Legislature(1995 - 1996)
04/21/1995 09:35 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
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= bill was previously heard/scheduled
SENATE BILL NO. 70
"An Act relating to the public school foundation
program; and providing for an effective date."
Senator Taylor was asked to join the committee. He
acknowledged the help and assistance he received by Dr. Nat
Cole, for his help in writing the last revision into the
foundation formula. His expertise was invaluable in this
effort. He also thanked Linda Snow at the Legislative
Finance Division for the excellent job she did and the hard
work administered, in developing the earlier drafts and
spread sheets needed to explain this proposal. He expressed
the appreciation and complete cooperation of Duane
Guiley, Director, School Finance, and especially his staff
member, Eddy Jeans. He testified that the proposal revises
the foundation funding formula in an attempt to create a
more equitable plan based on a community's ability to pay.
Those school districts with a tax base are asked to come to
the table on an equal basis. The plan requires a local
contribution of the equivalent of a 5 mill tax levy. Where
such a levy would generate more than the school district's
basic need, the excess is recaptured to be distributed in
the form of supplemental equalization aid around the state.
Our regional education attendance areas which have no tax
base, to speak of, would be required to put up 100% of any
eligible federal impact aid, as their local contribution in
lieu of taxes. The key to this proposal is the addition to
the foundation formula of a supplemental equalization aid
provision. The plan requires school districts to fund
additional contributions, using the formula based on 2.5
mills and calculated on the district's average daily pupil
membership, and the property evaluations of all school
districts in the state. In return for the local
contribution, the state would provide matching money based
on a calculation also using average daily membership and
property values. Communities that already make a local
contribution, equal to that required by this plan, will see
an increase in state aid from what we are calling the power
equalizer. Those communities which would be required to
increase their local effort, would be rewarded with
additional matching dollars from the supplemental
equalization plan. By way of example, Juneau's FY-96 local
contribution is budgeted at $12.8 million. That is $12.8
million more than the local contribution required under this
proposal. Juneau would see an increase in state funding of
$1.3 million under this plan. Anchorage's estimated local
contribution for FY-96 is $74.6 million under the current
law. This plan before the committee would require a local
contribution of just under $79 million. That is a $4
million increase. However, that increased local contribution
would generate an additional $10 million in supplemental
state aid. The spreadsheets are based on the latest
property evaluation numbers available to the Dept of
Education. Spreadsheets use the current $61.0 unit value.
The comparisons are based on estimates for FY-96 under the
existing law and under this plan. The bottom line is that
the contribution of state and local resources available to
education under this plan would exceed that available under
current law by $27 million. By requiring the 5 mill
equivalency and 100% of eligible federal match, as a local
contribution, combined with other elements of SB 70, this
plan would actually reduce state spending by more than $35
million, while increasing the number of dollars available to
education statewide.
Senator Phillips MOVED to adopt CSSB 70, version "O" dated
4/19/95.
Senator Rieger asked to make a motion to amend the motion
that was before the committee. There was debate as to the
amendment.
OBJECTION was removed and the CS working draft "O" was
ADOPTED.
Senator Taylor noted a technical change on page 4 and 14,
replacing the word, "percentage" to "factor".
Co-chair Halford asked where the funds are coming from?
Senator Taylor explained that the spreadsheets reveal the
funds coming from two districts: North Slope Borough and
Valdez. Both of which have been blessed with a tax base
that is extraordinary compared to any other community in the
state. The amendment is saying that those communities
should pay the same level of taxation that each of the other
communities in the state are contributing towards education.
Senator Taylor reflected that presently there are
communities that contribute less to the school districts
than others. When averaging daily membership (total number
of children attending school) and dividing that number into
the tax base of each community, the results show that
Anchorage is much lower than Juneau, Ketchikan and several
other communities, that have a greater level of community
tax base. When those communities say they are paying high
taxes, they are right.
Joe McCormick, Executive Director for the Commission on
Postsecondary Education made reference to the spreadsheet
fax dated 4/20/95. The spreadsheets show the actual
comparison of what would occur under this proposal. It
covers every district. The first two pages on the right
hand column labeled "E"(existing law -combined state and
local resources) and on page 3 and 4, it answers:
supplemental equalization aid; basic foundation aid based on
a $61.0 unit; and the combination thereof; what the 5 mill
requirement would generate from each community; the local
share that would be required to obtain supplemental
equalization aid; the capture column,"K", and what would be
required locally, over and above what is currently being
contributed for communities to meet the requirement of the
bill. The figures shown indicate those communities not
currently contributing what would be contributed under this
bill. Communities zeroed out are either REAA's or
communities that already contribute more than required.
Pages 5 and 6, indicate the additional local revenue
required to meet 5 mills and local share. He indicated that
there were not many communities in this category that would
have to put in more money, but in each case, that increased
local contribution generates additional supplemental aid
with the exception of the two communities of the North Slope
Borough and Valdez.
Co-chair Halford asked how the recapture works. Senator
Taylor responded that the when the money has been
transferred into the state fund, through the power equalizer
formula, the state fund then redistributes the money. That
is where those monies come from that are matched. For
example, when Anchorage puts forth $4 million of additional
local funds, they will receive $10 million.
Mr. McCormick stated that there is a fiscal analysis of the
impact of this legislation in the form of a spreadsheet. He
stated that it refers to draft "M" on the spreadsheet, but
it actually refers to draft "O". Co-chair Halford inquired
to the amount the state currently contributes to education
in the communities that will be seeing a reduction in state
aid, such as Valdez and the North Slope Borough? Senator
Taylor responded that the North Slope Borough receives $9
million for basic education. North Slope contributes 35%
and the state contributes $3 million over that for a total
of $12 million. North Slope spends over this amount, and he
indicated that it was in the $20 million range. With this
plan, they would not be receiving as much from the state.
Mr. McCormick noted that there is a provision requiring a
contribution of 100% of eligible federal impact aid
(currently it is 90%) as against the basic cost of
education. The reason for the 90% used in the past, was to
provide an incentive for the district doing the paperwork.
Co-chair Halford inquired as to the mechanism drawing the
money back into the formula from communities who have the
huge oil investments? Mr. McCormick responded that Section 1
of the bill states that the public school foundation account
is established. It adds, "municipal contributions made
under AS 14.17.025(i)", and on page 2 of the bill, it gives
the formula for the 5 mill equivalency. That is the
mechanism which requires the municipality to actually send
the check. There are alternatives to that requirement. The
state could allow a year for transition and forgive the
requirement, but that the state will not fund them, they
would be endorsing their educational system. That alone
would be dropped back to a $60.0 funding level. This will
still generate income over and above what is currently being
spent on education in all the other tax paying districts in
the state because the amount has been saved that was not
sent out to the districts who can afford it. The funds then
would be redistributed throughout the state. Senator Taylor
did express that it is a circle against state revenue.
Senator Taylor noted that the State of California was faced
with a similar problem several years back. They were faced
with a differential between rich and poor tax districts.
This led to the Sonoma Case. In Alaska, we had a similar
case, whereby Mat-Su Borough sued the state 3 years ago.
Every time funding is short, there are disparities within
the state. He has concerns that the state will lock into
two years of flat funding, which he says is happening right
now. If one of the districts brings forth a suit like the
Sonoma suit, and we are ordered by the courts to go back and
adjust the formula, in an even more disproportionate amount
than it is now, it could be disastrous. By adopting this
formula, it should prevent a situation like the Sonoma Case
from happening.
Senator Phillips MOVED to adopt the change of "percentage"
to factor on page 4, lines 14 and 16, and on page 14. No
objection being heard the amendment was ADOPTED into the
working draft.
ADJOURNED
The meeting was adjourned at approximately 11:00 a.m.
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