Legislature(2001 - 2002)
03/20/2002 01:37 PM Senate HES
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ALASKA STATE LEGISLATURE
SENATE HEALTH, EDUCATION & SOCIAL SERVICES COMMITTEE
March 20, 2002
1:37 p.m.
MEMBERS PRESENT
Senator Lyda Green, Chair
Senator Loren Leman, Vice Chair
Senator Gary Wilken
Senator Jerry Ward
Senator Bettye Davis
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Gene Therriault
COMMITTEE CALENDAR
Minimum Expenditure for Instruction Requirement
WITNESS REGISTER
Mr. Eddy Jeans
Manager
School Finance and Facilities Section
School Support Services
Department of Education and Early Development
th
801 W. 10 St. Ste. 200
Juneau, AK 99801-1894
ACTION NARRATIVE
TAPE 02-22, SIDE A
CHAIRWOMAN LYDA GREEN called the Senate Health, Education &
Social Services Committee meeting to order at 1:37 p.m. Present
were Senators Leman, Therriault, Wilken and Chairwoman Green.
Senator Davis and Senator Ward arrived later.
She announced the committee would discuss the minimum expenditure
for instruction requirement. She said each school district was
required to spend a certain percentage of its budget on
instruction under SB 36 [legislation enacted during a previous
session]. She said the committee wanted to make sure that the
intent of the legislation was being followed. She said Mr. Eddy
Jeans was speaking on behalf of the Department of Education and
Early Development (DEED). She asked if Senator Therriault had
any comments.
SENATOR THERRIAULT said the legislature was better able to
evaluate how well the school districts were able to meet the 70%
requirement because they had all come into compliance with a
uniform chart of accounting. He said AS 14.17.520 required that
the Division of Legislative Budget & Audit (LB&A) received
information and evaluate requests for waivers to make
recommendations to the State Board of Education & Early
Development (SBEED). He said school districts requesting a
waiver were supposed to send a copy to LB&A as well as DEED but
LB&A wasn't receiving waiver requests from all of the districts
even though DEED had informed them of the requirement. He said
he received a report from DEED one day before the SBEED meeting
to consider the waiver requests. He said there was no time for
LB&A to offer any kind of opinion.
CHAIRWOMAN GREEN said in addition to the discussion on the
history of the minimum expenditure for instruction requirement,
the committee would discuss a system by which LB&A could receive
information concurrent with DEED in order to allow them to make
recommendations.
SENATOR THERRIAULT said DEED could inform LB&A of the number of
districts they should be expecting waiver requests from. He said
the districts could be checked off as the requests were received
by LB&A and then LB&A could get the missing information from
DEED. He said LB&A needed a better way to get the information if
they were supposed to have any meaningful input into the process.
CHAIRWOMAN GREEN said the letter sent out with the instructions
of the waiver process to the school districts specified that a
copy of the waiver request must be sent to LB&A. She said the
committee had to figure out a way for LB&A and DEED to confirm
back and forth during the waiver process. She said that would
take care of Senator Therriault's primary concern that LB&A would
have all the information necessary to make a recommendation to
the SBEED.
SENATOR THERRIAULT said there was also the consideration that
perhaps the committee should be making the recommendations rather
than LB&A.
CHAIRWOMAN GREEN asked Mr. Eddy Jeans to give his presentation.
1:43 p.m.
MR. EDDY JEANS, Manager, School Finance and Facilities Section,
School Support Services, DEED, said the minimum expenditure for
instruction requirement in AS 14.17.520 was passed in 1998 within
SB 36 and implemented in FY 99. He said the requirement was
phased in so that 60% was required in FY 99, 65% was required in
FY 00 and 70% was finally required in FY 01.
He said DEED worked with key legislators in implementing the
requirement to ensure that the appropriate components of the
operating fund were being measured. He said it was a work in
progress and there had been amendments to what was being measured
each year. He said the financial information from FY 02 would
really be the baseline. He said instruction, special education,
special education support services, support services for students
and support services were included in FY 99. He said that was
expanded to include school administration, which was school
principals and support staff, in FY 01. He said that category
was split into two pieces so that school administration, which
includes the principal, assistant principal and certified staff,
was separate from school administration support services, which
includes the classified staff. He said the classified staff no
longer counted in the minimum expenditure.
SENATOR LEMAN asked if DEED differentiated between a principal
who taught and a principal who did not.
MR. JEANS said no. He said the principal was considered the
instructional leader of the school.
He said the second page of the handout in the committee packets
showed the actual percentages of school districts' budgets spent
on instruction each year. He said DEED was required to calculate
the percentages on the district budgets at the beginning of the
year. He said if they didn't meet the minimum expenditure for
instruction requirement, the budget was rejected and the district
could either request a waiver or modify their budget. DEED was
also required to calculate the instructional expenditures on the
audited financial statements of the districts. He said a waiver
granted at the beginning of the year was good for the entire
year. He explained that the chart showed that in the first year
13 school districts had instructional expenditures below 60%, 14
districts spent between 60% and 65%, 18 spent between 65% and
70%, and 8 school districts spent more than 70%. He said in FY
02, only two school districts spent less than 60%. He said that
was probably due to economies of scale because some very small
school districts had high fixed costs.
SENATOR LEMAN said Tanana School District spent less than 50% on
instruction. He said he had been to Pelican and understood why
that district had such a low instructional expenditure. He said
Tanana School District was larger. He asked if there was
anything systemic that contributed to Tanana's percentage being
so low.
MR. JEANS said he was not prepared to speak to individual
districts but he would research the issue and get back to the
committee.
CHAIRWOMAN GREEN asked if the difference between 2001 and 2002
was because of the changes in what was measured.
1:48 p.m.
MR. JEANS said yes. He said school administration was split into
the two components between 2001 and 2002.
He addressed the handout again. He said the trends showed that
the districts were headed in the direction the legislature had
intended. He said 24 school districts met the 70% requirement.
He said 21 districts spent between 65% and 70%. He thought that
was pretty good.
MR. JEANS stated that DEED was required to provide the
legislature with an annual report by August 15 of each year. He
said the committee should have copies of the SBEED packet for the
waiver requests in the annual report.
He said the third page of the handout outlined some of the
reasons that districts could not meet the 70% requirement. SBEED
was concerned about the reasons some school districts weren't
meeting the 70% requirements so DEED put together the matrix to
identify key problem areas. He said there were a number of
school districts that had very small student populations and
served a large number of communities. Those districts had fixed
costs that couldn't be spread across the student population.
DEED directed school districts to submit waiver requests to LB&A
but had not been following up on the directive. The committee
had a copy of a letter from Representative Gail Phillips to
Commissioner Rick Cross dated March 2000. He said the letter
implied that LB&A would be using the annual report. That didn't
allow LB&A an opportunity to comment to SBEED but that was the
process Representative Phillips said she was going to use. DEED
would be happy to amend their process to ensure that LB&A got the
requests in a timely manner.
He said school districts had 20 days to request a waiver or amend
their budget after DEED rejected their budget. DEED had two
internal auditors that worked with those districts in refining
the waiver requests because the issues weren't always clearly
outlined. That helped DEED make recommendations to SBEED. He
said the budgets were carefully scrutinized before they were
rejected or accepted. DEED kept a file with the budget, DEED's
letters to the district, follow up documentation and contact
sheets for each district. DEED did not rubber stamp the waiver
requests. He said the districts had to "go through the drill" in
order to ensure that DEED had adequate information to make an
appropriate recommendation to SBEED.
CHAIRWOMAN GREEN asked what would be the basis for denying a
waiver.
MR. JEANS said if a school district's waiver request was denied,
the penalty would be a reduction in state funding by the same
percentage that they missed the requirement by. He said that
would put the district in a downward trend and they would not be
able to meet the requirement the following year. He said DEED
focused on reviewing and scrutinizing the budgets at the
beginning of the school year so that they didn't have to
recommend a punitive assessment on the district after the audit
was performed. He said DEED didn't want a district saying they
were going to meet the 70% requirement and then have the audit
show that only 65% had been spent on instruction and cause 5% of
their state funding to be withheld. He said that wouldn't help
the students.
He said there were four waiver requests in 2000 based on audits.
DEED recommended that two of those requests be granted and two be
denied. He said the superintendents of the two districts DEED
recommended denying made presentations to SBEED in person. Both
were new superintendents that had nothing to do with the original
budget submission or the expenditures of the district in the
prior year. He thought SBEED granted those districts waivers
based on the testimony of the superintendents and their
commitment to submit documents amending their budget that
reflected how they intended to meet the 70% requirement.
He said there were no waiver requests based on audits in 2001.
CHAIRWOMAN GREEN asked if there were two waivers.
MR. JEANS said there were two reviews. He said the waiver
request graph in the handout showed the instructional expenditure
percentage based on the initial budgets and the audits.
SENATOR THERRIAULT said LB&A was supposed to be involved in the
process when DEED was considering the waiver requests based on
the initial budgets. He said LB&A was supposed to render some
kind of opinion but didn't get the information in time. He said
the statute could be modified to require DEED to give LB&A a list
of the districts that had their budgets rejected so that LB&A
could check off the districts as they received the waiver
requests. He said if LB&A didn't get information from one of the
districts, a copy of their waiver request could be obtained from
DEED.
He wasn't sure that LB&A would really have anything meaningful to
input into the process. He said the committee could decide that
it might be better for DEED to come to the legislature and have
the discussion and leave LB&A out of the process.
MR. JEANS said DEED would amend its procedure to provide LB&A
with copies of the waiver requests. He explained there was a lot
of work that occurred between the receipt of the initial waiver
request and the waiver recommendations made to SBEED. A lot of
interaction occurred between DEED staff and school districts to
make sure that DEED understood exactly what the waiver request
was saying. LB&A would not have the same opportunity. He said
he could direct his staff to send copies of waiver requests to
LB&A without a statutory amendment but a statutory amendment
would be needed if the committee wanted to take LB&A out of the
process.
He said LB&A could also continue down the path Representative
Phillips was following, which was to rely on the annual report
and then make a recommendation to SBEED of items that should be
looked at.
CHAIRWOMAN GREEN was not sure that would meet the intent of SB
36. She asked Senator Wilken if he remembered what the intent
was.
SENATOR WILKEN thought the most important thing had been to set
up a system by which the numbers could be accumulated. He
thought Senator Therriault was right in that the Senate and House
Health, Education and Social Services Committees ought to be
discussing the waiver requests rather than LB&A.
SENATOR THERRIAULT thought LB&A was chosen because the
legislature wanted some oversight of the waiver process. He said
the Health, Education and Social Services Committees could
probably provide better oversight because they had more power
while the legislature was in session. He said the committee
might want to consider removing LB&A from the process and
requiring DEED to come to the legislature each year to look at
the trends.
He said DEED could probably fix the problem of information
getting to LB&A in a timely manner without a statutory amendment.
2:06 p.m.
CHAIRWOMAN GREEN thought SB 36 intended the legislature to be
involved in the waiver process in the beginning rather than after
the fact.
SENATOR THERRIAULT said the oversight that year had involved him
sitting down with a one-inch stack of waiver requests and trying
to wade through the requests. He didn't know that his input had
been very meaningful. He also noted that he didn't have all of
the requests.
MR. JEANS said the waiver requests were probably incomplete as
well. DEED often got initial requests that didn't state the
reasons the district was requesting the waiver so it worked with
the districts to get a complete waiver request.
He said there were some other changes DEED would request if the
committee was going to amend the statute. He said the timing of
the waiver process was very difficult to work with. He said DEED
amended its regulations so that it issued an acceptance or
rejection letter to every school district in the state on
September 1. He said that was done to buy a little bit of time
because DEED was required to issue foundation payments by the
th
15 of each month and is supposed to withhold state aid if they
rejected the district's budget. The September 1 deadline allowed
districts an additional month to complete the waiver requests.
DEED was also able to convene a SBEED meeting. He said a special
telephonic meeting was held each year. If the board rejected a
school district's budget waiver request, DEED would have to send
another letter to the district and the 20-day clock would start
again. Another SBEED meeting would have to be convened to
reconsider the waiver. He said they had not had to go that far
yet but they might at some point in time.
CHAIRWOMAN GREEN asked if that had been a deterrent in turning
down a waiver.
MR. JEANS said it was not. DEED worked very hard to structure
the timing so that the waiver requests could be fully reviewed
before DEED made a recommendation to SBEED. He wanted to point
out that they did hold an extra SBEED meeting, which was not as
costly because it was held telephonically.
CHAIRWOMAN GREEN asked if he would move it earlier in the summer.
MR. JEANS didn't think that could be done. He said the budgets
weren't due to DEED until July 15. He said the penalties seemed
harsh. He said it was fortunate that they had not had to go
through the second round.
CHAIRWOMAN GREEN thought the intent was that the penalties be
harsh if the district refused to take DEED's suggestions and work
with DEED.
MR. JEANS said DEED reminded the districts of that quite often.
CHAIRWOMAN GREEN didn't think the penalties were meant to be
something that DEED didn't have to use. She asked if Mr. Jeans
felt there were some districts that were refusing to be a party
to the process.
MR. JEANS believed they had made a lot of progress in the
previous three years.
CHAIRWOMAN GREEN agreed. She didn't think that it was much of a
problem if a district could only spend 69% on instruction rather
than 70%. She was concerned about the districts that still
weren't able to spend more than 60% of their budgets on
instruction. She said there might be some anomaly that would
keep districts below 70%. She noted that a wide variety of
school districts were managing to spend 70% or more on
instruction.
MR. JEANS said some districts were never going to be able to meet
the 70% requirement. He said some districts might be very small
single-site districts or serving multiple communities. He said
those school districts serving a dense population in a few
locations were meeting the requirement and would continue to meet
the requirement.
2:13 p.m.
SENATOR WILKEN said there was a lot of acrimony while discussing
SB 36. He thought everyone was concerned that Senator Torgerson
had discovered that some school districts were spending more on
administration than on teaching. He thought that surprised
everyone. He said Commissioner Cross went to bat under tough
circumstances to encourage the 70% requirement for instructional
spending. He said the legislature set the minimum expenditure
for instruction at 70% as a goal. The legislature also put into
place a process to discuss the issue every year, accumulate data
and track the progress of school districts. He said the data
didn't mean much unless the chart of accounts was aligned. He
appreciated that DEED had separated out certified and classified
school administration. He said that year would be the year that
they set up the baseline information.
He asked if the uniform chart of accounts was being used by all
of the school districts.
MR. JEANS said DEED also expanded definitions to provide clarity
in the chart of accounts when the school administration was split
into two groups. He believed there was more uniformity in the
use of the chart of accounts.
SENATOR WILKEN asked if any districts were not using the chart of
accounts as intended.
MR. JEANS said all districts were using the uniform chart of
accounts as required.
SENATOR WILKEN said the 70% requirement considered state, local,
federal and other moneys but did not consider special revenues.
He said 2% to 49% of the school districts' budgets were from
special revenues. He asked why special revenues weren't
considered.
MR. JEANS said the statute specified that the 70% requirement
applied to school operating expenditures and not special revenue
funds.
SENATOR WILKEN asked why that was. He said special revenue funds
were part of the operation of the school districts. Some of the
schools that were struggling to meet the 70% requirement received
only 10% to 20% of their total budget in special revenues.
MR. JEANS said DEED did not collect budgets for special revenue
funds. He said DEED only collected budgets on the school
operating fund, which was tied to the foundation formula.
SENATOR WILKEN said the special revenues came from other sources
such as the federal government and went directly to the school
district while the operating funds came through the foundation
formula from the state.
MR. JEANS said that was correct for the most part.
CHAIRWOMAN GREEN thought some special money was designated for
Native children through the Elementary & Secondary Education Act.
She asked if that would be considered special revenue funds.
MR. JEANS said it would. He said school districts received money
through a number of different federal programs such as migrant
education, special education and vocational education. Those
were categorical funds that the school districts apply for or had
to meet certain eligibility requirements.
CHAIRWOMAN GREEN asked if those were considered special revenue
funds.
MR. JEANS said they were considered special revenue funds because
they had specific expenditure requirements.
CHAIRWOMAN GREEN asked if that was separate from the 20% in the
foundation formula for special education.
MR. JEANS said yes. He said the 20% for special education in the
foundation formula was discretionary money that went to the
school districts' operating funds. He said the districts could
allocate those moneys any way they chose.
He said the impact aid to districts was federal discretionary
money that went into the school operating fund and was measured
in the foundation formula.
SENATOR WILKEN was surprised at how much special revenue some
districts received. He said $1.9 million of Chugach School
District's $3.8 million total budget and $1.8 of Delta Greely
School District's $7.8 million total budget was special revenue.
He addressed the chart outlining the reasons why districts could
not meet the 70% requirement. He said 25 districts cited high
costs in maintenance and operations. Those 25 districts spent
between 17% and 22% of their budget on maintenance and
operations. He said it would be interesting to compare the
maintenance and operations budget percentage of districts that
could meet the 70% with those that couldn't meet the 70%.
Districts such as Tanana School District were going to
continually struggle. He said maybe a few years down the road,
the legislature might want to consider two categories of school
districts.
He read the following from AS 14.17.520(d), "The board may grant
the waiver if the board determines that the district's failure to
meet the expenditure requirements of this section was due to
circumstances beyond the control of the district." He asked if
there was a definition of what "beyond the control of the
district" meant.
MR. JEANS said no.
SENATOR WILKEN said the committee might consider determining some
categories to describe "beyond the control of the district." Two
years previously he asked the Commissioner about a situation in
which SBEED denied some waiver requests, the districts made their
pleas and SBEED reversed their decisions. He said the chair of
SBEED said that was because both districts expressed concern
about at-risk students in an at-risk community. He said that
entered a new facet into the discussion of what was "beyond the
control of the district." He said that may be something to
discuss when trying to define what was "beyond the control of the
district." He asked if a definition would help.
MR. JEANS said the legislature could provide SBEED with more
direction if it would like.
CHAIRWOMAN GREEN asked what Mr. Jeans would do to decrease the
number of waivers.
MR. JEANS said it needed to be recognized that 70% was a
reasonable requirement for some districts but not for all
districts. He said the size of the student population, the size
of the district and the number of communities served needed to be
taken into consideration because they added fixed costs across
the board. He said some school districts could meet the
requirement if they had more money and would hire more teachers
if they could. He said there wasn't an easy solution. More
school districts were putting an effort into spending their money
on instruction rather than administrative costs. That was one of
the primary concerns during the discussions on SB 36.
TAPE 02-22, SIDE B
CHAIRWOMAN GREEN asked if DEED looked at a budget without
considering the previous year's budget.
MR. JEANS said DEED did not look at a budget in isolation in a
given year. DEED looked at trends and what the districts had
done in the past and where they were going. He said if they saw
a trend in the wrong direction, they would follow up with phone
calls and letters. One anomaly that could occur was new teachers
coming in at lower pay levels and replacing tenured teachers. He
said DEED looked at multiple years when they considered budgets.
CHAIRWOMAN GREEN said the committee would look at the issues.
She said there probably wasn't time to work out changes that
year. She would be happy to discuss changes in the process and
the proper roles for LB&A and the Health, Education and Social
Services Committees in the waiver process along with any other
changes.
MR. JEANS said DEED would automatically forward the waiver
requests to LB&A.
CHAIRWOMAN GREEN asked if there were any further questions or
comments for Mr. Jeans. There were none.
ADJOURNMENT
There being no further business before the committee, the Senate
Health, Education & Social Services Committee meeting was
adjourned at 2:28 p.m.
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