Legislature(2005 - 2006)SENATE FINANCE 532
04/20/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB471 | |
| SB188 | |
| SB1 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 471 | TELECONFERENCED | |
| *+ | SB 1 | TELECONFERENCED | |
| += | SB 188 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
April 20, 2006
9:06 a.m.
CALL TO ORDER
Co-Chair Lyda Green convened the meeting at approximately
9:06:54 AM.
PRESENT
Senator Lyda Green, Co-Chair
Senator Gary Wilken, Co-Chair
Senator Con Bunde, Vice-Chair
Senator Fred Dyson
Senator Bert Stedman
Senator Donny Olson
Senator Lyman Hoffman
Also Attending: REPRESENTATIVE BILL STOLTZE; WILLIAM GREEN,
Project Counsel, Knik Arm Bridge and Toll Authority; STEPHANIE
ALLISON, Parent and Member, Glacier Valley Elementary School
Site Council; MARY HAKALA, Parent and Member, Alaska Kids Count!
Network; MARY BECKER, State President, Association of Alaska
School Boards; Member, Juneau School Board; and Retired School
Teacher; CARL ROSE, Executive Director, Association of Alaska
School Boards; JOHN ALCANTRA, Government Relations Director, NEA
Alaska; MARY FRANCIS, Executive Director, Alaska Association of
School Administrators; ANDREA STORY, Parent and Member, Juneau
School Board
Attending via Teleconference: From an offnet site: LARRY WIGET,
Director, Government Relations, Anchorage School District; From
Valdez: KATHY TODD, Member, City of Valdez School Board; From
Kenai: MELODY DOUGLAS, Chief Financial Officer, Kenai Peninsula
Borough School District; JENNIE HAMMOND, Nikiski Resident
SUMMARY INFORMATION
HB 471-KNIK ARM BRIDGE AND TOLL AUTHORITY
The Committee heard from the bill's sponsor and a representative
of the Knik Arm Bridge and Toll Authority. A committee
substitute was adopted and the bill reported from Committee.
SB 188-BULK FUEL REVOLVING LOAN FUND CAP
The Committee heard from the bill's sponsor and reported the
bill from Committee.
SB 1-INCREASE AMT OF BASE STUDENT ALLOCATION
The Committee heard from the bill's sponsor and took public
testimony. One amendment was considered but not adopted. The
bill was held in Committee.
CS FOR HOUSE BILL NO. 471(FIN) am
"An Act amending the Knik Arm Bridge and Toll Authority Act
and the powers and authority of the authority to finance
construction and maintenance of the Knik Arm Bridge, to set
and collect tolls, and to carry out its duties; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Green noted that a committee substitute was before the
Committee.
Co-Chair Wilken moved to adopt committee substitute Version 24-
LS1670\L as the working document.
Co-Chair Green announced that the Senate version (SB 303) of
this bill had previously reported from Committee and was
currently in the Senate Rules Committee. However, the House of
Representatives (House) made "substantive" changes to the House
companion bill, and, as a result, Senate Rules has requested the
Committee consider the House version of the bill. The bill's
sponsor would discuss the changes contained in the Version "L"
committee substitute.
9:08:44 AM
REPRESENTATIVE BILL STOLTZE, the bill's sponsor, shared with the
Committee his long-term involvement with the Knik Arm Bridge and
Toll Authority (KABATA) project. This legislation would further
"a commitment" to provide "the details of the plan and
mechanisms" that was made after the initial KABATA legislation
was adopted. He explained the two changes the House made to the
bill: the first removed the State's ability to attach a person's
Permanent Fund Dividend (PFD) to address unpaid fines. The
second eliminated language pertaining to the issuance, renewal
or reinstatement of drivers' licenses. These provisions were
removed in order to focus the bill on the construction of the
bridge. He had been uncomfortable with the amount "of
government" in the original bill and thought it "best to take
those provisions out".
Co-Chair Green referred the Committee to Representative
Stoltze's Sectional Analysis of the bill [copy on file], which
further explained the changes in the committee substitute.
Representative Stoltze continued to explain the changes
contained in Version "L", characterizing a bill amendment
adopted "on the fly in a careless fashion" during a House floor
session as "innocuous". The amendment would have limited
KABATA's authority and would have served to restrict its
function. The initial authority provided to KABATA by the
Legislature would allow it to interact with outside business and
the financial market without any politicizing. The amendment
adopted on the House floor re-injected political involvement.
Co-Chair Green asked whether the language being referenced was
located in Section 1(a)(18) page 3, line 29 of the House bill,
Version 24-LS1670\I.A.
Representative Stoltze affirmed.
Co-Chair Green thereby noted that Version "L" eliminated that
language, as it was "directly contrary to the function and the
role of the Toll Authority itself". Version "L" would retain
KABATA's authority and not require the Governor's approval of
its actions.
Representative Stoltze concurred.
Co-Chair Green noted that Version "L" retained language the
House added to Section 1(a)(18) page 3, line 31, which would
affirm that KABATA's powers of eminent domain would not exceed
those of the State.
Senator Green reiterated that action taken in the House
eliminated the ability of KABATA to place "a lien" on someone's
PFD were they "in violation of something at the Toll".
9:12:31 AM
Representative Stoltze reminded that the garnishing of a
person's PFD is a provision commonly exercised by municipalities
in regards to such things as unpaid fines. However, due to the
fact that any reference or inclusion of language about the
Permanent Fund or the Permanent Fund Dividend tends to "mire
down" and "confuse" an issue, it was his desire to exclude that
provision from the bill in order to focus on building a bridge.
Omitting the PFD attachment would not hinder KABATA's functions;
"it could collect unpaid tolls in another fashion".
9:13:12 AM
Co-Chair Green asked whether this was also the reason behind the
decision to exclude language addressing individuals' drivers'
licenses or vehicle registrations in regards to unpaid tolls or
other violations.
Representative Stoltze affirmed.
Co-Chair Wilken understood the difference between committee
substitute Version "L" and the House version, Version 24-
LS1670\I.A was the deletion of the authority of the Governor.
Co-Chair Green affirmed.
Co-Chair Wilken asked for confirmation that the words "or money
that the legislature may appropriate" as specified in Section
1(a)(12) page 3, line 15 would "not obligate the State to be
supporter or the court of last resort" were there a bond
deficiency.
9:14:30 AM
WILLIAM GREEN, Project Counsel, Knik Arm Bridge and Toll
Authority, affirmed the language would "not obligate the State
to do anything nor" would it obligate the State's general fund.
It mirrors "similar provisions included in other titles dealing
with similar facilities. It is simply there to acknowledge that
if the Legislature desired to appropriate monies it may, but
it's no obligated to."
9:15:18 AM
Co-Chair Wilken communicated concerns expressed by residents in
the State about the Knik Arm Bridge, the Gravina Island Bridge,
and the access road out of Juneau in regards to how those
projects might impact the National Highway System (NHWS) funding
the State would receive over the next several years. The
Administration has been requested to develop a five-year pro
forma to address how those projects would be funded as well as
how the NHWS funding would be dispersed on a statewide basis. To
that point, he asked Mr. Green whether he has been in
communication with the Administration in this regard.
Mr. Green disclosed that some preliminary discussions had taken
place. He deferred to the Administration to provide the
conclusions of the discussions.
9:16:22 AM
Senator Stedman opined that the five-year pro forma would assist
in furthering the interpretation of the federal Highway
Authorization bill, Safe Accountable Flexible Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU). He
suggested that, when the final plan is developed, the discussion
could include SAFETEA-LU funding.
There being no objection, the Version "L" committee substitute
was ADOPTED as the working document.
Co-Chair Wilken moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, SCS CS HB 471(FIN) was REPORTED from
Committee with two previous zero fiscal notes: Fiscal note #1
dated January 22, 2006 from the Department of Natural Resources
and fiscal note #2 dated March 1, 2006 from the Department of
Transportation and Public Facilities.
Senator Hoffman asked whether it is anticipated that the
Administration's response to the request for a five-year pro
forma would be provided prior to Senate floor action on this
bill.
Co-Chair Green understood otherwise, as the primary concern is
not specific to this legislation.
Co-Chair Wilken agreed that this legislation is "a part of the
whole picture", however, not to the point that this bill's
progression should be halted. Continuing, he shared having
recently sent a memorandum to Department of Transportation and
Public Facilities Commissioner Mike Barton reminding him of the
specifics of the request.
CS FOR SENATE BILL NO. 188(CRA)
"An Act increasing the maximum amount of loans from the
bulk fuel revolving loan fund to one borrower."
9:19:00 AM
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Green reminded that committee substitute, Version 24-
LS0952\S, had been adopted during the bill's first hearing in
the Committee.
9:19:19 AM
Senator Olson, the bill's sponsor, communicated that the bill
would increase the loan limit allowed under the Bulk Fuel
Revolving Loan Fund program; thereby allowing communities to
purchase larger quantities of bulk fuel and to account for
higher fuel costs.
Co-Chair Wilken asked whether either Amendment #1 or Amendment
#2 [copies on file] had been adopted.
Co-Chair Green expressed neither had been adopted. [Amendment #1
was offered but failed to be adopted during the first hearing on
the bill. Amendment #2 had been withdrawn.]
Senator Olson moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS SB 188(FIN) was REPORTED from
Committee with new zero fiscal note dated February 8, 2006 from
the Department of Commerce, Community and Economic Development.
9:20:56 AM
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 1
"An Act relating to the base student allocation used in the
formula for state funding of public education; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken, the bill's sponsor, reminded the Committee the
funding provided to K-12 public schools is the "single largest
general fund appropriation" made annually by the Legislature;
education funding would exceed one billion dollars in FY 2007.
This bill would address the student component as determined by
the Base Student Allocation (BSA) funding formula. He referenced
a chart titled "Alaska K-12 Funding" [copy on file], often
referred to as Governor Frank Murkowski's "Pencil Chart". The
Pencil Chart depicts K-12 BSA funding amounts from FY 1999
though FY 2007. The Sponsor Statement was read into the record
as follows.
Since 1998, the K-12 public school funding formula has
distributed state education dollars based on a per student
allocation. Sponsor Substitute for Senate Bill 1 increases
this allocation by $433, establishing the per student
dollar at $5,352.
Sponsor Substitute for Senate Bill 1 recognizes that day-
to-day educations costs continue to increase, causing a
financial strain on the school budgets in all 53 school
districts. The 8.8 percent proposed increase in the student
dollar will help mitigate these rising costs, thus allowing
local school boards to direct more education dollars into
the classroom.
Unfortunately school districts are also burdened with a
five percent increase in their required employer
contribution to two retirement systems, Public Employees'
Retirement System and Teachers' Retirement System. Sponsor
Substitute for Senate Bill 1 will generate the needed funds
to cover these costs, estimated to increase $40 million
statewide in FY 07.
Please join me in support of our public school system and
give your approval to Sponsor Substitute for Senate Bill 1.
9:23:22 AM
Senator Bunde likened the proposed FY 2007 BSA funding to that
of FY 2006 in that approximately half of it would be utilized to
fund public education's retirement system obligation. He
estimated that approximately $45 million of the total $90
million FY 2007 BSA would be used in this manner; only $45
million would be funneled to support classroom needs.
9:24:01 AM
Co-Chair Wilken clarified that $40 million would be utilized to
fund public school's FY 2007 obligations to the Public
Employees' Retirement System (PERS) and Teachers' Retirement
System (TRS). The $50 million balance would be utilized in the
classroom. In FY 2006, $30 million of the total $70 million BSA
funding supported the PERS and TRS obligation and $40 million
went to the classroom.
Co-Chair Wilken identified the Pencil Chart as "a good chart" as
it reflects the year-to-year increase in the BSA; however, some
considerations are missing. It should be noted that, while it
would appear there was no change in BSA levels in 2002 and 2003,
the fact is that those years' BSAs included "logs" which were
kept at the time. The chart depicts an approximate 36 percent
increase in the BSA from 1999 through 2007. One component
missing from the chart is the number of students educated each
year. The number of students educated in 1999 was 133,000; the
projection for 2007 is 132,000 students. Funding has increased,
while the student count has remained essentially flat. While
there is a concentrated effort to "drive dollars into the
classroom" those who might support increasing the FY 2007 BSA
level further should be mindful of the fact the State is
spending more money on the same amount of students. "That should
be on the table for discussion."
9:26:06 AM
Senator Bunde, observing the BSA has increased 33 percent since
2004, asked whether a chart could be developed to reflect
student achievement performance during that timeframe.
9:26:30 AM
Co-Chair Wilken reminded that legislation sponsored by Senator
Bunde in 1997 furthered student performance measurements. As a
result, such information is being compiled and efforts to
increase student performance are occurring in the various school
districts.
9:26:59 AM
Senator Bunde noted many school districts are being forced to
use the majority of funds received from the State to address
increasing overhead and maintenance needs rather than being able
to utilize it in the classroom. The Department of Education and
Early Development has granted waivers to numerous school
districts in this regard even though State law designates 60
percent of the funding districts receive from the State should
be utilized in the classroom. He suggested consideration be
given to "consolidating" school districts, as 53 separate
districts exceeds the level required to support the number of
students being educated in the State.
Co-Chair Wilken clarified State law as currently requiring 70
percent rather than 60 percent of State funding to be used to
support the classroom. Provisions in previously adopted SB 36
were intended to curb school districts that were spending half
of their State funds to support administration rather than
classroom needs. That legislation "has worked to a certain
degree … but there's a number of school districts that do claim
waivers", some of which are valid. While the Department is
responsible for reviewing those requests, it might be time to
revisit the effort and ensure that 70 percent of the funding
provided by the State is "driven to the classroom".
9:29:01 AM
Senator Bunde agreed the issue should be "revisited", as he
understood that waivers are being granted automatically.
9:29:08 AM
Senator Hoffman asked regarding the FY 2007 BSA breakout for
PERS/TRS and classroom funding.
Co-Chair Wilken specified that $50 million would provide for
classroom needs and $40 million would support TRS obligations.
In FY 2006, the breakout was $40 million for classrooms and $30
million for TRS.
Senator Hoffman expressed that the "substantial increases" in
heating fuel and other utility costs experienced by schools in
the State would greatly reduce the amount of funding available
to the classrooms; numerous schools would be forced to layoff
teachers. This is the reason for his concern about the proposed
level of funding. School districts and education organizations
throughout the State view the proposed $90 million as
insufficient. While he would not propose an amendment at this
time, he expected this would be a topic of discussion when the
bill advanced to the full Senate.
9:30:51 AM
Senator Stedman pointed out that the full impact of the TRS
obligation on the education system has not yet been experienced;
there would be "several more years of incremental" payroll
increases. This unfunded liability would continue to "erode" the
dollars being allocated to education. This would impact the
effort to get more dollars in the classroom.
Senator Stedman noted another "struggle." The Sitka School
District and other school districts, particularly those in
southern Southeast Alaska, "are disadvantaged in the formula
that is used to allocate the financial resources around the
State." An effort should be conducted "to rectify" this
situation.
Senator Stedman stated that, in addition to the effort to get
more funding into the classroom, the effort should focus on
addressing "the pension liability" which would "approach fifty
percent of payroll here in a few years". This is a "huge" issue.
Monies should also be "allocated in a more equitable manner so
that the children around the State have equal opportunity in
education which I don't believe they have today…"
9:32:25 AM
Senator Bunde observed that a separate Senate bill currently
being considered would allocate ten million additional dollars
to school districts in "higher cost areas of the State to help
with their education." "All sources of funding" should be
considered when discussing school funding.
Senator Bunde, in regards to Senator Stedman's comments about
the plight of school districts in southern Southeast Alaska,
recalled receiving a letter the previous year from two teachers
on Prince of Wales Island who were considering leaving the State
were local taxes imposed. The fact that their community had no
local taxes rather than "their love of learning or their wanting
to work with children or even for an adventure…" was the reason
they had accepted teaching positions there.
9:33:32 AM
Senator Stedman clarified that the inequities he spoke of are
not between the organized and unorganized boroughs, but instead
are between "the organized areas where people are actually
paying for their schools" via such things as local mill rates.
The school districts in Ketchikan, Wrangell, Petersburg, and
Sitka are disadvantaged in comparison to other organized borough
school districts.
9:34:31 AM
There being no further Committee discussion, Co-Chair Green
stated that public testimony would commence. In order to allow
time for all desiring to testify, remarks would be limited to
three minutes per testifier.
9:34:58 AM
LARRY WIGET, Director, Government Relations, Anchorage School
District, testified via teleconference from an offnet site and,
on behalf of the Anchorage School Board and the Anchorage School
District Administration, communicated that the total $92 million
BSA proposed by the Governor be increased an additional six
million dollars. This would allow the State's school districts
"to maintain a rigorous and effective instructional program that
continues to increase student academic proficiency." The
proposed $5,352 BSA level would be insufficient to allow the
Anchorage School District's FY 2006/2007 operating budget to be
maintained at the FY 2005/2006 level "without implementing
budget reductions and increasing student participation fees".
Senator Bunde asked "the percentage of the maximum allowable
local [education] contribution" currently provided by the
Municipality of Anchorage.
Mr. Wiget did not have that information; however, he noted that
Anchorage's local education contribution, like many other
communities in organized boroughs, is paying a local
contribution "up to what the local tax cap allows".
Senator Bunde stated that rather than the question being about
the local tax cap, the question pertained to the percent of the
local allowable contribution that Anchorage could pay. To that
point, he understood Anchorage only pays "about 80 to 85 percent
of what the local contribution could be".
Mr. Wiget thought Anchorage paid "several million dollars below
the current" contribution allowable by State law.
Senator Bunde pointed out it is often professed, "that the State
is not providing enough money". However, it should be noted that
"in some cases, like Anchorage, the locals" are not providing
their maximum contribution.
9:37:34 AM
KATHY TODD, Member, City of Valdez School Board, testified via
teleconference from Valdez and urged the Committee to adopt a
higher BSA. The proposed level would not provide for the
community's PERS and TRS increased obligation or the increase in
electricity expenses. Even though the District conducts
conservation efforts such as turning off lights and lowering
thermostat settings, the expense of three month's worth of
electricity now equates to one year of a teacher's salary. At
the current proposed BSA level, the district would be forced to
terminate ten percent of its teachers plus classified personnel.
The BSA money would not find its way into the classroom, but
would instead provide for required materials, energy, and the
retirement system obligations. The BSA must be at a level
through which a quality well-rounded education could be
provided.
9:39:21 AM
MELODY DOUGLAS, Chief Financial Officer, Kenai Peninsula Borough
School District, testified via teleconference from Kenai and
communicated that preliminary numbers indicate the proposed BSA
would be insufficient to support the District's status quo after
such things as increases in insurance, fuel and utility,
retirement obligations, and "a modest amount set aside to
address the collective bargaining process" are factored in. The
District's budget revenue shortfall would be approximately $3.6
million.
Ms. Douglas communicated that, as a result of demands from the
legislature, educational organization, and parents for low
pupil/teacher ratios (PTR), the District expended FY 06 funds to
ensure "effective class sizes". However, due to increased
utility expenses, accounts, enrollment under-projections, and
other unforeseen situations, the School Board approved a FY 07
budget increasing PTR by three students "for all staffing
formulas". The District is anticipating a reduction of 63
teacher positions in FY 07, for a 13 percent decrease in the
District's teaching staff. 22 positions would be lost due to
declining enrollment and 41 due to the PTR formula change. Some
classes would exceed 30 students. There would also be losses of
vocational education, art, and foreign language classes, and
reductions in librarians and counselors. While the District
currently has administrators servicing several different
schools, there is anticipation of further increases in this
practice. The Kenai Peninsula Borough would fund the District at
the maximum allowable level in FY 07; however this "level of
support continues to be a struggle considering their financial
constraints. An increase in the mill rate" would be required to
provide the FY 07 funding. Even though local residents recently
rejected a local sales tax increase initiative, the issue would
be introduced again this year, as the Borough would require
additional revenue in order to continue funding schools at the
maximum allowable level.
Ms. Douglas acknowledged the importance of Statewide equity and
avowed, "something must be done" to counteract the funding
shortfalls declining enrollment is having on the School
District. "District cost factors must be adjusted" in addition
to the BSA. She appreciated the efforts exerted by the
Legislature in addressing education needs.
9:42:13 AM
JENNIE HAMMOND, Nikiski Resident, testified via teleconference
from Kenai and shared with the Committee the negative affect
current school funding is having on her son and daughter's
elementary school class sizes. The Nikiski North Star Elementary
School has 415 students this year and a loss of 25 students is
anticipated in FY 07; the number of teachers would decrease from
16 to 14. More funding would be required to offset the projected
three student PTR increase. The school promotes parental
involvement and in excess of 3,000 hours of volunteer time,
valued at $35,000, has occurred this year. Urging the Committee
to increase the BSA in order to allow more teachers to be hired,
she noted the Borough currently supports its schools at the
maximum allowable level. In addition, she urged consideration of
district cost differentials.
9:44:03 AM
[NOTE: The remainder of the public testimony occurred in
Juneau.]
STEPHANIE ALLISON, Parent and Member, Glacier Valley Elementary
School Site Council, informed the Committee she had received
both her secondary and post secondary education in the State. As
a Certified Public Accountant, she found the information
provided on the Pencil Chart "interesting" but lacking
consideration of the "comparable expenses" experienced from year
to year. In addition to the increased PERS and TRS expenses,
other expenses such as health care, utilities, and overhead have
"substantially" increased. A review of the year-to-year
comparisons of these expenses would be encouraged. Funding
should support salaries that would attract quality teachers. The
City and Borough of Juneau continues to contribute to its
schools at the State's maximum allowable funding level. The
Juneau School District (JSD) endeavored successfully to lower
its PTR this past year; however, those PTRs could not be
maintained under the proposed BSA. She could personally testify
to the positive impact low PTRs have on a teacher's ability to
teach, specifically in the Kindergarten through third grade (K-
3) levels. K-3 class sizes exceeding 20 students negatively
impact the ability of a teacher to manage the class. The
proposed BSA would also reduce the number of elementary school
counselors. Those people provide substantial support to students
needing such assistance. She acknowledged this being "a
difficult issue", particularly as there are numerous "variances"
between school districts and community funding support. She
supported the establishment of "a permanent endowment" for
schools. Such action would negate the demand on both legislators
and citizens to re-address the issue each year.
9:46:59 AM
Co-Chair Wilken asked Valdez testifier, Ms. Todd, to further her
remarks attesting that the district's "retirement costs weren't
covered in this legislation".
Ms. Todd understood the proposed BSA might be insufficient to
provide for the District's increased PERS and TRS costs.
Co-Chair Wilken noted the legislation would provide Valdez
$315,937 for FY 07 PERS and TRS expenses.
Ms. Todd communicated that the District's business manager has
estimated the additional FY 07 PERS/TRS expense to exceed
$400,000.
Co-Chair Wilken requested Ms. Todd to have the District's
business manager contact him to discuss this further as he had
understood Valdez's increased PERS/TRS expense would be covered.
Ms. Todd would convey the message to the business manager.
9:48:47 AM
MARY HAKALA, Parent and Member, Alaska Kids Count! Network, "a
grass roots non-partisan network of citizens who are advocates
for great schools in Alaska", communicated there being many
parents concerned about their children's education. Even though
education funding has increased over the years, it has "not kept
pace" with such things as overhead, PERS/TRS, fuel, inflation,
and health insurance premium costs. School districts are unable
to control these expenses. There is a negative impact on
classrooms "when revenues do not meet expenses". Such things as
larger PTRs, reduced staff and student support, and reduced
course offerings occur. The proposed BSA would erode the
capabilities of schools. She urged the Committee to review an
Alaska Kids Count! Network handout [copy on file], which depicts
the effects of the proposed BSA on schools in the City and
Borough of Juneau, where she resides. In order to meet overhead
expenses and provide a minimal amount toward improving classroom
conditions, the BSA funding should be an investment of $150
million rather than $90 million. The goal of the Network is to
get money into classrooms. She hoped her children "would grow up
realizing that government is accessible and responsive". She
also noted that businesses consider the quality of education
offered in a community when deciding whether or not to locate
there. Being successful in attracting businesses to a community
would increase its tax base and would assist in reducing such
things as individual's property tax burdens.
9:52:36 AM
MARY BECKER, State President, Association of Alaska School
Boards; Member, Juneau School Board; and Retired School Teacher,
shared that in her capacity as State President, she has heard
the needs of districts throughout the State. The Association has
participated in the development of numerous districts' strategic
plans. Input from parents and communities is also encompassed
into a community's school district strategic plan. These plans
are an integral part of a school district's operation as budget
decisions and other educational decisions are based on the plan.
The Juneau School District's strategic plan is affected by the
annual BSA amount. Recent BSA funding levels have been
inadequate and programs and positions supporting certain
strategic plan goals that encourage communication between
parents and the school district have been curtailed. One
important element of the District's strategic plan is the effort
to support staff training. This would assist the District to
develop highly qualified staff and to remain compliant with
State and federal requirements. Other focuses of importance are
healthy attitudes and behaviors, safety in schools, bus
transportation, "Alaska Native success, and graduation success
for all".
Ms. Becker declared the proposed BSA would be insufficient to
provide for the needs of the Juneau School District Strategic
Plan. The District's Truancy Tracker position, three "drop-out"
counselor positions, support for students having difficulty with
passing the High School Qualifying Exam, and literacy assistance
positions would be eliminated. School activities would decrease
and the District's PTR would increase three to five students
across the board. She urged the Committee to increase the BSA.
9:57:32 AM
Senator Bunde, a former educator, avowed, "it is difficult to
pay a very good teacher too much". Continuing, he noted that
separate legislation is being considered that would provide
"merit pay" to schools meeting certain student achievement
standards. He asked whether the Association had a position on
that legislation.
Ms. Becker replied the Association has reviewed the legislation,
but has not taken a "supportive position" on it.
Senator Bunde encouraged the Association to further review the
merit pay program legislation, as it would be a means through
which to increase teacher compensation.
9:58:08 AM
Senator Stedman asked whether the Association has had a "policy
discussion" addressing "the escalation of employee benefit
contributions that's going to push 50 percent of payroll" and
salary increases anticipated in the forthcoming years, within
its attempt to provide more funds to classrooms.
9:59:55 AM
CARL ROSE, Executive Director, Association of Alaska School
Boards, informed the Committee that each school district
negotiates its own salaries; there is no statewide salary
schedule. Nonetheless, the impact of increased salaries is a
statewide concern. Furthermore, while the Association has no
formal position on the issue of the unfunded PERS/TRS
obligations, it has attempted to make districts aware of the
"growing" impact of this unfunded liability.
Mr. Rose noted several proposals are being considered through
which to address the PERS/TRS issue, including bonded debt
legislation being advanced by the House of Representatives Rules
Committee. The Association does not have "the wherewithal to
address" the issue and districts must continue to provide the
employee contribution portion, which school districts assumed in
the mid 1980s. At that time, there was no indication the
obligation would become such a problem. It was only in recent
years the districts became aware of the unfunded liability. In
summary, while the Association does discuss this issue with the
districts, it has not addressed the issue, as each school
district deals with employee negotiations individually.
10:01:16 AM
Ms. Becker stressed the importance of teacher salaries keeping
pace with cost of living increases. Districts are losing
teachers and are having "an extremely difficult time" in hiring
specialists such as special education and speech teachers. "It
is a concern."
10:01:45 AM
Co-Chair Green pointed out that "the State has been very
generous in working with communities, departments, agencies, and
school districts in funding the increase for the past several
years. That is not the State's obligation." It is a school
district and community obligation. The State's funding support
of the PERS/TRS issue should be recognized, as it provided more
than it was required to contribute.
10:02:24 AM
Mr. Rose voiced appreciation for the State's funding support.
Assuming the PERS/TRS obligation placed a "strain" on school
district finances. The State's support was "a huge relief" for
the school districts. Districts continue to be in a difficult
situation, as they must also address the increase in fixed
costs.
Co-Chair Green noted the intent of her remarks was to ensure the
State's effort was being recognized and that school districts
were aware of their responsibility. The unfunded liability could
not be addressed in the short term.
10:03:12 AM
Mr. Rose assured that the conversation is occurring. Had the
State not provided $40 million toward the issue, the money would
have been "come straight out of the classrooms".
10:03:25 AM
Senator Bunde remarked that "due to bad actuarial advice that
was passed onto the Legislature by previous retirement boards",
the PERS and TRS retirement system was under-funded. That led to
this unfunded liability situation. The Legislature enacted SB
141-PUBLIC EMPLOYEE/TEACHER RETIREMENT/BOARDS in an effort to
curtail that situation. That legislation made "major changes" to
the retirement system, as continuance of the status quo would
have acerbated the situation. To that point, "some organized
effort to delay the implementation of" that legislation is
occurring. A one-year delay would allow an additional year of
liability to be incurred. People are apparently "more concerned
about their individual benefits than the quality of education".
He asked whether the Association is opposed to the
implementation of SB 141 and is encouraging its delay.
10:04:53 AM
Mr. Rose communicated that while Association members are
concerned with the impacts of SB 141, the Association has not
taken a position on its implementation. Retirement liabilities
are a nationwide issue and many large companies are also
"seeking relief". School districts "concerns moving forward"
include "attracting and retaining" employees and numerous other
issues.
10:05:52 AM
Senator Bunde "encouraged" the Association to consider the fact
that continuance of the existing system would incur further
unfunded liabilities on the system. "Every dollar that goes into
those benefits is a dollar that cannot go into the classroom."
JOHN ALCANTRA, Government Relations Director, NEA/Alaska,
informed the Committee that the NEA/Alaska bargaining unit
represents approximately 13,000 employees.
10:06:43 AM
Mr. Alcantra thanked Co-Chair Wilken, "a warrior for education
funding" from kindergarten through the University, for
sponsoring this legislation.
Mr. Alcantra specified $5,611 as being the BSA recommended by
NEA/Alaska. This would be a $55 million increase above the
current $90 million proposal. The discussions have included
"adequate funding of public education" as well as the fact that
an inadequate level of education funding occurred during the
years 1983 through 2002. While funding in recent years has
significantly increased, that 20-year span of flat education
funding negatively affected schools. While some might interpret
NEA/Alaska's request for increased funding beyond that being
proposed as "looking a gift horse in the mouth", newspaper
headlines across the State underscore the fact that increased
levels of school funding are necessary. For example, the Kenai
School District would be forced to terminate 75 schoolteachers,
The Matanuska-Susitna (Mat-Su) School District would be four
million dollars short, and the Anchorage School District would
be two million dollars short. A January 2006 survey conducted by
NEA/Alaska indicated that not "a single school district in the
State" has agreed that the proposed BSA would be adequate. He
allowed that some of those responses might have changed since
January, as The Fairbanks North Star School District has since
testified that the proposed BSA would be adequate.
Mr. Alcantra acknowledged being unaware of the Legislature's
total proposed education increase in the FY 07 State budget;
however, noted that the 8.8 percent BSA increase proposed in
this bill does not align with the Governor's overall budget
increase of 16.3 percent, which is double the increase being
provided to K-12 BSA funding. He voiced appreciation for the
Legislature's effort in helping with the PERS/TRS problem and
other issues; however, the goal is to get adequate funding
levels. NEA/Alaska has worked diligently "to develop a plan that
would create a funding mechanism to achieve adequacy over … the
next eight years". Approximately $155 million more funding above
the $90 million proposed in this bill would be required to reach
adequacy today. While voicing appreciation for the "positive
direction" that is occurring, he reiterated the request to
increase the FY 07 BSA to $5,611.
10:10:27 AM
Senator Stedman reviewed the recent BSA increases: the
compounded BSA growth rate for the past four years has been 7.5
percent, and, when the FY 07 BSA is factored in, the compounded
rate would increase to 7.75 percent. Thus, at this rate,
NEA/Alaska's request for a BSA of $5,611 would be achieved with
just a slight delay. Based on the recent rate of growth,
education funding would double in 9.6 years.
Senator Stedman puzzled as to whether NEA/Alaska's eight-year
adequacy target considered a BSA rate as influenced by declining
enrollment. The forward trends are troubling.
10:11:44 AM
Senator Bunde shared that, during his Legislative career, there
have been "two constants: one, oil forecasts are always wrong
and two, there's never adequate funding for education". Two
separate bills being advanced, SB 112-TAX ON RESIDENTS/EMPLOYEES
IN REAA;GRANTS and SB 235-SCHOOL PERFORMANCE BONUSES, would
provide an additional $15 million for schools. Noting that
NEA/Alaska is on record in opposition to SB 235, he inquired to
their position on SB 112.
10:12:49 AM
Mr. Alcantra responded NEA/Alaska has no position on SB 112. He
suggested further discussion should occur in regards to other
contributions that might be being made by the districts in the
Rural Education Attendance Areas (REAAs). Even though the SB 235
fiscal note has been reduced from $15.2 million to $5.8 million,
that money could be put "to better use."
Senator Bunde questioned what better use could there be "than
rewarding successful teachers".
Mr. Alcantra responded the money could be utilized to support
such things as mentoring programs and "to train teachers how to
be successful". Although Department of Education and Early
Development Commissioner Roger Sampson has developed a good
proposal, it mirrors other merit pay programs in the nation that
have failed. There are numerous other successful programs this
funding could more appropriately support.
10:14:10 AM
Senator Hoffman referred to Senator Stedman's comments about the
positive advancement being made in education funding.
Nonetheless, there is "no guarantee" that future legislators
would continue to support increased funding for education. This
is substantiated by the periods of flat funding on record. In
addition, the price of oil is unpredictable and who the next
governor would be is an unknown. Thus saying that education
funding would continue to move in the right direction "cannot be
forecast". The Legislature should determine the appropriate
funding level necessary for today. Estimating future education
expenses provides "very little consolation" to school districts
and to students.
Senator Hoffman avowed teachers would be laid off were the
proposed BSA adopted. This would result in "a lower standard of
education".
10:15:39 AM
Co-Chair Wilken asked the process through which NEA/Alaska
determined its BSA recommendation of $5,611.
10:15:56 AM
Mr. Alcantra responded the amount had been calculated in January
2006 and included projected costs from FY 2008 through FY 2014.
He was "hesitant" to provide the calculation summary, as it
could present "some sticker shock", as K-12 education funding
needs would double over the next eight years. NEA/Alaska's FY 07
$145 million calculation would include $39.7 million for
PERS/TRS expenses and a three percent inflation factor equating
to $25 million. A portion of the eight-year adequacy plan cost
would be used to recover approximately $80 million of the $641
million gap in education funding resulting from the education
funding levels between 1983 and 2002.
Mr. Alcantra stated that once inflation and retirement expenses
are deducted from the total $90 million provided by this
legislation, only approximately $20 million would be provided to
classrooms. The BSA amount proposed by NEA/Alaska would provide
approximately $80 million to classrooms.
10:18:04 AM
Senator Stedman asked whether a K-12 calculation based on the
maximum actuarial rate had been conducted, as he was curious as
to how much funding would have been required "today to
neutralize the growth of the liability". The liability increased
$1.2 billion this past fiscal year.
10:18:40 AM
Mr. Alcantra noted his recent attendance at the Alaska
Retirement Management Board (ARM Board) meeting. It was
announced during that meeting that $110 million would be
required for PERS and $98 million would be required for TRS this
year. One of the ARM Board recommendations was to "infuse $208
million" this year to address that need.
10:19:12 AM
Senator Stedman understood therefore that in order to maintain
the status quo and "to neutralize the liability", an additional
$100 million beyond the $90 million K-12 funding proposed in
this legislation would be required. "Part of the funding is paid
for by the local communities, and wouldn't necessarily be picked
up by the State."
10:19:59 AM
Mr. Alcantra affirmed the total PERS/TRS liability would be
approximately $180 to $200 million. An addition of $90 million
would only provide for the anticipated TRS expense. Of the
11,400 active public school employees represented by NEA/Alaska,
3,200 are support staff in PERS' positions. Thus, there would be
both PERS and TRS expenses to address.
10:20:34 AM
Senator Stedman concluded therefore, that in order to drive
money into the classroom, additional funding beyond the
additional $100 million required to halt the K-12 retirement
system liability from growing, would be required.
Senator Stedman hoped the Association of Alaska School Boards
was "paying attention" to this situation. There is a "huge
capital draw coming at us and we need help to fix it". He echoed
Co-Chair Green's earlier warning to school districts: they
should not "rely on the State for 100 percent bailout…"
10:21:31 AM
Senator Bunde noted another analyst has also indicated there
would be an additional $100 million cost differential expense.
Therefore $400 million would be required to "truly" provide
adequate funding for K-12 education in FY 07. This could be
accomplished provided other State agencies' funding was reduced.
Referencing Mr. Alcantra's remark about the 16 percent increase
in the Governor's FY 07 budget over that of FY 06, Senator Bunde
pointed out that were the Governor's budget funded in its
entirety, "the State would be $50 million in debt this year" and
half a billion dollars next year.
Senator Bunde identified "the one constant" communiqué he
receives from constituents as "there is too much State
spending". Constituents urge saving a portion of the additional
oil revenue the State has received this year as the result of
record high oil prices rather than spending it and subjecting
the State to further budget deficits in the future. To that
point, he is "still seeking an adequate definition of adequate
funding" for the level required for "adequate funding" continues
to escalate.
Senator Hoffman noted there are good things on the horizon;
specifically the development of legislation that would revise
the State's Petroleum Profit Tax (PPT) formula. The proposed PPT
could generate an additional $900 million to $2 billion. An
additional $300 million "in real dollars" could be realized were
the PPT's effective date made retroactive to March 30, 2006.
There are manners "in the near future" through which to address
some of the State's short and long term needs.
10:24:52 AM
MARY FRANCIS, Executive Director, Alaska Association of School
Administrators, appreciated the increase in the BSA; however,
reported that when preliminary budgets were developed at the
proposed BSA, most districts found it insufficient to continue
the positive forward momentum that funding levels in recent
years have provided. Therefore, while the proposed BSA is
appreciated, a higher level would be desired.
Senator Bunde pointed out there being 21 or 22 single site
school districts. Consolidating some of those districts would
allow a reduction in the number of district superintendents and
other expenses. The salary paid to support a superintendent
could be used to hire two teachers.
Senator Bunde asked Ms. Francis whether the Association might
support consolidating single site school districts.
10:26:52 AM
Ms. Francis shared that the Association has, in the past, been
opposed to school district consolidation; however, the
Association has not addressed the issue this year. Nonetheless,
the Association is supportive of consolidating administrative
services, professional staff, and sharing professional
development programs. Such action has occurred in recent years.
She noted the Association's support of SB 235-SCHOOL PERFORMANCE
BONUSES, "as long as the money provided" for that program is
separate from the BSA funding.
Senator Bunde appreciated that support.
10:27:59 AM
ANDREA STORY, Parent and Member, Juneau School Board, reminded
the Committee that the Juneau School Board (JSB) is on record in
support of increasing the BSA to $5,552, as the $5,352 amount
proposed would result in a two million dollar reduction to the
District. Increasing the BSA to $5,552 would half that reduction
to one million dollars.
Ms. Story noted that, as a parent and an advocate for public
school students, she has witnessed "the impact" State funding
has on schools. School Boards must allocate their funding based
on needs and community input. The allocation of funds "is often
a struggle because costs have increased more than the revenues
that have come in". An additional minimum of $43 million would
assist in alleviating school district budgetary concerns. She is
looking to the Legislature to wisely determine how the
additional revenue the State has received as a result of recent
high oil prices could assist school funding. She urged the
Committee to increase school funding.
10:31:16 AM
Amendment 1: This amendment changes the base student allocation
from $5,352 to $5,380 in Section 1, page 1 line 6 of the bill.
Senator Hoffman moved for adoption of the amendment.
Co-Chair Green objected.
Senator Hoffman characterized this six million dollar increase
to the total BSA as "a modest increase" in comparison to the
levels suggested by NEA/Alaska, the Juneau School District, and
Alaska Kids Count. This minimal amount would address some of the
concerns voiced by those entities and others.
10:32:29 AM
Co-Chair Wilken spoke against the amendment, as he considered
the $5,352 BSA amount proposed by the Governor and presented in
this bill "generous". The BSA total amount of $90 million is
appropriate. Referring to a similar increase presented in the
House of Representatives the previous day, he pondered as to how
the decision to offer this six million dollar increase was
derived. In other words, the decision to increase the BSA should
be based "on knowledge and a decision that we could defend".
Absent that, he could not support this amendment.
Senator Stedman also spoke against the amendment. While he
"appreciated the desire" to provide more funding for classrooms,
the issue should be mindful of the large amount of funding that
"would be required to bring the contribution rate up to the
actuarial calculated rate to stop the liability growth". The $90
million amount proposed in this legislation would address
approximately half of the total dollars required for public
education. "Going forward, capping the growth of that liability
will allow us to drive more money into the classrooms."
10:34:32 AM
Senator Bunde noted that, as part of the budgetary process, the
Committee's subcommittees addressed each State department's
needs and required each department "to justify their spending"
and undergo reductions. The general fund budget recently adopted
would be a 13 percent growth over last year. "That's as large as
we can go." Therefore, before he could support providing
additional money to education, he would require knowing which
agency's funding would be reduced. Were increasing education
desired, he could suggest a few programs whose funding reduction
he could support. Therefore, this would be likened to robbing
Peter to pay Paul.
10:36:00 AM
Senator Olson spoke in support of the Amendment. Noting the
comments of various testifiers who have urged for increased
education funding, proclaimed "that we are in a new era today".
This is "a digital age" and various "outsourcing" endeavors have
occurred "due to school's inability to keep up with" the times.
The monetary benefits the State would receive by the enactment
of the proposed Petroleum Profits Tax (PPT) legislation would
far surpass the six million dollars in additional education
funding this amendment would provide.
10:38:00 AM
Senator Bunde cautioned against funding anything with
anticipated PPT revenue. He likened it to "buying a lottery
ticket and then going out to buy a new car based on your
potential earnings."
Senator Hoffman stated he would "buy a couple of those lottery
tickets." Continuing, he noted the Committee, including himself,
supported increasing the University of Alaska's funding by 14
percent this year. That legislation is scheduled to be heard by
the full Senate today, and he would buy a lottery ticket on that
legislation being approved. To that point, he questioned as to
why K-12 funding was not increased the same percent as that
provided to the University. After all, not everyone continues
their higher education at the University, but most K-12 school
age children in the State attend a public school. Even with the
adoption of this amendment, the percentage increase for K-12
"does not even come close" to that provided to the University.
K-12 funding should receive "at least" the same percentage
increase as the University. The arguments presented against
increased K-12 funding "do not hold water".
A roll call was taken on the motion.
IN FAVOR: Senator Hoffman and Senator Olson
OPPOSED: Senator Bunde, Senator Dyson, Senator Stedman, Co-Chair
Wilken and Co-Chair Green.
The motion FAILED (2-5)
Amendment #1 FAILED to be adopted.
10:41:17 AM
Co-Chair Wilken, the bill's sponsor, observed that at times, the
perception is that "the glass is half empty". However, he argued
the "glass is really half full". The Legislature has
accomplished many things during the past decade. In 1997, K-12
education received 29.9 percent of the State's general fund
budget; whereas the operating budget today allocates 38.8
percent to education. We should be "proud" of this fact. This
equates to a 30 percent increase in education's "piece of the
pie". This is the result of Legislators understanding the
importance of K-12 and citizens advocating for it. The pie chart
depicts that support. He suspected that Legislative support for
K-12 would continue.
The bill was HELD in Committee.
Co-Chair Green overviewed the Committee's afternoon meeting
schedule.
AT EASE 10:43:51 AM / 10:43:53 AM
ADJOURNMENT
Co-Chair Lyda Green adjourned the meeting at 10:44:02 AM.
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