Legislature(1997 - 1998)
02/24/1998 08:40 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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."
Co-chair Sharp convened the meeting and reviewed the
expected schedule. He did note that SB 173, Charitable
Gaming, would be held over until Thursday morning at 8:30
a.m. Co-chair Pearce would be chairing the afternoon
meeting on Results-based Budgeting beginning at 4:30 p.m.
At 6:00 p.m. Thursday evening will begin public testimony on
SB 36, continuing for three hours, and will continue daily
until everyone has been given an opportunity to testify, up
through Saturday. He said Senator Phillips would introduce
a new CS work draft and the drafter would go through it
section by section for the benefit of committee members and
the public. Then the bill will be set aside so the
Department of Education can complete their runs on it as to
how the bill will affect the school districts throughout the
State and to do the fiscal notes. After public testimony is
complete he said the committee would work on amendments and
have further discussions which probably would be on Tuesday
at 8:30 a.m.
Senator Adams asked when the public could have their copy of
the new drafted CS. Co-chair Sharp said it would be
available as soon as the committee adopted it for work
purposes, and further it would be available electronically.
Co-chair Sharp said copies were being made for the public to
follow along presently.
Senator Torgerson asked about the time limit on public
testimony or if it would be the regular three minutes. Co-
chair Sharp said it was publicized for three minute
testimony but he could go a little longer for school
district testimony.
Co-chair Sharp cautioned the audience to be more orderly so
the committee could begin work on the bill. In further
response to Senator Torgerson he said he would be somewhat
lenient in the taking of public testimony but he wanted
everyone to be able to testify and therefore would try to
hold to the three minutes limit so it would be a dependable
schedule.
Senator Phillips, representing Senate District "L",
introduced proposed CSSB 36, which is an accumulation of
various bills. He noted one correction to the work draft on
page 3, line 2, delete "three" and insert "four" so it would
read "...four mills...". Senator Adams indicated this was a
bad change.
Co-chair Sharp further reiterated that there would be no
teleconference testimony taken at this time. This would be
"listen only".
Senator Phillips continued and said that the Department of
Education would come up with its own analysis and hopefully
the numbers would be available to the committee and the
public by Thursday morning. Then we can see the effects of
the bill on the various fifty-three school districts around
the State. Mike Ford is available to review the bill
section by section
Senator Phillips said they had tried to accomplish three
main principles: simplicity, equity and accountability.
They believe they reached those goals. First, funding was
allocated per student rather than instructional unit value.
Second, the size adjustment in the formula was based on
individual schools instead of "funding" community. Third,
the adjustment for geographical cost differences is based on
the 1998 McDowell Study of the actual cost of operating
schools, instead of household cost of living. Number four
and five points are based on the equity equation. Fourth,
requires local contribution from municipal districts at four
mill value, or one hundred percent of the district's State
support. He noted that currently the limit is thirty-five
percent. Fifth, the required local contributions for the
REAA's was set at the equivalent of four percent employment
tax. This referred to those areas of the State that were
not contributing locally would now contribute something
towards the cost of education. Sixth, the Regional
Educational Service Areas, or more commonly called REAA's
were established using the boundary proposals of the model
borough in the 1995 local boundary commission "model
boroughs boundaries report". Seventh, category funding is
set at twenty percent State funding plus funding for
intensive needs. The last point he made was that funding
for Statewide correspondence studies programs offered by the
districts was set at point six five times the ADM, same as
the State operated program. He emphasized the three basic
principals that were being worked toward; simplicity, equity
and accountability. It is believed that this bill achieves
those goals and it is understood that there may also be some
changes through the committee process. The bill is a
starting point, however complicated; therefore making it
also complicated for the Legislature to deal with it. It
was a good faith attempt at rewriting the foundation
formula, which he believed, along with others, was broken
and needed to be fixed.
Senator Adams gave the minority position regarding this bill
which he only received this morning. He said one of the
problems with the McDowell Study was that it was flawed.
There were approximately ten disclaimers, making something
wrong with the study, and in using that study the bill was
considered flawed. This bill would pit rural areas against
urban areas. The study suggested shifts of education
resources from rural to urban. There the economic tax base
and scales is good for that area. Basically if the study is
looked at it relies on misinterpretation of the laws that
are presently on the books. Also, there was the setting of
financial targets regardless of education needs and the
reality of education delivery system in Alaska. The
particular study done by LB&A predetermines direction so the
study would favour urban over rural Alaska. The public
needs to look at the study and then submit a list of
questions with regards to his statement just made and then
they can be responded to, whether he is correct or not. He
noted Senator Phillips referral to simplicity, equality and
accountability. Basically it has been forgotten the oath of
office that was taken. Article XII, section 8, reads that
"The Legislature shall, by general law, establish and
maintain a system of public schools open to all children of
Alaska and may provide for other public education." The
Legislature is summonsed to provide free public education.
Looking at, in particular section 14.17.410 (2), money is
taken away from a school district, which goes against the
grain of the Constitution. That is not right. If it is
done against a particular school district, which one is
next? By the adoption of a committee substitute lawsuits
are being encouraged against the Legislature and the State
of Alaska. Simplicity, equality and accountability are not
being reached in this bill. However, it is a start.
Senator Adams continued, referring to the foundation task
force that was set up, it was not said that money should be
taken from one district and put into another. Rather, it
was said there was inadequate funding available. Sufficient
funds are available, for instance, from cigarette taxes. He
continued his opposition this legislation but said he would
be happy to work with the chairman in coming up with
appropriate legislation.
Co-chair Sharp thanked Senator Adams.
Mike Ford, Attorney, Legal Services, Legislative Affairs
Agency was invited to join the committee. He said he would
give a brief overview of CSSB 36 (FIN) "F" and the
provisions contained therein.
Section 1: Purpose section
Section 1: Rewrite of the foundation formula
14.17.300: Establishes public school account and
provides the money can only be used for certain
purposes, public schools, community schools programs or
centralized correspondence study.
14.17.400: Provision that provides for funding for
school districts and specifies that funding is the
amount calculated under section 14.17.410. The section
also provides for a pro rata reduction in State funding
if the amount appropriated is insufficient to meet
amounts authorized under this section.
14.17.410: Actual funding formula. It provides that a
district is eligible for public school funding in an
amount equal to the sum calculated under (b) and (c) of
this section. Subsection (b) breaks down what actual
public school funding consists of. It consists of a
State share and local contribution and it provides for
how we determine what those two parts are. The State
share actually consists of State support less local
contribution and ninety percent of Federal funds.
Following through subsection (b)(1) it contains the
elements necessary to calculate what each district will
receive in State funding. Subsection (b)(2) is the
local contribution from city and borough school
districts, a four mill levy on taxable real and
personal property. Subsection (b)(3) is a local
contribution from REAA's and that is the equivalent of
a four percent employment tax. Subsection (c) is the
optional local contribution for city and boroughs.
That is set at an equivalent of a two mill tax levy or
twenty-three percent of the State share, whichever is
greater. Subsection (d) describes the local
contribution required of an REAA and what that consists
of. That is an equivalent tax on services performed in
REAA's. Subsection (e) provides that public school
funding cannot be provided to cities and boroughs who
don't make their local contribution. Subsection (f)
provides similar provisions for REAA's. If they fail
to make the local contribution then their State share
is reduced by the amount they fail to contribute.
14.17.420: Funding provision for special needs and
intensive services funding. He noted there was a blank
on line twenty-five, page four, and that was because it
had not been established what the number should be.
(a)(1) is special needs funding and (a)(2) is intensive
services funding.
14.17.430: Funding for correspondence study. The
provision breaks down correspondence into three
components: State centralized correspondence study
program, Statewide correspondence study program and a
district correspondence study program. It was all
under ADM funding.
14.17.440: State funding for State boarding schools.
14.17.450: New school size factor.
14.17.460: District cost factors. This section also
required the department to monitor the cost factors and
to come back to the Legislature with proposed new cost
factors beginning in January 2001.
14.17.470: (contains a missing element) It will be
the base student allocation, formerly known as the
instructional unit value. This will be a key element
of the formula.
14.17.500: Contains provisions that are in existing
law that should have been rewritten. They are
substantiatively the same as existing provisions of
law.
14.17.500: Concerns student count estimates when the
data is required to be reported to the department.
14.17.505: Concerns fund balances limiting the
accumulation of fiscal year end fund balances by school
districts.
14.17.510: Provision which requires Community and
Regional Affairs to assess values in city and borough
districts.
14.17.520: Authority for the department in
consultation with the Department of Labor to adopt
regulations necessary to calculate, determine, collect
or enforce the local contribution from REAA's.
14.17.530: Cap on administrative expenditures by
school districts. The cap is $950/ADM multiplied by
the district cost factor. It also provides a mechanism
for waiver of that cap at the discretion of the
commissioner or the board.
14.17.600: Establishes student counting periods.
Those periods in which a district would count are
actual attendance and would report it to the department
for purposes of calculating how much State funding they
are entitled to.
14.17.610: Established provisions for distribution of
State funding. These two provisions are similar to
existing law.
14.17.900: Provides the Chapter 14.17 is not a debt of
the State. It requires each district to operate under
a balanced budget and again provides for pro rata
reduction if amounts are insufficiently appropriated.
14.17.910: Establishes restrictions concerning receipt
and expenditure of district money; requiring each
district to keep complete financial records, providing
that the public school funding is for general
operational purposes of the district.
14.17.920: Authority for the department to adopt
regulations that are necessary to implement the
chapter.
14.17.990: Definition section.
Section 3: Technical amendment, as is sections 4, 5, 6
and 7.
Section 8: Provision requiring the reorganization of
REAA's into areas that are identified in the local
boundary commission report, entitled: "Model Borough
Boundaries". Actually, they are reorganized into
educational service areas and an educational service
area will constitute a new REAA.
Section 9: Adds additional authority to an REAA school
board and allows them by resolution to request
organization into a municipality.
Sections 10, 11, 12 and 13: Technical amendments.
Section 14: Changes existing law to allow a school
district to implement a ten-year teacher lay-off plan
if State support decreases in a fiscal year by three
percent or more or from one fiscal year to the next by
three percent or more.
Section 15: Technical amendment.
Section 16: Amends existing law on when a district has
to provide transportation for exceptional children to
qualify that to transportation has to be provided to
all children in the district.
Section 17: Adds new language regarding special
education service agency to allow a pro rata reduction
in funding if amounts appropriated are insufficient.
Sections 18, 19, 20, 21 and 22: Technical amendments.
Section 23: Amends a provision that concerns child
care facility grants. Because there is no longer
instructional unit allotments the child care grant
provision is now tied into the same percentage as
funding under 14.17.460.
Section 24: Repealers necessary to implement the bill.
Section 25: Delayed repealer concerning reorganization
of REAA's.
Section 26: Transitional funding provision. It
basically holds districts harmless for the upcoming FY
year 1998. In 1999 it reduces the hold harmless to
fifty percent; in the third year you're into the new
system.
Section 27: Deals with regulations providing that
existing regulations are consistent and remain in
effect. Other regulations are nulled. It also
requires the Department of Education to define by
regulation the term "school". And that term, of
course, is essential to many of the elements of the
formula.
Section 28: Provides a two year transition period for
the local contributions from REAA's. First year that
it takes effect would be a one percent contribution.
The second year would be a two percent and then the
third transition year would go to the full percent.
Section 29: Specifies when the first new proposed cost
factors would be required to be submitted to the
Legislature.
Section 30: Transition section for the base student
allocation. Those numbers are not available yet, but
they will be anticipated to be a two year transition
process through the full base student allocation.
Section 31: Requires for purposes of 14.17.450, which
is calculation of school funding elements, that a
school smaller than ten ADM is calculated into the
largest school in the district.
Section 32: Provision that requires new REAA school
board elections once the REAA's have been reorganized.
Sections 33 and 34: Effective dates.
Senator Adams asked Mr. Ford to go back to page three and
explain (2) and (3) again. Basically, (2), the way it's
read is not to exceed one hundred percent. He asked if this
was correct.
Mr. Ford responded that under paragraph two, lines one
through six, if a city or borough school district did not
make a contribution then they potentially are not going to
get their support because of subsection (e), which says no
support if contribution is not made. Under paragraph three,
which is the REAA contribution, if they fail to make their
contribution, then under subsection (f) the amount by which
they fail to contribute is taken out of their State share.
Senator Adams asked if the State share was equivalent to
four percent employment tax on people in unorganized areas?
Mr. Ford indicated that was correct.
Senator Adams said they were not segregating but rather tax
an area without the rest of the State? To discriminate?
Mr. Ford said the bill provided for local contributions from
all districts, cities and boroughs as well as REAA's. The
contribution in an REAA is the equivalent of a four percent
employment tax.
Senator Adams asked if in one of his rural villages that
isn't an organized borough and one makes twelve thousand
dollars they would have to pay four percent of that money?
Mr. Ford said that if it met the definition of compensation
for services as is calculated is how one will be paying.
Co-chair Sharp asked if there were any more questions for
Mr. Ford.
Senator Phillips MOVED CSSB 36 draft as a working document.
Senator Adams objected.
Senator Adams said he objected to this committee substitute
because rural Alaska, including the North Slope Borough,
already bears the impact of resource development of its oil,
timber and fish. While most of the wealth flows from this
area into the general fund and then into the urban areas,
what really is happening is an attempt to reallocate funding
or redistribute tax revenues from one community to another's
school district. That is not the answer to this
legislation. He said that robbing one school district to
serve another is wrong. He asked what other school district
would be next. Equity was mentioned in the presentation.
Measuring this on a per capita basis is heavily
discriminating against rural Alaska. Local rural areas and
rural governments should be expected to pay for urban
population group. Rural Alaska also has a high delivery of
education and needs. Those that he represents in rural
Alaska do not need to be taxed the four percent tax.
Basically, adequate funding within the State coffers to take
care of areas that have overcrowding and over enrollment,
such as in the urban centers. Rural Alaska would like to
help out, but one school district should not be pitted
against another. This does not do what the majority of
people want to do as far as simplicity, equality and
accountability. He noted for the record that his objection
was maintained.
Co-chair Sharp asked the roll call be taken and the
Secretary did so, showing a vote of 5 - 1 (Parnell,
Phillips, Torgerson, Pearce, Sharp; yea) (Adams; nay)
(Donley; absent) adopting CSSB 36 (FIN) "F" version as the
working document before the committee. Co-chair Sharp said
his intent was to set the bill aside until the committee had
actual figures to work with to analyze to see the effect of
the legislation. The runs would be made available upon
request. Senator Phillips asked that the runs be made
available to all LIO offices around the State as well. Co-
chair Sharp concurred.
Richard Cross, Deputy Commissioner, Department of Education
was invited to join the committee. He said the runs would
be made available via electronic transfer as soon as
possible. He said they hoped to work into this evening and
have runs available by Thursday. However, they needed some
additional guidance from the committee because there were
blanks in the bill. He referred to page four, line twenty-
five there being a blank for the ADM multiplier. The base
student allocation specified on page eight, line nine is
blank. The transitional allocation on page twenty-one,
lines twenty-two and twenty-three are also blank. If the
values are to be determined and if it is the intent of the
committee they must have some guidance of what the total
amount of spending that is intended to be allocated.
Otherwise they will show up Thursday with no numbers.
Co-chair Sharp indicated that the totals would be gotten
from Senator Phillips and Senator Wilken.
Senator Phillips asked if the question was on the amount of
funding for this year. Mr. Cross responded that if they
were being asked to back in numbers that had been done
before, however, they needed the amount of funding that is
going to be provided to the formula in order to accomplish
this. Also, he received the bill only twenty minutes ago
and they may have some pretty significant questions about
how the transition language is supposed to work. He asked
if staff would be made available to answer these questions
while reading this language so they would be sure of the
intent as opposed to making up their own theory.
Co-chair Sharp indicated that was corrected and asked Mr.
Cross and his staff to work in conjunction with Senator
Phillips and his staff to obtain the necessary information.
Senator Phillips requested an at ease.
Senator Adams said it was important that the total amount
for education be made clear for this year. Senator Phillips
indicated they would have an answer. Senator Adams further
said there had been runs made to make the bill and those
favoured the urban areas.
Co-chair Sharp at approximately 9:30 a.m. said there would
be approximately a two minute at-ease. He called the
Finance Committee back to order at approximately 9:45 a.m.
Richard Cross, Deputy Commissioner, Department of Education
was again invited to join the committee. Senator Sharp
indicated to Mr. Cross that they would like them to use the
FY '99 adjusted numbers from the Governor's budget as a base
and go from there. Mr. Cross reiterated his understanding.
Senator Phillips advised the amount was $631,677,700. and
that it would be used for now.
Senator Adams said that amount just as a base did not
include public transportation. Senator Phillips concurred.
He said it also did not contain the single sites.
Senator Phillips asked Mr. Cross if that was enough
information to go by and Mr. Cross said he believed it was
sufficient.
Co-chair Sharp at this point SET ASIDE CSSB 36 (FIN) and
said it would be taken up again at 6:30 p.m. on Thursday for
public testimony. After a short pause on record Co-chair
Sharp indicated the committee would take up SCR 19,
Prototype School Design.
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