05/09/1998 11:25 PM House FIN

SENATE BILL NO. 36                                                             
                                                                               
"An Act relating to transportation of public school                            
students; relating to school construction grants;                              
relating to the public school foundation program and                           
to local aid for education; and providing for an                               
effective date."                                                               
                                                                               
Representative Mulder MOVED that work draft #0-LS0070\J,                       
Ford, 5/8/98, be the version before the Committee. [Copy on                    
File].  There being NO OBJECTION, it was so ordered.                           
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #1.  [Copy on                     
File].                                                                         
                                                                               
EDDY JEANS, MANAGER, SCHOOL FINANCE SECTION, DEPARTMENT OF                     
EDUCATION, explained that the amendment would add money                        
appropriated for single site funding to the base in order                      
to calculate the funding floor.  There being NO OBJECTION,                     
it was adopted.                                                                
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #2.  [Copy on                     
File].  Mr. Jeans explained that Amendment #2 would add a                      
transition section defining "basic need" for the purpose of                    
calculating the required local effort.  For some school                        
districts, local effort requirement will be 45%.  There                        
being NO OBJECTION, it was adopted.                                            
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #3.  [Copy on                     
File].  Mr. Jeans explained that Amendment #3 would allow                      
the pro-ration of the quality school grant funds.  Co-Chair                    
Therriault added that these schools would be treated the                       
same way, noting that the pro-ration formula which also                        
applies to the general formula.  Mr. Jeans commented the                       
action would delete "competitive" before "grant".  There                       
being NO OBJECTION, Amendment #3 was adopted.                                  
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #4.  [Copy on                     
File].  Mr. Jeans commented that Amendment #4 would delete                     
the language which the Department of Education recommended                     
on Line 7, Page 5.  There being NO OBJECTION, the motion                       
was adopted.                                                                   
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #5.  [Copy on                     
File].                                                                         
                                                                               
RICK CROSS, DEPUTY COMMISSIONER, DEPARTMENT OF EDUCATION,                      
explained that Amendment #5 would modify the quality school                    
language.  The substantive change is that the accreditation                    
process would be removed.                                                      
                                                                               
Mr. Cross advised that during the past week, Commissioner                      
Holloway had been holding meetings with school communities                     
in the State in order to discuss the proposed language.                        
Mr. Cross pointed out that Amendment #5 was the result of                      
those conversations, and has the support of the Department                     
of Education.                                                                  
                                                                               
Co-Chair Therriault asked if school districts would be                         
required to continue reporting.  Mr. Cross replied that                        
there would continue to be a testing and reporting of                          
student results in order to insure that students are                           
meeting high standards.  Such action provides a tool to                        
identify schools in crisis and decline, requiring them to                      
submit improvement plans.  If during the next two-year                         
cycle improvement was not occurring, those school districts                    
would then have to submit a report to the State Board of                       
Education.                                                                     
                                                                               
There being NO OBJECTION, Amendment #5 was adopted.                            
                                                                               
Co-Chair Therriault stated that Amendment #6 would be HELD.                    
[Copy on File].  He asked Mr. Cross to address the                             
problematic impact of "bumping up" the determination need                      
for two schools or two programs.                                               
                                                                               
Mr. Cross replied that Amendment #6 would move the                             
definition of "school" from regulation to statute,                             
establishing definition for application of a foundation                        
formula.  The definition provided during a previous                            
Committee meeting included a "breaking" point as to where                      
to begin running an elementary or secondary program in                         
communities that were greater than 50 and up to 75                             
students.  Amendment #6 would change that number from 50 to                    
100.  Additionally, for those communities over 750,                            
alternative schools would be counted separately when having                    
over 200 students.  At this time, Alaska does not have                         
alternative schools with over 200 students.                                    
                                                                               
In response to Representative G. Davis, Mr. Cross explained                    
that prior to SB 36, there has not been a definition of                        
schools for the specific purpose of computing state aid.                       
This is the first bill which uses schools as a point of                        
focus.  The definition was created for the purpose of                          
applying state aid and was made in consultation with                           
McDowell Group.                                                                
                                                                               
Co-Chair Therriault stated that Amendment #6 would be HELD                     
for further consideration.  Representative Foster                              
questioned the impact of the proposed amendment.  Co-Chair                     
Therriault replied that the impact would be to those school                    
districts with over 50 children, which are counted as two                      
schools.  Amendment #6 would raise the break point of one                      
school up to 100 students.  Co-Chair Therriault remarked                       
that the Committee would need more time to consider the                        
number of schools which that change would impact.                              
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment #7.  [Copy on                     
File].  He explained that Amendment #7 would provide a two-                    
year phase-in for districts benefiting under the new                           
proposed formula.  There being NO OBJECTION, it was                            
adopted.                                                                       
                                                                               
Representative J. Davies MOVED to ADOPT Amendment #8.                          
[Copy on File].  Co-Chair Therriault OBJECTED.                                 
Representative J. Davies noted that the amendment would                        
delete the comparison of administrative to instructional                       
costs.  He explained that the "average" recommended in the                     
proposed legislation was heavily weighted toward larger                        
districts.  Amendment #8 provides language to address this                     
concern.                                                                       
                                                                               
Co-Chair Therriault questioned the Department's procedures                     
when viewing district records, moving them into compliance,                    
filing information.  Mr. Jeans responded that school                           
districts are statutorily required to have an annual                           
financial audit.  The problem, which the McDowell Group                        
discovered, is that the Chart of Account used is only a                        
guide, and that there are 53 different school districts                        
interpreting that information differently.  He guaranteed                      
that there will be inconsistencies without the Department                      
staff comparing expenditures.                                                  
                                                                               
Co-Chair Therriault asked if the Department had proposed                       
regulations that could define the chart, which would                           
hopefully lead to a more consistent reporting.  Mr. Jeans                      
replied that the Department did initiate that process and                      
that the State Board of Education had adopted a revised                        
Chart of Accounts.  The definitions are now tighter.                           
Representative J. Davies pointed out that currently, there                     
has not been enough time to gauge for the efficiency                           
follow-up.                                                                     
                                                                               
(Tape Change HFC 98 - 166, Side 2).                                            
                                                                               
Mr. Cross understood that the language referenced by                           
Representative Mulder would indicate that an analysis would                    
occur in order to guarantee that a school district                             
complies.  If they do not comply, they would need to                           
petition the Department to receive justification.  If a                        
waiver were granted, it would be forwarded to the                              
Legislative Budget and Audit Committee (LBA) for review.                       
He believed that a standard was being established in which                     
most districts in the State would not be able to comply,                       
consequently, the Department believes that the exemptions                      
will become standard.                                                          
                                                                               
Mr. Cross pointed out that the operative portion of                            
Amendment #8 would provide oversight to insure that the                        
administrative costs are minimized.  The idea is consistent                    
with what the McDowell Study recommended.  All the audits                      
done in the State are independent and must apply with                          
generally acceptable accounting principles.  Therefore,                        
there are wide differences in how each district reports                        
information.  Until there is an agreement within the                           
districts to gain consistency in reporting, it will be                         
difficult to establish targets and goals.  The Department                      
needs to provide the oversight and to work in partnership                      
with the school districts.                                                     
                                                                               
Co-Chair Therriault inquired the percentage of districts                       
which operate efficiently.  Mr. Cross replied that would be                    
an impossible question to answer because of the vast                           
differences which exist in our school districts.                               
                                                                               
A roll call vote was taken on Amendment #8.                                    
                                                                               
IN FAVOR:  Grussendorf, Moses, J. Davies                                       
OPPOSED: Foster, Kelly, Kohring, Martin, Mulder, G.                            
Davis, Therriault                                                              
                                                                               
Representative Hanley was not present for the vote.                            
                                                                               
The MOTION FAILED (3-7).                                                       
                                                                               
Representative Grussendorf MOVED to ADOPT Amendment #9.                        
[Copy on File].  He explained that the amendment would                         
address the true and assessed value of a borough.  The                         
North Slope Borough is afraid that they will not be capable                    
to continue to make a high payment as they have in the                         
past.  Passage of the amendment would allow them to                            
contribute the same amount as in prior years.                                  
                                                                               
Mr. Cross commented that when the current foundation                           
formula was developed ten years ago, everyone believed that                    
the assessed valuation of the North Slope Borough (NSB) was                    
the "high" number.  The formula was written with that                          
amount and the excess contribution was based on $12 million                    
dollars.  When SB 36 was drafted, the high number was used                     
and the North Slope Borough based their calculations on                        
that understanding.  Current law was written to allow a                        
high local contribution for the NSB.  Representative                           
Grussendorf emphasized that Amendment #9 is essential to                       
continue the practice currently used in that community.                        
                                                                               
Co-Chair Therriault questioned the impact.  Mr. Cross                          
explained that NSB has both a required local effort and an                     
excess local effort to arrive at their cap which is 23% of                     
the basic need.  NSB does not have a cap because it falls                      
outside the disparity test, resting in the high five                           
districts of the State.  The crafters of the current                           
foundation formula wanted some limit on the amount that NSB                    
should contribute.  Two (2) mills was used, based on the                       
belief that to use the higher accessed number would                            
determine the value.  He continued, 2 mills was under the                      
target and, thus, was allowed.                                                 
                                                                               
Representative J. Davies pointed out that the community                        
does not want to be limited by the lower amount and that                       
the language of the amendment stipulates that they could                       
use last year's amount.  Co-Chair Therriault noted that if                     
the pending litigation determines that the assessed                            
valuation is the lower amount, they would be able to use                       
prior years-actual local contribution or the 2 mills.                          
                                                                               
Mr. Jeans explained that currently, NSB is contributing                        
approximately $27 million dollars toward their school-                         
operating budget.  The proposed language would allow them                      
to continue to contribute at the $27 million dollar level.                     
                                                                               
Co-Chair Therriault noted that Amendment #9 would be HELD                      
in Committee.                                                                  
                                                                               
SB 36 was HELD in Committee for further consideration.