Legislature(2007 - 2008)CAPITOL 106
02/01/2007 03:00 PM House HEALTH, EDUCATION & SOCIAL SERVICES
| Audio | Topic |
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| Start | |
| Overview: Alaska Public School Funding Formula | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
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ALASKA STATE LEGISLATURE
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE
February 1, 2007
3:09 p.m.
MEMBERS PRESENT
Representative Peggy Wilson, Chair
Representative Bob Roses, Vice Chair
Representative Anna Fairclough
Representative Mark Neuman
Representative Paul Seaton
Representative Sharon Cissna
Representative Berta Gardner
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Mike Chenault
Representative Bryce Edgmon
COMMITTEE CALENDAR
OVERVIEW: ALASKA PUBLIC SCHOOL FUNDING FORMULA
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
EDDY JEANS, Director
Division of School Finance
Department of Education and Early Development
Juneau, Alaska
POSITION STATEMENT: Provided an overview of Alaska's public
school funding formula.
ACTION NARRATIVE
CHAIR PEGGY WILSON called the House Health, Education and Social
Services Standing Committee meeting to order at 3:09:46 PM.
Representatives Wilson, Roses, Fairclough, Seaton, Cissna, and
Gardner were present at the call to order. Representative
Neuman arrived as the meeting was in progress. Also in
attendance were Representatives Chenault and Edgmon.
3:10:01 PM
^Overview: Alaska Public School Funding Formula
CHAIR WILSON announced that the only order of business would be
an overview of Alaska's public school funding formula, commonly
known as the foundation formula.
3:11:14 PM
EDDY JEANS, Director, Division of School Finance, Department of
Education and Early Development (EED), noted that the committee
packet should include the PowerPoint that he will review today
as well as document entitled, "Public School Funding Program
Overview Updated January 2007." Mr. Jeans began by reminding
the committee that the current state public school funding
formula was adopted under Senate Bill 36 in 1998 and is defined
in AS 14.17. He then explained that the average daily
membership (ADM) is based on enrollment during the 20-school-day
count period ending on the fourth Friday of October. The
reports are due within two weeks after the end of the 20-school-
day count period and student projections for the upcoming school
year are collected. The budget is based on the aforementioned
projections. Those who qualify as a student are defined in
statute as a child who is six years of age prior to September
1st and under the age 20, and hasn't completed the 12th grade.
With regard to the completion of the 12th grade, Mr. Jeans
explained that many students may complete course requirements by
the age of 17 or 18, but may not have passed one piece of the
high school exit exam. This [definition of a student] allows
the state to provide funding to the school district in order to
provide remedial sources and classes until such a student passes
the high school exit exam. A child five years of age prior to
September 1st, following the beginning of the school year may
enter kindergarten. A child with a disability and an active
Individualized Education Program (IEP) may enter school at the
age of 3 and funding is provided up to the age of 22.
3:15:27 PM
REPRESENTATIVE NEUMAN mentioned that in some schools the school
has a transient population. Therefore, he inquired as to why
the ADM isn't calculated twice a year. He also asked if an ADM
could be calculated [a second time] and adjustments [in funding
made] to reflect any changes.
MR. JEANS related that prior to the funding formula there was an
optional count for those school districts with an increase in
student population. The aforementioned allowed those school
districts the additional resources necessary due to student
population increases. However, during the debate on Senate Bill
36, the legislature elected to remove that option and a
statutory change would be required to do something else. Under
the current funding formula there isn't a mechanism for the
money to follow students when they move between districts. In
further response to Representative Neuman, Mr. Jeans said that
tracking such would create an additional burden on the
department. Although the tracking of such students is possible
due to the state's student identification system, additional
collection efforts throughout the year would be required. Mr.
Jeans clarified that the department does make monthly payments
to school districts and thus it's possible to make adjustments.
Therefore, the question is how many times would the legislature
want to adjust a school's budget during the school year after
the district has already staffed based on that budget.
3:19:35 PM
MR. JEANS continued his PowerPoint and related that there are
five steps to adjusting the ADM. The first step is to adjust
the ADM for school size, which requires reviewing the student
population within a community. He related that a community with
an ADM of 10 through 100 is funded as one school in the
community. A community with an ADM of 101-425 is funded as if
there are two schools and the student population is divided
between grades K-6 and 7-12. For a community with an ADM
greater than 425, each school is administered separately and
adjusted independently. However, the ADM of an alternative
school with an ADM of less than 200 students is counted as part
of the school with the highest ADM. A charter school has to
have 150 or more to be adjusted as a separate facility. In both
cases if the thresholds specified aren't met, that student
population will be counted as part of the school in the district
with the highest ADM. Therefore, the school doesn't receive the
benefit of going through the size-adjustment table
independently. The ADM of schools with fewer than 10 students
is added to the smallest school in the district. He related his
understanding that the aforementioned was to provide the school
districts with as much revenue as possible for those very small
schools. However, the first year after the passage of [Senate
Bill 36] Kodiak Island had one school that barely had 10
students and another that had 7 or 8 students and when the two
were combined no additional funding was received for those 7 or
8 students.
3:23:06 PM
MR. JEANS informed the committee that he would utilize the Nome
City Schools through the entire calculation of the [public
school funding formula]. Nome has four schools within its
district, including the Nome Youth Facility. Since the Nome
Youth Facility is a state detention facility, it's counted as a
separate facility for funding purposes as are all such detention
facilities. Basically, the state is working under a contract
with the school districts to serve those students.
3:23:41 PM
CHAIR WILSON described the situation in Wrangell where the ADM
for the three schools in the district is under 450; the
[district] only receives funds for two schools. Still, there is
a building supervisor in all three schools.
3:24:17 PM
MR. JEANS, in response to Representative Cissna, specified that
McLaughlin is a youth detention facility and the North Star
Elementary School and the school within API are considered
alternative schools. In fact, [the department] has an agreement
with the Anchorage School District to count those under Whaley
Center.
3:25:12 PM
MR. JEANS returned to his presentation and pointed out that
within the Nome City schools, the Anvil City Science Academy, a
charter school, has fewer than 150 students and thus its ADM is
added to the largest school in the district, the Nome Elementary
School. The total ADM for the Nome City schools is 965. Mr.
Jeans then drew attention to the school size adjustment table
provided, which specifies that for schools of 10-20 students
there is a base allocation of 39.6. For every student above 20,
1.62 is added to the 39.6. However, as the school size
increases, the adjustment is reduced in order to address
economies of scale. The larger the student population, the more
efficient it should be to operate that school. Mr. Jeans
informed the committee that the formula restricts the revenue to
school districts with fewer than 10 students in a school.
Therefore, [the district] is encouraged to close the school. He
clarified that the state doesn't close the school. In response
to Chair Wilson, he further clarified that a school with less
than 10 students doesn't have to close. In fact, often school
districts will work with communities with schools smaller than
10 students and allow the school a year to increase its student
population.
3:29:30 PM
CHAIR WILSON interjected that in Naknek it's less expensive to
fly the students back and forth to attend a neighboring school
across the river rather than run the local school.
3:29:51 PM
MR. JEANS, in response to Representative Seaton, recalled the
boarding school legislation that passed last year, which
ultimately didn't include the provision to hold harmless those
schools that fell below a population of 10. Again, Mr. Jeans
confirmed that the state doesn't mandate the closure of a school
with less than 10 students, rather it's left for the district to
decide. In response to Representative Fairclough, Mr. Jeans
reminded the committee that under current statute the ADM of any
school that falls below 10 students is added to the smallest
school in the district. The belief, he related, is that the
next smallest school in the district would have an ADM of more
than 20 and thus there would be some funding for the school with
a population below 10 students. However, he emphasized that at
that level, it's not enough to maintain the school on an ongoing
basis. In most cases, the state does allocate some funds for a
school with a population of less than 10 students, although the
earlier example with Kodiak illustrates the rare situation when
no additional funds are received.
3:31:58 PM
MR. JEANS continued his presentation by discussing the second
step in determining the district adjusted ADM, which is to apply
the district cost factors. Senate Bill 36 required EED to
review the area cost differentials and make recommendations to
the legislature for adjustments. The department attempted to do
so in 2001. However, the methodology utilized to establish the
cost differentials was no longer valid and thus the department
performed an internal analysis that it ran by the McDowell Group
who created the original cost differentials. The McDowell Group
concurred with EED that its methodology couldn't be used.
Therefore, EED asked the legislature to fund a study. The
legislature appropriated funds to the Legislative Budget and
Audit Committee to do so and it commissioned a study with the
American Institute for Research from California. There was a
lot of debate over the results from the American Institute for
Research study, which resulted in the legislature commissioning
another study with the Institute of Social and Economic Research
(ISER) of the University of Alaska Anchorage. The peer review
of the ISER study said that the methodology was sound, but that
some of the data wasn't sound or applied appropriately. At that
point, the legislature contracted with ISER to use the same
methodology, but change some specific components in order to
develop new cost differentials. The aforementioned was done two
years ago and just last year the legislature passed legislation
that implemented a quarter of the increase in the cost
differentials recommended by ISER for a one-year period. The
cost of the aforementioned was approximately $24 million, which
was included in the governor's budget. However, it will be a
grant determined on the amount that the district received this
year. As currently proposed in the governor's budget, a school
district that benefited by $100,000 this year would expect to
receive a $100,000 grant next year.
3:35:17 PM
MR. JEANS, in response to Representative Neuman, explained that
$24 million was for the cost differentials and an additional $11
million allocated for school improvement grants for a total of
$35 million. The $11 million was the equivalent of an $81 grant
per child.
3:36:00 PM
REPRESENTATIVE EDGMON inquired as to how the cost of fuel is
factored into the district cost factor.
MR. JEANS answered that heating and utility costs are a
component of the cost factor. When the American Institute of
Research did its model, it developed prototype schools and broke
[the costs] down by regions of the state. However, when ISER
compared the aforementioned cost model to the actual energy
costs of the state, there was a large difference. Therefore,
the updated study ISER performed used actual energy costs in
2004.
3:37:29 PM
CHAIR WILSON mentioned that some schools are better insulated
than others and the cost of fuel may vary.
3:37:47 PM
REPRESENTATIVE SEATON surmised then that in the governor's
budget, the cost differential is a set dollar amount.
Therefore, if the base student allocation increases, those
percentages that were allocated to districts won't include any
relationship to the new base student allocation.
3:38:26 PM
MR. JEANS said he believes Representative Seaton is correct.
Mr. Jeans then returned to his presentation and pointed out that
the cost factors, which are set in statute, are specific to each
school district. The district cost factors range from 1.00-
1.736. The adjusted ADM is multiplied by the district cost
factor to arrive at the new adjusted ADM. The next step in the
public school funding formula is to take the new adjusted ADM
and increase it by 20 percent for special needs.
3:39:12 PM
CHAIR WILSON related her understanding that the district cost
factors are also used for day care centers to be paid by the
state for qualifying children. She recalled that the district
cost factors are utilized for other things as well.
MR. JEANS noted his agreement that there are other programs that
use these cost differentials, although he didn't know what
programs those are.
CHAIR WILSON opined then that this formula is a factor in
funding other aspects of the state budget.
3:40:16 PM
MR. JEANS returned to the special needs funding, which is a 20
percent block grant that is intended to help school districts
with special education, vocational education, gifted and
talented education, and bilingual and bicultural education. To
qualify for the funding, school districts had to submit a plan
indicating how those services would be provided. All school
districts did so in 1999.
3:41:16 PM
REPRESENTATIVE SEATON asked if the department follows up on
whether the 20 percent block grant is utilized as specified.
MR. JEANS answered that there is follow-up in terms of
compliance with the federal Individuals With Disabilities Act.
He pointed out that the department doesn't require the districts
to split the block in a certain way, but rather leaves it for
the local school district to decide.
3:42:16 PM
CHAIR WILSON inquired as to what happens in those school
districts with more than 20 percent special needs children.
MR. JEANS replied that such a school district would need to
utilize other resources generated through the foundation
program. Mr. Jeans acknowledged that many believe that the 20
percent block for special needs isn't enough. However, he
pointed out that on a statewide basis the 20 percent for special
needs provided $4 million more than the previous funding formula
that included categorical funding. On an individual school
district basis, some schools receive more and some less in this
category.
3:43:18 PM
REPRESENTATIVE FAIRCLOUGH inquired as to whether the 20 percent
multiplier will help or hurt a larger urban district, such as
her district which includes Anchorage, Chugiak, and Eagle River.
She indicated that Anchorage is more of a hub for special needs
students from rural areas.
MR. JEANS reiterated that many school districts don't believe
that the 20 percent is enough. As the session progresses,
typically the legislature determines how much additional funds
will be provided. Mr. Jeans said that he has done analysis on
this component regarding the result of placing the 20 percent in
the base student allocation or if the 20 percent is increased.
The result of either is practically a wash. Therefore, if the
legislature has additional funds, it doesn't matter whether
those funds are added to the special needs funding or to the
base student allocation.
3:45:06 PM
REPRESENTATIVE FAIRCLOUGH asked if Anchorage gained or lost
money under the special education category when the process went
to a 1.2 model factor for the formula.
MR. JEANS offered to provide that information to Representative
Fairclough. He then highlighted that under the previous formula
there were four different special education categories, which
were based on level of service. There were five categories for
bilingual and bicultural students and one category for
vocational education. Under the old formula, there was a
relatively stagnant student population, although the bilingual
and bicultural category was increasing each year as well as the
special education category. The legislature didn't provide
additional funding through what is now the base student
allocation. Therefore, there was a perception that districts
were labeling children in order to generate revenue.
3:46:59 PM
REPRESENTATIVE FAIRCLOUGH commented that depending upon the
model for special needs education, it could cost more or less to
serve students in rural Alaska.
CHAIR WILSON remarked that in some schools the students don't
speak English until the 3rd grade and thus those schools would
need 100 percent funding rather than just 20 percent.
REPRESENTATIVE NEUMAN highlighted that although every school is
mandated to provide for special needs, not every community is
able to accommodate the special needs in the same way.
CHAIR WILSON further remarked that whether the allocation is
fair or not depends upon who is looking at the numbers and
situations.
REPRESENTATIVE SEATON informed the committee that the state is
responsible for building the schools in rural areas. Therefore,
if there are schools that aren't up to the standards the state
would desire, it's the state's fault to some degree.
3:51:34 PM
MR. JEANS reminded the committee that this system is different
than the prior system in which students were categorized and had
to receive services within those categories. However, under the
current system the 20 percent special needs funding is applied
across the board to all students after the school size and cost
factor are determined. The analysis between the old formula and
the new formula found that the new formula provides about $4
million more.
3:52:21 PM
MR. JEANS highlighted that the intensive services funding is the
only special education category that is broken out separately.
For a school district to receive funding under the intensive
services category, students must receive services and the head
count is done on the last day of the 20-school-day count period.
The student also has to have an active IEP identifying those
services. An intensive services student generates $26,900,
which is equivalent to five times the base [student allocation].
Therefore, the intensive student count is multiplied by five to
determine the number of intensive school [students], which is
added to the adjusted ADM. In response to Chair Wilson, Mr.
Jeans clarified that intensive services students are typically
those students requiring a one-on-one attention of a full-time
aide. He confirmed that such an aide can be difficult to
obtain, and the State Board of Education recently amended its
regulations to allow a ratio of three students to one aide. Mr.
Jeans noted that the intensive services students must meet other
criteria, such as needing assistance in daily living skills in
two areas and need special transportation services. There are
six to seven categories that must be met in order to qualify for
the intensive services funding. In response to Representative
Fairclough, Mr. Jeans clarified that for intensive services
students the formula uses a multiplier of five to account for
the high cost of these students. He reiterated that each
intensive services student generates an additional $26,900 to
account for the high cost of providing educational services to
these students.
3:55:49 PM
REPRESENTATIVE GARDNER surmised then that each intensive needs
student is treated as though he/she is five students for funding
purposes.
MR. JEANS replied yes. He then clarified that all the formula
is addressing to this point is the student count.
3:57:02 PM
MR. JEANS moved on to the final adjustment within the student
count, which is the correspondence adjustment. Each student
enrolled in a correspondence program is funded at .80.
Therefore, the number of correspondence students is multiplied
by .80 and then added to the adjusted ADM. All of the
aforementioned results in the final district adjusted ADM. At
that point the final district adjusted ADM is multiplied by the
base student allocation to arrive at the basic need entitlement.
He then reviewed the formula with Nome as the example as
provided on the PowerPoint slide entitled, "NOME: Summarized
District Adjusted ADM & Basic Need."
3:59:02 PM
MR. JEANS turned the committee's attention to who pays for this
basic need after it is established. The following three sources
of revenue are considered: the required local contribution for
municipalities, federal impact aid, and state aid. He then
highlighted the slide entitled, "[Senate Bill] 174 Full & True
Value/Local Effort Calculation." Senate Bill 174 established
1999 as the base year and any increases in the full and true
value over the base year are only 50 percent of the base year
value. The state has been under the aforementioned provision
for seven years. He mentioned that this proposal flew through
the legislature because it only amounted to $3.6 million
statewide. However, today the impact of this provision is $50
million in fiscal year (FY) 08. He clarified that under Senate
Bill 174 communities that are growing communities would only
count 50 percent of the growth while those communities that
aren't growing are still held at the 4 mill required local
contribution. He characterized it as a taxpayer subsidy.
4:01:10 PM
MR. JEANS related that the property value in the Bristol Bay
area hasn't increased and thus a 4 mill levy is applied to it.
However, the Matanuska-Susitna Borough has been growing
tremendously, but only 50 percent of the increase has been
counted over the past seven years. Therefore, when one
calculates the required local contribution for the Matanuska-
Susitna Borough and compares it to the borough's full and true
value as established by the state assessor, it contributes the
equivalent of a $2.8 mill contribution. He pointed out that a
mill on a $100,000 home would result in $100 in taxes and thus a
$100,000 homeowner in the Matanuska-Susitna Borough would pay
$280 to support education. However, in Bristol Bay a property
owner of a $100,000 home would contribute $400 to support
education. Additionally, this applies to newly incorporated
boroughs, but Mr. Jeans said he didn't know how to calculate a
newly incorporated district's local contribution since it
doesn't have a base from 1999.
4:04:02 PM
CHAIR WILSON opined that an area that is losing students
receives less per student, while the local contribution to
education is higher than an area that is experiencing growth.
Therefore, there are concerns regarding areas that don't pay the
full [local contribution] because the state is providing those
areas more funds per student than other areas.
4:04:56 PM
REPRESENTATIVE GARDNER inquired as to the history that lead to
the passage of Senate Bill 174. She also inquired as to whether
that legislation passed the "red face test."
MR. JEANS recalled that after the passage of Senate Bill 36,
there was an effort in the Senate to increase the required local
contribution for the North Slope Borough, Valdez, and Unalaska.
The foundation program specifies that a local community
contributes the equivalent of a 4 mill tax levy up to 45 percent
of basic need. The aforementioned establishes a ceiling and
guarantees state aid above that ceiling. The Senate attempted
to increase that ceiling for the aforementioned three districts,
which proved to be difficult. Mr. Jeans opined that the
rationale may have been that if the ceiling for those three
communities couldn't be raised, then other communities shouldn't
have to pay more as property values increase. The $3.6 million
was a small dollar amount at the time and thus moved through
with ease. However, it has a compounding effect reflecting back
to 1999. In fact, it increased $10 million last year and will,
he predicted, increase to $15 million from 2007 to 2008.
4:07:00 PM
REPRESENTATIVE SEATON recalled that in some areas there was more
local contribution than the required amount. He asked, "Now,
does that in any way compensate or is it just the required
amount and the state pays everything above, even if the local
community is contributing more than the required amount?"
MR. JEANS confirmed that most municipalities contribute above
the required local effort. However, this strictly deals with
the required local effort. In further response to
Representative Seaton, Mr. Jeans explained that basically the
$50 million is a state subsidy on local contributions. If
districts were required to contribute 4 mills on the full and
true value today, there would be $50 million less in the
foundation program unless the legislature increased the base
student allocation to redistribute that money.
CHAIR WILSON surmised then that those [three] communities are
getting by without paying the 4 mills, but if they did the state
would save $50 million.
MR. JEANS pointed out that all municipalities are allowed to
make an additional local contribution above that which is
required. That additional local contribution doesn't impact the
community's state aid.
CHAIR WILSON surmised then that [the three aforementioned
communities] don't have to pay the 4 mills, but they can pay
extra in other areas if they so desire.
MR. JEANS, in response to Representative Seaton, confirmed that
the additional local contribution allowed above the minimum
local contribution is up to 23 percent.
4:09:49 PM
MR. JEANS related his concern with regard to uniformity and how
the [foundation formula] is being applied across the state. He
suggested that perhaps the solution is to return to a uniform
mill rate across the state. Furthermore, if the 45 percent is
too low, then the legislature needs to address that as well.
The playing field in relation to the required local effort needs
to be leveled.
4:11:11 PM
REPRESENTATIVE NEUMAN opined that the Matanuska-Susitna
Borough's 2.8 [contribution] is a bit deceiving. For instance,
he related that he pays over $2,500 per year in local
contribution for education whereas a resident of an unorganized
area who pays a 4 mill rate doesn't come close to paying that.
In response to Chair Wilson, Representative Neuman stated that
the mill rate for property tax in the Matanuska-Susitna Borough
is 17.3, which includes the road service area.
4:12:51 PM
CHAIR WILSON pointed out that the Alaska Municipal League's
documents provide a list taking into account sales tax and the
mill rate for property tax in order to relate what percent
communities pay for education per capita. Chair Wilson
highlighted that communities such as Ketchikan, Petersburg,
Wrangell, and Sitka pay the 4 mills and don't receive any impact
aide and may not be as prosperous as the Matanuska-Susitna
Borough.
4:14:34 PM
REPRESENTATIVE FAIRCLOUGH related her understanding that a
particular geographic area is required to contribute a set
amount of money to education. However, because of the ADM and
the land valuation, the state provides a specified amount of
money back to the community [for education]. Therefore, some
areas are receiving a deductive rate on the appraisal prices.
MR. JEANS noted his agreement that some communities are
receiving a deducted rate of property values that the state
picks up.
4:15:49 PM
MR. JEANS the referred to the slide entitled, "Calculating
Nome's Full and True Value," which uses the state assessor's
full value. The state assessor's value is used for all
communities and thus is applied uniformly across the state. In
response to Representative Fairclough, Mr. Jeans confirmed that
the state assessor doesn't include any local exemptions in the
full and true value of the property of an area. He then
continued reviewing the slide that illustrates that in order to
determine a community's education full and true value, the 1999
full value is subtracted from the 2006 full value. The result
of the aforementioned is divided in half and added to the 1999
full value. Therefore, although the 4 mills is applied
uniformly to every community, an artificial full value has been
utilized. The formula further specifies that the lesser of the
minimum of 4 mills of the education full and true value or 45
percent of the school district's prior year basic need is
utilized as the community's required local contribution for
education.
4:18:01 PM
REPRESENTATIVE ROSES related his understanding that once the ADM
is calculated a dollar amount is determined based on the
foundation formula, from which the minimum local contribution is
subtracted.
MR. JEANS noted his agreement, but clarified that it's simply a
deduction. The money doesn't come back to the department,
rather it's a mechanism through which the department determines
how much state aid a community will be provided.
4:18:56 PM
MR. JEANS continued his presentation by informing the committee
that the other revenue considered in the state funding formula
is the impact aid, which is under Title VIII. The impact aid,
he explained, is basically the payment in lieu of property taxes
for federal lands. He pointed out that the military bases in
Anchorage and Fairbanks and the Coast Guard base in Kodiak have
people living on the bases, which are nontaxable lands.
Therefore, federal impact aid pays the school district a tax
effort for those students living on the base. The other large
factor in Alaska are the lands conveyed under the Alaska
National Interest Lands Conservation Act (ANILCA). Those
students that live on such lands generate impact aid dollars.
He clarified that school districts don't receive federal impact
aid merely because there is federal land within its boundaries,
the students must actually live on the lands. Mr. Jeans noted
that the federal law has a calculation that requires the
required local effort to be divided by the total local
contribution. Therefore, if a community is making a
contribution over and above the requirement, the federal
government wants that ratio extended to the federal impact aid
and thus provide the same benefit to the federal dollars. The
aforementioned is illustrated in the slides entitled, "Title
VIII Percentage" and "Impact Aid." The impact aid is subtracted
from the district's basic need just as is the required local
contribution, he explained. In response to Representative
Seaton, Mr. Jeans confirmed that the impact aid funds go
directly to the school district and don't flow through the
department.
4:22:13 PM
REPRESENTATIVE FAIRCLOUGH returned to the assessed value. She
related her understanding that in a community in which property
values are increasing from the values established in the base
year of 1999, the education formula is impacted positively
because there isn't additional state aid. However, a community
in which the population is decreasing [from the base year of
1999], the community will be maxed to the full 4 mills local
contribution.
MR. JEANS stated his agreement with Representative Fairclough.
4:22:47 PM
REPRESENTATIVE SEATON pointed out that the situation isn't
necessarily based on student population but rather is based on
the valuation of the property in the district.
MR. JEANS concurred, and added that the valuation could grow
without an increase in population due to industry entering a
community.
4:23:09 PM
MR. JEANS then returned to his presentation and informed the
committee that school districts can receive additional funds
above basic need. Those additional funds are as follows:
additional local contributions, quality schools grant, and
supplemental funding floor. The additional local contribution
is the greater of 2 mills of the tax base or 23 percent of the
district's basic need in the current year. Mr. Jeans told the
committee that the additional local contribution factor for all
the school districts at the 4 mill local contribution level will
be the 23 percent factor. In response to Representative Roses,
Mr. Jeans clarified that the 23 percent is of basic need and
doesn't have anything to do with the valuation. Mr. Jeans
turned to the quality schools grant, which takes the adjusted
ADM and multiplies it by 16.
4:25:27 PM
MR. JEANS then addressed the supplemental funding floor, which
was a hold harmless/transition provision ("floor") established
in Senate Bill 36. Therefore, the difference between the old
formula of state aid and the new formula state aid was provided
to the [district] as transition funds. All adjustments to the
funding floor are decreases and occur when there is an increase
in basic need or a decrease in ADM. He noted that the increase
in basic need typically happens due to an increase in the
student population or an increase in the base student
allocation. The second adjustment occurs if the ADM falls below
95 percent of the 1999 base school year. Very few school
districts have fallen into the aforementioned category because
there have been increases in the base student allocation. In
response to Chair Wilson, Mr. Jeans said that eight or nine
schools are under the [supplemental funding floor]. What
happens with the funding formula this year will determine how
many schools [continue under the supplemental funding formula].
If the legislature increases the base student allocation, he
said he expected the number of schools under the [supplemental
funding floor] to decrease to four. However, he mentioned that
it will probably be a while longer before the Chugiak School
District or Pelican completely transition to the new funding
formula. He then reviewed the slide entitled, "Establishing
Nome City School's Floor," which relates how Nome went from the
old formula in 1999 to the new formula in 2004.
4:29:56 PM
REPRESENTATIVE NEUMAN recalled that back in 1999 there was the
sentiment in the legislature that some school districts were
being paid too much, which is why the floor was incorporated
into the new formula as it provided a transitional time period.
4:31:25 PM
REPRESENTATIVE SEATON interjected that if the legislature
increases the base student allocation, there will be complaints
that the legislature is only partially funding students in some
areas, which is related to the decrease in transitional funds.
However, those areas are receiving more money than they would've
in the prior year.
4:33:06 PM
MR. JEANS noted that he has been through many education formula
funding rewrites. Under previous rewrites, the hold harmless
was calculated as it was in the first year under [Senate Bill
36] and was a very prescriptive ratchet down. He opined that
this particular provision has caused a lot of "heart burn,"
which he characterized as a lesson learned as he said he would
be surprised if the legislature went that path again.
4:33:53 PM
CHAIR WILSON surmised that some of the schools would say that
they weren't receiving too much and viewed [the ratcheting down
period] as penalizing them.
4:34:12 PM
MR. JEANS summarized that with regard to the supplemental
funding floor, it will always decrease by 40 percent either due
to the increase in basic need or a decrease in student
population.
4:34:30 PM
MR. JEANS informed the committee that he has been administering
the foundation program since 1985 and the legislature has always
fully funded the foundation program. The program was even fully
funded in 1987 when Governor Bill Sheffield, due to declining
oil prices, instituted a 10 percent across the board reduction.
However, if there were a reduction, the statute provides a
provision to prorate [the districts] equally.
4:35:38 PM
REPRESENTATIVE NEUMAN directed the committee's attention to page
7 of the document entitled, "Public School Funding Program
Overview," which utilizes the Nome School District as an
example. This is helpful because members can substitute the
information for their districts in order to determine the total
state aid entitlement.
4:36:43 PM
REPRESENTATIVE SEATON identified the eroding floor and the 4
mill requirements as problematic. He asked if Mr. Jeans views
any other areas of the education funding formula as problematic.
MR. JEANS opined that the legislature will continue to have
discussions regarding area cost differentials. Since the
eroding floor is almost gone, it isn't quite the issue it once
was. However, he opined that the intensive needs students need
to be scrutinized as there have been claims that they don't meet
the department's criteria. As pointed out earlier, the local
effort provision needs to be reviewed, he said. Mr. Jeans
suggested that a hold harmless for school districts experiencing
declining enrollment should be developed because districts that
close a school are penalized, and furthermore it doesn't
encourage efficiencies. Therefore, a hold harmless provision to
help districts transition to a new level of service would be
helpful, he opined. In fact, Mr. Jeans said that he has drafted
language on such a provision and he offered to share it with the
committee.
4:39:18 PM
MR. JEANS, in response to Representative Seaton, said that the
[funding formula] does not include transportation and thus it
would be a different discussion. In further response to
Representative Seaton, Mr. Jeans clarified that within the
foundation formula cost differentials, local effort, and a hold
harmless provision for declining enrollment should be reviewed.
4:39:52 PM
REPRESENTATIVE EDGMON turned to the special needs component. He
related his understanding that some schools have more special
needs students and the associated costs than other schools.
MR. JEANS said that the way to address that is to return to the
categorical funding and provide an adjustment for students based
on the service provided. However, the legislature made a
conscious decision to utilize the block grant because it felt
that districts were labeling children in order to generate
revenue. Mr. Jeans specified that he isn't advocating either.
The distribution, whether the funds are put in the base student
allocation or placing it in the 20 percent [for special needs],
really isn't that different, he opined. Mr. Jeans related his
belief that block funding is a good approach because the school
districts know exactly the revenue source and it doesn't place
the department in a compliance state. Furthermore, the block
grant allows school districts to work with the revenue and
budget for it accordingly.
4:42:03 PM
CHAIR WILSON asked if Mr. Jeans can provide the committee with
examples of invalid claims with regard to intensive services.
MR. JEANS explained that all intensive services students are
special education students, but they don't meet the seven
criteria in regulation for intensive services. He characterized
it as a definition issue between EED and what the legislature
thought it was paying for with the intensive services category
versus what school districts view as a high-cost student. He
emphasized that school districts view a high-cost student as an
intensive student. However, unless that student meets the seven
criteria in regulation, the student doesn't qualify for the
additional funding. He offered to provide the committee with
the list of the seven criteria for intensive service students.
4:43:28 PM
REPRESENTATIVE SEATON recalled a few years ago when there were
some differentials such that some school districts allow 4-year
olds to enter the school system and have them in kindergarten
for two years. Representative Seaton asked, "Is there any
widespread shoe horning of younger kids into school earlier
under this classification system?"
MR. JEANS opined that the aforementioned loop hole has been
closed. Although there are 4-year olds who enter kindergarten,
those children have been assessed and it has been determined
that those children are ready to begin their educational career.
4:44:23 PM
REPRESENTATIVE SEATON asked if school districts can classify
three-year olds as special education students and include them
in the base student count.
MR. JEANS answered that it's conceivable, although one must go
through the IEP process. He pointed out that the federal
government requires school districts to find children with
disabilities and provide services to those children at age
three. This isn't a problem, he said.
4:45:16 PM
MR. JEANS, in response to Representative Seaton, said he could
provide the committee with a spreadsheet showing the difference
in the distribution if the $207 million in additional funds for
the Public Employees' Retirement System (PERS) and the Teachers'
Retirement System (TRA) goes through the foundation program
versus the district's anticipated liability. However, he
cautioned the committee when thinking in terms of including
money in the formula for a specific purpose.
4:46:37 PM
CHAIR WILSON related her understanding that including the PERS
and TRS [obligation] in the foundation formula would increase
the base student allocation by $1,005.
4:47:00 PM
REPRESENTATIVE ROSES opined that a disadvantage of putting the
PERS and TRS obligation into the formula has to do with the
school districts that apply for additional grants. Furthermore,
it would seem to boost the salary and benefit percentage to a
point at which many of them no longer qualify [for additional
grants].
MR. JEANS noted his agreement, adding that at some point there
is so much money allocated for salaries and benefits that the
eligibility criteria becomes difficult to meet.
REPRESENTATIVE ROSES related his understanding that when the
PERS and TRS obligation was handled in the aforementioned manner
for the university system, the university system lost a
considerable amount in grants for the aforementioned reasons.
4:48:10 PM
ADJOURNMENT
There being no further business before the committee, the House
Health, Education and Social Services Standing Committee meeting
was adjourned at 4:48:28 PM.
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