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