Legislature(1993 - 1994)
03/22/1994 03:00 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
Number 359
CHAIR TOOHEY brought HB 533 to the table and said it was not
her intent to move the bill out of committee that day. She
asked Duane Guiley to come forward to answer questions.
HB 533 - ALLOWABLE EFFORT FOR SCHOOL FUNDING
DUANE GUILEY, Director, Division of Education Finance and
Support Services, Department of Education, testified on HB
533. He stated that the legislation would provide an
opportunity for districts to assist in the budget process of
running schools with locally contributed dollars without
putting additional burden on the state of Alaska. He
indicated that under current state statute, the maximum
amount that a district can contribute is 23% of the current
year's basic need as adjusted for the actual appropriation,
or the prorated dollar amount of basic need.
MR. GUILEY indicated that the reason for the cap is so that
the state of Alaska stays in compliance with the federal
test, in order to recognize $43 million of federal impact
aid in the state formula. He maintained that the bill
proposes to raise the cap to the federal limit of 25%. He
explained that the actual local contribution is not known
until after the year is closed out and audits are received
by the Department of Education (DOE). At that time, the DOE
calculates the actual disparity amount and makes adjustments
to school district's total state aid. He indicated that the
DOE had just completed adjustments for the 1993 fiscal year
in the month of March 1994. He said if the limit is raised
to 25%, the state would be asking districts to retroactively
return any excess local contribution to the municipality or
borough after the year has ended and the money is expended.
MR. GUILEY further explained that in the past the cap has
been less than 23%. He said when the bill that created the
current foundation formula passed in 1987, the cap was 21%.
Based upon the request of local school districts, to raise
that cap to allow for additional contributions, the bill was
amended and raised to 23%. He indicated that if the cap is
raised to 25%, there is additional capacity provided to
districts throughout the state that would total $11,397,318.
He said, "That again is the amount of additional capacity
that would be afforded to local municipalities and boroughs,
additional contributions to the budget, and staying within
the 25% level."
Number 453
REP. B. DAVIS asked for clarification regarding
municipalities asking for rebates up to a certain amount.
MR. GUILEY explained that the disparity standard controls
the actual limit in order for the state to stay in
compliance with federal law. He said once the audits are
submitted, the process of confirming actual local revenues
begins. He indicated that prior to that time the DOA works
from the budgeted number. He said if a district actually
contributes more than they are allowed under law, the DOA
asks the district to refund local money.
REP. B. DAVIS said she understood.
Number 482
REP. BUNDE said he had heard that the 25% might cause some
concern regarding federal regulation. He asked Mr. Guiley
why 25% is a better level for the legislation.
MR. GUILEY indicated that under current statute, the cap is
at 23%. He said the DOE has already gone on record
supporting an increase to as high as 24% and have indicated
that under the current disparity calculation it is not
problematic in relation to the federal regulation. By
raising the limit to the full 25%, the state may be put in a
situation where districts would be asked to retroactively
return local dollars or put them out of compliance with
state statute which would keep them from receiving any state
aid.
MR. GUILEY further explained that the choice a local school
district has is to continue to receive the excess local
dollars and forfeit 100% of their state aid or give back a
minimal of excess local dollars that put them over the 25%
cap should the legislation pass. He pointed out the bar
graph schedule supplied in the committee bill packets and
explained that it demonstrates the effects of the cap. He
pointed out that the white bar indicates the four mill
minimum contribution. He explained that the three
exceptions to the rule are North Slope, Unalaska, and
Valdez. He said their four mill contribution exceeds 35% of
basic need and therefore a different cap applies to those
districts. He indicated that the shaded bar represents the
maximum allowable excess. He stated that the district of
Hoonah contributes absolutely all they can to their local
budget. He indicated that where there are black diamonds at
the top of shaded bars, it represents the districts that
would benefit from the legislation. He said those districts
could choose to assist their schools with a greater amount
of local contribution without fear of losing state aid.
Number 556
REP. BUNDE stated that he supported the bill as it would
encourage local support for school districts at a time when
the state has to do more with less. He said federal
regulation keeps the state from going beyond 25% and the
state should allow and encourage districts to come as close
to 25% as possible.
CHAIR TOOHEY asked Mr. Guiley if the areas affected by the
legislation would have to vote on the issue or would it be
an automatic option.
MR. GUILEY indicated that if the revenue is available to a
municipality or borough, through their budgeting process
they would provide an amount requested by the local school
district. Under state statute, school districts must
provide their request to the municipality by April 1. He
said once the request is provided, the district has 30 days
to act on it through their budget process. He indicated
that the money may be available already to the local
municipality without an increase tax revenue or other
sources of revenue. If the money is not available, it might
result in additional tax increases through sales tax, bed
receipts, fish tax, federal forest receipts, or any other
source of revenue to meet the need if they have the desire.
Number 612
CHAIR TOOHEY stated for the record that she rescinded her
statement that the bill would not be moved out of committee
that day.
REP. G. DAVIS indicated that some local taxes need tax payer
approval and some assemblies and council have the authority
to raise taxes without voter approval. He said it depended
on what tax they want to obtain it from and how their
ordinances read.
REP. BUNDE observed that nothing in the proposal requires
local taxes to be raised. He said it allows those that
would like to assume more responsibility for their school
district to do so. He reminded the committee that the state
may not fully fund education this year and that local
municipalities could assume some of that responsibility if
they choose to do so.
Number 640
REP. NICHOLIA asked what type of impact the formula would
have on school districts, single sight school districts, and
REAAs in rural areas.
Number 645
MR. GUILEY stated that the proposal would provide an equal
opportunity for all organized municipalities and boroughs to
provide additional support to their school districts. He
said there is no opportunity for local contributions
regarding REAAs. He indicated that the state of Alaska
funds basic need at 100% in the case of REAAs without a
local contribution requirement.
REP. NICHOLIA asked what impact the legislation would have
on Galena or the Tanana city school district.
Number 671
MR. GUILEY directed the committee's attention to the
schedule included in the bill packets that indicates that
Galena could contribute an additional $14,756 at a 1%
increase which would be 24% total. He said under the
proposal Galena could contribute an additional $29,512 if
they are already at the cap. He said, currently, Galena is
not at the cap so they do have additional contribution
capacity within existing statute.
REP. NICHOLIA asked Mr. Guiley if he has been in contact
with Galena so they could comment on the formula.
MR. GUILEY responded he had not been in contact with any
specific district so that they might comment, but he
indicated that attached to the sponsor statement is a
schedule of what Galena currently contributes to the local
school district. He asserted that under the existing
statute, the total allowable excess is $360,000 over the
required local effort, giving a total allowable contribution
of $440,000 compared to the $253,000 that Galena currently
budgets. He said Galena may not benefit from the statute
because they are not currently contributing at the cap but
may find themselves in that situation in the future.
Number 711
REP. NICHOLIA stated that she had concerns regarding the
legislation. She indicated that HB 533 was first introduced
March 16, 1994, while she was attending a conference in
Fairbanks. She said she had not had time to speak to her
school districts about the bill.
Number 721
REP. BUNDE reiterated that the legislation does not require
local districts to do anything, it allows them to take
responsibility if they wish.
REP. VEZEY observed that there are not very many areas that
will be affected by the legislation.
MR. GUILEY clarified that the bill provides opportunity to
districts that have the desire to contribute more. He said,
"So those districts that are currently at the cap, or in the
event if we have proration, the cap is applied to the
prorated dollar amount. That would change the schedule
somewhat and more districts would find themselves closer to
that cap. So, especially in the event of proration, you may
find more districts than what are indicated here in the
position to take advantage of this legislation, should it
pass."
Number 758
REP. VEZEY asked if his observation is wrong, as he saw only
three or four communities currently that would benefit from
the bill.
MR. GUILEY said Rep. Vezey is correct. He stated that
historically Ketchikan, Kenai, Fairbanks, and Juneau have
been the four districts that have repeatedly contributed
very close to the cap.
REP. G. DAVIS offered to Rep. Vezey that the legislation
would allow those districts that are in "dire straits" to
gain more funding.
REP. B. DAVIS indicated that there may be only a few
districts at the cap currently, but in the future other
districts would have the opportunity to rise to that
maximum, especially if state funding is cut back. She said,
"Anchorage, for example, does not reach the cap that's set
by, we reach the artificial cap that we have in our city,
but not what's set here. But, that would give us an
opportunity to do it should there be a need to do it." She
reiterated that the legislation would be beneficial to other
districts in the future.
Number 805
REP. BUNDE made a motion to pass HB 533 out of committee
with individual recommendations and accompanying fiscal
note.
CHAIR TOOHEY asked if there were any objections.
REP. OLBERG objected.
CHAIR TOOHEY called for the vote. Reps. Toohey, Bunde, G.
Davis, Vezey, B. Davis, Nicholia, and Brice voted "Yea" and
Rep. Olberg voted "Nay." Chair Toohey declared that HB 533
was so moved.
(Chair Toohey handed the gavel over to Rep. Bunde to preside
over the remainder of the meeting.)
Number 845
CHAIR BUNDE indicated that there would be teleconference
testimony starting at 3:45 p.m.
(Chair Bunde took a brief at-ease from 3:30 until 3:45 p.m.
to accommodate teleconference testimony.)
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