Legislature(2007 - 2008)HOUSE FINANCE 519
02/06/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB273 | |
| HB321 | |
| HJR2 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 273 | TELECONFERENCED | |
| + | HB 321 | TELECONFERENCED | |
| + | HJR 2 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 273
An Act relating to school funding, the base student
allocation, district cost factors, and the adjustments
for intensive services and average daily membership
calculations; and providing for an effective date.
1:46:56 PM
Representative Mike Hawker, MOVED to ADOPT Amendment 1, 25-
LS0148\M.1, Mischel, 1/25/08. Co-Chair Meyer OBJECTED for
discussion purposes.
Representative Hawker explained that the amendment adds
essential information on financing components &
recommendations made by the Joint Legislative Education
Funding Task Force. At the time the bill was drafted, the
information was not available to be included, addressing
recalibration of the pupil transportation costs. The
contracts were rewritten last summer and then renegotiated.
Amendment 1 reflects those contracts, adding them to the
bill.
1:48:01 PM
Co-Chair Meyer WITHDREW his OBJECTION. There being NO
further OBJECTTION, Amendment 1 was ADOPTED.
1:48:32 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, provided
members a handout: "K-12 Foundation Formula Funding-State of
Alaska FY2002 through FY2011". (Copy on File).
He explained that the information resulted from requests to
identify the numbers representing inflationary costs and
basic education funding. He highlighted the three various
scenarios:
· Method 1 - The amount of State spending for
education increased since FY2002
· Method 2 - Increases to the Base Student Allocation
(BSA)
· Method 3 - Numbers including retirement costs
Mr. Teal explained there is "no clear way" to determine what
education funding actually is or how it has changed. The
easiest way to understand education funding is to observe
the total amount appropriated for the foundation formula.
In FY02, the General Fund formula spending for the
foundation formula required $643 million dollars; FY09,
General Fund spending, not including debt reimbursement,
will amount to $1.214 billion dollars, which includes Task
Force recommendations not included in the BSA. The increase
from FY02 to FY09 is anticipated to be $570 million dollars,
an increase of 89% during the seven years or a 9.5% annual
increased spending.
Representative Gara inquired the location of that
information on the handout. Mr. Teal said the cream colored
area listed under Method 1. He noted an objection to the
comparison of total spending and the number of items
affecting it includes the student count. On a per student
base, the average daily membership (ADM) in FY02 was $5
thousand dollars higher than it is currently. On a per
student basis, funding was approximately $4.8 thousand
dollars; in FY02 & FY09, it has increased 95% to $9.4
thousand dollars. To adjust that number for inflation, the
spending would be boosted by inflation to match FY09
equivalent dollars, placing the increase up to 62% per
student funding.
1:51:44 PM
Representative Gara pointed out that a large dollar increase
went into funding the retirement shortfall. That account
was placed into the BSA for a few years. He asked if those
funds had been backed out, would there still be an adjusted
inflation amount increase to education funding. Mr. Teal
pointed out that information was indicated on the Method 2
chart. Method 2 identifies the increase to the BSA, a more
traditional method at looking at education funding.
Education funding tends to be a mix of State and local
contributions, which can be affected by property values. He
commented, the BSA is the "cleanest way" to look at the
amount of money going toward education in the classroom.
Mr. Teal referenced handouts from previous meetings, which
he had modified to reflect the Task Force recommendations
amounting to a $100 dollar increase from that proposed for
FY09-FY11, $200 dollars.
Mr. Teal referenced Handout 2: "Alaska K-12 Funding, Base
Student Allocation with Adjustments". (Copy on File). The
pencils on that chart do not show an increase quite as
rapidly, highlighting a 49% increase from FY02-FY09.
However, with the indicated changes, what is actually being
proposed is a 45% increase.
The BSA does not reflect what the State has spent for K-12
because of inclusion of the early opportunity grants,
district cost factors, school improvement grants and
intensive needs.
1:54:02 PM
Representative Gara pointed out that the increases show the
upward flow to the BSA but do not indicate outside funding
such as the learning opportunity grants. Consequently, the
increases were actually higher. He noted that a large
portion of the BSA increases for a few years had gone into
the retirement shortfall. He requested more information
indicating the exclusion of money to the retirement
shortfall. He maintained that those dollars never go into
the classroom.
Mr. Teal advised that he had not tracked those numbers
because retirement was funded through the BSA; in order for
it to be tracked, there must be a conversion of the district
cost factors and the learning opportunity grants to a BSA
equivalent. He understood why Representative Gara would
want to do that for the retirement numbers because,
basically, that too is a reduction to the BSA. He noted
those numbers were only tracked for FY09; he added,
retirement costs could be ignored from the FY02-FY09
comparison. The State now has returned to the FY02
contribution rate and retirement costs have been corrected
in the FY02-FY09 comparison.
1:56:09 PM
Representative Gara understood that in FY09, the
contribution rate would be 12.5%; he asked if that was the
rate in FY02. Mr. Teal replied it was approximately 12.5%.
Representative Gara asked the change between FY02 and FY09
to per student funding. Mr. Teal referenced the chart with
the bars next to the pencils, Handout 2. The bars represent
the adjustments to the BSA. He described the process for
determining the difference between the graphed numbers,
pointing out that in FY05 & FY06, there was no funding
outside the formula. The BSA and the adjusted BSA was the
same in FY07, including the district cost factors; in FY09 &
later, intensive needs and district cost factors (DCF) add a
substantial amount of funding outside the BSA.
Mr. Teal continued, the Governor's proposed increase of $200
dollars to the BSA, would cost $44.8 million dollars in
FY09. Therefore, the $90 million dollars added for
intensive needs and DCF equals a $402 dollar increase to the
BSA.
1:59:28 PM
Mr. Teal stated those numbers include what the Department of
Education has indicated in the footnote with the $35 million
& the $70 million dollars outside the formula, converting it
to an equivalent BSA and then indicating the number. The
inflation adjustment does not include retirement costs, but
instead addresses dollars within the classroom. The
increase is approximately 45%, with an average increase of
about 5.4%. The BSA is anticipated to increase to 5.8% n
FY09, which will be a 45% increase since FY02. He
reiterated that the average annual rate of growth is
approximately 5.4% annually. Inflation has averaged 2.65%
each year, which means that since FY02, K-12 funding has
grown twice the rate of inflation.
2:01:08 PM
Representative Gara observed that those numbers did not
include the cuts for funding. By excluding retirement costs
and then including the outside allocated dollars within the
formula, the increase will be 5.4% per year. He pointed out
it is not calculated and in FY03, the Legislature cut the
amount of pupil transportation funding and the formula.
Additionally, the Legislature cut the pre-Kindergarten
program, which had been included in the FY02 budget.
Schools were required to make up the shortfalls from their
BSA dollars; hence, classroom money had to be placed into
the above listed items. Community school funding was cut in
FY03. Representative Gara summarized, there are a number of
funding sources K-12 education in FY02, which are not
indicated in the itemization graph, which narrows the change
between FY02-FY09. Mr. Teal agreed.
2:02:18 PM
Mr. Teal admitted that many complications occur when making
a comparison. The attached chart represents only three
scenarios. Mr. Teal added that the items referred to by
Representative Gara were relatively small and would not
change the bottom line, which is that funding is increasing
roughly twice the rate of inflation.
2:03:12 PM
Co-Chair Meyer noted that references such as community
schools are not considered education funding. He commented
that pupil transportation had increased. Mr. Teal advised
that pupil transportation had not been indicated, only the
foundation formula and that pupil transportation has
increased. Some consider that cost outside classroom money.
There are numerous methods that could be considered in
providing a valid comparison.
Co-Chair Chenault noted that in FY03, the Legislature
instituted a new pupil transportation funding arrangement,
which he understood provided an increase. Currently, those
dollars are no longer adequate to address the concerns.
2:04:49 PM
Representative Hawker observed that the analysis had not
included any funding for the major maintenance list, capital
construction or debt reimbursement. Mr. Teal added, the
included costs are strictly operational.
Representative Hawker recalled that in FY03, pupil
transportation was moved from a non-accountable to an
accountable system. He acknowledged the difficulty of
composing an analysis and applauded the efforts done by
Legislative Finance Division (LFD).
Representative Kelly noted appreciation for the work
provided by the LFD breaking down specific funding
information. He warned that there had not been enough
information and research done for the choices being made.
He pointed out the 89% increased educational funding for K-
12 over the past seven years, emphasizing his concern with
the proposed budget. He stated the budget is unsustainable
and does not provide adequate value for increases to the
educational system. He pointed out that the retirement
costs to the system will take twenty-five years to pay off.
Representative Kelly urged that a more conservative approach
be taken. He reiterated that the proposed costs are "out of
control".
Co-Chair Meyer agreed with concerns voiced by Representative
Kelly. He had hoped that the Task Force would have adequate
information for making recommendations. Representative
Hawker noted that Mr. Jeans from the Department had provided
extensive information regarding the financial consequences
of the decisions being made.
Co-Chair Meyer advised that the legislative appropriations
have more than doubled in keeping up with inflation.
Representative Gara remembered opposing the change to pupil
transportation made in FY03. Until FY03, school districts
received full compensation for transportation costs.
Beginning in FY03, the communities were provided increased
supplemental funding for fuel costs. In most school
districts, the increase has been steep. The Legislature
determined a formula providing a percentage that did not
increase with the actual costs. Many districts have had to
take money from their classroom funds to pay for the
increased fuel costs, which has been a great concern since
FY03. He acknowledged, the education debate has been
frustrating. Education policy should be determining the
balance between urban and rural areas. In many districts,
class sizes are too big. He recommended that discussion
occur on what the legislature can do to help reduce class
size. Instead, discussion only compares funding from one
year to the next. Representative Gara worried about basic
education considerations.
2:12:33 PM
Mr. Teal addressed Method 3, the model excluding retirement
costs. Method 3 provides an analytic view of only the
dollars in the classroom. State retirement contributions on
behalf of school districts in FY09 will be $216 million
dollars. If that money was distributed to the districts,
the BSA would experience a 68% increase in K-12 funding
since FY02, growing at 7.7% annually, tripling the rate of
inflation. Retirement funding is costing the State more
money, however, the teachers are not being paid more. There
is no more available to the districts or the classrooms
because the funds are paid directly to the Department of
Education. Method 3 excludes retirement costs. Retirement
costs are now $216 million dollars per year, which the State
pays instead of increasing the BSA. If those dollars were
paid to the districts, it would be the equivalent of having
a BSA of $6.8 thousand dollars. He concluded that it grows
triple the rate of inflation.
Representative Gara discussed the amount of money currently
placed into the education system. Costs to the schools are
increasing faster than inflation. He questioned how much
health insurance & fuel costs had superseded inflation.
Those costs are eating away the district's ability to
provide curriculum. Mr. Teal agreed, but did not have the
numbers. The inflation indicator being used is the Consumer
Price Index (CPI), which has no relationship to the costs of
running schools but is the standard recommendation.
2:16:09 PM
Representative Kelly asked if K-12 education system used a
similar index as that used by the University. Mr. Teal said
no. Representative Kelly opined that the spreadsheet
attachment provides a "great voucher proposal" for
education. He reiterated concerns with the proposed budget.
2:17:30 PM
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, explained that he had
just received the LFD analysis, which, he assumed originated
from his testimony during the pervious hearing, identifying
the Governor's request to move $100 dollars per student per
year for each of the next three years.
Mr. Jeans hoped he had not left the Committee with the
impression that education funding had not substantially
increased since FY02. That was not his intent. Mr. Jeans
warned it is inappropriate, for the Legislature to consider
formula adjustments in an inflation calculation. The Task
Force made recommendations because they perceived
deficiencies in the existing formula, to be adjusted. Mr.
Jeans stated there should not be an adjustment, weighing in
a cost of living factor. He understood that Anchorage's
contract for their teachers would increase 4%-3%-3% over the
next three years. The Governor's proposes a $200 dollar
increase, which would be slightly below 4%. The
Administration attempts to achieve sustainability and
predictability for the school districts & municipalities so
that they can plan ahead for the next four years. He
commented that the $200 dollar increase will provide that
predictability.
2:20:09 PM
Representative Gara maintained that there must be a formula,
protecting both urban and rural school districts. He noted
his support for the proposal by the Administration, increase
as recommended in the bill. He observed the increase for
special needs funding is a fraction of the real costs. He
asked how much the Anchorage School District receives for
their special needs student versus the real costs for that
student.
Mr. Jeans replied that currently, Anchorage is spending $80
thousand dollars for a special needs child; they are
actually funded $26 thousand dollars through the foundation
program. He hoped that could be a formula correction
recommended by the Task Force and to include it as an offset
to inflation in the analysis would be inappropriate.
Representative Gara warned that establishing a formula that
leaves the majority of students in the State behind
inflation, results in bigger class sizes & less curriculum.
He hoped that the Committee could discuss ways to address
those concerns.
Representative Kelly disagreed with comments that Alaskan's
only look at the cost of education. He believed that the
public looks at the total costs, reiterating that the
proposed costs are not sustainable.
2:23:32 PM
Co-Chair Meyer interjected that on the State level, only the
total costs should be addressed. It is up to the local
school districts to determine which programs are offered in
their location. The function of the Legislature is only to
provide the necessary funding.
Representative Gara advised he intends to offer an amendment
on the House floor. He urged reconsideration of the
proposed increase contained in the bill. He agreed with the
Administration that $200 dollars per year does make more
sense. Initially, the however, the Task Force members
disagreed about the exact amount and decided that the
Legislature should determine it. He requested further
discussion on the increased levels of funding are and what
it means in terms of class size and curriculum offered and
it affects each student.
2:26:01 PM
Representative Crawford noted frustration maintaining the
status quo for Alaska's students. He urged a better
investment in kids so that they can succeed in the
competitive world. He supported the number proposed by the
Administration.
Representative Joule observed that the Education Funding
Task Force had a narrowly defined mission and that the
timeline was short for addressing such a large focus. He
shared frustration as voiced by other members.
2:29:49 PM
Co-Chair Chenault appreciated the work that the Task Force
accomplished with the requested direction provided them.
They did address some of the needs of Alaskan students. He
did not agree that the proposed funding keeps districts at a
status quo but thought, instead, it moves them forward. He
indicated the short funding over the past ten years, and
realized that Anchorage intensive needs are a huge issue.
He mentioned the special needs in his own district and
pointed out that statewide, there are over 800 children in
that category. Smaller classrooms require more money in
education and/or hiring more teachers. He agreed the topic
should be discussed at greater length at a future time.
Co-Chair Chenault acknowledged the system is not perfect.
He indicated concern with the voucher criteria. He thought
that the Task Force did an excellent job in forming
legislation, maintaining that HB 273 improves the outlook of
education in the State.
2:34:05 PM
Co-Chair Meyer reiterated his appreciation for the work by
the Task Force. He pointed out the three fiscal notes, with
a new one by the Department of Education and Early
Development.
Representative the statistics on the number of kids actually
graduating from high school & how Alaska ranks with the
other states.
2:35:22 PM
Representative Hawker acknowledged there had been a
divergence of opinions brought forward in drafting HB 273.
He acknowledged shared concerns voiced by Representative
Kelly.
Representative Hawker MOVED to REPORT CS HB 273 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Kelly OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Crawford, Gara, Hawker, Joule, Nelson,
Stoltze, Thomas, Chenault, Meyer
OPPOSED: Kelly
Representative Foster was not present for the vote.
The MOTION FAILED (9-1).
CS HB 273(FIN) was reported out of Committee with a "do
pass" recommendation and with two previously published
fiscal notes by the Department of Education and Early
Development and one new fiscal note by the Department of
Education and Early Development.
AT EASE: 2:38:12 PM
RECONVENE: 2:44:03 PM
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