Legislature(1997 - 1998)
02/19/1997 09:03 AM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 85 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS
CHAIRMAN WILKEN introduced SB 85 as the next order of business
before the committee.
Number 177
RICK CROSS , Deputy Commissioner for the Department of Education,
emphasized the following three points. Firstly, this formula does
have a fiscal note requesting $12,800,000 in additional funds.
These funds are requested in order to change and improve schools.
The funding will not be utilized for inflation but for the
incentive grant portion of the legislation. Mr. Cross noted that
there will be a demonstration program regarding meeting higher
standards. Generally, there are many examples of high quality
education in Alaska; however, there is a lack of consistency from
classroom to classroom. Standards and quality incentives attempt
to provide a specified level for all students to reach.
Secondly, SB 85 would eliminate unnecessary labeling of students.
The bill proposes to change the current method of identifying
special education, bilingual, bicultural and other students. Under
the existing formula, districts are given instructional units based
on the number of special education, bilingual, bicultural students
identified. The more identified the more money the district
receives, however Mr. Cross pointed out that under the current
formula there is no requirement that money be spent on those
programs or the children identified to generate the revenue.
Therefore, a considerable disparity between districts regarding how
many students are identified for such programs results. For
example in one district, of the instructional units generated nine
percent are special needs instructional units while another
district has 33 percent identified as special needs instructional
units. Mr. Cross stressed that such disparities cannot simply be
explained by the student population or demographics alone rather
some districts have been more aggressive in the identification of
students. Over-identification and labelling of students is a
concern and cannot continue. Over-identification is not right and
hurts those districts that do not generate the additional revenue
by over-identification. The department can determine that a
district is over-identifying and will no longer receive approval of
its programs which would result in less revenue, but that only
solves half of the problem. Such action will not improve the
programs in the districts that do not over-identify. Mr. Cross
said that the solution is to recognize the cost for such programs
not by unnecessarily labeling children. This needs to be addressed
this session.
Number 250
Thirdly, SB 85 would perform a statewide area cost differential
study. The bill allocates funding per student rather than per
instructional unit value basis as is the current practice. Mr.
Cross believed that the area cost differential study in the bill is
linked to the elimination of the instructional unit. The area cost
differential study under SB 85 would be like no other previously
done in Alaska. The study under SB 85 would take a new approach
regarding the cost to educate a child and operate a school, not the
cost of operating a district which is the current practice. The
cost of operating a district must be justified with the impact on
the classroom. Mr. Cross was pleased that in the testimony last
week most everyone indicated the need for an area cost differential
study. Mr. Cross acknowledged that an area cost differential study
redistributes the wealth which results in winners and losers.
EDDY JEANS , Manager of the Finance Section in the Department of
Education, noted that the committee packet included copies of the
flip charts that he would review.(See Attachment A) The flip
charts begin on page 6. The new funding formula is named the
Public School Funding Program. Mr. Jeans highlighted the main
features of the Public School Funding Program under SB 85. He then
reviewed the three levels of funding for this program.
Under Level I funding - Base Student Allocation, Mr. Jeans
explained that the intensive service allocation of $22,500 would
serve the approximately 1,225 severely handicap students in the
state. The cost of providing these students services is extremely
high. With regard to the area cost differentials under Level I
funding, there are seven under SB 85 while the current formula has
23 area cost differentials. The current differentials are assigned
to a school district while SB 85 would assign the differentials to
a funding community, a school. Mr. Jeans clarified that under
SB 85, there would be a 3 mill required local effort the fist year.
That required local effort would increase .25 mill each year for
four years in order to reach the 4 mill requirement in the current
law.
Mr. Jeans reviewed the Level II funding - Supplemental
Equalization, page 9. In the review of the hold harmless provision
Mr. Jeans pointed out that the hold harmless provision would be
phased out over a four year period. In the third year, the area
cost differential study should be completed and implemented which
would accelerate the decrease of the hold harmless. He reviewed
the Level III funding - Incentive Grant. Level III would not
require additional local contribution. Page 12 illustrates how the
transition to the Public School Funding Program will occur. Mr.
Jeans explained that the hold harmless decreases while the required
local effort increases by .25 mill each year. That increase in
funds is redirected to increase the per student allocation which
maintains the state's share of the total funding. When the program
is fully implemented the student allocation will be set in statute
at $3,400 until the Legislature adjusts it. Mr. Jeans asked if
there were any questions.
Number 411
SENATOR LEMAN referred to page 6 of the packet when inquiring as to
why SB 85 would eliminate Alaska's requirement to comply with the
federal disparity test. EDDY JEANS explained that under the
current foundation formula, the required local effort of 4 mills
and 90 percent of the school district's impact aid is deducted from
the basic need which determines the amount of state aid. Due to
that adjustment for impact aid, Alaska must comply with the federal
disparity test. The new formula does not adjust for federal
dollars.
SENATOR LEMAN asked why during the transition period the area cost
differential increased when most evidence illustrates that area
cost differentials are shrinking as transportation and
communication systems improve. RICK CROSS specified that the chart
utilized the seven area cost differentials and the range of 1.00 to
1.55. Mr. Cross acknowledged that there was no way of knowing
whether the range was inappropriate, but it did suggest what the
boundaries may be. For that reason, the hold harmless is so rigid
in the first two years which negates the effect of the
differentials until the study is completed. The study would
determine the range of differentials as well as the number of
differentials needed; the flexibility to change is necessary. Mr.
Cross seemed to agree with Senator Leman's assessment that cost
differentials have diminished, but the study will confirm or deny
that suspicion.
SENATOR LEMAN was unsure as to why the 1.55 was chosen instead of
staying at the current level. This may create an expectation of a
higher differential. RICK CROSS explained that the current
differentials were used in order to move away from the district
area cost differential and move towards a school/funding community
area cost differential. Mr. Cross believed that on an overall
statewide basis, the total effect of the range of costs has
decreased; however in small, remote communities, the costs may
remain quite high. Mr. Cross stated that the existing
differentials were not used in order to indicate that a new study
will be performed. Mr. Cross acknowledged Senator Leman's concern.
Number 473
SENATOR LEMAN believed that Yakutat, Unalaska, and Chenega Bay were
comparable communities although, there is disparity in their area
cost differentials. RICK CROSS said that those communities were
rounded to the closest current differentials with a few exceptions.
SENATOR LEMAN commented that the differentials seemed to be
determined on an areal basis. For example, almost all of Southwest
Alaska was one differential.
SENATOR GREEN asked if there would be a statewide responsibility
for those students needing an intensive allocation of $100,000 per
year. Would that be dealt with through waivers or would the
district be responsible for that expense? EDDY JEANS said that
SB 85 does not include a waiver provision for intensive allocation.
The intensive allocation of $22,500 practically mirrors the
intensive allocation under the current formula. Under the existing
and proposed formula, the district would bear the burden over the
$22,500.
CHAIRMAN WILKEN asked if there was an estimated cost and a model
for the area cost differential study. RICK CROSS pointed out that
the fiscal note shows that slightly less than half a million
dollars would be needed for the study. Mr. Cross believed that
some information needed for the study would be available, but much
of the information is not available and would require
investigation. With regards to a model study, Mr. Cross noted that
business often looks at the cost of manufacturing a product. There
have been studies which reviewed the costs to operate schools as
opposed to district or state costs of the operation of schools.
Mr. Cross emphasized that Alaska is different and that should be
recognized in this study.
CHAIRMAN WILKEN noted that not everyone wants an area cost
differential study.
In response to Chairman Wilken, RICK CROSS said that a funding
community is not the school in many parts of the state. In larger
communities, the funding community is a K-12 group of students that
would stay together. For example, Fairbanks is a funding community
and North Pole is a funding community, but the Fairbanks North Star
Borough School District is not a funding community. Mr. Cross
agreed that a school district could be made up of many funding
communities. For example, the Kenai Peninsula Borough School
District has many funding communities with one differential for the
entire district. Mr. Cross said having one differential for the
Kenai District does not make sense when one reviews the cost of
school operation in some of the remote communities.
With regard to the PL874 funds, those funds are received by the
district from the federal government. Under the existing formula,
those funds were considered in determining how much state aid would
be given to the district. Under SB 85, the money will continue to
be received by the districts, but the money will not be used in
determining how much state aid the districts will receive. The
amount of PL874 money is relatively small in comparison to the
nearly billion dollar program of education in Alaska. Under the
existing formula, a small portion of the education budget, the
PL874, drives the formula. Mr. Cross recognized that there will be
some anomalies, but they are not serious. The information before
the committee does not include the PL874 funds. This does allow
districts to generate more money if the district chooses to do so.
TAPE 97-14, SIDE B
In response to Chairman Wilken, EDDY JEANS explained that the
impact aid goes directly to the school district. Ninety percent of
the impact aid is deducted in determining the state aid under the
existing formula. Under SB 85, there is no adjustment for impact
aid. Therefore, the spreadsheets are a side-by-side comparison of
state aid under the existing formula and state aid under SB 85.
Number 572
SENATOR GREEN noted that no federal laws or state laws regarding a
district dealing with special needs students have been changed. In
response to Senator Green, RICK CROSS agreed that SB 85 speaks to
how money is distributed to districts not what services districts
are to provide. SENATOR GREEN asked if there was any requirement
to use a percentage of the money for the student that the money is
being non-categorically designated. RICK CROSS said that there is
no required allocation for the direction of funds in the existing
state laws, regulations or under SB 85. Mr. Cross noted that the
match requirement for Level III funding is an exception.
EDDY JEANS continued with his review of the spreadsheets in the
packet on page 13. (See Attachment A) The spreadsheet on page 13
illustrates for each community, the projected FY98 entitlements
under existing law with the local budget for FY97 and the total for
state and local funds. Page 14 illustrates the distribution under
SB 85. Mr. Jeans pointed out that the districts who would be
required to make an additional local contribution to schools are
listed with accompanying amounts. The spreadsheet on page 15
compares the combined state and local funding under the current
formula and the proposed formula which results in an increase in
revenue of $13,144,425. Page 15 also compares the change in state
aid under the current formula versus the proposed formula which
totals $12,322,400. That number would be listed on the grants line
of the fiscal note. Page 16 compares the current foundation
formula with SB 36 and SB 85/HB 126.
SENATOR GREEN inquired as to the reference that illustrated the
increased mills that a city/borough district contributes on page 10
of the packet. EDDY JEANS clarified that was referring to a
district's ability to qualify for the hold harmless provision. The
statewide average of that is about 7.5 mills. Mr. Jeans continued
with the side-by-side comparison on page 16.
Number 420
In response to Senator Green, RICK CROSS did not know if other
districts would be expected to participate at the same level as a
district contributing in excess of the normal contribution.
Currently, there are significant differences in local
contributions. Mr. Cross recognized that some are concerned with
lifting the cap due to the belief that some communities will
generate more for their students than others and unfairnesses would
result. Mr. Cross, as a former school administrator, did not
believe that would occur; he believed there is a natural limit in
place within local communities. SENATOR GREEN commented that she
liked the elimination of the cap. RICK CROSS clarified that this
formula would set the floor not the ceiling.
CHAIRMAN WILKEN inquired as to how the 20 percent allocation for
special needs students was derived in SB 85. RICK CROSS said that
20 percent is close to the current total effort on a statewide
basis.
SENATOR LEMAN asked if those numbers should be adjusted in order to
take into account that some schools over-identify such students.
RICK CROSS stated that there is no way of knowing what the true
number would be. Further, this allocation method recognizes that
in the cost it does not matter.
SENATOR GREEN commented that a special education task force a few
years ago found that 20-22 percent for special needs recurred
regularly.
RICK CROSS remembered that to be 14 percent which is a certain
category of special education and 20 percent resulted when
including everything. Mr. Cross recalled that Alaska's statewide
averages are higher than the national averages, particularly in the
area of special education. Mr. Cross was not sure if Alaska
included other categories under that heading.
In response to Senator Leman, RICK CROSS agreed that in Alaska the
districts' range of special education students is 9-33 percent, but
some smaller districts are higher than 33 percent. Under the
current formula there are default units which allow a unit to
operate such programs no matter how small the district which
results in those smaller districts at levels higher than 33
percent.
In response to Senator Ward, RICK CROSS explained that under SB 85
money is requested to perform a study in order to implement new
area cost differentials in the third year of implementation. The
implementation must be completed prior to the elimination of the
hold harmless. Mr. Cross said that a Request For Proposal process
would be utilized. The study would be done independently. Mr.
Cross acknowledged that there have been many cost studies regarding
wages or district-by-district. There has not been a study
regarding the school's operating costs that has been implemented.
CHAIRMAN WILKEN asked the committee to write down any questions
remaining to be answered later so as to receive the testimony from
those on the teleconference.
Number 324
DICK SWARNER , Executive Director of Business Management with the
Kenai Peninsula School District, informed the committee that he was
a life long Alaskan who had been in public schools for 30 years.
The Kenai is in serious financial trouble. Mr. Swarner believed
that the Legislature needed to tackle the philosophical question
regarding how to fund education. The Kenai is in the process of
reducing its budget for the coming year below that of the current
year. Next year's budget is projected to face of reduction of $1.3
million in revenue. The pending budget reduction has lead to an
increase in the pupil teacher ratio, cut text book allocations,
and negotiated a two-tier salary schedule with all employees for a
10 percent reduction. In Kenai the salary for a beginning teacher
is $29,500 which with a Masters degree and 90 credit hours tops out
at $50,400. The Kenai has also participated in a RIP.
Mr. Swarner expressed concern with the area cost differential under
SB 85. He discussed an example of how the area cost differential
differences did not make sense and should be addressed during the
study. Mr. Swarner agreed with an area cost differential study
based upon the educational costs not the CPI. Under the current
foundation formula, Kenai has been at the cap for the last nine
years. Kenai is at the 7.44 mill. Mr. Swarner stated that a
formula does need to take into account the taxable wealth of a
district and Kenai would therefore expect to receive less money.
Number 236
LARRY WIGET , Director of Government Relations for the Anchorage
School District, stated that the Anchorage district supports a
rewrite of the formula in a manner more equitable for the Anchorage
School District. Mr. Wiget cited concerns with the following
aspects of SB 85:
*Placing pupil transportation in the formula because there is
no mechanism for increased costs.
*Limiting bilingual, special needs students to 20 percent.
There is a growth of such students not from over-
identification, but because of actual student need.
*How would the area cost differential study be accomplished?
In Anchorage, there are three service area pupil
transportation contracts coming up in 1998 and three more in
1999 and in 2000 which would not be included in the study
which is to be completed in 1999.
*The hold harmless clause with the increased local
contribution over the next few years. Mr. Wiget was
interested in spread sheets that would reflect this with
various assumptions.
Mr. Wiget commented that the fact that the $61,000 instructional
unit value has not changed since 1992 should not be forgotten
during this rewriting process. In conclusion, Mr. Wiget supported
the rewrite of the formula.
Number 192
SCOTT BRANDT-ERICHSEN , Chairman of the Ketchikan Gateway Borough
School District, identified the problem surrounding the lack of
inflation adjustment. Both SB 36 and SB 85 call for local
communities to absorb the increased cost brought about by
inflation. Mr. Brandt-Erichsen believed that an area cost
differential study was a positive step, but emphasized the need to
review how much it would cost to provide a certain level of
educational opportunity. The Department of Labor issued a report
regarding the cost of living. That report illustrated that the
area cost differentials in the current formula are off the mark
which SB 85 does not address. Perhaps, the study would address
that issue so long as the overexpenditures in travel and such do
not occur as in the past. Mr. Brandt-Erichsen pointed out that the
area cost differential for Southeast communities is 1.00 as is the
case in Kenai and Anchorage, however a cost of living study places
the cost of living in Ketchikan as comparable to that in St. Mary
or Bethel where the area cost differential is 1.32. In the 1994
1995 Public School Report Card, Ketchikan received less foundation
aid per student than virtually any other district. Mr. Brandt-
Erichsen said that the key to providing a comparable education
opportunity is to design a system which recognizes the accurate
costs in each district; without that these bills will not work.
DIANE GUBATAYAO , Ketchikan School Board member, supported SB 85 and
the specified 20 percent for special needs. SB 85 perpetuates an
equitable area cost differential factor. Ms. Gubatayao strongly
supported the area cost differential study. Over the recent years,
Ketchikan has lost more student services than other comparable
districts. Further, the closure of the pulp mill will create a
loss in the tax base. Ms. Gubatayao liked the Level III funding
and the Quality School Initiative due to the allowance for new
funding rather than the mere redistribution of inadequate existing
funds. In conclusion, Ms. Gubatayao believed that equity for all
students and districts was at issue.
Number 089
KEITH TOLZIN , Superintendent of the Ketchikan Gateway Borough
School District, supported Mr. Brandt-Erichsen's testimony.
Ketchikan has been without services such as nurses, librarians and
many others for the last several years. That is a result of the
existing inequitable formula. Mr. Tolzin reiterated support for an
area cost differential study, but also recommended that the time
line be shortened. The information from the Department of Labor
should be reviewed. Mr. Tolzin suggested that study be funded
immediately.
CHRIS CAMPBELL , Ketchikan School Board member, stated that the
future looks bleak in Ketchikan regarding this issue. An area cost
differential study may be unnecessary, if the Department of Labor's
report could be used. Ms. Campbell believed that basing an area
cost differential on the cost to operate a school or educate a
child may merely ratify the status quo. Ketchikan has a lower
educational cost per student due to the many cuts already
experienced. Ms. Campbell also noted the economic effects of the
closure of the pulp mill and pointed out that the area cost
differential study will occur when Ketchikan's economy will be
severely depressed. Therefore, the Ketchikan district will be
negatively impacted for four years. Ms. Campbell believed that the
area cost differential study should be tied to the Department of
Labor's information. The hold harmless provision of SB 85 will not
necessarily help Ketchikan during the transition because Ketchikan
has consistently contributed to the cap without reward or
incentive. Ms. Campbell suggested that an incentive be provided
for those districts that have historically contributed at or near
the cap. Ms. Campbell emphasized that Ketchikan's pupil
transportation would be reduced by 50 percent which would devastate
the district.
TAPE 97-15, SIDE A
Number 005
LARRY EKLUND , testifying from Ketchikan, stressed that the gap in
Ketchikan is widening. For the past few years, Mr. Eklund
acknowledged that the Legislature has made difficult decisions
regarding funding, especially for education. Ketchikan's funding
per instructional unit remained the same and happily was not
reduced. Mr. Eklund said that excellent teachers were being
encouraged to retire with the hope that equally competent or better
teachers would take their place. Although Mr. Eklund had seen many
great first year teachers, he had not seen any that would measure
up to these experienced teachers. As public education continues to
cut programs and reduce the quality of those working with the
students, private schools, charter schools and home schooling will
become more prevalent. Mr. Eklund encouraged the Legislature to
support an atmosphere for students to achieve all that is possible.
Education is expensive, however the lack thereof is more costly.
In conclusion, Mr. Eklund urged the committee to increase the
funding for education to a meaningful level and provide better
equity in the funding.
ADELINE HOPSON , Barrow School Advisory Member, had grave concerns
with both SB 36 and SB 85. Ms. Hopson indicated that she leaned
toward SB 85. She echoed the need to include the cost of living
expenses. Every school district needs to discuss this. The North
Slope Borough seems to be targeted, although the North Slope has
also experienced cuts every year for the past few years. The North
Slope still has schools needing maintenance and improvements which
must be spread over several years.
Number 115
CHAIRMAN WILKEN thanked everyone for participating. Chairman
Wilken believed that this issue was one of the most important with
which the committee would deal. Perhaps, one of the most important
issues for the Legislature as a whole. Chairman Wilken expressed
the need to work on this issue in order to find a resolution by
adjournment. Chairman Wilken informed the committee of his desire
to have a subcommittee of at least three members work on this
issue. Senators Leman and Wilken have volunteered. If anyone else
is interested, please come forward.
SENATOR ELLIS volunteered to serve on the subcommittee as well.
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