Legislature(1993 - 1994)
02/23/1993 03:00 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 date." 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 exemptions 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 programs 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 communities PREVIOUS ACTION BILL: HB 66 SHORT TITLE: MUNICIPAL PROPERTY TAX EXEMPTIONS 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, FINANCE 01/15/93 84 (H) -3 ZERO FNS (2-DCRA, ADM) 1/15/93 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 SHORT TITLE: PUBLIC SCHOOLS & PUBLIC FACILITIES FUND 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) 2/15/93 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) 2/22/93 02/22/93 411 (H) GOVERNOR'S TRANSMITTAL LETTER 02/23/93 (H) HES AT 03:00 PM CAPITOL 106 BILL: HB 157 SHORT TITLE: APPROP: PUBLIC SCHOOLS/FACILITIES FUND 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 exemptions. 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 BRUCE GERAGHTY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY 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 FY93. 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 statutes. 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 process. Number 347 CHAIR TOOHEY invited public testimony on HB 66. Number 350 MARIE DARLIN, PRESIDENT, ALASKA FEDERATION OF THE NATIONAL 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 institutions. Number 408 KEN SWISHER, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE, 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 ROSE PALMQUIST, CHAIRMAN, MATANUSKA-SUSITNA SENIOR CITIZENS 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 exemptions. 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. Davis.) Number 503 DUANE GUILEY, DIRECTOR, DIVISION OF EDUCATION FINANCE AND 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 support. 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 DICK SWARNER, EXECUTIVE DIRECTOR OF BUSINESS MANAGEMENT FOR THE KENAI PENINSULA BOROUGH SCHOOL DISTRICT (KPBSD), 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 salaries. (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 said. Number 344 DENNIS WETHERELL, PRESIDENT OF THE MAT-SU TALENTED AND 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. LARRY WIGET, LEGISLATIVE LIAISON TO THE ANCHORAGE SCHOOL 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 District. Number 405 CARL ROSE, EXECUTIVE DIRECTOR OF THE ASSOCIATION OF ALASKA 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 ELL B. SORENSEN, SUPERINTENDENT OF THE MAT-SU SCHOOL 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 funding. 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 standard. 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 districts. Number 050 REP. B. DAVIS asked Mr. Sorensen whether he would be happy with HB 85 if his district retained funding communities as well. 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 year. 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 p.m.