Legislature(1993 - 1994)

02/23/1993 03:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES                         
                       STANDING COMMITTEE                                      
                        February 23, 1993                                      
                            3:00 p.m.                                          
  MEMBERS PRESENT                                                              
  Rep. Cynthia Toohey, Co-Chair                                                
  Rep. Con Bunde, Co-Chair                                                     
  Rep. Gary Davis, Vice Chair                                                  
  Rep. Al Vezey                                                                
  Rep. Harley Olberg                                                           
  Rep. Bettye Davis                                                            
  Rep. Irene Nicholia                                                          
  Rep. Tom Brice                                                               
  MEMBERS ABSENT                                                               
  Rep. Pete Kott                                                               
  COMMITTEE CALENDAR                                                           
  HB 66:    "An Act relating to municipal property tax                         
            exemptions for certain residences and to property                  
            tax equivalency payments for certain residents;                    
            and providing for an effective date."                              
            HEARD AND HELD                                                     
  *HB 85:   "An Act relating to the public school foundation                   
            program; and providing for an effective date."                     
            HEARD AND HELD                                                     
  *HB 156:  "An Act establishing the educational facilities                    
            maintenance and construction fund; and providing                   
            for an effective date."                                            
            NO ACTION - NOT HEARD                                              
  *HB 157:  "An Act making special appropriations to the                       
            educational facilities maintenance and                             
            construction fund and the mental health trust                      
            income account; and providing for an effective                     
            NO ACTION - NOT HEARD                                              
  (* First public hearing.)                                                    
  WITNESS REGISTER                                                             
  BRUCE GERAGHTY, Deputy Commissioner                                          
  Department of Community and Regional Affairs                                 
  P.O. Box 112100                                                              
  Juneau, Alaska 99811-2100                                                    
  Phone:  (907) 465-4700                                                       
  Position statement:  Made presentation on HB 85                              
  MARIE DARLIN, President                                                      
  National Association of Retired Federal Workers,                             
  Alaska Federation                                                            
  P.O. Box 2-1283                                                              
  Juneau, Alaska 99802                                                         
  Position statement:  Senior citizens depend on tax                           
  KEN SWISHER, Executive director                                              
  Alaska Municipal League                                                      
  217 Second St.                                                               
  Juneau, Alaska 99801                                                         
  Phone:  (907) 586-1325                                                       
  Position statement:  Supported HB 66                                         
  DUANE GUILEY, Director                                                       
  Division of Education Finance and Support Services                           
  Department of Education                                                      
  801 W. 10th St.                                                              
  Juneau, Alaska 99801-1894                                                    
  Phone:  (907) 465-2891                                                       
  Position statement:  Answered questions on HB 85                             
  DICK SWARNER                                                                 
  Executive Director of Business Management                                    
  Kenai Peninsula Borough School District                                      
  148 N. Binkley                                                               
  Soldotna, Alaska 99669                                                       
  Phone:  (907) 262-5846                                                       
  Position statement:  Supported HB 85                                         
  TOM BUZEK                                                                    
  P.O. Box 71810                                                               
  Chugiak, Alaska 99567                                                        
  Phone:  (907) 745-5408                                                       
  Position statement:  State should fund gifted student                        
  DENNIS WETHERELL, President                                                  
  Mat-Su Talented and Gifted Association                                       
  P.O. Box 876862                                                              
  Wasilla, Alaska 99687                                                        
  Phone:  (907) 745-2007                                                       
  Position statement:  Opposed HB 85; supported full funding                   
                       for gifted student programs                             
  LARRY WIGET, Legislative Liaison                                             
  Anchorage School District                                                    
  4600 DeBarr Road                                                             
  Anchorage, Alaska 99508-3195                                                 
  Phone:  (907) 269-2255                                                       
  Position statement:  HB 85 is unfair to Anchorage                            
  CARL ROSE, Executive Director                                                
  Association of Alaska School Boards                                          
  316 W. 11th St.                                                              
  Juneau, Alaska 99801                                                         
  Phone:  (907) 586-1083                                                       
  Position statement:  Supported HB 85                                         
  ELL SORENSEN, Superintendent                                                 
  Mat-Su School District                                                       
  P.O. Box 153                                                                 
  Palmer, Alaska 99645                                                         
  Phone:  (907) 746-9200                                                       
  Position statement:  Protested elimination of funding                        
  PREVIOUS ACTION                                                              
  BILL:  HB  66                                                                
  BILL VERSION:                                                                
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  TITLE: "An Act relating to municipal property tax exemptions                 
  for certain residences and to property tax equivalency                       
  payments for certain residents; and providing for an                         
  effective date."                                                             
  JRN-DATE    JRN-PG                     ACTION                                
  01/15/93        84    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/15/93        84    (H)   CRA, HEALTH, EDUCATION & SS,                     
  01/15/93        84    (H)   -3 ZERO FNS (2-DCRA, ADM)                        
  01/15/93        84    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/09/93              (H)   CRA AT 01:00 PM CAPITOL 124                      
  02/09/93              (H)   MINUTE(CRA)                                      
  02/10/93       286    (H)   CRA RPT CS(CRA) 3DP 3DNP 1NR                     
  02/10/93       286    (H)   DP: OLBERG, BUNDE, TOOHEY                        
  02/10/93       286    (H)   DNP: DAVIES, WILLIAMS, WILLIS                    
  02/10/93       286    (H)   NR:  SANDERS                                     
  02/10/93       286    (H)   -3 PREVIOUS ZERO                                 
                              FNS(DCRA,DCRA,ADM) 1/15                          
  02/22/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  02/23/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  BILL:  HB  85                                                                
  SHORT TITLE: PUBLIC SCHOOL FOUNDATION PROGRAM                                
  BILL VERSION:                                                                
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  TITLE: "An Act relating to the public school foundation                      
  program; and providing for an effective date."                               
  JRN-DATE    JRN-PG                     ACTION                                
  01/22/93       138    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/22/93       138    (H)   HES, FINANCE                                     
  01/22/93       138    (H)   -FISCAL NOTE  (DOE)  1/22/93                     
  01/22/93       138    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/18/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  02/23/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  BILL:  HB 156                                                                
  BILL VERSION: SSHB 156                                                       
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  TITLE: "An Act establishing the educational facilities                       
  maintenance and construction fund; and providing for an                      
  effective date."                                                             
  JRN-DATE    JRN-PG                     ACTION                                
  02/15/93       346    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/15/93       346    (H)   HES, JUDICIARY, FINANCE                          
  02/15/93       346    (H)   -ZERO FISCAL NOTE  (REV)                         
  02/15/93       346    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/22/93       411    (H)   SPONSOR SUBSTITUTE                               
                              INTRODUCED-NEW TITLE                             
  02/22/93       411    (H)   HES, JUDICIARY, FINANCE                          
  02/22/93       411    (H)   -ZERO FISCAL NOTE  (REV)                         
  02/22/93       411    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/23/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  BILL:  HB 157                                                                
  BILL VERSION: SSHB 157                                                       
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  TITLE: "An Act making special appropriations to the                          
  educational facilities maintenance and construction fund and                 
  the mental health trust income account; and providing for an                 
  effective date."                                                             
  JRN-DATE    JRN-PG                     ACTION                                
  02/15/93       347    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/15/93       347    (H)   HES, JUDICIARY, FINANCE                          
  02/15/93       347    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/22/93       412    (H)   SPONSOR SUBSTITUTE                               
                              INTRODUCED-NEW TITLE                             
  02/22/93       412    (H)   HES, JUDICIARY, FINANCE                          
  02/22/93       412    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  02/23/93              (H)   HES AT 03:00 PM CAPITOL 106                      
  ACTION NARRATIVE                                                             
  TAPE 93-20, SIDE A                                                           
  Number 000                                                                   
  CHAIR TOOHEY called the meeting to order at 3:05 p.m. and                    
  noted members present.  She announced the meeting calendar                   
  would include HB 66 and HB 85 and would be teleconferenced                   
  for public hearing.  She noted that HB 156 and HB 157 would                  
  not be heard at the meeting.  She invited Rep. Bunde to                      
  speak on HB 66.                                                              
  HB 66:  MUNICIPAL PROPERTY TAX EXEMPTIONS                                    
  Number 037                                                                   
  REP. CON BUNDE began speaking as SPONSOR of HB 66.  He                       
  announced his hope to develop a committee substitute for the                 
  governor's version of HB 66, and, barring that, his                          
  intention to hold HB 66 for more study.                                      
  CHAIR TOOHEY interrupted to announce that the committee                      
  would consider the work draft of HB 66.                                      
  Number 055                                                                   
  REP. BUNDE said that the original HB 66 moved funding                        
  responsibility for the municipal property tax exemption                      
  program from the state to the municipalities, then left it                   
  up to the municipalities either to continue or terminate the                 
  program.  Rep. Bunde said his version of the bill would                      
  grant the municipalities a third option of deferring                         
  collection of property taxes until the property was sold or                  
  the owner died.  He said HB 66 offered more options and a                    
  more humane way to address the conflicting needs of                          
  municipalities to collect property taxes and the needs of                    
  retirees to remain in their homes, sometimes on fixed                        
  incomes, despite rising costs of living.                                     
  REP. VEZEY asked the advantages of passing this bill over                    
  repealing the state authorizing statutes and leaving                         
  municipalities the option of doing what they will on tax                     
  REP. BUNDE said municipalities are neither encouraged nor                    
  discouraged from any one option, but the governor's bill                     
  would likely encourage municipalities to "zero out" or                       
  terminate their exemption programs, as the municipalities                    
  cannot now afford to fund the program as it exists without                   
  the deferral option proposed in the work draft.                              
  Number 132                                                                   
  REP. VEZEY commented that the committee substitute does not                  
  mandate anything, but lays out alternatives.                                 
  REP. BUNDE agreed.                                                           
  CHAIR TOOHEY announced the meeting was being teleconferenced                 
  to Anchorage, the Mat-Su, Soldotna and Tok.  She announced                   
  her intention to hear Bruce Geraghty, then to take testimony                 
  from the remote sites.                                                       
  Number 146                                                                   
  AND REGIONAL AFFAIRS, conveyed the department's support for                  
  HB 66.  He said the bill is part of the governor's efforts                   
  either to eliminate programs or make them run more                           
  efficiently in the face of declining state revenues.  The                    
  state now funds the property tax exemptions for senior                       
  citizens and disabled veterans at 20 percent of what it                      
  costs municipalities, he said.  The state pays 85 percent of                 
  the costs of a similar program offering exemptions for                       
  senior citizens and disabled veterans who rent their                         
  residences.  He said the department proposes to no longer                    
  require municipalities to operate the rental rebate program,                 
  and instead, to help municipalities establish an optional                    
  property tax exemption program, possibly based on a hardship                 
  needs basis, so that municipalities could fine-tune their                    
  programs to their individual needs.  The work draft does not                 
  limit the exemption to property of any particular assessed                   
  valuation, though the current mandated program limits the                    
  exemption to the first $150,000 of assessed value, he said.                  
  MR. GERAGHTY said the department has no problem with Rep.                    
  Bunde's deferral proposal.  Mr. Geraghty said it might be                    
  possible to include both property tax deferrals and                          
  exemptions for hardship cases in a final version of the                      
  bill.  He stated the Department of Community and Regional                    
  Affairs recommends using the original language in HB 66                      
  concerning exemptions, which cut out the municipalities'                     
  option of exempting more than the first $150,000 of assessed                 
  value.  Mr. Geraghty also said he supports a provision in                    
  Rep. Bunde's work draft that would extend the deferral to                    
  spouses who also qualify, which, according to a verbal legal                 
  opinion from the attorney general's office, would work.                      
  MR. GERAGHTY said that under the current mandated program                    
  and in the working draft, tax-exempted property is not                       
  included in the full-value determination for the school                      
  foundation formula or municipal revenue sharing.  He noted                   
  he had no problem with that provision, without which                         
  Anchorage would have to pay an additional $1.6 million in                    
  contributions for school funding.                                            
  Number 280                                                                   
  REP. G. DAVIS asked why the fiscal note from the Department                  
  of Community and Regional Affairs showed no fiscal impact                    
  for HB 66, though $2.8 million had already been spent in                     
  MR. GERAGHTY said the fiscal note shows no cost for the                      
  senior citizens and disabled veterans property tax rebates,                  
  because the cost of the program, which he acknowledged was                   
  about $2.8 million, was not included in the governor's FY94                  
  budget.  He added, however, that the renters' rebate program                 
  cost an additional $800,000, making the total cost of the                    
  rebates and exemptions approximately $3.6 million in FY93.                   
  REP. VEZEY asked why it was necessary to pass new laws to                    
  authorize municipalities to do what they could already do on                 
  their own authority.                                                         
  Number 308                                                                   
  MR. GERAGHTY said the department feels the same way, but                     
  municipal attorneys have told the department municipalities                  
  would not have property tax exemption or rebate programs if                  
  such programs were not specifically permitted in state                       
  REP. BRICE asked the Alaska Municipal League's (AML)                         
  position on the work draft of HB 66.                                         
  REP. BUNDE said the executive director of the AML planned to                 
  testify on the bill later in the meeting.                                    
  REP. B. DAVIS asked why the work draft had a title different                 
  from that of the governor's original bill.                                   
  REP. BUNDE responded that the new title addressed the true                   
  value determination issue, making it clear that                              
  implementation of the bill did not affect that determination                 
  Number 347                                                                   
  CHAIR TOOHEY invited public testimony on HB 66.                              
  Number 350                                                                   
  ASSOCIATION OF RETIRED FEDERAL EMPLOYEES, testified in                       
  Juneau concerning HB 66.  She said a survey of the 5,000                     
  members in Alaska, 57 percent of them over 65 years of age,                  
  showed that repeal of the longevity bonus and property tax                   
  exemptions would force 40 percent of them to leave the                       
  state, taking with them their investments and their share of                 
  the $89 million in pensions retirees bring to Alaska each                    
  year.  Ms. Darlin said she had distributed a report on                       
  retiree concerns and positions to the members of the                         
  committee.  She stated 92 percent of the survey respondents                  
  owned their homes.  The federation recommended retaining the                 
  property tax exemption, and, if necessary, lowering the cap                  
  on assessed value, or possibly raise the eligibility age,                    
  she said.  Ms. Darlin left copies of a clipping from the                     
  Senior Voice newspaper outlining results of the report on                    
  retiree concerns.                                                            
  Number 394                                                                   
  CHAIR TOOHEY asked whether seniors generally knew of the                     
  proposed options concerning the property tax exemptions and                  
  rental rebates, and said that she anticipated they would be                  
  received favorably.                                                          
  MS. DARLIN said senior citizens had not heard of the                         
  proposals, but would consider the deferral as another option                 
  in the programs.                                                             
  CHAIR TOOHEY said she anticipated that deferrals would                       
  sometimes be more than just an option, because they are a                    
  workable alternative to placing senior citizens in                           
  Number 408                                                                   
  testified in Juneau supporting the working draft of HB 66.                   
  He expressed concern about the proposed change in the                        
  effective date to January 1994.  He said that would leave                    
  the existing mandated program in effect without state                        
  funding, repesenting a loss of from $2.5 to $3 million to                    
  the municipal governments in FY94.  While property tax                       
  deferrals are a new concept in the legislature, other states                 
  use them as a successful compromise between providing                        
  nothing at all and providing a straight exemption, Mr.                       
  Swisher said.  Deferrals allow municipalities to collect the                 
  tax due them, plus an appropriate rate of interest, and                      
  allow property owners to defer paying the taxes out of their                 
  income.  He expressed a preference for the state to fund the                 
  tax exemption fully, as the state has more money than the                    
  municipalities.  He stated his second preference would be to                 
  add deferrals as an option.                                                  
  Number 438                                                                   
  REP. BUNDE asked whether making the effective date                           
  retroactive would affect the net gain for municipalities.                    
  MR. SWISHER responded that would presume that all                            
  municipalities would exercise their options to establish a                   
  deferral program.  Those that did not would see a net change                 
  in 1994, he said.  And, if a municipality could not begin a                  
  deferral program, then it would not recover property taxes                   
  for the fiscal year upon the sale of property, he stated.                    
  Mr. Swisher said having an effective date of 1993 would make                 
  it tight, but doable, for FY94.                                              
  REP. BUNDE commented that the state would be glad to fund                    
  the program fully if the participants all contributed their                  
  permanent fund dividend.                                                     
  REP. G. DAVIS asked if members of the AML had discussed how                  
  many of those municipalities that provide property tax                       
  exemptions to senior citizens in addition to the state                       
  program might offer a property tax exemption.                                
  MR. SWISHER answered no.                                                     
  Number 468                                                                   
  ADVISORY BOARD, testified from Wasilla opposing HB 66.  She                  
  said the borough assembly, upon advice of the board, had                     
  passed two resolutions supporting the property tax exemption                 
  with full funding from the state.  The assembly did not                      
  support having an election on whether the borough itself                     
  should fund a tax exemption.  She said a small but vocal                     
  element of the community opposed to senior citizens benefits                 
  would probably sway borough voters against assuming passing                  
  a borough-funded tax exemption for seniors.  She also noted                  
  that she was past president of the Older Persons' Action                     
  Group, which wants the state to fund the property tax                        
  Number 489                                                                   
  CHAIR TOOHEY, hearing no further requests to testify, closed                 
  public testimony on HB 66.                                                   
  REP. BUNDE announced his intention to provide a clean copy                   
  of HB 66 with revisions the following day, Wednesday,                        
  February 24, at which time he would request a vote by the                    
  committee on the bill.                                                       
  CHAIR TOOHEY called an at-ease at 3:39 p.m. and recalled the                 
  meeting to order at 3:40 p.m.                                                
  HB 85: PUBLIC SCHOOL FOUNDATION PROGRAM                                      
  Co-CHAIR BUNDE assumed the chair, announced the committee                    
  would hear HB 85, and noted that the meeting was being                       
  teleconferenced to Anchorage, Barrow, Bethel, Mat-Su, Nome,                  
  Sitka, Valdez, Soldotna, and Tok.                                            
  (Members present were Rep. Bunde, Toohey, Nicholia and B.                    
  Number 503                                                                   
  SUPPORT SERVICES, DEPARTMENT OF EDUCATION, testified in                      
  Juneau and provided an overview of HB 85.  He said he would                  
  briefly explain all elements, but would concentrate on the                   
  Alaska School Price Index (ASPI), which he said had                          
  generated lots of interest.  The ASPI is the department's                    
  attempt to update the current Area Cost Differential (ACD),                  
  designed to achieve an incremental increase in state school                  
  aide in accordance with the location-based differences in                    
  the cost of providing education.                                             
  (Rep. G. Davis returned at 3:42 p.m.)                                        
  MR. GUILEY referred to sections of the bill concerned with                   
  the vocational education (voc-ed) and talented and gifted                    
  (TAG) student programs, which he said were an attempt to                     
  provide a flat rate of funding per student based on a                        
  simplified formula.  He said the department intends to                       
  repeal regulatory requirements on plans of service,                          
  individual education programs and compliance monitoring, to                  
  eliminate the need for weighting classes, calculating                        
  student full-time equivalents and other administrative                       
  requirements, and to increase funding for voc-ed programs.                   
  Mr. Guiley said the bill includes "hold harmless" provisions                 
  whereby a district would not receive less than its FY93                      
  level of funding under the current law for three years,                      
  regardless of how the new basic need levels were calculated                  
  under the new foundation formula.  At the end of the three                   
  years, a section in the new law would take effect reenacting                 
  the ASPI based on the increase in cost of an education                       
  program, he said.                                                            
  MR. GUILEY referred to a section of HB 85 changing the due                   
  date of the student enrollment projection.  The current law                  
  requires schools to submit an enrollment estimate for the                    
  following year before the actual count of the current year's                 
  enrollment, which he said leads to awkward enrollment and                    
  budget revisions.  He mentioned a section of the bill which                  
  holds the districts harmless for any decreases in enrollment                 
  in one year by allowing them to use the current or prior                     
  year's enrollment, whichever brought it more money.  This is                 
  an effort to relieve the districts of having to plan their                   
  budgets without knowing their final enrollment count, which                  
  determines their foundation formula funding, he said.                        
  Number 530                                                                   
  MR. GUILEY handed out pie charts showing the components of                   
  the ASPI.  He stated that districts are concerned about the                  
  ACD because it is based on the cost of operating a                           
  household, not a school district.  The current index is                      
  based on information from 1983 and 1984, and has not been                    
  updated in statute since, though the original study was                      
  updated in 1988, he noted.  The ASPI committee arose from                    
  the Alaska 2000 finance committee, which felt it did not                     
  have enough time to fully consider the ADC, Mr. Guiley said.                 
  Another task force was formed, and charged with defining the                 
  types of expenditures necessary to deliver an educational                    
  program, then defining how to measure incremental cost                       
  increases over a base.  The committee established the base                   
  as the eight districts that now receive 1.0 in their ACD,                    
  and compared the types of educational program costs to the                   
  average of that base, he said.                                               
  MR. GUILEY said the components of the ASPI are:  certified                   
  salaries and benefits at 65 percent; non-certificated                        
  salaries and benefits at 20 percent; and non-personnel costs                 
  at 15 percent.  There are further breakdowns in each                         
  component, he said.  The ASPI is based on districts' audited                 
  average expenditures for 1989 and 1992.  Mr. Guiley stated                   
  that the changes in the price differential program adds                      
  $12.4 million to the total cost of the foundation formula in                 
  the first year.  That is due primarily to the increases for                  
  some districts over their current 1.0 classification, but                    
  also due to increases for other districts that had been held                 
  at lower amounts, and to increases for some single-site                      
  districts that had previously received single-site                           
  supplements.  He commented that the department would make a                  
  presentation the following day to the State Board of                         
  Education for final adoption of a table for single site                      
  REP. BUNDE said he had heard that the Anchorage and Mat-Su                   
  school districts would retain their classification at 1.0 of                 
  the ACD, which would nonetheless lose money under the                        
  proposal because they would have fewer units.  He asked how                  
  much districts that previously had multiple units would see                  
  their funding drop.                                                          
  MR. GUILEY said he believed Rep. Bunde was referring to the                  
  definition of "funding community."  The department intends                   
  to level the playing field and apply statutes and                            
  regulations consistently to all districts as the new                         
  foundation law takes effect, and to eliminate some of the                    
  funding communities previously approved as exceptions to                     
  existing regulations, Mr. Guiley said.  Eliminating those                    
  exceptions would not result in revenue losses, but would                     
  result in overall increases for Anchorage and Mat-Su school                  
  districts under the proposal.                                                
  REP. BUNDE said he may have gotten incorrect information.                    
  Number 597                                                                   
  REP. VEZEY asked why the proposal would result in a net                      
  increase in funding, when a new cost index should be revenue                 
  neutral.  He asked why the average cost would be greater                     
  than 1.0.                                                                    
  MR. GUILEY responded that the state school price index                       
  committee was charged first with defining educational                        
  expenditures, then developing a method of comparing the                      
  expenditures in 54 districts to a base.  Most past studies                   
  have arbitrarily assigned a base, sometimes Anchorage, he                    
  said.  The committee suggested that a better base would be                   
  the eight districts currently at 1.0, as that would allow                    
  each district to go higher on that scale if they could prove                 
  their costs were higher than the base, he said.                              
  TAPE 93-20, SIDE B                                                           
  Number 000                                                                   
  MR. GUILEY said seven districts are scheduled for increases                  
  above 1.0 under the new formula.  The formula was not                        
  designed to redistribute revenue, but to obtain defensible                   
  data to be used as a basis for comparison.  Though there was                 
  initially no discussion of preventing any district from                      
  taking funding cuts through a hold harmless provision, the                   
  commissioner decided during the process of developing the                    
  formula that districts should not face immediate cuts                        
  without the opportunity to reduce expenses to meet the new                   
  funding levels, Mr. Guiley said.                                             
  Number 023                                                                   
  REP. VEZEY asked if the new formula would not bring less                     
  money to any district.                                                       
  MR. GUILEY stated that was correct in terms of the                           
  foundation formula.  Some single site districts worried that                 
  the single site supplemental appropriations have been                        
  outside the foundation formula law, but the hold harmless                    
  provision concerns only the funding from the foundation                      
  formula, he said.  Some single site districts will see their                 
  total state funding receipts drop, but not the funding                       
  provided through the foundation formula.                                     
  REP. VEZEY explained the proposal results in a net increase                  
  in education funding, using the existing $61,000 per                         
  instructional unit.                                                          
  MR. GUILEY agreed, saying it would bring a $12.4 million                     
  increase in education funding the first year, or $9 million                  
  if the department ended the existing $3.4 million single                     
  site supplement built into the budget.  The amount of                        
  increase would drop as the hold harmless provisions phased                   
  out, he said.                                                                
  REP. VEZEY asked whether the new formula would penalize                      
  those school districts able to operate at lower costs by                     
  subsidizing the other, less-efficient districts.                             
  MR. GUILEY said the department did not intend to penalize                    
  efficient systems, but was trying to provide money with few                  
  strings attached, such as the flat-rate funding for voc-ed                   
  and TAG programs without compliance provisions.                              
  Number 081                                                                   
  REP. NICHOLIA asked whether the table the department planned                 
  to present to the State Board of Education the following day                 
  would reduce the single site districts' funding.                             
  MR. GUILEY commented that single site schools would not be                   
  funded at 100 percent under the proposal and might receive a                 
  supplement of $80,000 instead of $125,000 as in past years.                  
  He repeated that they would receive no less in foundation                    
  formula funds.  He said the department had not tried to                      
  force an index to provide current levels of funding, but to                  
  provide a defensible and justified formula.                                  
  Number 115                                                                   
  REP. NICHOLIA asked why the department wanted to change from                 
  ACD to the ASPI, and how it will benefit the state.                          
  MR. GUILEY responded that the department made the change to                  
  achieve revenue equality, and tried to do so by basing the                   
  cost differential plan on educational costs, not household                   
  costs.  He added that the costs were based on surveys of                     
  such costs in each district in 1989 and 1991, information                    
  much more up to date than the 1983 data now in use.                          
  Number 145                                                                   
  REP. NICHOLIA asked Mr. Guiley's definition of equity.                       
  MR. GUILEY said an Alaska 2000 committee was to have tried                   
  to define a basic quality education in Alaska.  He stated                    
  that 10 years ago, equity meant more money for everyone.                     
  The department is now trying to distribute revenue based on                  
  defensible data, he said.                                                    
  Number 170                                                                   
  REP. NICHOLIA asked Mr. Guiley to tell her the important                     
  components of Alaska 2000.                                                   
  REP. BUNDE interrupted, saying the question was quite broad,                 
  and the committee would discuss the components of Alaska                     
  2000 other than funding at another time.                                     
  Number 180                                                                   
  testified in favor of HB 85.  He said it is clear something                  
  is wrong with the foundation formula when the KPBSD reached                  
  the funding cap in 1989-90 and has remained there since, as                  
  he expects other districts to do in time.  He mentioned a                    
  long list of ways in which the funding cap was hurting the                   
  district:  a forced increase in the student-teacher ratio by                 
  three students two years ago, the forced absorption of 130                   
  additional students next year without new staff; the                         
  inability to buy new textbooks or equipment; and low                         
  (Rep. Nicholia departed at 4:01 p.m.)                                        
  MR. SWARNER said the changes in the ACD did not address the                  
  need for increases in the instructional unit value to meet                   
  inflation.  He expressed support for the changes in the TAG                  
  and voc-ed programs, which will cut paperwork, and the                       
  changes in enrollment estimates.  He concluded by saying the                 
  bill needs more consideration, and that the ASPI more                        
  accurately reflects educational costs than the ACD.  He                      
  disputed allegations that the new formula regards districts                  
  that pay teachers more than do other districts.                              
  Number 300                                                                   
  TOM BUZEK testified from Anchorage concerning the TAG                        
  portion of HB 85, opposing provisions that would give school                 
  boards discretion to fund TAG programs or not.  He said he                   
  favors current laws mandating that schools serve TAG                         
  students as special needs students.  The proposed budget                     
  allocates 4.5 percent to TAG programs, and he favored                        
  regulation to ensure the money is spent on TAG students. The                 
  budget for the Mat-Su school district's 1993-94 school year                  
  cuts TAG funding by half to approximately $300,000, while                    
  voc-ed funding would increase to $900,000, Mr. Buzek said.                   
  Without regulations mandating an independent, funded TAG                     
  program, he would prefer to see TAG remain under special                     
  needs programs, where it receives guaranteed funding, he                     
  Number 344                                                                   
  GIFTED ASSOCIATION, testified from Anchorage opposing HB 85.                 
  He wanted to retain guaranteed minimum funding for TAG                       
  student services.  While voc-ed and special education are                    
  guaranteed a minimum of one instructional unit under the                     
  bill, TAG funding is entirely set by administrative                          
  regulations to be developed by the Department of Education,                  
  he said.  Mr. Wetherell protested the diversion of already                   
  limited TAG funds to voc-ed programs.  TAG students only                     
  receive a maximum of three hours of advanced instruction per                 
  week, he said.                                                               
  DISTRICT, testified from Anchorage on HB 85, saying it would                 
  mean less money for the district.  He said the district                      
  counts on at least $61,000 per instructional unit to meet                    
  growing demands, and would support rewriting the foundation                  
  formula to be more equitable to Anchorage.  The ASPI would                   
  allow for less equitable distribution of funds, he said.                     
  Anchorage would receive $474,000 of the $12.4 million                        
  increase in funding under the ASPI.  The $12.4 million could                 
  increase the foundation formula to $62,000 per unit.  Each                   
  $1,000 increase in the unit value would mean $3.75 million                   
  more for Anchorage, compared to the $474,000 it would get                    
  under the ASPI.  Anchorage faces a projected deficit of up                   
  to $13 million, so the district needs all the help it can                    
  get, Mr. Wiget said.  He asked the legislature to rewrite                    
  the ASPI to make it more equitable to the Anchorage School                   
  Number 405                                                                   
  SCHOOL BOARDS, testified in Juneau in support of HB 85 as                    
  long as it is adjusted to better meet association concerns.                  
  He stated the association has long recognized the need to                    
  revise the foundation program to provide equity.  He said                    
  some districts may have received too much state money and                    
  others have not received enough because of where certain                     
  lines have been drawn.  Mr. Rose said the actual formula                     
  proposed by the Department of Education appears to represent                 
  a comprehensive review, but he questioned the data points.                   
  The association recommends placing the new formula in                        
  statute, not regulation, following final review to forestall                 
  lobbying against the department as it wrote regulations.                     
  According to Mr. Rose, the association recommended that the                  
  legislature consider annual adjustments to counter the                       
  effects of inflation.  The association also recommended                      
  dealing with as many problems, such as the single-site                       
  districts, as possible in the bill because of the difficulty                 
  of achieving reform.  Mr. Rose said the bill achieves a fair                 
  and equitable distribution of state resources and addresses                  
  many longstanding concerns.                                                  
  REP. BUNDE asked a clarifying question about the                             
  association's recommendations.                                               
  Number 468                                                                   
  CHAIR TOOHEY asked the purpose of a meeting scheduled for                    
  the following day.                                                           
  MR. ROSE said it was a meeting of the state Board of                         
  Education, at which the board would try to adopt a scale in                  
  connection with the ASPI.                                                    
  REP. BUNDE asked if the Association of Alaska School Boards                  
  had a position on funding of TAG programs.                                   
  MR. ROSE stated that the association members felt that the                   
  changes in voc-ed and TAG programs represented a tradeoff,                   
  and the advocates for each constituency would probably                       
  appeal to the committee on their own behalf.                                 
  Number 500                                                                   
  DISTRICT, testified in Juneau concerning HB 85, saying it                    
  did not provide for equitable distribution of the increase                   
  in funds.  He said he would support the bill if it did not                   
  cut funding for funding communities.  He argued that equity                  
  in state funding should be by program, not by distribution                   
  of funds, and that the changes under ASPI do not distribute                  
  the $12.4 million equitably.  The Anchorage and Mat-Su                       
  districts serve more than half the state's students, but                     
  receive only $1 million of the $12.4 million, because the                    
  bill removes the allowances for funding communities, he                      
  said.  The Kenai school district's funding communities are                   
  smaller than the Mat-Su district's, so the loss of funding                   
  communities hurts the Mat-Su district more. Further, when                    
  the new ASPI is applied to the districts, Kenai gains $1.2                   
  million, and Mat-Su gains $200,000, Mr. Sorensen said.                       
  MR. SORENSEN explained that when the Mat-Su district got new                 
  funding communities two years ago, they were built into how                  
  the district is run, and to pull them out would leave the                    
  district with a $4 million shortfall.  That deficit would                    
  make it impossible to maintain the district's comprehensive                  
  high schools, which could mean the loss of voc-ed, art or                    
  music programs for the resultant lower enrollments, he said.                 
  It would also mean the loss of 35 teachers and a total of                    
  60-90 employees, the addition of up to three students per                    
  class when some middle schools already have 35 students, he                  
  said.  According to Mr. Sorensen, the ASPI makes sense, but                  
  he asked the committee to retain funding communities.                        
  REP. VEZEY said he believed HB 85 and its guarantee against                  
  loss of funding was simply a way of increasing education                     
  MR. SORENSEN said it was difficult to tell which districts                   
  would win or lose over the long run under HB 85.  If there                   
  was a movement toward funding per child, then the larger                     
  districts could benefit over time.  Nome, for example, loses                 
  no money in the change, but might lose more over the long                    
  run by loss of its single-site supplements.                                  
  REP. VEZEY asked whether the ASPI is not a straight linear                   
  analysis based on a cook book of costs.                                      
  MR. SORENSEN said the numbers that went into the ASPI are                    
  good numbers, and the formula is defensible as an index of                   
  educational costs, and is a positive development.  He noted                  
  the combination with other issues makes the question of                      
  equity more complex.                                                         
  REP. VEZEY clarified his question, asking whether the ASPI                   
  was a straight comparative index, or whether there was any                   
  statistical adjustment for deviation from a norm or                          
  MR. SORENSEN said he could not respond and would rather                      
  defer to Mr. Guiley.                                                         
  REP. VEZEY said a straight index would reward districts that                 
  have not controlled their costs by allowing them a higher                    
  cost basis and not comparing them to more efficient                          
  Number 050                                                                   
  REP. B. DAVIS asked Mr. Sorensen whether he would be happy                   
  with HB 85 if his district retained funding communities as                   
  MR. SORENSEN answered yes.  In such a case the Mat-Su                        
  district would realize a $4 million increase in state                        
  funding, which would make him very happy.                                    
  REP. B. DAVIS asked Mr. Guiley why the funding communities                   
  were dropped.                                                                
  MR. GUILEY answered by saying the funding communities were                   
  dropped because they were exemptions to existing regulations                 
  that consider a unified city-borough a single funding                        
  community.  Anchorage has three funding communities, one                     
  each for Anchorage, Girdwood, and Eagle River, even though                   
  each area is part of a single city-borough, just as Juneau                   
  has a single funding community for all the schools in the                    
  city and borough of Juneau, he said.  In the areas outside a                 
  unified city-borough, as in the Mat-Su school district,                      
  funding communities are defined as a high school and all of                  
  the elementary schools that graduate students to that high                   
  school, Mr. Guiley said.  Incorporated cities within a                       
  borough, such as Wasilla or Palmer in the Mat-Su borough,                    
  are awarded a separate funding community, he said.  The                      
  department wanted to eliminate as many exceptions and apply                  
  the law consistently across the state, he concluded.                         
  Number 100                                                                   
  REP. B. DAVIS asked how much more HB 85 would cost if the                    
  exception were not removed and the funding communities for                   
  the Mat-Su district were left intact.                                        
  MR. GUILEY answered that the funding communities represent                   
  about $7.5 million, and the fiscal note for the bill would                   
  rise to a total of approximately $20.5 million in the first                  
  REP. B. DAVIS asked Mr. Guiley to explain how he could claim                 
  the bill had a "hold-harmless" provision when it appeared                    
  Anchorage and Mat-Su districts were losing money.                            
  MR. GUILEY responded by saying the "hold harmless" provision                 
  means that no district will receive less in net foundation                   
  formula funds in FY94, FY95 and FY96 than they did in FY93.                  
  He further stated that the Anchorage and Mat-Su districts                    
  are scheduled for increases in funding under the proposal.                   
  Hearing no further requests to testify, REP. BUNDE closed                    
  public testimony on HB 85, announced the bill would be held                  
  over for further study, and ADJOURNED the meeting at 4:43                    

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