Legislature(2011 - 2012)HOUSE FINANCE 519
03/30/2012 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB313 | |
| HB64 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 313 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 64 | TELECONFERENCED | |
HOUSE BILL NO. 313
"An Act relating to student counts and estimates for
public school funding; and providing for an effective
date."
9:14:29 AM
Vice-chair Fairclough MOVED the committee substitute HB
313(EDC) 27-LS1223\B as the working document.
REPRESENTATIVE ERIC FEIGE, read from the sponsor statement:
Our school districts need effective tools to plan and
budget for the education of our children.
Under HB 313 -- subject to the hold harmless
provisions, changes in the Base Student Allocation, or
other legislative changes -- districts will be able to
complete the budget process and determine staffing
levels earlier, eliminate unnecessary layoff notices,
and execute employment contracts to improve the
stability of the education climate in the state.
The purpose of the bill is to base the funding for
each school district in the state on the count under
A.S. 14.17.600 for the preceding fiscal year. For
example, the count conducted in Fiscal Year 2013 will
establish the funding level for the district for the
2014 Fiscal Year.
The new funding formula will not change the "hold
harmless" clause currently in existence. If a decrease
in enrollment of five percent or more occurs, the
district will continue to receive funding based upon
the Average Daily Membership plus the 75/50/25 percent
addition over the succeeding three years. Other
provisions of the foundation formula will remain as
well.
If a district has an increase in student count of 200
students or three percent over the previous year,
supplemental funding will be provided to the district
for the current fiscal year. Helping districts deal
with large changes in population.
The new funding method will implement with the FY 2014
year. Thus, the count conducted in the fall of 2012
will provide the funding level for both FY 2013 and FY
2014, subject to the hold harmless provisions.
HB 313 also increases transparency in the governmental
budgeting process by prohibiting the current practice
that allows municipalities to take funds back from
school districts at the end of the fiscal year.
9:17:14 AM
MICHAEL PASCHALL, STAFF, REPRESENTATIVE FEIGE, explained
that the proposed legislation was spurred by a request from
the Rural Education Attendance Area (REAA). The intent was
to determine how the daily membership applied to the Base
Student Allocation (BSA).
Co-Chair Stoltze queried the number of school districts
involved.
Ms. Paschall replied that one district was involved
initially and other districts began participating in the
discussions. He noted that modifications were made to meet
the needs of all of the districts. He was unaware of any
objection from a district to the bill. He hoped to address
concerns of any interested district.
Representative Wilson requested a definition for REAA. Mr.
Paschall responded Rural Education Attendance Area, which
included the school districts located outside of
municipalities.
Mr. Paschall provided a presentation titled "HB 313
Application of Average Daily Membership (ADM) to Base
Student Allocation (BSA)" (copy on file). He identified
slide 1: "Application of ADM to BSA." He explained that the
budget process occurred in the spring. The actual student
count was released in October, and confirmed in January. He
noted that between July and March, an estimated payment was
made based on January's estimate. Payments were adjusted
between April and June to compensate for any under or over-
payments. He stated that HB 313 used the confirmed count
and made actual payments July through March. April through
June would incur actual payments unless hold harmless
supplemental provisions of the bill applied.
9:20:19 AM
Mr. Paschall continued with slide 2: "Variation of ADM
Projections." He explained the differences between extremes
that led to budget issues.
· For FY 2011, Variations ranged from
o 743 students too high (1.5%) to
o 192 students too low (0.84%)
o 9.8 % too high (3.35 students)
o 15.8% too low(16.25 students)
Representative Costello asked about the terms "too high"
and "too low." She asked if slide 2 referred to the current
situation or the application of the legislation.
Mr. Paschall responded that the slide exemplified the
current process. The purpose of the slide was to
demonstrate the extreme variations for FY 11.
Representative Costello queried the statement "too high."
Mr. Paschall replied that the estimate provided was greater
than the actual number of students. He added that the slide
demonstrated extremes, but in fact, many district
projections were accurate.
Co-Chair Thomas asked how the large number of students was
derived when REAA districts tended to be small. He imagined
that REAAs were comprised of small village schools.
Mr. Paschall responded that some REAAs encompassed larger
districts.
Representative Doogan asked about slide 1 and its
variations. He asked if the differences were detailed in
the ADM confirmation row of the slide.
Mr. Paschall replied in the affirmative.
Representative Doogan clarified that he was seeking the
data regarding the variation amounts.
Mr. Paschall replied that the difference between the
estimate and the confirmation equaled the variation amount.
9:24:20 AM
Representative Gara expressed concern about the budget. He
wondered about the establishment of the budget using the
prior year's student counts. He asked if the school
received funding at the beginning of the year.
Mr. Paschall responded that funding arrived during the last
quarter of the year. He elaborated that the actual amount
was derived after the confirmation count. He stated that
provisions existed in the bill to address the issue.
Representative Neuman commented on slide 2. He considered
the information more valuable if committee members could
discern which districts were too high and which too low.
Mr. Paschall offered to provide the information.
9:26:27 AM
Mr. Paschall continued with slide 3: "Statewide Average
Daily Membership Fiscal Year 1988-2011." The graph
displayed that "statewide ADM has been relatively flat for
over a decade." He noted the lack of volatility in the
statewide enrollment.
Mr. Paschall discussed slide 4: "Statewide ADM FY 2002-
2011." He noted the "decrease of 2.7 percent (3,627
students) statewide in past decade."
Mr. Paschall continued with slide 5: "The Biggest Losers."
He noted that 42 districts dropped in enrollment.
Mr. Paschall continued with slide 6: "The Biggest Gains."
He noted that 12 districts increased enrollment. He stated
that the two districts at the bottom of the screen
exemplified their electronic scores.
Mr. Paschall referred to slide 7: "Returned Funds." The
slide detailed the reallocation of unspent funds. The money
was returned to the borough and reallocated to the district
in a future budgeting process. The slide exemplified two
districts. The process depleted reserves leading to a lower
balance.
· Fairbanks North Star Borough School District
o FY 2012 $2.1 million
o FY 2011 $1.2 million
· Mat-Su Borough School District
o FY 2010 $1.3 million
o FY 2011 $268 thousand
Mr. Paschall continued with slide 8: "Best Fund Balance:
Best Practices." He noted that a provision of the bill was
to increase the reserve balance from 10 percent of the
current year's fund to 15 percent as a maximum amount of
unrestricted reserves. The change would allow greater
flexibility to acquire funds for projects.
9:29:43 AM
Co-Chair Thomas shared his experience working on a school
board where a budget reserve led to negotiations.
Mr. Paschall responded that districts had options regarding
reserves. Some districts preferred to retain the reserves.
He spoke to the flexibility allowed by the increase from 10
to 15 percent maximum unrestricted reserve.
Co-Chair Stoltze commented on "hidden money" that was
addressed during negotiations on the subject.
Representative Neuman added that Mat-Su had 50 percent of
unspent funds reincorporated into the borough's general
fund. A fund was thus created for the purchase of future
schools with the unspent funds.
Mr. Paschall noted the variety of uses for unspent funds
among Alaskan districts. He added that some districts had a
good relationship with their borough regarding the use of
reserves.
9:32:20 AM
KEN FORREST, CHIEF BUSINESS OFFICIAL, MATANUSKA-SUSITNA
SCHOOL (via teleconference), testified in support of the
bill. He spoke about the provision that would provide
supplemental funding for growing districts and would
directly impact the Mat-Su district. He stated that the
average annual growth was 425 students. He cited that the
level of growth seen in his district led to greater than
normal operational expenditures. He mentioned the abundant
modular units used to house the growing population of
students in the district. The modular units cost $100
thousand to purchase and equip. He added that technology
and infrastructure improvements increase costs above those
provided in the foundation formula. He mentioned the
possibility of bond issues to contribute funding from local
citizens.
Representative Gara supposed that a growing school district
would be underfunded, since the figures were based on the
prior year's data.
Mr. Forest agreed that the district would be underfunded
when using the prior year's counts if the district fell
behind the 200 per pupil increase, but supplemental funds
would be acquired in years where the district was above the
200 per pupil increase. He mentioned that the historic
average encouraged predictions of balance over time. He
agreed that the district would be deficient in funding for
one fiscal year only, under HB 313.
Representative Gara understood that the foundation formula
in existence allowed additional students money. He
expressed concern that district would not receive the
additional money unless they were 200 students off.
Mr. Forest understood that the intent of the legislation
was to provide a planning window for school districts to
eliminate the variance.
Co-Chair Thomas noted frequent testimony regarding funding
deficiencies, making the discussion about surpluses
confusing. He added information about a list of communities
who neglected to contribute to the cap.
9:38:41 AM
Representative Neuman echoed confusion regarding the
conflicting testimony. He agreed that most statements from
school districts pleaded for additional funding to address
shortages, while Mr. Forest spoke about reserves swept back
into the municipality. He agreed that personal services
were separate, but opined that additional needs for
education existed.
Mr. Forest responded that it would be fiscally
irresponsible to spend the majority of the district's
budget. He noted that the operational fund budget was
approximately $190 million. He stated that only $268,460
went to the borough. The ending fund balance was
$1,400,000. He stated that the reserves were limited. He
noted the recommendation for two months of reserve on-hand,
but his district had approximately one and one-half days
reserve on-hand.
Representative Neuman recalled testimony from the Mat-Su
district stating a $13 million shortfall.
Representative Guttenberg queried a resolution from Mat-Su
district, which would prevent the fund balance rolling back
into the borough. He requested more information about the
resolution.
Mr. Forest replied that the school board prepared a
resolution requesting allowance for the fund balance to
remain with the school district. The resolution failed with
one vote. The board of education submitted a similar
regulation in 2012. The resolution would allow for the
recommended amount of operating funds in the event of an
unanticipated need. He recalled a school fire that led to a
need for approximately $1 million to equip the new
building. He noted the ideal of small class size, which
pushed the limits of the budget.
Representative Guttenberg asked about the borough's
responsibility to the school board.
Mr. Forest believed that the borough's position was that
the school district should operate without reserve.
9:44:17 AM
Co-Chair Thomas pointed out documentation that the Mat-Su
district fell $12 million below the required local
contribution.
9:44:38 AM
DUNCAN WARE, SUPERINTENDENT, DELTA GREELY SCHOOL DISTRICT
(via teleconference), noted that his district was
classified as REAA, and therefore did not have the benefit
of local funding from a borough. He voiced his support for
the bill. He explained his district's budgetary process. He
noted the stability of his district's student population
over the last two fiscal years, but he shared that
decreases ranging from 5 percent to 2 percent were seen in
the last decade. He understood that HB 313 provided
effective planning to optimize for program delivery and
allow for student services.
Co-Chair Thomas understood that forward funding
accomplished a similar task.
PETE LEWIS, SUPERINTENDENT, FAIRBANKS NORTH STAR BOROUGH
(via teleconference), supported the bill. He believed that
the legislation provided another tool in the budget
planning process. He echoed the testimony of Mr. Forest and
Mr. Ware.
Representative Wilson asked about the practice of sweeping
reserves into municipal funds.
Mr. Lewis believed that Representative Wilson referred to
the lapse ordinance, which placed operating dollars in a
fund for major maintenance.
Representative Wilson asked if the bill would alter the
effective date of the ordinance.
Mr. Lewis responded in the affirmative. He added that the
June 30, unassigned balance was zero.
Representative Gara asked if school districts retained
reserves for the purpose of retaining teachers when funding
was inadequate. He understood that the purpose of reserves
was to limit course and staff disruptions.
Mr. Lewis agreed and added that his district had an
assigned fund balance in the form of inventories.
Representative Gara referred to page 8 of the legislation
which indicated that funding was based on last year's
student count. He understood that a discrepancy of 200
students led to an adjustment and queried the action taken
if the discrepancy was less than 200. He asked if a change
in bill language would be acceptable where the 3 percent
threshold was eliminated.
Mr. Lewis stated that his district approved of the bill as
written. He cited line 25 stating that if a district was
unable to meet the fiscal year needs, supplemental funding
was available upon application. He informed the committee
that his district could manage changes in student count of
100 or more. He maintained that the legislation would
provide a tool to address the issue.
Co-Chair Thomas stated that Fairbanks contributed 15
million below the cap and were therefore sitting on
reserves.
9:51:23 AM
LAUREN BURCH, SUPERINTENDENT, LONG ISLAND SCHOOL DISTRICT,
supported the bill. He stated that his district was
classified as REAA. He echoed the testimony of the previous
speakers. He agreed that a reserve was important. He shared
stories about the difficulty of planning and projecting.
Co-Chair Thomas closed public testimony.
HB 313 was HEARD and HELD in committee for further
consideration.
9:54:48 AM
AT EASE
9:59:05 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 313 Sponsor Statement 2012-03-12.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |
| HB 313 Sectional Analysis Ver 27-LS1223B (EDU).pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |
| HB 313 Fund Balance Letter Mat-Su Resolution 12-006.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |
| HB 313 Presenation to House Finance.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |
| CH HB64 version S.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 64 |
| Summary of new version hb64.docx |
HFIN 3/30/2012 9:00:00 AM |
HB 64 |
| CS HB64 sponsor statement.doc |
HFIN 3/30/2012 9:00:00 AM |
HB 64 |
| HB313 Relevant Statute.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |
| HB313 Amendment 1 Gara.pdf |
HFIN 3/30/2012 9:00:00 AM |
HB 313 |