CS FOR HOUSE BILL NO. 278(FIN) am "An Act increasing the base student allocation used in the formula for state funding of public education; relating to the exemption from jury service for certain teachers; relating to the powers of the Department of Education and Early Development; relating to high school course credit earned through assessment; relating to school performance reports; relating to assessments; establishing a public school and school district grading system; relating to charter schools and student transportation; relating to residential school applications; relating to tenure of public school teachers; relating to unemployment contributions for the Alaska technical and vocational education program; relating to earning high school credit for completion of vocational education courses offered by institutions receiving technical and vocational education program funding; relating to schools operated by a federal agency; relating to a grant for school districts; relating to education tax credits; establishing an optional municipal tax exemption for privately owned real property rented or leased for use as a charter school; requiring the Department of Administration to provide a proposal for a salary and benefits schedule for school districts; making conforming amendments; and providing for an effective date." 4:04:00 PM Vice-Chair Fairclough MOVED to ADOPT the proposed committee substitute for HB 278, Work Draft 28-GH2716\V (Mischel, 4/19/14). There being NO OBJECTION, it was so ordered. Vice-Chair Fairclough wondered if the committee should take a brief AT EASE to distribute the CS. Co-Chair Meyer replied that there were very few changes in the CS. EDRA MORLEDGE, STAFF, SENATOR KEVIN MEYER, related that there were 5 changes in the CS. She looked at Section 7, which involved the procurement for the Personalized Learning Opportunity Grants. The inserted language ensured that school districts would use competitive procedures, including seeking bulk purchase discounts for equipment, support, and training. The section also clarified that the procurement process would provide vendors with reasonable and equitable opportunities to participate in the program. The section required the Association of Alaska School Boards to evaluate the effectiveness of a sub grant under the program. The section also required an independent third party evaluation of the effectiveness of the entire grant program, and to provide a report to the legislature. Co-Chair Meyer noted that there was discussion the previous day regarding the various types of electronic devices available, and the intent of the change to allow for equal opportunities for every company. Vice-Chair Fairclough hoped that the Association of Alaska School Boards would testify before the committee, in order to ensure understanding of the new language and the legislature's intent. Co-Chair Meyer replied that they would testify following the presentation of the bill changes. Ms. Morledge looked at Section 20, which related to the bond debt reimbursement program through Department of Education and Early Development (DEED). The previous bill version's effective date was July 1, 2014, but there was some concern that it did not include the municipalities with fall elections. The effective date was changed to January 1, 2015. She explained that Section 24 outlined a change to the required local contribution of a city and borough to the school district, changing the mil tax levy from 2.65 to 2.80 mil rate. Co-Chair Meyer recalled that the local contribution was changed two years prior. The mil rate was changed from 2.9 to 2.65, which took the education funding from the municipalities to the state. He stated that the change shifted the mil rate back to the municipality, so they could greater contribute to education. 4:09:16 PM Ms. Morledge explained that the two teacher tenure provisions were removed from the bill. Co-Chair Meyer surmised that the tenure status had returned to its original term of three years. Ms. Morledge responded in the affirmative. Ms. Morledge stated that the last page of the bill had a change, which required the Department of Administration (DOA) to present a proposal for a statewide salaries and benefits schedule for school districts. The current version removed DOA from that obligation, and moved it into the LB&A committee to present a study on the salaries and benefits schedules statewide. Vice-Chair Fairclough asked if there was an analysis on how the mil rate affected the local communities. Co-Chair Meyer replied in the affirmative, and wondered if there was a specific community that should be addressed. Vice-Chair Fairclough queried the mil rate for the Aleutian Borough. Co-Chair Meyer replied that the Aleutian East Borough would be required to contribute $34,831. Vice-Chair Fairclough wondered if the $34,831 was in addition to the current contribution. Co-Chair Meyer replied in the affirmative. Vice-Chair Fairclough explained that there was a mil rate cap that was instituted a few years prior. She surmised that the bill's intent was to encourage communities to participate above the mil rate cap. Co-Chair Meyer replied that the state took $9.2 million by moving the mil rate to 2.65. The legislation would change the mil rate to 2.8, so Anchorage would contribute an additional $5.5 million to education. Vice-Chair Fairclough asked if Anchorage could use its $7 million to help the school district. She did not believe that the action could occur retroactively, so she wondered if there could be an effective date. Co-Chair Meyer replied that the communities would be equally affected. Vice-Chair Fairclough requested that the document be posted in the backup documents attached to the bill. Ms. Morledge agreed to provide that information. Vice-Chair Fairclough asked that Mr. Whicker address the procurement issues of the bill. 4:14:11 PM AT EASE 4:18:00 PM RECONVENED Vice-Chair Fairclough remarked that the Association of Alaska School Boards (AASB) managed the One-on-one Education Learning opportunity. There was a concern regarding the type of technology that each school district would utilize, and the state management of technology. She wanted the lowest possible unit cost price to school districts to allow them to utilize their preferred platform. ROBERT WHICKER, DIRECTOR, CONSORTIUM FOR DIGITAL LEARNING, ASSOCIATION OF ALASKA SCHOOL BOARDS, JUNEAU, announced that AASB would be soliciting vendors to seek the one-to-one solution set, and work with school districts on that platform. Vice-Chair Fairclough looked at page 7, item C, and announced that, if passed, the law would read: "Before making a sub grant to a school district, the Association of Alaska School Boards shall use a competitive process to solicit prices from vendors, including, where possible, seeking bulk purchase discounts for the technology, equipment, support, and training to be purchased with the funds from the grant program." MICHAEL HANLEY, COMMISSIONER, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, felt that Ms. Morledge accurately addressed the bill changes. He remarked that the changes were small, but significant, and would continue to have a positive impact on education. Co-Chair Meyer remarked that the funding of the legislation had also changed from the original version. He stated that the fiscal notes would be discussed, and hoped that the conversation would bring clarity to the bill's funding. There had been some discussion about the funding for the upcoming three years. The $25 million a year funding equated to a $100 base student allocation (BSA). He stressed that the funding was outside of the current funding formula. He remarked that there were some other additions to the funding: broadband, standardized testing, middle school pilot program for Alaska Native Science and Engineering Program (ANSEP), the charter school startup, and the correspondence schools. He reiterated that the analysis of additional funding depending on the financial manipulation. He felt that there were substantial changes and additions to the education funding. 4:25:32 PM KELLY CUNNINGHAM, FISCAL ANALYST, LEGISLATIVE FINANCE DIVISION, wondered if there would be a page by page discussion of the fiscal note packet. Co-Chair Meyer replied in the affirmative. Co-Chair Meyer asked if there would be one fiscal note substitution. Ms. Cunningham replied in the affirmative. Ms. Cunningham announced that the fiscal note from the Department of Labor and Workforce Development (DLWD), and was an agency wide allocated appropriation. The fiscal note was only for TVEP, and was applied to eight entities. Senator Dunleavy inquired the number of the fiscal note. Ms. Cunningham responded that the fiscal notes had not been numbered. Co-Chair Meyer announced that the fiscal note was labeled, "Department of Labor and Workforce Development." Ms. Cunningham restated that the fiscal note was agency wide and allocated, and related to eight entities. Ms. Cunningham related that the next fiscal note was for DOA. She stated that the funding was originally intended for a study that the new CS directed LB&A as the overseer. The note should now be disregarded. Senator Hoffman wondered if the funding would be applied to LB&A. Co-Chair Meyer responded that LB&A already had the funding to conduct the study. Vice-Chair Fairclough announced that LB&A would attempt to use its existing funds to conduct the study. Ms. Cunningham stated that there was a fiscal note from the Tax Division of the Department of Revenue (DOR), and was a zero fiscal note. Ms. Cunningham explained the fiscal note for the DEED Boarding Home Grants for $2.249 million. It increased the stipend ratio to the boarding schools. There was a partial increase the year prior, and the funding provided a slight increase to the grant. Ms. Cunningham announced that the fiscal note for K-12 Support Foundation was zero, because the actual dollars were reflected in the public education fund note. Ms. Cunningham explained that the fiscal note for the Alaska Library and Museums was $7.3 million for internet support. She believed the funding would provide for a district at which one or more schools qualify for a discounted rate for internet services would be eligible to receive an amount to bring their download speed up to ten megabits per second. Vice-Chair Fairclough asked if the fiscal note related to the "e rate", and whether it including matching money. Ms. Cunningham replied that the fiscal note was associated with Senator Olson's broadband legislation. The e-rate was mentioned, but she could not speak further on that topic. 4:30:08 PM Senator Olson understood that the fiscal note related directly to matching e-rate funds. He stated that it also included the federal portion that would apply directly to the school districts. Vice-Chair Fairclough did not see information regarding matching money in the backup for the note. Senator Olson observed that one of the reasons that it was not in the note was because the money went directly to the school district, but was delivered at a four-to-one ratio. Ms. Cunningham spoke to a zero fiscal note for debt service and school debt reimbursement. She stated that there was some reduced cost, so that was the reason for the zero note. The replacement note was for the DEED Student and School Achievement. The note added $3 million for personalized learning grants. Co-Chair Meyer wondered if the revised fiscal note also included a three-year pilot program for STEM. Ms. Cunningham replied in the affirmative. Senator Dunleavy asked if the $750,000 in Innovative Grants was contained in the revised fiscal note. Ms. Cunningham replied in the affirmative. Senator Dunleavy announced that the funding was included in the DEED submitted budget. Ms. Cunningham responded that the funding would not be accepted at the Conference Committee. Co-Chair Kelly announced that the adjustment would be addressed at the Conference Committee. Ms. Cunningham Vice-Chair Fairclough wondered if the fiscal note for $1.794 million should be disregarded, and be replaced with $7.550 million should replace that note. Ms. Cunningham replied in the affirmative, and explained that the backup for the new fiscal note would be revised to reflect the changes. Ms. Cunningham spoke to another fiscal note for the University of Alaska (UA), which included technical funding for the TVEP program. Senator Bishop commented that the increase was a decrement of $204,000 to UA, so it was less than what would appear under the percentage decrement. Vice-Chair Fairclough wondered if the funding related to the penny increase. Senator Bishop replied that it was 0.16 of 1 percent increase. Vice-Chair Fairclough asked if the funding was new money for UA, and if it was an addition of the expanded programs. Ms. Cunningham deferred to Mr. Teal. 4:37:48 PM DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, stated that the change was negative, but there was an increase in total TVEP funding. He explained that UA had 50 percent of the funding, but 5 percent of the funding for UAS was removed, so UA received 45 percent of a larger portion, but was ultimately less money. Ms. Cunningham explained that the public education fiscal note correlated with the K-12 foundation program. It included the correspondence multiplier change from 0.8 to 0.9, and amends the charter school funding by providing higher funding starting at the 75 ADM. Mr. Teal pointed out that there was still a missing fiscal note from DEED. Senator Dunleavy wondered if the change in the mil rate guaranteed that the schools within the municipality would receive that funding. Mr. Teal replied that the change did not guarantee funding for the municipality. Senator Dunleavy queried the impact of the change in the mil rate. Mr. Teal responded that communities had to contribute another $132 million to school districts. Senator Dunleavy wondered if "communities" referred to recognized municipalities. Mr. Teal responded in the affirmative Vice-Chair Fairclough stated that there was an additional fiscal note from LB&A Committee for FY 15 only for $650,000 to implement a school district cost factor study; a school size factor study; and a study of the salaries and benefits that were paid through the State of Alaska. Senator Dunleavy asked what the total package would be for each year of the proposed legislation. Ms. Cunningham replied that there was $22.695 million in FY 15. Senator Dunleavy asked that she be more specific by announcing specific dollars. 4:42:33 PM AT EASE 4:45:48 PM RECONVENED 4:45:53 PM Ms. Cunningham stated that part 1 of the total package cost was $100 million in FY 15, and the fiscal notes were an additional $23 million, with a $12 million savings from the change in the mil rate. The total extra cost in FY 15 was approximately $11 million in addition to the $100 million. Senator Dunleavy surmised that the total cost for FY 15 was $111 million. Ms. Cunningham agreed. She furthered that the cost would continue into FY 16 and FY 17, except for the $650,000 the LB&A studies. Co-Chair Meyer thought that the figure was pretty close to his own estimate. He felt that it was almost a $500 BSA. He stated that a large portion of the funding was for broadband. Senator Dunleavy announced that it $111 million per year for the following three years and $2 billion was appropriated for the Public Employees' Retirement System (PERS). He felt that the proposed legislation would stop the argument that the state was not funding public education. Co-Chair Meyer wondered if the legislation funding was in addition to the overall spending for $1.2 billion to $1.3 billion. Mr. Teal replied in the affirmative Co-Chair Meyer asked if it was $1.2 billion or $1.3 billion. Mr. Teal replied that it was almost $1.3 billion. Vice-Chair Fairclough noted that there were a lot of public interest based on an expectation of an increase to the BSA. She commented that she was willing to participate with the organizations for three years to solve the schools issues in urban and rural Alaska. 4:51:32 PM Co-Chair Kelly MOVED to REPORT SCSCSHB 278(FIN) as amended out of committee with individual recommendations and the accompanying and forthcoming fiscal notes. There being NO OBJECTION, it was so ordered. SCSCSHB 278(FIN) was REPORTED out of committee with a "do pass" recommendation and with a new fiscal impact note from the Department of Education and Early Development, a new fiscal impact note from the Department of Education and Early Development, a new zero fiscal note from Department of Education and Early Development, a new fiscal impact note from the Senate Finance Committee for the Legislature, a new fiscal impact note from the University of Alaska, a new indeterminate fiscal note the Department of Revenue, a new fiscal impact note from the Senate Finance Committee for the Department of Labor and Workforce Development, a new fiscal impact note from the Department of Education and Early Development, a new fiscal impact note from the Department of Education and Early Development, a new zero fiscal note from the Department of Education and Early Development, and a new zero fiscal note from the Department of Education and Early Development. 4:51:55 PM AT EASE 5:19:41 PM RECONVNED Co-Chair Meyer handed the gavel over to Vice-Chair Fairclough