competency examination.                                                                      
Commissioner Hanley  answered that the language  in the bill                                                                    
repealed the High School  Graduation Qualifying Exam (HSGQE)                                                                    
and  the  section  provided   the  transition  language.  He                                                                    
communicated that the governor's  bill included a three year                                                                    
transition period.  House Bill 220 [HB  220-Secondary School                                                                    
Exit Exam;  Perf Report] changed  the repeal date  from 2017                                                                    
to 2015.                                                                                                                        
2:20:01 PM                                                                                                                    
Co-Chair Stoltze  interjected that  HB 220 was  in committee                                                                    
and  a committee  substitute (CS)  was  evolving. He  voiced                                                                    
that the  CS authorized repeal  after the current  year. The                                                                    
committee considered the test invaluable and "meaningless."                                                                     
Vice-Chair Neuman  supported eliminating the test.  He asked                                                                    
about charter  school transportation. He was  concerned that                                                                    
there  were  not enough  school  buses  and that  they  were                                                                    
overbooked.  He  worried  that the  school  districts  could                                                                    
renege on  providing transportation  for charter  schools by                                                                    
claiming that  the district did  not have enough  busses. He                                                                    
wondered  whether state  law required  a  certain number  of                                                                    
buses based on average daily membership.                                                                                        
Commissioner  Hanley replied  in the  negative. He  read the                                                                    
language in the CS, on page 9, line 3:                                                                                          
     (2) at  a minimum, provide transportation  services for                                                                    
     students  enrolled in  the charter  school  on a  space                                                                    
     available  basis  along  the regular  routes  that  the                                                                    
     students  attending schools  in an  attendance area  in                                                                    
     the district are transported;                                                                                              
Vice-Chair  Neuman asked  for  verification  on whether  the                                                                    
school  district excluded  charter  school  students in  its                                                                    
Average  Daily  Membership  (ADM)  calculation  for  student                                                                    
Commissioner  Hanley  responded  that the  ADM  counted  for                                                                    
transportation  funding  no   matter  what  school  students                                                                    
attended in the district.                                                                                                       
Representative  Costello   identified  the   charter  school                                                                    
funding equality  issue. She wanted  clarification regarding                                                                    
the commissioner's  previous statement that  charter schools                                                                    
received 100 percent funding. She  related that she had been                                                                    
approached  by  a  charter  school  hoping  for  legislation                                                                    
providing equity for charter schools.                                                                                           
Co-Chair  Stoltze  pointed  out  that  the  school  district                                                                    
received the funding not the charter school.                                                                                    
Commissioner   Hanley  concurred   with  the   Co-Chair  and                                                                    
clarified  that the  school district  received full  funding                                                                    
for the  students and  a contract  between the  district and                                                                    
charter  stipulated the  school's funding.  Statute required                                                                    
that the budget  of the charter should not be  less than the                                                                    
funds generated  by the number  of students  and distributed                                                                    
in the  same manner as  students in other public  schools in                                                                    
the  district. He  stated that  the  charter schools  should                                                                    
have equitable funding.                                                                                                         
Representative Munoz stated that  currently a charter school                                                                    
could contract with a district  to provide special education                                                                    
and other services for a  certain percentage of funding. She                                                                    
wondered whether a disincentive  for the district to provide                                                                    
special education  services to  charter schools  was created                                                                    
when a charter school received 100 percent of its funding.                                                                      
Commissioner  Hanley  reiterated  that  the  state  provided                                                                    
funding  to  school  districts and  not  individual  charter                                                                    
schools and  the contract  delineated the  services provided                                                                    
and how or  if the school was charged. He  believed that the                                                                    
charter  schools were  typically strongly  supported by  the                                                                    
Representative  Munoz asked  about  the  requirements for  a                                                                    
charter school that was placed  in a single site district on                                                                    
Commissioner  Hanley  answered  that  if  a  charter  school                                                                    
became a single  site district the school  would be required                                                                    
to meet  all of the  needs of  students by itself.  He noted                                                                    
that the school would be  required to find special education                                                                    
teachers,  provide   transportation  and   other  resources.                                                                    
Small districts  were relatively  vulnerable when  trying to                                                                    
provide  all of  the required  services. Single  site school                                                                    
districts often  utilized "itinerant" resources  from nearby                                                                    
school districts.                                                                                                               
Representative   Munoz   shared   that   in   other   states                                                                    
"alternative  chartering organizations"  were authorized  to                                                                    
approve  a   charter  school.   She  wondered   whether  the                                                                    
chartering organization would become  a school district upon                                                                    
appeal   if   alternative  chartering   organizations   were                                                                    
permitted in Alaska.                                                                                                            
Commissioner  Hanley concurred  that several  states allowed                                                                    
the  scenario and  affirmed that  "in  essence" the  charter                                                                    
schools were  their own  school district  as defined  by the                                                                    
authorizer and not by their geography.                                                                                          
Co-Chair Stoltze  asked about the likelihood  of single site                                                                    
charter  school districts  in cases  of appeal.  He presumed                                                                    
that all parties would seek  to avoid a single site district                                                                    
Commissioner  Hanley replied  that the  likelihood would  be                                                                    
rare. He  believed that a  strong incentive existed  for all                                                                    
parties to work together towards a solution.                                                                                    
Co-Chair Stoltze  believed the  issue was  being "overblown"                                                                    
and provided  "sound bites' regarding  the formation  of new                                                                    
school districts.                                                                                                               
Representative Wilson pointed to page 7, line 19 and read:                                                                      
     "the indirect cost rate approved by the department up                                                                      
     to 4 percent…"                                                                                                             
Representative  Wilson  asked  whether  the  charter  school                                                                    
would receive  96 percent  of the  funding and  the district                                                                    
kept 4  percent for indirect  costs or whether  the contract                                                                    
would focus on the 96 percent.                                                                                                  
Commissioner  Hanley  explained  that  indirect  costs  were                                                                    
administrative costs  the districts incurred for  all of its                                                                    
schools  which  included  compliance and  budgetary  issues.                                                                    
Direct costs  were not addressed  in the language.  He spoke                                                                    
to  the indirect  administrative  cost. He  stated that  the                                                                    
indirect  figure  seemed  low. The  administration  did  not                                                                    
include the  language in the  original bill in order  not to                                                                    
"insert  themselves in  the  contracts  between the  charter                                                                    
school and the local district."  He understood that it was a                                                                    
measure to protect the charter school from unfair charges.                                                                      
Representative Wilson  believed that the goal  was to ensure                                                                    
more  equity between  traditional and  charter schools.  She                                                                    
supported the  language in the  bill. She wanted  to clarify                                                                    
that the language  did not guarantee that 96  percent of the                                                                    
funding would  be passed through  to the charter  school and                                                                    
that a  contract based  on the 96  percent was  required for                                                                    
direct cost services.                                                                                                           
Commissioner Hanley answered that  96 percent of the funding                                                                    
would  go to  the district  and a  contract would  ensue for                                                                    
direct cost services.  He reiterated that the  intent of the                                                                    
language was to limit indirect costs.                                                                                           
2:34:15 PM                                                                                                                    
Representative     Wilson    discussed     charter    school                                                                    
transportation. She  did not  understand why  charter school                                                                    
transportation  should be  limited to  space available  when                                                                    
the state was paying for all  of the students in a district.                                                                    
She was concerned about the  issue. She believed that if the                                                                    
bill was  about equity then  all students on the  same route                                                                    
should be provided transportation.  She asserted that if the                                                                    
extra   students  were   traditional  school   students  the                                                                    
district would have to provide the transportation.                                                                              
Co-Chair Stoltze  commented that  the idea  opened up  a big                                                                    
issue. He  relayed that  students attending  optional public                                                                    
schools were also not  provided transportation. He continued                                                                    
that the  minimum standard was to  provide transportation on                                                                    
a  space  available  basis  to   at  least  force  the  most                                                                    
"intransigent"  districts   that  did  not  allow   for  any                                                                    
transportation to provide it.                                                                                                   
Representative  Wilson understood  the issue  but felt  that                                                                    
since the state was  paying for the student's transportation                                                                    
it should be provided.                                                                                                          
Co-Chair  Stoltze wondered  whether  the  state board  could                                                                    
declare that a charter school  approved upon appeal could be                                                                    
forced  on the  district and  placed under  "administrative"                                                                    
observation to  ensure the districts compliance  towards the                                                                    
charter school.  He wondered whether  a new  school district                                                                    
would need to be created under an appeal scenario.                                                                              
Commissioner Hanley  agreed that alternatives to  the single                                                                    
site school district scenario existed.                                                                                          
Co-Chair  Stoltze  believed  that   a  better  scenario  was                                                                    
possible than  creating new  school districts.  He expressed                                                                    
frustration  with   the  way  the  single   school  district                                                                    
scenario  was  being  repeated   by  detractors  of  charter                                                                    
schools.  He noted  the commissioner's  statements that  the                                                                    
possibility  was "unlikely."  He stated  that the  committee                                                                    
had  the  ability  to  make  the  single  site  district  an                                                                    
"impossible" scenario.                                                                                                          
Representative Gara wondered  about the provisions regarding                                                                    
testing  out  of  a  course   found  in  Section  1  of  the                                                                    
legislation. He  wondered whether a student  that tested out                                                                    
of a  course would have to  take another course. He  did not                                                                    
want a  student to have  to take a  course in a  subject the                                                                    
student already mastered but also  did not want a student to                                                                    
sit idle.                                                                                                                       
Commissioner  Hanley  replied   that  clarification  on  the                                                                    
provision  was necessary.  He  anticipated  that the  school                                                                    
districts  offered students  the ability  to test  out of  a                                                                    
course in  the beginning of  the school year or  semester so                                                                    
the  student could  take something  else. He  commented that                                                                    
the student  would receive  credits for  testing out  of the                                                                    
course  but  the  student  could move  on  to  take  another                                                                    
required course.                                                                                                                
Representative Gara  surmised that  if a student  tested out                                                                    
of  a required  course  the  student did  not  need to  take                                                                    
another course because they acquired the credit.                                                                                
Commissioner Hanley  replied that if a  student received the                                                                    
credit  for testing  out  of  a class  and  met  all of  the                                                                    
requirements the  student could graduate early.  He reported                                                                    
that typically a student will elect to take another course.                                                                     
Representative  Gara wondered  whether the  provision needed                                                                    
more  fine  tuning.  He  noted  that  the  student  was  not                                                                    
required to take another course.                                                                                                
Commissioner  Hanley  answered   that  currently  a  student                                                                    
tested  out of  a class  and  graduated early  or took  less                                                                    
credits   during   a   semester.  The   provision   "simply"                                                                    
authorized the ability  for students to test  out of classes                                                                    
for credit.                                                                                                                     
Representative Gara  asked about the 4  percent for indirect                                                                    
costs in  Section 9. He  noted that the indirect  costs were                                                                    
currently determined  by DEED.  He wondered  what percentage                                                                    
DEED calculated for indirect costs.                                                                                             
Co-Chair  Stoltze  asked  whether the  indirect  costs  were                                                                    
currently determined by the department or school district.                                                                      
Commissioner Hanley  clarified that the indirect  costs were                                                                    
determined  by  the  school district  but  approved  by  the                                                                    
Representative   Gara   requested    what   the   percentage                                                                    
difference was between the bill and current practices.                                                                          
ELIZABETH   NUDELMAN,   DIRECTOR,    SCHOOL   FINANCES   AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
stated  that the  amendment would  set  a 4  percent cap  on                                                                    
indirect costs.  Currently the indirect costs  were based on                                                                    
a formula and approved by  the department. She reported that                                                                    
the indirect  rates ranged from  4.5 percent to  5.5 percent                                                                    
and were calculated annually.                                                                                                   
Representative  Gara  believed  in  adequate  and  equitable                                                                    
funding for  charter and other  public schools. He  spoke to                                                                    
inequities that existed in  traditional public schools. Some                                                                    
schools required  more labor intensive services  than others                                                                    
and  the  districts determined  the  levels  of funding.  He                                                                    
wondered  why a  formula  would be  carved  out for  charter                                                                    
schools when  districts used its own  funding discretion for                                                                    
traditional schools within the same district.                                                                                   
Commissioner   Hanley   responded   that   the   legislation                                                                    
recognized that  the mechanism for funding  a charter school                                                                    
under contract  was set up differently  than the traditional                                                                    
schools in the  district and largely spoke  to the different                                                                    
operating structure of charter schools.                                                                                         
2:45:57 PM                                                                                                                    
Representative  Gara   agreed  that  charter   schools  were                                                                    
treated unfairly  under certain circumstances.  He expressed                                                                    
discomfort  about removing  the school  districts discretion                                                                    
to  fund schools  at  a level  to best  educate  all of  the                                                                    
students  in a  district.  He wondered  why  he should  feel                                                                    
comfortable by the language in the bill.                                                                                        
Commissioner Hanley  answered that  the 4  percent provision                                                                    
added by  the education  committee was  a new  provision and                                                                    
limited  the amount  a district  could  charge for  indirect                                                                    
costs.  He explained  that  traditionally  in the  Anchorage                                                                    
school district costs for the  schools were taken care of by                                                                    
the school district and a  small amount was allotted to each                                                                    
school  for discretionary  funds.  Charter schools  received                                                                    
additional money  but had  the additional  responsibility to                                                                    
set up a  school. Charter school funding was  not changed in                                                                    
the legislation.                                                                                                                
Representative Costello  wondered whether  the credit  for a                                                                    
student  that tested  out  of a  class would  show  up on  a                                                                    
transcript. She asked whether a  student could fill the time                                                                    
with a college class.                                                                                                           
Commissioner Hanley replied in  the affirmative. He restated                                                                    
that  testing out  of a  course was  currently allowed.  The                                                                    
districts  decided how  to allocate  the  credits. The  bill                                                                    
required  the  districts  to  provide  the  opportunity  for                                                                    
students  to  test  out  of  a  class.  The  intent  of  the                                                                    
legislation was  to provide the  student the  opportunity to                                                                    
test  out and  take a  college  class or  elective based  on                                                                    
their need.                                                                                                                     
Co-Chair Stoltze thanked the departments for their time.                                                                        
HB  278  was  HEARD  and   HELD  in  committee  for  further                                                                    
2:50:40 PM                                                                                                                    
The meeting was adjourned at 2:50 p.m.                                                                                          

Document Name Date/Time Subjects
HB 278 NEW FN Debt Service SDR 3-14-14.pdf HFIN 3/18/2014 1:30:00 PM
HB 278
HB 278 EDC Letter of Support NWALT LOS.pdf HFIN 3/18/2014 1:30:00 PM
HB 278
HB 278 Public Testimony.pdf HFIN 3/18/2014 1:30:00 PM
HB 278