HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE April 24, 1999 10:09 a.m. MEMBERS PRESENT Representative Fred Dyson, Co-Chair Representative John Coghill, Co-Chair Representative Jim Whitaker Representative Joe Green Representative Carl Morgan Representative Tom Brice MEMBERS ABSENT Representative Allen Kemplen COMMITTEE CALENDAR HOUSE BILL NO. 191 "An Act relating to charter schools; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 195 "An Act relating to school construction grants and to municipal school construction debt reimbursement." - HEARD AND HELD HOUSE BILL NO. 115 "An Act relating to the University of Alaska; and providing for an effective date." - FAILED TO MOVE HB 115 OUT OF COMMITTEE HOUSE BILL NO. 15 "An Act relating to disclosure of information about certain children; and amending Rule 22, Alaska Child in Need of Aid Rules." - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 191 SHORT TITLE: CHARTER SCHOOLS SPONSOR(S): REPRESENTATIVES(S) DYSON, Kohring Jrn-Date Jrn-Page Action 4/13/99 794 (H) READ THE FIRST TIME - REFERRAL(S) 4/13/99 794 (H) HES, FIN 4/20/99 (H) HES AT 3:00 PM CAPITOL 106 4/20/99 (H) HEARD AND HELD 4/24/99 (H) HES AT 10:00 AM CAPITOL 106 BILL: HB 195 SHORT TITLE: SCHOOL GRANT/DEBT REIMBURSEMENT SPONSOR(S): REPRESENTATIVES(S) DYSON Jrn-Date Jrn-Page Action 4/13/99 795 (H) READ THE FIRST TIME - REFERRAL(S) 4/13/99 795 (H) HES, FIN 4/20/99 (H) HES AT 3:00 PM CAPITOL 106 4/20/99 (H) HEARD AND HELD 4/24/99 (H) HES AT 10:00 AM CAPITOL 106 BILL: HB 115 SHORT TITLE: USE OF UNIVERSITY OF ALASKA APPROPRIATION SPONSOR(S): REPRESENTATIVES(S) BUNDE Jrn-Date Jrn-Page Action 2/24/99 301 (H) READ THE FIRST TIME - REFERRAL(S) 2/24/99 302 (H) HES, FINANCE 4/20/99 (H) HES AT 3:00 PM CAPITOL 106 4/20/99 (H) HEARD AND HELD 4/24/99 (H) HES AT 10:00 AM CAPITOL 106 WITNESS REGISTER ACTION NARRATIVE WES KELLER, Researcher for Representative Fred Dyson Alaska State Legislature Capitol Building, Room 104 Juneau, Alaska 99801 Telephone: (907) 465-3759 POSITION STATEMENT: Presented sponsor statement for HB 191. CAROL COMEAU, Assistant Superintendent for Instruction Anchorage School District P.O. Box 196619 Anchorage, Alaska 99519 Telephone: (907) 269-2290 POSITION STATEMENT: Testified on HB 191. GLEN BIEGEL, Member Board of Alaskans for Educational Choice Board of Alaska Charter School Association Academic Policy Committee for Aquarian Charter School P.O. Box 202280 Anchorage, Alaska 99520 Telephone: (907) 346-6244 POSITION STATEMENT: Testified on HB 191. GREG MILLER, Chair Advisory Policy Committee Aquarian Charter School 2311 Albion Circle Anchorage, Alaska 99515 Telephone: (907) 344-9672 POSITION STATEMENT: Testified on HB 191. BARBARA GERARD, Principal Academy Charter School 258 South Bailey Palmer, Alaska 99645 Telephone: (907) 745-3369 POSITION STATEMENT: Testified in support of HB 191. JACK MILLER, Chair Academic Policy Committee Family Partnership Charter School 2448 Brook Drive Anchorage, Alaska 99517 Telephone: (907) 243-0849 POSITION STATEMENT: Testified in support of HB 191. ROBERT HALL, Board Member Midnight Sun Family Learning Center P.O. Box 871906 Wasilla, Alaska 99687 Telephone: (907) 373-6555 POSITION STATEMENT: Testified on HB 191. EDDY JEANS, Manager School Finance Section Education Support Services Department of Education (DOE) 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 Telephone: (907) 465-2891 POSITION STATEMENT: Testified on HB 191. BRUCE CAMPBELL, Legislative Assistant to Senator Randy Phillips Alaska State Legislature Capitol Building, Room 103 Juneau, Alaska 99801 Telephone: (907) 465-2661 POSITION STATEMENT: Presented HB 195. LARRY WIGET, Executive Director Public Affairs Anchorage School District 4600 DeBarr Road Anchorage, Alaska 99519 Telephone: (907) 269-2255 POSITION STATEMENT: Testified on HB 195. DEE HUBBARD, Member Bond Reimbursement and Grant Review Committee 4251 Pinnacle Circle Anchorage, Alaska 99504 Telephone: (907) 337-6370 POSITION STATEMENT: Testified on HB 195. MIKE MORGAN, Manager Facilities Section Education Support Services Department of Education (DOE) 801 West Tenth Street, Suite 200 Juneau, Alaska 99801 Telephone: (907) 465-1858 POSITION STATEMENT: Answered questions on HB 195. REPRESENTATIVE CON BUNDE Alaska State Legislature Capitol Building, Room 501 Juneau, Alaska 99801 Telephone: (907) 465-4843 POSITION STATEMENT: Testified as sponsor of HB 115. WENDY REDMAN, Vice President Statewide University Relations University of Alaska P.O. Box 755200 Fairbanks, Alaska 99775 Telephone: (907) 474-7582 POSITION STATEMENT: Testified on HB 115. ACTION NARRATIVE TAPE 99-43, SIDE A Number 0001 CO-CHAIRMAN COGHILL called the House Health, Education and Social Services Standing Committee meeting to order at 10:09 a.m. Members present at the call to order were Representatives Dyson, Coghill, Whitaker, Morgan and Brice. Representative Green joined the meeting at 10:24 a.m. HB 191 - CHARTER SCHOOLS Number 0099 CO-CHAIRMAN COGHILL announced the first order of business as House Bill No. 191, "An Act relating to charter schools; and providing for an effective date." Number 0124 WES KELLER, Researcher for Representative Fred Dyson, presented the sponsor statement for HB 191. In 1995, the Alaska State Legislature passed CSSB 88(FIN) authorizing Alaskan charter schools. The Center for Education Reform has pretty well established that Alaska charter school law is viewed as being relatively weak, and the liaison in the Department of Education (DOE) has been in contact with the charter school people and has asked them what could be done to make the bill stronger. MR. KELLER referred the committee to the position statement in their packets. The DOE has several recommendations that they took into account. The first recommendation is to lift the current cap on the number of charter schools in Alaska, and Section 1 takes care of that. Their second recommendation is to ensure that educational programs are based on state standards, and Section 2 takes care of that, so the charter schools could not be exempt from taking the exit exam required in other public schools. The third recommendation is to establish fund raising guidelines for charter schools that are established as nonprofit under 26 U.S.C. 501 (c)(3), and Section 4 takes care of that. They also recommended that they remove the sunset provision of 2005, and that is done in Section 8. MR. KELLER informed the committee that the DOE also recommended that an appeals body be created at the local level for the charter schools, and this bill has not done that. Part of the reason is that they feel that the local school boards have that power now to establish an advisory committee, and they didn't want to add another level of bureaucracy. The next thing the DOE recommended is to grant start-up funds for funding charter schools, and they did not respond directly that way; they responded to the concern about getting more money to the schools. The next recommendation is to clarify that charter schools receive local revenues in excess of required local contribution, as well as state determined basic need, and they did that in Section 4. MR. KELLER noted that Section 7 requires that charter school be counted as separate schools for the purpose of calculating funding for school districts. The DOE counts charter schools as alternative schools when applying AS 14.17.905, which basically says that alternative schools will be counted as part of the school and district with the highest ADM [average daily membership], so charter schools are counted currently with the largest school with the highest ADM. The problem is that alternative schools reside in a public school facility, and a charter school is in its own facility. It seems like more money ought to be going to the charter schools because they have to provide the facilities. MR. KELLER acknowledged that HB 191 allows the district to charge rent if the charter school resides in a school district facility. This is the section that produced the $3.5 million fiscal note from the DOE. In addition to what the DOE has recommended, this bill does two things. One is addressed in Section 5, which requires the districts to assign itemized costs of services provided to the charter school and allows the charter school to opt out of any service that it doesn't want that is not required by law. Number 0495 MR. KELLER said that it requires an itemized list of the cost on a per student basis. The intent of HB 191 in Section 5 is to show exactly what the charter school is purchasing from the district. Section 3 requires that the itemized cost be reflected in the contract with the charter schools. The second thing HB 191 does in Section 6, is it allows for the contracts of the charter schools to be longer than five years. There were problems with long-term rent arrangements with only five year contracts, and this extends it up to ten years. He read a support letter from a charter school student which read: To the Capital, I am a 1st grader at the Academy Charter School in Palmer. My favorite [subject] is science and art. My favorite food is pizza, ice cream, and candy. My name is Danielle May Pempek. I am a happy kid. Can you give us some money so we can have some more Academy Charter Schools. My favorite teachers are Miss Cottle, Mrs. Booth, Mrs. Schmidit, and Mrs. Gerard. Love, Danielle Mary Pempek CO-CHAIRMAN COGHILL asked who provides the itemized list in Section 3. MR. KELLER referred him to Section 5 to answer part of that. He understands that it is a negotiated contract between the charter school and the school board. The local school districts shall itemize each service provided by the school district to the charter school. There is a school budget provided by the district, and the school budget is roughly $4,000 per student. The student generates quite a bit more than that and the difference between what the student generates and what is in the school budget is often defined as educational services, which includes items like special education, transportation, audio-visual support and teacher inservice. This bill is trying to itemize those things so the charter school know exactly what they are "purchasing." CO-CHAIRMAN DYSON commented that it is the perception of some of the charter schools that they are getting $3,035 per student to run their school, and the district is getting between $7,000 and $8,000, and the charter schools maintain that they are not getting their fair share. The intention of this section is to get an accounting of that to make it fair. Number 0868 CAROL COMEAU, Assistant Superintendent for Instruction, Anchorage School District, testified via teleconference from Anchorage saying one of her jobs is the liaison with the charter schools in Anchorage. She wanted to ask some questions and then will provide to the committee their written response later. She noted that they do not have any problem administratively with lifting the cap on the number of charter schools or relieving them of the geographic distribution. Anchorage currently has four charter schools, and they are allotted ten. They would welcome additional applications, but they wouldn't want to preclude others in the state from being able to apply for charter school status if their allocation would hinder that. They support that the charter schools will be required to be tested, as all the other students are, and wondered if that includes the benchmark testing as well as the state mandate on the CAT [California Achievement Test] and the exit exams. CO-CHAIRMAN DYSON answered that they didn't address that and asked what she would prefer. Number 0947 MS. COMEAU prefers that any required state testing would be required of the charter schools, so they could include those into their profile performance that they issue every fall to the public, and the charter schools, and they are to include that in their report back to the school board. MS. COMEAU requested more clarification on Sections 3 and 5 as to what would that mean. She wondered if they would be required to itemize, literally in a log everyday, when they respond to questions or provide information to each charter school. She doesn't know how they would anticipate that ahead of time before negotiating a contract. She wanted more information on their intent on the school district's part. CO-CHAIRMAN DYSON said their intent is that there be an accounting trail of the overhead and administrative costs that the school district has to devote to the administration and support of the charter schools. It might be better to do that retroactively. He is open to their coaching on making that clear and convenient. Number 1067 MS. COMEAU noted that the current law requires that they subtract from the overall allocation, the indirect cost rate which includes all of her services, budget department purchasing, chief financial officer, human resources, which would be all of their hiring procedures, assessment evaluation services, technology and public affairs, and others which they do not charge the charter schools other than the [4.31] percent in the indirect cost rate for the district. The charter schools don't have to pay for any of their services. They do require them to pay for things set by law which include special education. The state law requires that all students are able to apply to a charter school. Some of the charter schools have chosen not to provide the services, but they wanted the district to provide the services so they have worked out a charge back cost on that. That has mixed success because there seems to be less ownership of identification and IEP [individual educational plan] services on the part of the charter schools who are not delivering the services themselves. MS. COMEAU stated that they have two charter schools delivering the services, and the others are getting the services from the district. That is where they are struggling with this language because they believe if they start to cost out all of the time they are spending with the charter schools, it will be significantly more than what the charter schools are being charged now. The indirect cost rate of 4.31 percent is set by the state. She believes that when they take the charter schools' total budgets and reduce it by the indirect cost rate, she estimates it is going to cost them less than it would be under this legislation. They will wrestle with the itemization and costing things out for students and submit a written response. Number 1212 MS. COMEAU said they currently allow the charter schools to raise funds as long as they identify the resources, and that is built into their budget. She doesn't believe that HB 191 will do any disservice to the fund raising aspect. She asked what they mean by "must reflect state, local and other funding for that school district." It seems to her that that may be tied to Section 5 where they list transportation, special education and intensive services that come to the district based on the whole district's needs. She wondered if the intent was to allocate transportation funding to the charter schools, even though their policies do not provide transportation to any of their alternative schools. CO-CHAIRMAN DYSON said what they are trying to accomplish there is just an open accounting so that the charter schools see clearly what administrative and overhead costs are being deducted from the total per-student allocation. They never intended that anything here would preclude them from excluding charges like transportation. Number 1330 MS. COMEAU commented that she can assume from that that the list of services are currently provided under the indirect cost rate, the 4.31 percent, which they take right off the top. She wondered if they would then be itemizing how much time each of them in those departments is spending, and that would be given to the charter schools. CO-CHAIRMAN DYSON indicated that the record of whatever they charge to the charter schools would be a part of the accounting record that they would have access to. But the district doesn't have to charge them a pro-rata share of their time if they choose not to. Number 1370 MS. COMEAU asked Co-Chairman Dyson to explain the opt out. If their district policy requires that the charter schools follow the district's purchasing procedures, and they want to opt out of that, she wondered what the position is with this legislation on that. CO-CHAIRMAN DYSON said that is one of the questions they are interested in her response on. The problem of any school, or any subset of the school district, doing purchasing and contracting is backing them up; it is necessary to have some controls on that. What they are interested in is if there a way for the charter school to do purchasing under the district or state regulations and do it themselves, as opposed to using the district's purchasing department. MS. COMEAU asked if he was asking the district to respond to what they think the pluses and minuses would be of the services and which ones they could support and which ones they think could be problematic. CO-CHAIRMAN DYSON said that is exactly right. Number 1440 MS. COMEAU said they recognize the constraints that the current SB 36 restriction on charter schools under 200 places on the charter schools, and it seems to be forcing, in their estimation, the charter schools to have to increase their enrollment over 200 students in order to access the funding. They are supportive of the charter schools who would like to remain smaller but not be penalized by having to attach themselves to the largest school in the district. They tried to get that changed on SB 36 last spring and were not successful, but they support that. If a charter school wants to stay at 150 students, because they believe that is the size that best meets their mission and space, the district agrees they shouldn't be penalized in the funding because of that. CO-CHAIRMAN DYSON appreciates her comments. Because the charter schools are very separate, physically and administratively, it seems to him, from a management and fairness perspective, that they really are disadvantaged by being lumped with the largest school in the district, which must by scale factor, be more efficient. MS. COMEAU agreed that has been their position. As long as the charter schools are housed in a separate facility, they do not want them penalized for a smaller enrollment. They believe there is a benefit in some of the charter schools to start smaller and grow as they feel comfortable and are more successful. Her experience is that they are more successful to start that way than to start large for an artificial reason, just because a number is in the legislation, rather than what is the best program for the student. Number 1600 GLEN BIEGEL, Member, Board of Alaskans for Educational Choice, Board of Alaska Charter School Association, Academic Policy Committee for Aquarian Charter School, testified via teleconference from Anchorage. He would like to respond to some things that Ms. Comeau mentioned. One of the illustrations perfectly defines the problem that charter schools are having in their attempt to provide choice for parents. He read from his written testimony which states: It is a legitimate and most sacred function of government to provide for the equal treatment among the unequal. The manifestation of this as it is best known is the court system that arbitrates fairly among people who are manifestly unequal by position, wealth, circumstances et cetera. In the world of charter schools, we are tasked with bargaining with districts for the funding to allow us to present to the public an equal and fair presentation of school alternatives. What we are asking for is protection from the word game. The word game is really just a front for the discrimination game. The statements of the district I would like to center on are these: We in essence get local and state funding. There happens to be $38 million we are not participating in, this is called discretionary funds or discriminatory funds. We receive a fair allocation of funds as would be demonstrated if you read the general fund revenues segment and the adopted financial plan of the school district. I will take issue with that in a moment. The district will treat all other public school students as having a priority for housing. I believe that they are funded at about 65 percent of other students. The question is what is the function of the legislature in guaranteeing and allowing charter schools to make an equitable position for parents to choose, as our constitution guarantees? There is no getting around the fact that the expenditures ... for charter school students are $3,900 per child. The expenditures for the Anchorage School District are $7,500 per child. ... We get $3,900 to spend; they get $7,500 to spend. MR. BIEGEL commented that it is a question for the legislature. Is that equitable? The charter schools do not have the ability to impact that $3,900 on their own. They are asking for the ability to guarantee that charter schools have the ability to provide parents with an equitable choice. They can't provide it with $3,900. And it may be very difficult to allow for the presentation of that money to charter schools and the language in the bill as it is currently written may not provide for that. MR. BIEGEL noted that Carol Comeau is well-versed in how funding is allocated by the state, and by various sources of funding. It is very difficult to pry all that apart to say that the money is allocated by per student on this basis. They have an allocation by student in their plan here, and it shows that charter school students actually receive more money per child than every other school in this district. The average amount of money that every other student in this district receives is $3,600. Charter school students receive $3,900. But the expenditure discrepancy cannot be reconciled by that statement. It is just simply not true. They do not participate in 100 percent of local and state funding. It cannot be reconciled. They are asking in HB 191 to have the opportunity to be treated fairly in a funding way. Number 1829 MR. BIEGEL indicated that they were denied housing, a primary and necessary element of educating children. Some people in this room who represent charter schools, are going to show that they just simply won't be able to stay open unless they have a place to teach their children. The charter school movement is willing to work out how much less money they can do it for. They can't do it for 55 percent and no housing. They can't do it; they have tried. They are required to expend money in every way that the school district expends money. They are required to abide by all the same contracts with all the different unions, all their building codes much match the school district. MR. BIEGEL agrees that HB 191 holds the essence of the solution to this problem. They have some suggestions by charter school people about how to fix that problem, but he is not sure that it is dealt with adequately in the bill as it exists. Merely specifying what money they are not receiving isn't going to be enough. It is not going to be enough to say that the charter schools only gets $3,900 to expend per child, whereas the Anchorage School District gets $7,500 to expend per child, are these reasons. Enumerating the reasons isn't going to be enough. MR. BIEGEL continued with his written testimony which states: The real tragedy is that all the effort, all the thought, hope and the trust, will have been misplaced and unretrievable in the grave it has been cast into. There is only so much constructive energy to make the public school system more responsive and more effective. The legislature acted in good faith and trusted the districts to realize the dream of limited competition, but still equal competition. I have heard it said that by some, that the cry for equal treatment that there is a cry for equal treatment and consideration for all. History has shown that equality is reserved only to the equal. We will not be able to present an equitable choice unless we can secure the blessings of equality that our Constitution guarantees by its clause regarding equal access to education. Number 1967 GREG MILLER, Chair, Advisory Policy Committee, Aquarian Charter School testified via teleconference from Anchorage. He has two children at Aquarian Charter School in Anchorage, and he has been involved the past two years. There are 110 students in that school housed in seven portables. They don't have a library, gym, cafeteria, or any busing, and food isn't provided; yet they have made it and are here to stay. He wrote various letters last year regarding this issue: The breakdown of revenues, state versus local revenues and how they are being allocated. He stopped that endeavor about halfway through last year because he couldn't figure out the revenue side. He told himself he wouldn't approach them again until he did have it figured out, and he believes he does now. The irony of it is that he agrees with both Ms. Comeau and Mr. Biegel. This bill is a tremendous effort to fix some of the weak points in the existing statute. MR. MILLER referred to Section 4(a) which is a revenue versus cost issue in his mind. The cost allocation has never been a problem with charter schools. He agrees the school district shouldn't be burdened with more work for an itemized list. The revenue side of the existing statute is wholly inadequate, and HB 191 takes a very good stab at trying to clarify that. But he suggested that it doesn't quite get there because of some of the language. He thinks they need to take away any possible ambiguity within Sec. 4(a). Representative Dyson mentioned that what he is trying to do in this section is to make the allocation of revenues and funds fair and clear with an open accounting. Number 2107 MR. MILLER suggested equal funding. The school district has always said that the charter schools do get equal funding, and that isn't correct. They do get an equal share of the state monies, but they do not get an equal share of the local funding. There is about $92 million locally in the Anchorage School District that goes into the local funding side of it, and they get approximately 60 percent of that, if he understands the numbers correctly. That comes down to $36 to $38 million that Glen Biegel mentioned. Those funds are allocated by the school district per its discretion. He recommended that the language in the bill eliminate that discretion so it is equal. MR. MILLER suggested a formula for equal funding: Take the total amount of money in from all sources; divide that by the number of full-time equivalent students, and that gives the cost per student. Multiply that by the number of students in the charter school, and that is the revenue side. Alter the cost side, whether it be the 4.31 percent or an itemization of the costs, but the revenue side can be just that clear. That will then require the school district to say what the charter schools are being charged for or not, and they can opt in or opt out. He applauded Carol Comeau and the Anchorage School District for their efforts. Number 2242 CO-CHAIRMAN DYSON commented that if they are going to get anything done this session, they must do it well and quickly. TAPE 99-43, SIDE B Number 2280 BARBARA GERARD, Principal, Academy Charter School, testified via teleconference from the Matanuska-Susitna (Mat-Su) Legislative Information Office (LIO). She read her testimony which states: I am one of the founders of Academy Charter School. I currently have a first grader in this school, and I am also the current Principal of Academy Charter. I reside in Palmer. I have spent the last three years totally immersed in the formation and implementation of this school. Our school has been extremely successful. Our success has been largely due to the incredible parent dedication and commitment in both time, money and supplies and whatever else it has taken, including physically building a school out of a field last year. I am hoping you will help us by protecting us and getting a stronger law which delineates equity in funding. Currently our school is receiving $5,800 per student. Next year, due to the harm of HB 36, we are barely going to be able to scrape by. We are hoping that with the Representative Dyson's bill that we will be able to receive somewhat of an equity, an equal portion, and not lose that $1,000 per student. It is critical. Our students have not lessened in value from last year to this year, but yet we will receive less. I am hoping you will support both [HB] 191 and [HB] 197 and enable us to truly provide, and continue to provide, choice in education, and guarantee its quality, its rigor and its content. Charter Schools are true catalysts for school reform. We have seen schools all over the district that have been positively stimulated by the challenge the charter schools have placed them in. To stop the status quo and get busy and find some new innovative ways and which they can function within their own building and provide great education. Please, I can't say it enough, help us, provide us with some strength in that law. I read Representative Dyson's bill and I was excited. It says many of the things that need to be said and will help some of those gray areas become black and white. ...Thank you Representative Dyson for putting forth this bill and for all of you hearing it. Thank you. Number 2175 CO-CHAIRMAN DYSON asked Ms. Gerard if it was the defining of charter schools as alternative schools in HB 36 which caused them to lose $1,000 per student. Number 2166 MS. GERARD answered it basically classified their school with the largest neighboring school. Then through the district wizardry of funding determination, it was determined that they would drop from $5,800 to $4,817. They haven't figured out that rationale. No one seems to know what the formula is. Number 2124 JACK MILLER, Chair, Academic Policy Committee, Family Partnership Charter School, testified via teleconference from Anchorage. He has a son enrolled in their high school program, and he has been involved with the charter schools for the past two years. He reiterated that the challenge for the charter schools is to get equal funding, so they can provide housing and the other educational services that the children need. They cannot do that with the funding that they have now. MR. MILLER said he believes that the only way to solve the housing problem is for the legislature to enact a bill like HB 191. It has to come from the state as a mandate to all the local school districts that they provide equal funding, so that the charter schools can obtain housing and provide the educational programs and services the children need. The intent of the original legislation, and the whole charter school movement across the country, is to provide a good, honest, solid educational alternative for parents whose children don't fit well into the local school district's programs. Without the equal funding, they can do it better for less, but they can't do it for so much less that they barely scrape by. The children need more money, and the legislature is the only one who can provide that. He supports HB 191 and the basic challenge to get them equal funding, so they can continue with the charter school movement in the state. Number 2027 ROBERT HALL, Board Member, Midnight Sun Family Learning Center, testified from the Mat-Su LIO. They have 90 students, four teachers and staff, and the charter school experience has been exciting and challenging. The workload has been far greater than expected, and they are still very excited about it. He reported that they have received more support from the Mat-Su School District than they expected. The district has been very supportive and nurturing. However, there has been a great void of understanding of the relationship between a charter school and the district. It has changed each year; not in an adversarial way, but just because of new personnel. The funding formula isn't really a formula, it is just something that they make up every year. The idea of giving the local school board direction on how much of a local share they are entitled to is good. The charter schools do not want the overall bureaucracy charged to them because the fundamental idea of a charter school is that they can do things differently. MR. HALL commented that the idea of housing is difficult, and no one has really addressed the capital side: He wondered if a charter school wanted to be bonded, would the state step in, what would the process be, and what would be the role in support at the local level. Most school facilities are not paid for out of operating funds; many charter schools are. There is a great need for HB 191. There are a lot of little things to be worked out; clarifying the role and relationship between the charter schools and the districts in the state that will fill a big void, and it will lead to stronger and better charter schools, which offer a more appropriate alternative for students and parents. Number 1896 EDDY JEANS, Manager, School Finance Section, Education Support Services, Department of Education (DOE),came forward to testify and clarified several issues. The DOE's position is that charter schools are a part of the public school system, so they will be required to do the testing at the different grade levels as the other schools are. He discussed indirect rates versus itemizing administrative costs. Now they calculate what the charter schools' entitlement is, and then the school district is permitted to deduct from that an amount up to their state-approved indirect cost rate. Indirect cost rate is for the administrative overhead: purchasing, accounting, payroll, computer systems and so forth. An itemized list with a dollar amount will create a burden on the school district. It may be better for them to list out what services they are providing in that indirect cost rate, as opposed to trying to account for every time they work with a charter school and assigning a dollar value to that. MR. JEANS indicated that it is his understanding that charter schools do not know what services they are receiving for that indirect cost rate. In calculating charter school entitlement, the DOE has calculated a minimum that the school district has to provide to the charter school. They went to the foundation program and ran through a formula called basic need. From basic need they subtract the four mill required local effort, impact aid, and that is how they arrived at state aid. To apply the charter school law, they calculated basic need for that charter school, and that will be the minimum that the school district has to provide to the charter school. That includes the four mill required local effort. It does not include the excess local contribution over and above the four mills, and this is what the charter school people are complaining about. The DOE has left that optional local contribution up to the municipalities to decide whether or not they will provide that to the charter schools. MR. JEANS commented that the DOE would be looking for clarification and direction on Section 4. The foundation program provides operational funds; it does not provide the federal categorical funds. Those are accounted for outside of the school district operating funds: federal grants for special education, vocational education, bilingual education, and so forth. Most of those programs generate money based on students' needs identified through an application process. He assumes that if the charter school children are being identified through these programs, then that money should go there. MR. JEANS said the entire district budget includes special revenue funds. His opinion is that it is not appropriate to take the district's entire budget, divide that by the number of students, and say that this is what the allocation should be for the charter school because they are including costs that the charter school is not going to incur. The DOE has focused on the school operating fund and the foundation program for calculating entitlement. They focused on the four mills, not the local excess contribution. Number 1620 REPRESENTATIVE BRICE noted that one of the biggest issues that he is aware of deals with the capital cost of developing a charter school. He wondered how the state, under HB 191, would look at costs that certain charter schools might incur by building their own and bonding, or getting a loan and incurring certain capital costs, or would they look at incorporating charter schools within the current school construction programs. Number 1560 MR. JEANS said that schools cannot bond; the municipalities bond, and that has to be approved by the local voters. They could use existing capital requests for charter schools if they meet the same criteria as any other school within that district, and that district can demonstrate the need for the additional space. There is a mixed bag of charter schools in this state. Some are being housed in school facilities, some are renting space, and some have long-term leases. REPRESENTATIVE BRICE asked if there isn't a certain amount of logic to ensuring that local school districts are responsible for that cost that is incurred by the charter school. From what Mr. Jeans said, he gathered that those costs aren't necessarily reflected in the base rate that the state provides to charter schools, and HB 191 would require that the school districts look at those costs as well and provide funding for those costs. Number 1450 MR. JEANS said the foundation program provides funding for the academic and operations of the school district, which would include leasing of buildings. That would be part of the maintenance of the school district, and he believes that part is already covered. In terms of long-term capital costs, he believes that the charter schools can, through the school district, apply for, and get on the capital request list if they can demonstrate the needs, just like any other school in the state. CO-CHAIRMAN DYSON asked Mr. Jeans if it would follow that the districts not charge the charter schools a pro rata share of what it costs them to operate facilities across the district, if indeed the charter schools are paying their own facility operations and maintenance costs. MR. JEANS indicated that if the charter schools pay rent for a facility, the school district is taking that out of their allocation and appropriately should be. Number 1325 MR. JEANS explained that the foundation formula has a 20 percent allocation for special needs. This has been an issue raised by charter schools whether they are entitled to that funding or not. The DOE's position has been if they are providing the services on-site, then they are entitled to that funding. If the school district is sending staff over to provide those services, then that money should be retained by the school district. The DOE has left it up to the charter school and the school districts to negotiate that. MR. JEANS referred them to the fiscal note. There are 17 charter schools in the state now. All except for The Family Partnership Charter School in Anchorage, they fall under the alternative schools classification as the DOE defined in regulation. This means that they have to be serving over 200 students to get the benefit of going through the school-size-adjustment table as an independent school. If they have under 200 students, they are lumped in with the largest school in the district, and it does reduce the amount of funding, quite substantially, by being grouped in with the larger schools. In the school-size-adjustment table, for schools over 750 the adjustment is .84. That means that every charter school student is funded at 84 percent of the base student allotment which is $3,940. Each time they go through the formula, they get a base allocation. Base allocation is about $150,000. Taking each one of these schools and moving them from the .84 adjustment, putting them through the formula based on the number of students that they are serving, is what generated the $3.5 million fiscal note. CO-CHAIRMAN DYSON asked Mr. Jeans what the multiplier would be if the school was at 150 students. Number 1140 MR. JEANS said if they had 150 students, the multiplier would be 1.27. If they had 151 students the multiplier would be 1.08. If they had 150 students, the adjustment subtracts 75 students and the remaining 75 would be multiplied at 1.27; add that to the 122.85 to get the school size adjustment for that charter school. CO-CHAIRMAN DYSON said there are about 1,200 students in charter schools. He figured that the difference in moving from the .84 to the 1.27 is about $3,000 more per student. MR. JEANS explained the school size adjustment table is there to provide additional resources because the smaller the school, the less efficient it is to operate, so they are going to have higher fixed costs on a per-student basis. They have taken the students here and put them through a formula, as if they are all housed in independent facilities with very high fixed costs, low pupil-teacher ratios and on and on. Number 0963 REPRESENTATIVE BRICE asked when the policy changed and moved charter schools from regular schools to alternative schools. He asked if alternative schools were defined in statute or regulation. Number 0896 MR. JEANS told Representative Brice that the definition of schools, or facilities constituting schools, made it into SB 36 last year when the bill was in House Finance. Up until that time, the DOE ran every school regardless of size through the formula. It wasn't until they got to the House Finance Committee that this criteria was established. Number 0788 MR. JEANS said the definition for alternative schools is in regulations adopted by the State Board of Education in November 1998. REPRESENTATIVE BRICE asked when SB 36 went into effect. MR. JEANS answered July 1. REPRESENTATIVE BRICE asked how the state divided up the money in the current year's budget, with the understanding that alternative schools included charter schools, obviously without a definition. MR. JEANS said the regulation process takes a very long time. The DOE issued a numbered memorandum to school districts stating that these were the regulations that they were taking to the state board for consideration; and until the board acted on those regulations, this is the way they were going to apply the rules. The board did adopt those regulations. Number 0707 CO-CHAIRMAN DYSON asked if it is legal for the legislature to tell local school districts what to do with the local contribution. MR. JEANS said that is a very good question. Right now under SB 36, they are telling districts what to do with their local contribution with the 70 percent minimum expenditure requirement. They are telling them what to do with their local money as well as their federal money. CO-CHAIRMAN DYSON said until somebody takes them to court they will not know. Number 0614 CO-CHAIRMAN DYSON asked Ms. Comeau how they account for paying for building operation and maintenance. Number 0562 MS. COMEAU answered they do not charge the charter schools for the district-wide costs. Their policy charges a pro rata share for the custodial services for the space the charter schools use in the district's facilities. The other charter schools pay the full cost of their upkeep and maintenance through their leased or rental agreement. It varies with each charter school, but they are not charged for district-wide costs. Number 0486 MR. JEANS raised a couple of other issues for their consideration. The DOE does have a concern with changing charter schools so that they are not classified as alternative schools, especially with lifting the cap on the charter schools. The DOE may see alternative schools in districts, like alternative high schools and other such programs, apply for charter school status so that they can then go through the school-size-adjustment table. If they start having these little pockets of schools popping up all over under the umbrella of charter school, they could have some extremely high costs for the educational programs. CO-CHAIRMAN DYSON asked how they could fix that and asked Mr. Jeans for any suggestions. MR. JEANS said they may be able to come up with some ideas for fixing that. CO-CHAIRMAN DYSON said they are eager to do it right and well and not have some unintended, negative effects. Number 0330 MR. JEANS mentioned charter schools that are providing distance delivery or programs similar to "correspondence" programs. Right now they have the Delta-Greeley Cyber School, which is a distance delivery program, and the DOE has classified that charter school, for funding purposes, as a correspondence school. He asked if there was a way to clarify what the intent was for these types of programs. The foundation program has two pots of money: One for the school-size-adjustment to cover facilities, fixed costs and such, and one for the correspondence allocation which is a flat 80 percent allocation per student; that is an issue for them. Number 0244 REPRESENTATIVE MORGAN wondered how the DOE deals with the two small boarding schools in Galena with 75 students and Takotna with 25 students. He doesn't want to jeopardize them. MR. JEANS said those two schools are classified as alternative schools because they are serving less than 200 students. Under the charter school law now, charter schools that have boarding programs cannot get state funds for their residential component of that charter school. That has been an issue for those communities, but the law prohibits it, so the DOE can't help out for the funding on the residential component of that program. CO-CHAIRMAN DYSON asked Mr. Jeans how they could fix that. Number 0160 MR. JEANS answered they would need to remove the prohibition in the statute. Number 0127 CO-CHAIRMAN COGHILL noted that the fiscal note on that small change would change the chances of getting something through this year. REPRESENTATIVE BRICE asked what was the purpose of having that addition outside the fiscal impacts. MR. JEANS said he doesn't know why that was placed in there. It was placed in there about the same time Galena was getting their charter school approved as a boarding school. Number 0051 REPRESENTATIVE MORGAN said the schools in Takotna and Galena are the last line for these students. These are hard-to-place students, and these two schools have zero tolerance. TAPE 99-44, SIDE A Number 0019 CO-CHAIRMAN COGHILL suggested that they make some amendments and bring HB 191 back for discussion on Tuesday. [HB 191 was held over.] Number 0131 CO-CHAIRMAN DYSON made a motion to adopt an unnumbered bill on the Medical Marijuana as a committee bill. There was no objection, so it will be introduced as a committee bill. HB 195 - SCHOOL GRANT/DEBT REIMBURSEMENT Number 0174 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 195, "An Act relating to school construction grants and to municipal school construction debt reimbursement." Number 0218 BRUCE CAMPBELL, Legislative Assistant to Senator Randy Phillips, came forward to present the sponsor statement for HB 195. This is a companion bill to SB 95 which is supported by the Anchorage school board, the Anchorage caucus and the Fairbanks school board. Senate Bill 95 recognizes the grades 6 to 8 middle school concept. Currently, the statutes deal with junior high, grades 7, 8, and 9, but they don't have a middle school concept in the statute process; it makes it difficult to address middle schools in determining the school size and calculations for construction. Anchorage junior highs have been converted to the middle school concept. In downtown Fairbanks, there are still junior highs, grades 7 through 9, but North Pole has a middle school of grades 6, 7 and 8. This change seeks to expand the DOE regulations in a manner that conforms with the middle school concept, and it gives school boards flexibility in determining how they house their students. The core of the bill is on page 3 where they have added the middle school concept in lines 20 through 23. MR. CAMPBELL told the committee that currently sixth graders are calculated as if they were in elementary schools, even though they are in a middle school. Elementary schools have smaller size requirements than middle schools. Number 0417 REPRESENTATIVE BRICE asked how this will affect existing schools that have the sixth graders in elementary schools. MR. CAMPBELL said there would be no change. CO-CHAIRMAN DYSON believes this is not going to have any detrimental affect of schools and students now, but it will allow districts to plan and build for the middle school concept and be able to treat the students according to the facility they are in, not the academic progression. He asked if this change will get more operational funding for the student for the district. MR. CAMPBELL answered no, it is strictly the capital side. Number 0752 LARRY WIGET, Executive Director, Public Affairs, Anchorage School District, came forward to testify. Their goal is allow them to be able to count students who are in a middle school program have the square footage counted as a secondary school student to meet the program needs of that student. Sixth graders that are housed in elementary school programs will be counted as elementary students. They believe this will allow them the flexibility in the design in putting up new middle school, if the school board decides they want a sixth grade combination in a middle school program. This will allow them to put the square footage in. They are looking for flexibility in the design of new facilities and being able to count the sixth graders in a middle school program as secondary students as they should be. Number 0914 DEE HUBBARD, Member, Bond Reimbursement and Grant Review Committee, testified via teleconference from Anchorage. She is also a volunteer. She sees two concerns. One deals with the wording in both Sections 1 and 2 which talks about a specific building. She pointed out that there are schools in this state that house grades K-8 and K-12. The way this language is written, because the K-8 is housed in an elementary school, these sixth grade students, if they were receiving a secondary program education, would not be counted to allow the increase in square footage from 106 to 150 square feet. She suggested that instead of talking about the physical structure of where they are housed, they should talk about the level of education that they are getting. That would remove the barriers for schools with other configurations that aren't covered in this legislation. MS. HUBBARD said the other concern involves a lot of paperwork. If the bill does not take care of the K-8 and K-12 schools, the school districts will be keeping two sets of books, and that causes a consternation problem. She admitted to being the culprit of this bill. In 1994, she noticed the anomaly in the statute and went to the school board and suggested they do something about the sixth graders in middle schools. Number 1166 MIKE MORGAN, Manager, Facilities Section, Education Support Services, DOE, came forward to testify. He explained that the bill started out in a directed fashion looking at middle schools. Last year the DOE provided a definition for middle schools that really gave districts the maximum flexibility to put any grade configuration they wanted to together, and they didn't expand it beyond the middle school concept, because that is where the sponsor started out. They can certainly look at language changes that will accommodate the other K-8 or K-12 facilities. REPRESENTATIVE GREEN asked if Mr. Morgan saw any problem with the change to include K-8 and K-12. MR. MORGAN didn't believe it will cause any problems, but it would cost more. Number 1279 REPRESENTATIVE GREEN asked if they don't make the change, would there be a chance they would be hammered for preferentially selecting these students over those students. MR. MORGAN agreed that this does provide disproportionate funding to a very small element because primarily middle schools right now occur in large urban areas. The smaller districts have gone to unified facilities rather than splitting the facilities up so they could qualify for additional funding. CO-CHAIRMAN COGHILL asked if the word "shall" on page 3, line 20, was a prohibition to those districts who choose not to put sixth graders in middle school. Number 1346 MR. MORGAN commented that what is often misunderstood about the DOE's current space guideline regulations is that they are not recommendations; they are a maximum that is going to be available for funding. There is a range of space allocation per facilities but the DOE doesn't tell the district how to use their total space allocation. The way the districts combine their students is up to the districts. The DOE is only saying there is a maximum they will fund up to. The districts don't have to choose to build to that maximum. That is what the space guidelines are doing. There could be a ripple effect if districts decided to move the sixth graders out of K-6 schools into secondary schools to qualify for more space; the K-6 schools could have excess space and then the high schools would be overcrowded, and that is the most expensive space to build. CO-CHAIRMAN DYSON asked Mr. Campbell if these questions have come up in the Senate. Number 1485 MR. CAMPBELL answered that some have come up, and the general discussion is that it is not the intent, other than to allow flexibility. He has not heard the intent of increasing the dollars available for construction. Once the DOE makes the allocation, the school district can pick and choose and try to get more flexibility in their options. Number 1512 CO-CHAIRMAN DYSON made a motion to move HB 195 from the committee with individual recommendations and attached fiscal notes. Number 1523 REPRESENTATIVE BRICE objected because of concerns in his school district. CO-CHAIRMAN DYSON asked if they waited to move it out on Tuesday would that give him enough time to work on it. Number 1546 REPRESENTATIVE BRICE said yes, and if not he will try to deal with it in the Finance Committee. Number 1570 CO-CHAIRMAN DYSON announced they would hold HB 195 until Tuesday. [HB 195 was heard and held.] HB 115 - USE OF UNIVERSITY OF ALASKA APPROPRIATION Number 1578 CO-CHAIRMAN COGHILL announced the next order of business as House Bill No. 115, "An Act relating to the University of Alaska; and providing for an effective date." Number 1621 REPRESENTATIVE CON BUNDE, Alaska State Legislature, sponsor, came forward to present HB 115. He indicated that the essence of SB 36, which was passed last year on the foundation formula for funding public schools, is that they need to allocate the educational resources effectively and fairly. He believes that once the monies are allocated fairly, that will beget more money. It is unlikely that there would be additional funds put into a system that was unfair in the view of the majority of the residents of the state. House Bill 115 asks that the state investment in the university system be distributed equitably, and that it be distributed based, much like SB 36, on student population. Many other states do this. House Bill 115 also provides for additional funding for the university on page 2, section 2 (1) allocate for each campus 2 percent inflation factor. The university has been concerned for a number of years that they have not been adequately funded based on an inflation factor. He used a chart of student-teacher ratios to show why he believes the funds are not fairly allocated: Faculty Full Time Equivalent Head Count (FTE) University of Alaska Anchorage 321 7,127 13,559 Teacher/Student Ratio: 22 to 1 42 to 1 University of Alaska Fairbanks 376 3,181 5,110 Teacher/Student Ratio: 8 to 1 13 to 1 University of Alaska Southeast 54 1,037 2,604 Teacher/Student Ratio: 19 to 1 48 to Number 1844 REPRESENTATIVE BUNDE said this bill encourages the allocation of the university's investment on a per student basis. He believes this will encourage greater funding for the university because people are more supportive when they feel their monies are being used fairly and equitably. He would like to see the university have the opportunity to grow in total funds and have increases for inflation. CO-CHAIRMAN DYSON commented that most inflation provisions are tied into something like the wholesale price index. He asked what was Representative Bunde's thinking on making it a flat 2 percent as opposed to tied to some national standard on inflation. Number 2064 REPRESENTATIVE BUNDE commented that the normal growth of government is 1.5 to 2 percent so that is why he factored it in there. The other is the safety valve. It may not be possible for the state to inflation-proof the university at 10 or 12 percent. This anticipates the growth in other state services and the philosophy that something is better than nothing. Number 2113 REPRESENTATIVE BRICE clarified that HB 115 has very little to do with SB 36, in that SB 36 was a funding formula, and HB 115 is an allocation formula. The 2 percent on page 2, lines 13-15 does not mean there will be a 2 percent increase in the university's budget. There is nothing in HB 115 that requires the legislature, or even suggests to the legislature, that the allocation that they make to the university increase which is unlike a foundation formula that generates an expected funding level. This does not generate an expected funding level. It creates a division table that divides the appropriation the legislature makes to the university, and then tells the university how to make that allocation. They are not talking about incorporating a 2 percent increase in the university budget. They would be requiring 2 percent in the allocation which would become null and void if the legislature has to cut the university's budget. REPRESENTATIVE BUNDE said that the university could certainly use this, if HB 115 became law, to say they must fund them because they have asked that they provide this increase. None of this funding is sacrosanct; they could all be changed by a future legislature if that were necessary. Number 2254 WENDY REDMAN, Vice President, Statewide University Relations, University of Alaska, came forward to testify. She supports the spirit that has initiated this legislation. It has been borne of some deep frustration on the part of Representative Bunde about a difficult funding situation, particularly in Anchorage. The decade of the 90s should have belonged to UAA [University of Alaska Anchorage]. It is a booming campus, their enrollments have been going up, and they have not gotten any kind of increases except a $2 million increase in 1993. The UAA has been flat during a time of incredible growth. It has been extremely frustrating. However, the answer is not to try to take money from other campuses to enhance Anchorage; they need new money for Anchorage, and they have enough data to support that. MS. REDMAN referred to an article in their packet on formulas by Mary McKeown which concludes that states are abandoning the use of formulas at this time. Ms. McKeown says formulas will never solve the resource allocation problems in higher education. Formulas cannot recognize the full range of objective and subjective differences among institutions, nor can they anticipate changes in the missions of institutions, such as those changes that will come about with the advent of virtual universities. Ms. Redman said formulas have played an important role in many states in building up the base budgets, particularly in those states where the individual campuses are not part of a system. TAPE 99-44, SIDE B Number 2359 MS. REDMAN continued saying that formulas in many of those states have been helpful in bringing an equity to the base of those budgets. However, formulas are not very helpful when the budgets are flat or declining. Most states are beginning to move off of the formulas that are derived from the numbers of students and moving to more accountability and productivity types of formulas. That is the direction the University of Alaska is looking at internally. The formula that is included in Representative Bunde's bill is actually a formula similar to one in use in Idaho, which is a valid formula. Representative Bunde and his staff have worked hard to try to accommodate the concerns that they have expressed over the years about the differences in discipline which are very real. This formula does not work in Alaska because of the very different types of institutions and the location of institutions. For example, UAA's annual physical plant expenditure is about $6 million per year, and UAF's annual physical plant expenditure is about $19 million per year. It is not just in the square footage, although there is more square footage in Fairbanks, but the weather makes a tremendous difference in how those campuses are run and how much it costs to do things. The cost differential in Fairbanks is significant. MS. REDMAN explained it is important to look at the type and mission of the institution. At UAF, 50 percent of their faculty are research faculty who do not teach classes; they do have academic rank so they show up in the data as faculty, but they are not funded with general funds. They are not hired to teach; they are hired to do research and generate money. If you look at UAF, which is designated as a research 1 institution, about 65 percent of their faculty are full time. Anchorage is designated as a comprehensive master's institution, an urban institution, and their full-time faculty right now are about 35 percent. They would like to get them up to 45 percent which would be more appropriate for their type of institution. As they do that, the costs are going to rise. More full-time faculty, the higher that cost per student. Right now UAA's cost per student are artificially low because of the high number of adjunct faculty there, but that is not the best situation for the student. MS. REDMAN indicated that because of the differences in the types of institutions, about 70 percent of UAF's students are full-time, and in the FY 1998 academic year, close to 50 percent of their credits were at the upper division level. About 35 percent of UAA's students are full time, and about 30 percent of their credits are the upper division level. They have different profiles. Anchorage is changing more than Fairbanks; Fairbanks has been very stable over time. Anchorage is moving from the community college model and is beginning to add many more full-time students to their institution, and that is the largest growing element in Anchorage. Those numbers begin to shift as they turn out more baccalaureate majors, and they want to encourage that. It is important to understand that it is not as simple as taking the total budget, or even the total instructional budget, and dividing it by the number of students. Representative Bunde's bill makes a stab at trying to differentiate between that based on the disciplines. MS. REDMAN suggested that it doesn't really get into the other two elements which are the type of institution and the level of enrollment. Those are two important things to look at in a formula. Anchorage is able to generate large classes because of their large population. The whole issue of the impact of the size also comes into play when they look at instructional models. Number 2159 MS. REDMAN mentioned that last year the university formed a committee that was chaired by the Anchorage chancellor Gorsuch, and they worked all last summer on looking at formulas for the allocation of the instructional resources. They spent many hours going over detailed data trying to find where the differences are, and if there are major differences between the campuses once they strip away the things that are unique. For instance, UAF has a huge public service responsibility because of the Cooperative Extension Service, the Marine Advisory Program, things that UAA does not have. The University of Alaska Anchorage is not the land-grant institution, and it doesn't have those responsibilities. Anchorage has other responsibilities that UAF doesn't have. It has a much greater part-time and adult population; a much larger traditional community college type population that brings a lot of other issues. They tried to separate the differences out and the committee found that there are some differences in some key program areas. They were very small compared to what people were expecting to see, but they were significant in some areas. MS. REDMAN noted that those are the areas they are attempting to address now. The areas where they saw the big differences were in programs that are in the core curriculum: English, speech and history where they saw that UAF had many more faculty FTE per student than they had in Anchorage. They then compared them with the national averages. It is not that Fairbanks is over where they should be; but that Anchorage is so far under where they need to be. It is not in anybody's best interest to now make UAF under where they should be to increase Anchorage. They are trying to shift the resources as they become available so as UAF and UAA have faculty vacancies, they are trying to gather those in a way that they can allocate them out. Unfortunately, they haven't been able to hire back many of the faculty vacancies, so they are trying to focus the hiring on the areas that are the most underserved. MS. REDMAN said this bill follows the national formula which is applied to new money. It is not that the legislature is attempting to go in and re-allocate the existing base but trying to direct the appropriation of new monies into the priority areas. She likes the fact that there is real money attached to this bill. On the other hand, she believes that it really is the Board of Regents responsibility to try to make these decisions. There is no way that this particular formula can cover the kinds of issues they need to cover. This formula only measures where they are today; it doesn't provide any model to aspire to which is part of what the legislature is trying to do with new monies: to help a campus build toward something that it can be. The legislature will see in this year's budget request new program initiatives in Anchorage because they are building the new logistics program and the new health care programs. Those are things that they couldn't calculate into a formula like this because there is nothing there now. She understands the motive, and appreciates the frustration that led to this, but she believes that the Board of Regents are in a better position to try to determine where new resources should go in the university. They are the only ones who have the time and the responsibility to be looking at the needs of the whole state within the higher education system context. Number 1920 CO-CHAIRMAN DYSON agreed that the argument of the UAF faculty devoted to research is a valid one. He wondered how close do they come to paying for themselves. MS. REDMAN said the faculty that they hire to do research must pay for all of themselves. There are research faculty, who must cover their own salary, and instructional faculty. Instructional faculty can buy out of some instruction by bringing in research money so they can get let off of a teaching load to do research. Number 1877 CO-CHAIRMAN DYSON asked if non-teaching staff and facilities are included in the research budget at UAF. MS. REDMAN replied yes plus: They spend about $12 million a year in state money that is supportive of research, which about three quarters of that is in Fairbanks, and about one quarter is in Anchorage. The state return is $4.50 for every dollar that goes in. Research is generating, not only the full cost of the research, but they get research overhead in direct cost recovery, which is calculated by the federal government, and that provides additional income to heat the buildings and do the accounting and so on. CO-CHAIRMAN DYSON inferred that the research programs in Fairbanks are actually subsidizing the educational program. Number 1816 MS. REDMAN answered it is about a quarter out of every four dollars that they calculated to be a subsidy. It is a good deal, and it is why they are trying to push more research in Anchorage. Research does provide a subsidy on the facilities side. CO-CHAIRMAN DYSON commented that she may have suggested that if there is no new money, there is going to be no addressing of the inequities of the present allocations of the university's financial resources. Number 1750 MS. REDMAN denied that was her intent. Even with no new resources, they are attempting to deal with that issue. They just make smaller steps when they are dealing with reductions instead of increases. The ability to make changes is much less. CO-CHAIRMAN COGHILL asked if the properties throughout the state that the university is managing for income is worked through the UAF campus or is it done in the different campuses. Number 1711 MS. REDMAN said that is done centrally, but it doesn't show up in the UAF budget; it shows up in a statewide administration budget. They do not use any general fund money to manage their land; it is all income from the lands themselves. CO-CHAIRMAN DYSON mentioned that U.S. Senator Murkowski is trying to get unallocated federal lands allocated to the university. He asked Ms. Redman if they thought it likely to happen, if it did, will it be easy and practical for the university to convert those lands to income producing property or some kind of investment account, and how quickly it could happen. Number 1648 MS. REDMAN indicated that she gives it about a fifty-fifty chance of getting through Congress. She believes that they could make money, and there are some possibilities that actually have some potential money. It would be well into the future. Land is just not going to solve a problem in this decade. It could take 10 to 20 years at best. CO-CHAIRMAN COGHILL asked if there is a problem in the formula trying to make an even distribution given that certain schools are going to have different pieces of that. Number 1545 MS. REDMAN said the difficulty is not necessarily a problem; it is only half the picture. They need to add to the formula the whole issue of the type of institution it is, the size of the institution and the mission. If they took the community colleges and put them up one-on-one against the university, the community colleges would get all the money. They are extremely efficient because they operate primarily with adjunct faculty, offer only lower division classes and have huge classes that generate a lot of income. That is why they just can't look at them that way. This formula attempts to get at part of that, but it doesn't get at the mission issue, which is the more subjective analysis that they have to go through. The Committee took an at-ease from 12:50 p.m. to 12:59 p.m. Number 1445 REPRESENTATIVE BUNDE commented that in his 25 years working there, there has never been year when the university had enough money or too much money. He began there when there wasn't a campus in Anchorage, and they couldn't get one because the legislature gave the money to the regents, and the regents in their wisdom chose not to build a campus in Anchorage, knowing full well when they did, there was going to be a demand for funds there, and Fairbanks would have competition. For years the state put money into the regent's hands, and Anchorage said it is only fair, give us our turn. As Ms. Redman said, the 90s was UAA's decade, and they didn't get it, because the current system allocates money in part on political considerations. The notion that they would put more money into a system that distributed the money in what some people might think an unfair fashion is a little bit politically naive. The majority in the legislature is from Anchorage. He asks that the university ask themselves if they expect the legislature to support the university, they would work diligently to assure them, that the money would be distributed in a fair and equitable fashion. The university has been promised those things before, and they haven't occurred. Maybe there is hope for the future, and behavior will change. Number 1282 CO-CHAIRMAN DYSON made a motion to move HB 115 out of committee with individual recommendations and attached fiscal note. Number 1261 REPRESENTATIVE BRICE objected. Number 1256 REPRESENTATIVE WHITAKER commented that his commitment is not to UAF but rather to excellence. "If the resources are simply not there to provide for excellence throughout the system, then let's focus and provide excellence where we can, and then try to raise the level throughout to a level of excellence. By lowering the level throughout, I think we do not serve ourselves well. The other major concern that I have with regard to this legislation is that we are now putting ourselves in the position of dictating to the regents how to spend the money that we allocate. I think that is problematic. It alludes to micro-management, and that is not our charge. Our charge is to set policy. Our policy should be to demand excellence throughout, and then be willing to fund at a level that will allow for the achievement of that excellence. For those reasons, and not for the notion that this is UAF as opposed to UAA, I simply cannot vote for this." Number 1160 REPRESENTATIVE BRICE echoed that his commitment is to excellence as well. "My blood oath is to the UA system, not to UAF. During my tenure in this body, I have voted consistently for Anchorage dormitories and other programs that helped UAA. I think that UAA is a very important part just as is UAF and UAS [University of Alaska Southeast] is a very important part. I think that is my problem with [HB] 115, it is a step towards what I would like to see which would be a foundation formula approach to funding the university." He would like the legislature to show the university the same commitment and faith shown to public K-12 education in establishing a funding level and fund it as the needs grow. He would love to see a foundation formula for the funding, not necessarily the allocation. They need to address the needs of a certain area of the state. He believes they need to look at how they do that, and the foundation formula is a way to doing that, not an allocation formula. REPRESENTATIVE GREEN commented that if they continued with that line of reasoning then they would still be in Sitka rather than in Juneau. Through the wisdom of the people in that age, they moved from that area to this area and of course there are a lot of people who think it should move again. He pointed out that they have the university on one end and the capital on the other end, but the growth of this state has been in southcentral. If they are saying that that is a fine situation, but they want to keep the institutions on the extremities and let the people in the middle to what they want, he believes that works against the entire premise that they are trying to do what they can for the best of the majority of the people of the state. To reject this is not in the best interest of all the people in the state. It may be to maintain an excellent university in one part of the state, but does it adequately serve the majority of the people in another part of the state. "I have to do what I think is the best for the majority of the people so I have to support the recommendation to move it." Number 952 REPRESENTATIVE WHITAKER said if they are to serve the majority of the people, for them to "parochialize" that is a disservice to maintain excellence in a geographic area is really irrelevant to the access to that excellence. It is there for all. Now if they want to create an excellent community college in Anchorage, he will stand on the table and clap his hands. He agrees that Anchorage should have the finest community college in the state of Alaska. Number 0905 CO-CHAIRMAN COGHILL commented that he is resistant to the idea of formulating without being able to get an understanding of the mission beyond the core curriculum that was lined out in the last part of this. He is a little torn because he likes the concept of equity, but he also understands in the university system that they have built in Alaska has created diversity that defies a formula at this point. He is going to have to think on how that can fit into this particular concept. Number 0817 A roll call vote was taken. Representatives Green and Dyson voted in favor of moving the bill. Representatives Whitaker, Morgan, Brice and Coghill voted against it. Representative Kemplen was absent. Therefore, HB 115 failed to move from the House Health, Education and Social Services Standing Committee by a vote of 4-2. Number 0831 CO-CHAIRMAN COGHILL recommended that they bring it up for reconsideration. He is open to any thoughts the sponsor might have on the recommendations for the diversity of the university. ADJOURNMENT Number 0797 There being no further business before the committee, the House Health, Education and Social Services Standing Committee meeting was adjourned at 1:13 p.m.