Legislature(1997 - 1998)

05/07/1997 09:09 AM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                          May 7, 1997                                          
                           9:09 a.m.                                           
  MEMBERS PRESENT                                                              
 Senator Gary Wilken, Chairman                                                 
 Senator Loren Leman, Vice Chairman                                            
 Senator Lyda Green                                                            
 Senator Jerry Ward                                                            
  MEMBERS ABSENT                                                               
 Senator Johnny Ellis                                                          
  COMMITTEE CALENDAR                                                           
 HOUSE JOINT RESOLUTION NO. 29                                                 
 Supporting an increase in federal funding for prostate cancer                 
  - MOVED HJR 29 OUT OF COMMITTEE                                              
 HOUSE CONCURRENT RESOLUTION NO. 18                                            
 Declaring 1997 to be observed as the 80th Anniversary of the                  
 University of Alaska Fairbanks and recognizing the vital role                 
 played by the University of Alaska Fairbanks.                                 
  - MOVED HCR 18 OUT OF COMMITTEE                                              
 HOUSE BILL NO. 158                                                            
 "An Act relating to attendance at a public school on a part-time              
  - MOVED HB 158 OUT OF COMMITTEE                                              
 HOUSE BILL NO. 256 am                                                         
 "An Act relating to calculation of the default rate for purposes of           
 the student loan program and to regulation of postsecondary                   
 educational institutions; and providing for an effective date."               
  - MOVED HB 256 am OUT OF COMMITTEE                                           
 SENATE BILL NO. 142                                                           
 "An Act relating to formation of and taxation in regional                     
 educational attendance areas; and providing for an effective date."           
  - MOVED SB 142 OUT OF COMMITTEE                                              
 SENATE BILL NO. 193                                                           
 "An Act relating to a limitation on administrative expenditures of            
 school districts; and providing for an effective date."                       
  - MOVED SB 193 OUT OF COMMITTEE                                              
 SENATE BILL NO. 182                                                           
 "An Act relating to the establishment and operation of charter                
  - MOVED SB 182 OUT OF COMMITTEE                                              
  PREVIOUS SENATE COMMITTEE ACTION                                             
 HJR 29 - No previous Senate action to record.                                 
 HCR 18 - No previous Senate action to record.                                 
 HB 158 - No previous Senate action to record.                                 
 HB 256 - No previous Senate action to record.                                 
 SB 142 - No previous Senate action to record.                                 
 SB 193 - No previous Senate action to record.                                 
 SB 182 - No previous Senate action to record.                                 
  WITNESS REGISTER                                                             
 Representative Elton                                                          
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of HJR 29.                               
 Representative Dyson                                                          
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of HB 158.                               
 Sharylee Zachary, Home Schooling Parent                                       
 PO Box 1531                                                                   
 Petersburg, Alaska 99833                                                      
  POSITION STATEMENT:   Supported HB 158.                                      
 Carl Rose, Executive Director                                                 
 Association of Alaska School Boards                                           
 36 W. 11th Street                                                             
 Juneau, Alaska 99801                                                          
  POSITION STATEMENT:   Discussed the issue of local control.                  
      Opposed SB 142.                                                          
 Larry Wiget, Director                                                         
 Government Relations                                                          
 Anchorage School District                                                     
 4600 DeBarr Road                                                              
 Anchorage, Alaska 99519                                                       
  POSITION STATEMENT:   Opposed HB 158.                                        
 Eddy Jeans, Manager                                                           
 School Finance Section                                                        
 Department of Education                                                       
 801 W 10th Street, Suite 200                                                  
 Juneau, Alaska 99801-1894                                                     
  POSITION STATEMENT:   Supported HB 158.                                      
      Discussed SB 142.                                                        
 Jan Levy, Assistant Attorney General                                          
 Human Services Section                                                        
 Department of Law                                                             
 PO Box 110300                                                                 
 Juneau, Alaska 99811-0300                                                     
  POSITION STATEMENT:   Discussed the legality of HB 158.                      
 Linda Sharp, Mother                                                           
 PO Box 190051                                                                 
 Anchorage, Alaska 99517                                                       
  POSITION STATEMENT:   Endorsed HB 158.                                       
 Representative Davis                                                          
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of HB 256.                               
 Deborah Craig, Director                                                       
 Institutional Relations                                                       
 Alaska Commission on Postsecondary Education                                  
 3030 Vintage Park Boulevard                                                   
 Juneau, Alaska 99801-7109                                                     
  POSITION STATEMENT:   Discussed the fee schedule.                            
 Senator Torgerson                                                             
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of SB 142.                               
 Pat Poland, Director                                                          
 Division of Municipal & Regional Assistance                                   
 Department of Community & Regional Affairs                                    
 333 W 4th, Suite 220                                                          
 Anchorage, Alaska 99501                                                       
  POSITION STATEMENT:   Discussed SB 142.                                      
 Glen Marunde                                                                  
 Box 192                                                                       
 Tok, Alaska 99780                                                             
  POSITION STATEMENT:   Requested that SB 142 be withdrawn.                    
 Jerry Jernigan                                                                
 Box 785                                                                       
 Tok, Alaska 99780                                                             
  POSITION STATEMENT:   Discussed concerns with SB 142.                        
 Paul Smith                                                                    
 Box 559                                                                       
 Tok, Alaska 99780                                                             
  POSITION STATEMENT:   Discussed the Tok situation.                           
 Patricia Hutchinson                                                           
 Box 233                                                                       
 Tok, Alaska 99780                                                             
  POSITION STATEMENT:   Opposed SB 142.                                        
 Roger Jacobson                                                                
 Box 813                                                                       
 Tok, Alaska 99780                                                             
  POSITION STATEMENT:   Opposed property taxes.                                
 Al Weinberg                                                                   
 Kashunamiut School District                                                   
 Single Site Schools Consortium                                                
 300 Hermit Street #12                                                         
 Juneau, Alaska 99801                                                          
  POSITION STATEMENT:   Discussed SB 142.                                      
 Senator Ward                                                                  
 State Capitol                                                                 
 Juneau, Alaska 99801-1182                                                     
  POSITION STATEMENT:   Prime Sponsor of SB 182.                               
  ACTION NARRATIVE                                                             
  TAPE 97-48, SIDE A                                                           
          HJR 29 FUNDING FOR PROSTATE CANCER RESEARCH                         
 Number 001                                                                    
  CHAIRMAN WILKEN  called the Senate Health, Education & Social                
 Services Committee (HES) to order at 9:09 a.m. and announced that             
  HJR 29  would be the first order of business before the committee.           
  REPRESENTATIVE ELTON , Prime Sponsor, explained that HJR 29 would            
 request that President Clinton increase funding for prostate cancer           
 research.  The resolution was suggested by a friend who has been              
 diagnosed with prostate cancer and is being treated.  Over 330,000            
 men are diagnosed each year with prostate cancer.  Currently, over            
 nine million American men suffer from prostate cancer and 48,000              
 die each year from prostate cancer.  Representative Elton discussed           
 the signature drive by the National Prostate Cancer Coalition which           
 hopes to present President Clinton with its signatures on Father's            
 Day this year.                                                                
  SENATOR GREEN  commented that the single focus of HJR 29 was                 
 troublesome because there are many diseases that could use help               
 with research funding.                                                        
  SENATOR WARD  moved to report HJR 29 out of committee with                   
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
  CHAIRMAN WILKEN  announced  HCR 18  as the next order of business            
 before the committee.  Chairman Wilken pointed out that HCR 18 is             
 sponsored by Representative Davies who is in House Finance and his            
 assistant had an emergency, therefore Chairman Wilken offered                 
 HCR 18 to HES.  HCR 18 simply recognizes the 80th anniversary of              
 the University of Alaska-Fairbanks and its significance to the                
 university system as well as the Interior of Alaska.                          
  SENATOR LEMAN  moved to report HCR 18 out of committee with                  
 individual recommendations.  Without objection, it was so ordered.            
        HB 158 RIGHT TO ATTEND SCHOOL ON PART-TIME BASIS                      
 Number 119                                                                    
  CHAIRMAN WILKEN  introduced  HB 158  as the next order of business           
 before the committee.                                                         
  REPRESENTATIVE D  YSON , Prime Sponsor of HB 158, commented that             
 Alaska is enlightened about alternative education which is due in             
 part to Alaska's widely scattered population.  Alaska has one of              
 the strongest correspondence school systems.  A couple of years               
 ago,  Alaska included a provision for part-time students in                   
 regulation.  Schools that accept part-time students are reimbursed.           
 For example, a school would be reimbursed 25 percent of a full-time           
 student for a student that takes one hour.  The reimbursement                 
 progresses so that when a student takes four hours, the school                
 receives full-time credit towards the foundation formula.                     
 Representative Dyson informed the committee that Sitka, Mat-Su, and           
 Fairbanks schools do a good job with alternative education.                   
 Anchorage has chosen as a matter of policy not to work with                   
 alternative education such as home school, correspondence, and                
 private school students.  Representative Dyson informed the                   
 committee that when the regulations were written the State Attorney           
 General anticipated that every school district would make some                
 provisions.  Therefore, the enabling regulations were made                    
 permissive not compulsory.  HB 158 would require that every school            
 district accept part-time students.  Representative Dyson stated              
 that the Alaska Constitution says that the Legislature is required            
 to provide educational opportunities for all qualified students.              
 HB 158 is an anti-discrimination bill.  The State Board of                    
 Education endorsed HB 158 unanimously.                                        
 Number 177                                                                    
  SENATOR LEMAN  said that this issue has been worked on for several           
 years.  Senator Leman noted that this issue was first brought to              
 his attention with the Blomfield case which eventually went to                
 court.  The court concluded that legislation was necessary on this            
 issue.  Senator Leman stated his support.                                     
  SHARYLEE ZACHARY , Petersburg Home Schooling Parent, informed the            
 committee that when she wanted to access the public school library            
 for age related materials for her home schooled children, she was             
 told that it was policy that home schoolers could not use the                 
 library.  Since that time, Ms. Zachary has discovered that there              
 are no written policies.  Part-time schooling is also unavailable             
 in Petersburg.  Ms. Zachary said that in a discussion with a                  
 teacher she found out that teachers had voted down allowing part-             
 time students.  The teachers opposed part-time schooling because              
 the teachers felt that students who are goofing off would be                  
 allowed to participate in extra curricular activities due to the              
 student's part-time schooling.  Ms. Zachary understood that                   
 concern, but noted that there can be safeguards to avoid such.  Ms.           
 Zachary informed the committee that there are families in                     
 Petersburg who have expressed interest in part-time schooling.  Ms.           
 Zachary supported HB 158 as it would enhance communication between            
 those in the public school and those home schooling.                          
 Number 248                                                                    
  CARL ROSE , Executive Director of the Association of Alaska School           
 Boards, informed the committee that due to his travel commitments             
 he did not have an opportunity to testify in House HESS.  The issue           
 is local control.  School boards are locally elected to oversee               
 public schools and the delivery of public education.  Mr. Rose said           
 that no one in Alaska understands what it takes to educate 48,000             
 students with a $360 million budget which is the situation in                 
 Anchorage.  This is not a statewide problem, this is a concern with           
 the decision of Anchorage.  Anchorage has determined that it wants            
 to preserve its right to local determination.  Mr. Rose requested             
 that the committee consider the elected school board members and              
 their role of being accountable for the Anchorage system.  Mr. Rose           
 reiterated that this is not a statewide issue, most school                    
 districts have decided to accommodate many of the aforementioned              
 needs.  Mr. Rose stated that local determination is important.  The           
 association is concerned with a statewide policy that would                   
 circumvent the local school board.  Mr. Rose requested that the               
 committee consider the authority of the school board and the plight           
 that the board faces.  There has been almost a flat level of                  
 funding for almost the last 10 years while the responsibility of              
 local school districts has been increased.                                    
  SENATOR LEMAN  said that he was a proponent of local control, but            
 the Anchorage School District receives hundreds of thousands of               
 dollars from state funding.  An overall policy that addresses                 
 issues that go beyond local control is necessary.  Senator Leman              
 stated that he had tried to work with the Anchorage School District           
 who is wrong.  Senator Leman believed that the Legislature had no             
 choice but to make the better policy.                                         
  CARL ROSE  emphasized that the local school board is held                    
 accountable to the local electorate and the ballot box can be used            
 to express concerns.  Mr. Rose reiterated his request that the                
 committee review the local school board's local determination and             
  CHAIRMAN WILKEN  noted that the committee packet included an opinion         
 from Mike Ford, Legislative Legal Services, regarding HB 158.  Mr.            
 Ford and Ms. Levy, Assistant Attorney General, are present to                 
 answer any questions.                                                         
 Number 314                                                                    
  LARRY WIGET , Director of Government Relations for the Anchorage             
 School District, opposed HB 158.  Mr. Wiget said that the district            
 views this as a local control issue as expressed by Mr. Rose.                 
 There will be testimony that will state that HB 158 does not have             
 any constitutional problems.  Mr. Wiget informed the committee that           
 the district's attorney had been asked if HB 158 does have an issue           
 of constitutionality.  That attorney indicated that the Sheldon               
 Jackson case and a case in Montana would lead the district to                 
 believe that there is an issue of constitutionality of providing a            
 direct benefit to private educational institutions.  Mr. Wiget                
 believed that there would be court challenges on this issue, but              
 the Anchorage School District will not lead such a charge.  Mr.               
 Wiget pointed out that if a private school educated student comes             
 to the public school to take courses such as computers, chemistry,            
 and physics then the private school does not have to offer those              
 courses.  Therefore, that provides a direct benefit to a private              
 school educated student.                                                      
 Mr. Wiget informed the committee that he viewed this issue                    
 administratively by trying to ensure that the public school                   
 students are not discriminated against in the process of trying to            
 provide an education to part-time students.  The Anchorage School             
 District is the largest school district in the state.  Currently,             
 there are 2,000 private school and home school students in the                
 Anchorage area.  Mr. Wiget recognized the burden of those students            
 trying to take courses within the district and the kind of courses            
 those students want to take, often the more expensive courses.                
 Allowing students to pick and choose from the public school                   
 curriculum could ultimately weaken the public school system.  In              
 conclusion, Mr. Wiget reiterated that the Anchorage School District           
 opposes HB 158.  Currently, the law does allow for a school                   
 district to choose whether to allow students to enroll on a part-             
 time basis.  The Anchorage School District chooses not to allow               
 part-time students at this time.  Mr. Wiget noted that even the               
 current law has the possibility of being challenged                           
  EDDY JEANS , Manager of School Finance in DOE, clarified that                
 current regulations allow part-time attendance.  School districts             
 must develop a policy allowing students to attend on a part-time              
 basis.  Districts can be discriminatory in some nature, for                   
 instance, a part-time student would not be allowed to take a class            
 that would replace a full-time student; full-time students have               
 preference for classes.  The State Board of Education does support            
 HB 158.                                                                       
 Number 376                                                                    
  JAN LEVY , Assistant Attorney General for the Department of Law,             
 informed the committee that Representative Dyson had requested that           
 she testify whether the Department of Law saw any legal problems or           
 issues with  HB 158.  This issue was reviewed closely a few years             
 ago when the State Board of Education contemplated adopting part-             
 time regulations.  At that time, the department determined that               
 nothing in statute or the constitution required a part-time policy            
 to be established nor was there anything that prohibited such.  Ms.           
 Levy said that analysis would remain the same for HB 158.  Ms. Levy           
 was aware of the suggestion that the bill may violate the                     
 constitution due to the prohibition of any payment of public money            
 for direct benefit of a private school.  The department was told              
 that there would be a challenge upon the adoption of the                      
 regulations, but no such challenge has occurred.  Ms. Levy stated             
 that the department believes that such a challenge could be                   
 defeated and that HB 158 is constitutionally sound.                           
  LINDA SHARP , a mother of two children in public school, endorsed            
 HB 158.  Due to the failure of the public school system, many have            
 turned to home schooling and private schooling.  Ms. Sharp                    
 indicated the need to have the best choices for all families in               
 Anchorage in order that the most resourceful families choose the              
 Anchorage School District first.  This is a step in the right                 
  SENATOR WARD  moved to report HB 158 out of committee with                   
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
        HB 256 POSTSECONDARY SCHOOLS: REGULATION & LOANS                      
 Number 406                                                                    
  CHAIRMAN WILKEN  introduced  HB 256 am  as the next order of business        
  REPRESENTATIVE DAVIS , Prime Sponsor, said that HB 256 should look           
 familiar in that it identifies a fee that does not cover the cost             
 of the service provided.  Currently, the Postsecondary Education              
 Commission authorizes the postsecondary education institution in              
 Alaska to operate in the state.  Postsecondary Education currently            
 has a flat $100 fee to authorize the institutions to operate which            
 generates about $2,000 per year.  HB 256 would authorize the                  
 commission to establish fees that will come closer to meeting the             
 $100,000 annual expense to operate the program.  HB 256 authorizes            
 the adoption of regulations in statute that will adjust the annual            
 fees for authorization of postsecondary institutions.                         
 Representative Davis acknowledged that there may be some concern              
 regarding the regulations and Deborah Craig is present to speak to            
 that.  HB 256 does not specify the amount of fee to be charged.               
 Representative Davis noted that there was an amendment on the House           
 floor which addressed a clarification in Section 1 resulting from             
 legislation passed last year relating to postsecondary education              
 and the default rate on student loans.  The department did not                
  DEBORAH CRAIG , Director of Institutional Relations for the                  
 Commission on Postsecondary Education, informed the committee that            
 she had been an administrator of a postsecondary education                    
 institution for the past seven years.  Her current position as                
 director is new to her.  Ms. Craig emphasized that she took the               
 task of establishing a fair fee schedule very seriously due to her            
 knowledge of what that could do to a small school.  The school Ms.            
 Craig administered was very small and primarily funded by grants.             
 Ms. Craig noted that the packet should include a sample fee                   
 schedule.  After polling 25 states regarding each state's fee                 
 structure, Ms. Craig reviewed what other states were doing.  Most             
 states established a percentage of the tuition revenues that were             
 generated and then charged that percentage.  Sometimes a maximum              
 and a minimum were established.  This is what Ms. Craig is                    
 proposing.  Ms. Craig said that the proposal would be established             
 in regulation and school owners and administrators would be invited           
 to meet and provide input on the proposal.  This process would take           
 a number of months before implementation would occur.                         
 Ms. Craig emphasized that the fee structure would establish                   
 minimums and maximums in order to avoid discouraging schools from             
 doing business.  If the fee schedule was set at three percent of              
 the tuition revenue, that could result in a large fee for larger              
 schools; a fee similar to accrediting fees on a regional and                  
 national basis.  A maximum fee of $2,500 would be established.  If            
 a school has a tuition revenue of $100,000 a year, which over 60              
 percent of Alaska's schools do, the fee would be $3,000 based on 3%           
 of revenue; but the fee would be capped to $2,500.  HB 256 would              
 have a small impact on the smaller schools and a positive impact on           
 the larger schools.  HB 256 will not make the commission totally              
 self-supporting; that would require fees so high that it would                
 prohibit schools from doing business in Alaska.  With regards to              
 the concern that HB 256 would impact small schools, Ms. Craig                 
 pointed out the reality that requires the commission to tighten its           
 budget and generate fees for services.  This fee structure is                 
 intended to move agency towards self-sufficiency while not                    
 discouraging schools from doing business in Alaska.                           
  SENATOR GREEN  asked if this fee structure would encourage anyone to         
 alter the tuition revenue.   DEBORAH CRAIG  said that the fee                 
 structure might encourage some to manipulate the reporting of the             
 fee revenues.  However, Ms. Craig informed the committee that the             
 commission has an audit review process that is separate from the              
 authorization process.  The audit review process audits schools for           
 Alaska student loan participation and therefore, have oversight               
 over the management of the Alaska student loan which is of primary            
 concern.  Ms. Craig explained that the current fee of $100 is set             
 in statute.  HB 158 would establish those fees in regulation.  The            
 schedule in the committee packet was a proposed fee schedule based            
 on research from other states.                                                
  CHAIRMAN WILKEN  inquired as to the wishes of the committee.                 
  SENATOR GREEN  moved to report HB 256 am out of committee with               
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
         SB 142 REGIONAL EDUCATIONAL ATTENDANCE AREAS                         
 Number 528                                                                    
  CHAIRMAN WILKEN  announced that  SB 142  was the next order of               
 business before the committee.                                                
  SENATOR TORGERSON , Prime Sponsor, read the following Sponsor                
 Statement into the record:                                                    
 This legislation will (1) reduce school administration expenses by            
 consolidation and (2) provide equity in local funding for Alaska's            
  Consolidation:   There are three types of school districts in              
 Alaska:  19 Regional Education Attendance Areas (REAAs) which serve           
 the unorganized borough, 18 first class city districts which are              
 located in the unorganized borough, and 15 borough and home rule              
 municipality districts.  This bill would consolidate the 18 REAAs             
 into 16 REAAs.  This bill does not affect the city districts or the           
 borough districts.                                                            
 The estimated savings through consolidation are shown on the                  
 attached spread sheet, entitled REAA Consolidation Savings, and               
 total some $1.6 million.  The consolidation will conform to the               
 Model Borough Boundaries, as established by the Model Borough                 
 Boundary Report(MBBR).                                                        
 The Division of Legislative Audit issued a report May 11, 1992,               
 titled Potential for Administrative Savings from School District              
 Consolidation.  The letter of transmittal from that report, dated             
 June 3, 1992, sets out one of the reasons for this bill.                      
  "We conservatively estimate that consolidation could reduce                  
  school administrative costs by $5.3 million.  Our estimates                  
  represent potential savings that may be generated from                       
  economies of scale realized from the consolidation of 39                     
  school districts and Rural Education Attendance Areas that                   
  currently operate in the State's unorganized borough."                       
 While this bill does not completely consolidate the districts (it             
 does not affect the City Districts), there are still savings to be            
 realized through the concept of consolidation of the REAAs.                   
 The concept of utilizing the MBBR for these boundaries is a                   
 familiar one, and was used by the previously mentioned Legislative            
 Audit Report, where they noted that REAAs were established in                 
 response to the Alaska Supreme Court Molly Hootch decision in 1975          
 and stated in a foot note that "It should be noted that the factors           
 specified in the formation of the REAAs (transportation,                      
 communications, language, culture, and socio-economic factors) are            
 similar to the factors identified in the constitution as serving a            
 basis for boroughs:  population, geography, economy, transportation           
 and other factors."                                                           
 The report also noted that REAAs were intended to be a transitional           
 form of government necessary to deliver education to the children             
 in the unorganized areas.  As a validation of the report's use of             
 the MBBR for the consolidation, the report stated that:                       
  "Since the transition of REAAs to boroughs is the next most                  
  logical phase in Alaska's regional local government structure,               
  we have based our school consolidation analysis on these                     
  projected boroughs."                                                         
  Equity:   Residents living in incorporated areas (borough and city         
 districts) are currently required to contribute for education, but            
 residents in the unincorporated areas (REAAs) are not.                        
  * 92% of Alaska's population live in boroughs and are required to            
   pay a local contribution--they receive 79% of State foundation              
  * 8% of the population pay no taxes and receive 21% of the state's           
   foundation formula.                                                         
 The Borough and City school districts are required to provide local           
 contributions for the operation of the schools and so have taxing             
 authority.  The REAAs do not provide local contributions nor do               
 they have taxing authority.  This bill will remedy that inequity,             
 by requiring a local contribution from the REAAs, through the                 
 authority of the Legislature via this bill.  The estimated local              
 contribution is shown on the attached spread sheets REAA Local                
 As required by the bill, the state assessor performs the functions            
 necessary to collect the taxes levied under this bill.  The                   
 Department of Community and Regional Affairs shall then develop a             
 proposed method of levying and collecting the taxes, and prepare              
 draft legislation for submittal to the Legislature by January 1,              
 Number 570                                                                    
 Senator Torgerson noted the following technical changes.  He                  
 directed the committee to page 2, line 4 where "January 1, 1999"              
 should read "January 1, 2000" and on line 19 "January 1, 2000"                
 should read "January 1, 1999".  Senator Torgerson said that the               
 approximate value in the REAAs has already been determined by the             
 state assessor who has a fiscal note for about $300,000.  That                
 $300,000 would allow the state assessor to do a more defendable               
 appraisal using each area as a block.  Then the Department of                 
 Community & Regional Affairs would hold meetings to determine which           
 taxing method would be appropriate.  Senator Torgerson emphasized             
 that the same taxing methods, laws, and regulations available to              
 the organized boroughs and cities would also be available to the              
 current REAAs.  Therefore, it would not necessarily be a property             
 tax.  There are four boroughs that do not have a property tax.                
 With regard to the comments that REAAs are poor and that Indian               
 country or Native allotments that are not taxable, Senator                    
 Torgerson said that he had some of those type areas in his                    
  TAPE 97-48, SIDE B                                                           
 If it is not taxable in one entity then it is not in rural Alaska.            
 Senator Torgerson reiterated the estimated $3.1 billion in                    
 untaxable entities, a large portion of which is oil and gas                   
  SENATOR WARD  moved to adopt Senator Torgerson's suggested technical         
  Page 2, line 4:                                                              
   Delete "January 1, 1999"                                                    
   Insert "January 1, 2000"                                                    
  Page 2, line 19                                                              
   Delete "January 1, 2000"                                                    
   Insert "January 1, 1999"                                                    
 Hearing no objection, the amendment was adopted.                              
  SENATOR LEMAN  asked if there was a map of the current REAAs and the         
 new REAAs as suggested.   SENATOR TORGERSON  said that he had a map           
 in his office.  The Model Borough Boundary suggested that some                
 areas be annexed into existing areas which the Local Boundary                 
 Commission will have to revisit.                                              
  CHAIRMAN WILKEN  asked if the intent is to provide a sort of menu            
 from which the unorganized areas can choose how the area would                
 contribute to the education needs.   SENATOR TORGERSON  noted that he         
 has a list from the state assessor which lists the taxing                     
 structures that are available.  SB 142 says that the provisions of            
 29.45.0101 through 29.45.500 apply to the regional areas as well as           
 to the organized areas.  Senator Torgerson said that he could                 
 provide the committee with a list of those items that can be taxed.           
 Number 560                                                                    
  PAT POLAND , Director of the Municipal & Regional Assistance                 
 Division, gathered from Senator Torgerson's comments that he                  
 intends property taxation to be one of the options.  Mr. Poland               
 stressed that a property tax in an unorganized borough is not                 
 administratively feasible.  The problems with administration would            
 cost more than the revenue generated from the property tax.  With             
 regard to the Model Borough Boundaries adopted in 1995, some                  
 circumstances have changed and it may be appropriate for SB 142 to            
 allow the Local Boundary Commission to revisit those boundaries.              
 Mr. Poland pointed out the following possible areas to be                     
 revisited:  Adak, Petersburg, and Wrangell.                                   
  GLEN MARUNDE , 35 year resident of Tok, pointed out that as stated           
 by Senator Torgerson the main purpose of SB 142 is to consolidate             
 school districts which is not mentioned in the title of the bill.             
 Mr. Marunde referred to Article X of the Alaska Constitution calls            
 for maximum local self government.  In the unorganized borough,               
 local self government is doing quite well.  Mr. Marunde discussed             
 the Legislature's attempts to tax the unorganized borough and end             
 its free ride.  Whether an unorganized borough is receiving a free            
 ride is of considerable debate.  Mr. Marunde informed the committee           
 that as of today, there are seven home rule cities, eight first               
 class cities, and 34 second class cities in the organized borough             
 of Alaska.  Mr. Marunde said that there are many more cities in the           
 unorganized borough.  In the unorganized borough, there are five              
 home rule cities, 13 first class cities, and 77 second class                  
 cities.  By far, cities in the unorganized borough out number those           
 in the organized borough.                                                     
 Mr. Marunde stated that there are a number of flaws in SB 142.  The           
 most serious flaw is located on page 2, lines 9-11 which says "The            
 state assessor shall assess the property, collect the taxes levied            
 under this section and deposit them in the general fund, and                  
 perform the mandatory duties of a municipality, a board of                    
 equalization, or a municipal official".  Mr. Marunde inquired as to           
 the mayors and other municipal officials of the 77 second class               
 cities and the 13 first class cities in the unorganized borough who           
 also have property taxing authority as well.  With the vote of the            
 people, second class cities can levy a five mill property tax.  How           
 will the state assessor do his duty?  SB 142 fails to deal with or            
 recognize the existing local governments with the taxing authority            
 in the unorganized borough.  Mr. Marunde requested that the                   
 committee withdraw SB 142.  Mr. Marunde asked Mr. Van Sant if he              
 agreed with his assessment of SB 142.  Mr. Marunde seemed to                  
 believe that the amount of money to set up the tax structure seemed           
 low.  How many people would be added to the assessor's office in              
 order to do the proper research and such?                                     
 Number 478                                                                    
  JERRY JERNIGAN , Tok resident, informed the committee that he had a          
 sincere interest in the welfare of Tok as well as Alaska.  Mr.                
 Jernigan asked if it was a sound policy to remove money from                  
 circulation in the local communities to place the money in the                
 general fund, thus removing the control of those funds from that              
 community?  Local taxes should stay under the control of the                  
 community and the local improvement projects.  Mr. Jernigan                   
 questioned the cost effectiveness of such a tax program.  Mr.                 
 Jernigan suggested that the constitution be followed; the state               
 shall fund education.  One alternative is the Educational Endowment           
 Program.  Mr. Jernigan said that Tok has a population that is not             
 large enough to support many activities such as those found in the            
 larger cities of Fairbanks and Anchorage.  Due to the large cost of           
 construction and operation of the businesses in Tok, the businesses           
 would receive the brunt of the tax program and in many cases from             
 the gross profit.  Mr. Jernigan pointed out that the tax would not            
 be passed on to the customers because those folks shop in Fairbanks           
 and Anchorage also.  The businesses in the area would be severely             
 handicapped by such a tax.                                                    
  CHAIRMAN WILKEN  inquired as to the taxes that are paid in Tok.              
  JERRY JERNIGAN  said that there are no taxes in Tok.  The residents          
 of Tok do a lot of shopping in other communities which supports               
 those other communities.                                                      
  CHAIRMAN WILKEN  asked Mr. Jernigan if he believed that the people           
 of Tok should participate in the education of their children                  
 financially.   JERRY JERNIGAN  believed that there is a reason for            
 the Alaska Constitution saying that Alaska should finance that                
 education.  Mr. Jernigan reiterated the need to review other                  
 alternatives such as the Education Endowment Fund.                            
  CHAIRMAN WILKEN  asked how Mr. Jernigan believed the residents of            
 Tok should participate in the education of their children.   JERRY            
 JERNIGAN  did not have an answer at the time.                                 
 Number 437                                                                    
  PAUL SMITH , Tok resident, informed the committee that he owns his           
 own business in Tok.  With regard to the notion that communities              
 such as Tok have a free ride, Mr. Smith said that he created jobs             
 in Tok, and throughout the state.  Mr. Smith noted that he has                
 developed two motels and the lumber for those came from Anchorage             
 and Fairbanks.  If the idea is to tax, Mr. Smith suggested that a             
 statewide sales tax be imposed or perhaps an Education Endowment.             
  CHAIRMAN WILKEN  informed Mr. Smith that he owned a business in              
 Fairbanks on which he paid over $10,000 per year on his property to           
 support education.  Chairman Wilken asked Mr. Smith how that                  
 compared with what he paid.   PAUL SMITH  said that as Chairman               
 Wilken knew, no taxes are paid in Tok.   CHAIRMAN WILKEN  recognized          
 that everyone pays business taxes.                                            
  PATRICIA HUTCHINSON , Tok resident, informed the committee that she          
 was an active volunteer of the Tok community.  Ms. Hutchinson                 
 opposed SB 142 and echoed previous comments regarding how well the            
 REAA is already working.  If a tax is necessary to pay for schools            
 it should be levied, but it should be a just tax.  SB 142 only                
 addresses taking money out of an already depressed area.  Ms.                 
 Hutchinson wondered if the committee knew what it is like to live             
 in the Bush.  Ms. Hutchinson restated the previous comments                   
 relating that Bush residents help support the economy of the larger           
 cities.  Ms. Hutchinson asked the committee to vote against SB 142            
 which will be a hardship on the school system in Tok and will not             
 bring in funding to the schools.  SB 142 will hurt a lot of poor              
 people, including senior citizens.                                            
  SENATOR TORGERSON  clarified that senior citizens are exempt from            
 taxation up to $150,000 on the senior citizen's property.  This is            
 a statewide exemption.                                                        
  CHAIRMAN WILKEN  asked Ms. Hutchinson if she owned a home in Tok.            
 Chairman Wilken informed everyone that he pays almost $2,000 in               
 taxes on his home in Fairbanks.   PATRICIA HUTCHINSON  said that she          
 had a log house and she does not pay taxes on it.  Ms. Hutchinson             
 stated that she would be willing to pay taxes on her house, however           
 there are many in Tok who are not able to pay taxes.   CHAIRMAN               
 WILKEN  asked if Ms. Hutchinson would accept a tax other than a               
 property tax.   PATRICIA HUTCHINSON  said that a property tax is not          
 really being described either.                                                
 Number 339                                                                    
  ROGER JACOBSON , Tok resident, understood the need to pay for                
 education, but Mr. Jacobson opposed property taxes.  Mr. Jacobson             
 suggested that the financing of education should be done through a            
 statewide sales tax which could apply to the sale of real estate as           
 well as portable items.  The statewide sales tax could result in a            
 lower property tax for those currently paying a property tax.  Mr.            
 Jacobson stated that those in the Bush have true ownership of the             
 land.  What kind of county is it when a person's home can be                  
 foreclosed upon through no fault of his/her own?  Mr. Jacobson did            
 not believe that Alaska had to follow the course of the Lower 48              
 with regard to property taxes.  Mr. Jacobson wanted all Alaskans to           
 experience true home ownership and if hard times come, the person's           
 home should not be taken by the city, the borough, the state or the           
 federal government for unpaid taxes.  This is in contrast to the              
 home owners choice to place a lien on his or her home and the bank            
 can foreclose.  The unorganized borough is one of the last places             
 where people truly own their homes.  Will the Last Frontier be                
  CHAIRMAN WILKEN  announced that time was running short and two bills         
 remained on the committee agenda.  Chairman Wilken announced that             
 the committee would not get to SB 182.                                        
  SENATOR WARD  interjected that SB 182 would be heard and moved out           
  CHAIRMAN WILKEN  restated that SB 182 would not be heard today, but          
 that he intended to meet tomorrow or Friday.                                  
  SENATOR WARD  interjected that SB 182 would be reported out of               
 committee today.                                                              
  CHAIRMAN WILKEN  announced that the testimony on SB 142 would                
  CARL ROSE , Executive Director of the Alaska Association of School           
 Boards, opposed SB 142.  Mr. Rose disagreed with some of the cost             
 savings projected by the 1992 study.  With the issue of taxation,             
 there has been no mention of PL874 money and how that is                      
 redistributed through the foundation to provide statewide                     
 equalization.  For quite some time that impact aid was viewed "in             
 lieu of local taxation."  Mr. Rose was concerned with the notion              
 that the issue of taxation is not as of much concern as the                   
 consolidation of local autonomy.  Mr. Rose directed the committee             
 to Section 2, line 4 of SB 142 which is of concern.  The                      
 identification of the property, the survey and title, the                     
 assessment and value, and the collection of the tax are of concern.           
 That is an expensive endeavor.  Mr. Rose posed the following                  
 option.  The state assessor could review the schedules that involve           
 averaging.  The assessor can take the communities that have tax               
 value and assess that tax value which is then divided by the                  
 population which results in an average of per capita wealth.  Mr.             
 Rose said that he would like to work on the issue of taxation, but            
 Mr. Rose believed that he was always reacting to a proposal.                  
 With regard to the issue of the model boundaries and the first                
 class cities, Mr. Rose informed the committee that the City of                
 Skagway contributes about 52 percent to the local contribution for            
 schools.  What happens to that first class municipality under the             
 new borough?  Many other areas experience the same.  Mr. Rose said            
 that he was not opposed to paying his fair share, but how will the            
 first and second class municipalities be addressed.  If there is an           
 equitable way to extract taxes for the purpose of paying for                  
 education, that should be reviewed.  One option is the Educational            
 Mr. Rose was concerned with the purpose of consolidation.  Mr. Rose           
 did not see the reformation of the REAAs saving the cost as                   
 projected.  The issue is of consolidation and local autonomy                  
 collapsing.  Mr. Rose stated that in most of the school districts             
 with local control, the school board is the locally elected                   
 officials who represent the community.  To consolidate will take              
 the decision-making elsewhere; the local schools will face                    
 government off-site.  In closing, Mr. Rose requested that the                 
 association be allowed to work on this bill because not much                  
 progress has been made due to the lack of opportunity.                        
 Number 192                                                                    
  SENATOR TORGERSON  appreciated Mr. Rose's comments.  With regard to          
 the lack of opportunity to work on SB 142, Senator Torgerson noted            
 that he had similar legislation last year when the comments about             
 the lack of opportunity of involvement was mentioned as well.  The            
 Association of Alaska School Boards has had ample time to work on             
 this issue and this is merely an excuse.  Similar legislation was             
 introduced as a mandatory borough bill before Senator Torgerson was           
 a member of the Legislature and the same excuse was used then.                
 With regard to the PL874 money, that money was considered to be               
 local contribution; however the decrease of about $10 million in              
 PL874 has not been discussed.  Senator Torgerson pointed out that             
 his district does not even receive PL874 funds any longer.                    
 Senator Torgerson said that he had a problem with the 1992 study as           
 well.  The study projected $5.2 million in savings while Senator              
 Torgerson projects a savings of $17.1 million.  Currently, four               
 boroughs use this method of taxation of assessing and averaging a             
 block and it has held up in court.  The Northwest Arctic Borough,             
 Denali Borough and the Lake & Peninsula utilize this method; this             
 is not a new concept.                                                         
  CARL ROSE  pointed out that the boroughs Senator Torgerson mentioned         
 have some property or resource value.  Many of the REAAs that are             
 to be consolidated do not have that luxury.  Mr. Rose reiterated              
 that he would like to work on SB 142, but he always seems to be               
 Number 150                                                                    
  AL WEINBERG , representing Kashunamiut School District and the               
 Single Site School District Consortium, expressed concern with the            
 elimination of a few of the school districts.  SB 142 undermines              
 local control.  With respect to the LB&A report, that report found            
 that consolidation does not necessarily produce administrative cost           
 savings.  The report reviewed the only district that had recently             
 consolidated, the Aleutians East Borough.  The borough found some             
 administrative cost savings in the first year which did not                   
 continue in the following years.  The administrative savings of               
 $5.2 million from a statewide consolidation was a much broader                
 consolidation plan than SB 142.  Mr. Weinberg said that                       
 intuitively, one believes that administrative costs are smaller as            
 a percentage in larger entities.  Often that is not the case.  Mr.            
 Weinberg informed the committee that in 1986, the State of                    
 Washington LB&A did a study of school districts in that state in              
 order to determine the percentage of administrative costs as a                
 percentage of the district's budget.  The study reviewed a group of           
 large, medium and small school districts.  The State of Washington            
 LB&A found that the largest school district in the state had the              
 highest percentage of administrative costs and one of the smaller             
 districts had the lowest percentage of administrative costs.                  
 Consolidation does not necessarily reduce administrative costs.               
 With regard to taxation, Mr. Weinberg believed that tax payer                 
 equity is a notable goal which SB 142 does not necessarily achieve.           
 Furthermore, Mr. Weinberg did not believe that tax payer equity               
 existed now either.  Mr. Weinberg recognized that four boroughs do            
 not levy property tax as such, but of the many first class city               
 school districts - all do not levy property tax either.  One of the           
 options that both boroughs and first class cities have is to                  
 provide in kind service to the school district in lieu of the local           
 contribution requirement.  There is a governmental entity in all of           
 those cases that could provide those services.  In  REAAs, there is           
 no areawide governmental entity that could provide in kind services           
 in lieu of local contribution.  Mr. Weinberg pointed out that the             
 current required local contribution for city and borough school               
 districts is equivalent to a 4 mill levy, while SB 142 provides for           
 a 4.5 mill levy.                                                              
 Number 087                                                                    
  EDDY JEANS , School Finance Manager for DOE, informed the committee          
 that currently there are 19 REAAs.  The department's analysis of              
 SB 142 has determined that at a minimum, three of the REAAs would             
 consolidate into the existing REAAs:  Alaska Gateway would                    
 consolidate into Delta/Greely, Yupit School District into the Lower           
 Kuskokwim, and Kashunamiut School District into Lower Yukon.  The             
 fiscal note from the department deals strictly with the foundation            
 program.  The foundation program does not have a component that               
 provides additional funding for administrative costs.  Therefore,             
 any realized administrative cost savings as a result of SB 142                
 would be an administrative cost savings at the local level for the            
 school district.                                                              
  CHAIRMAN WILKEN  asked if there were any questions.  Hearing none,           
 Chairman Wilken inquired of the wishes of the committee.                      
  SENATOR WARD  moved to report SB 142 out of committee with                   
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
  SENATOR WARD  moved to report SB 182 out of committee with                   
 individual recommendations.                                                   
  CHAIRMAN WILKEN  said that he recognized the motion as out of order          
 until it is determined if it is part of the Uniform Rules.                    
  SENATOR WARD  called for a roll call vote.                                   
 The committee took a brief at ease from 10:39 a.m. to 10:42 a.m.              
  CHAIRMAN WILKEN  called the committee back to order and announced            
 that the meeting would be recessed to the call of the Chair to hear           
 the remaining bills.  Chairman Wilken intended to move both bills,            
 but to allow the appropriate discussion.  Senate HES was recessed             
 at 10:44 a.m.                                                                 
  TAPE 97-49, SIDE A                                                           
        SB 193 ADMINISTRATIVE SPENDING LIMIT FOR SCHOOLS                      
  CHAIRMAN WILKEN  called the committee back to order at 12:55 p.m.            
 and introduced  SB 193  as the next order of business.  He noted that         
 the next committee of referral for SB 193 is Senate Finance.                  
 Chairman Wilken said that he would entertain a motion.                        
  SENATOR WARD  moved to report SB 193 out of committee with                   
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
        SB 182 CHARTER SCHOOL ESTABLISHMENT & OPERATION                       
  CHAIRMAN WILKEN  announced that  SB 182  was the final order of              
 business before the committee.                                                
  SENATOR WARD , Prime Sponsor, explained that SB 182 would provide            
 another tool for the education system.  SB 182 provides a choice              
 and strengthens the law by clarifying that charter schools are in             
 fact public schools.  SB 182 establishes multiple ways of                     
 establishing charter schools, provides for a local school board for           
 charter schools as well as a state school board for charter                   
  CHAIRMAN WILKEN  announced that in the interest of time, those on            
 teleconference were contacted regarding SB 182.  Chairman Wilken              
 provided the committee with the following report from those on                
 teleconference.  In Anchorage, seven people signed up to testify              
 each of which supported SB 182.  Those in Anchorage were Linda                
 Sharp, Sara Schierhorn, Leo Albert, Fletcher Mitler, Dave Titus,              
 Mike Boots, and Karen Hare.  Many of those folks will be sending              
 public opinion messages.  In Mat-Su, Chris Cassler supported                  
 SB 182.  In Fairbanks, Bob Coghill was opposed to SB 182.  In                 
 Juneau, Carl Rose from the Alaska Association of School Boards,               
 Larry Wiget from the Anchorage School District, and John Cyr from             
 NEA-AK opposed SB 182.  Nancy Buell from DOE stated that the                  
 department did not have an official opinion, but did note concerns            
 that it would share with the Legislature.  The department                     
 questioned whether another board was necessary.                               
  SENATOR WARD  moved to report SB 182 out of committee with                   
 individual recommendations and accompanying fiscal notes.  Without            
 objection, it was so ordered.                                                 
 There being no further business before the committee, the meeting             
 was adjourned at 1:00 p.m.                                                    

Document Name Date/Time Subjects