Legislature(2013 - 2014)CAPITOL 106
02/20/2013 08:00 AM House EDUCATION
| Audio | Topic |
|---|---|
| Start | |
| HB27 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 27 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 27-STUDENT COUNT ESTIMATES
8:03:21 AM
CHAIR GATTIS announced that the only order of business would be
HOUSE BILL NO. 27, "An Act relating to student counts,
unreserved school operating fund balances, restrictions on
school district money, and estimates for public school funding;
and providing for an effective date."
8:03:23 AM
REPRESENTATIVE SEATON moved to adopt the proposed committee
substitute (CS) for HB 27, labeled Version 28-LS0171\N, Mischel,
2/19/13, as the working document.
REPRESENTATIVE LEDOUX objected for purpose of discussion.
8:03:58 AM
REPRESENTATIVE ERIC FEIGE, Alaska State Legislature, sponsor of
HB 27, directed attention to the proposed CS for HB 27, Version
N. He referred to page 7 line 21, and explained that the
citation read subparagraph "(A)" in the original bill, but was
changed to subparagraph (D) in Version N. On page 7, lines 17-
29, subparagraph (D) applies to factors and adjustments to the
school count results. The final number is multiplied by the
base student allocation (BSA), which is more representative of
the actual funds that the school district receives. Page 7,
line 22, previously read "200 students" but using 200 seems more
accurate since this figure has been multiplied by so many
different factors. The next change is on page 7, line 30 of
Version N. The current statute provides that when a school's
student count drops over five percent it will trigger a hold
harmless clause and adjusts the funding level based on the
student count. However, under HB 27, the overall funding level
is based on the prior year's count [conducted in October 2014,
certified in January 2015], so the hold harmless clause is no
longer necessary. Finally, on page 9, line 11, Version N
contains conforming language to renumber the subparagraphs.
8:08:24 AM
REPRESENTATIVE FEIGE continued with the handout titled,
"Possible Changes in Funding Based upon Direction of Student
Population Change Comparison of Given Year With or Without HB
27" and said this highlights the basic concept of the bill. He
referred to the Adjusted Average Daily Membership (AADM) and
explained that basically four things could happen. First, if
the student count stays the same there is no funding change.
Second, if the numbers drop, the school would receive more
funding than under the current funding structure. Third, if the
student count increases by greater than 3 percent or 200, the
school would receive additional funding, but it would equal the
funding under the current statutes. Thus this change would be
fiscally neutral. Finally, if the student count rises, but does
not rise to the threshold, the school would receive slightly
less funding. The purpose is to allow the school district to
retain more money in its reserve account so the bill raises the
cap from 10 to 15 percent to cover the cash flow in the event of
an increase. He offered that some disagreement arose with
respect to the fiscal note, but he anticipated the department
will prepare a new fiscal note which will correlate to the
proposed CS, Version N. By his calculation he anticipated the
forthcoming fiscal note will be slightly negative. He indicated
the differences are illustrated on the bar chart titled,
"Funding Change with HB 27." He said the fiscal note compared
three years of funding [FY 10, FY 11, and FY 12] to the current
funding and with proposed funding under Version N. He pointed
out the effect amounts to slight decreases from year to year.
8:11:14 AM
REPRESENTATIVE LEDOUX withdrew her objection. There being no
further objection, Version N was before the committee.
REPRESENTATIVE SEATON related a scenario in which a school
closed and under the current formula would not receive any
funding. He asked whether the bill contains a mechanism so the
school district will not receive funding based on the prior
year's enrollment.
8:12:14 AM
MICHAEL PASCHALL, Staff, Representative Eric Feige, Alaska State
Legislature, on behalf of the sponsor, commented that the
changes in Version N did not change the statutory provisions
with respect to school closures. He offered his belief that the
existing statutes would cover this although he offered to
confirm with the EED the schools that close prior to the fall
semester would not receive funding.
REPRESENTATIVE SEATON reiterated that under the current formula
if a school closes the school district would not be eligible for
funding so he wanted to be certain that under the proposed CS,
Version N, that would still apply. He asked the sponsor to
confirm this as the bill moves forward to ensure the bill
doesn't create an unintended consequence.
8:13:07 AM
REPRESENTATIVE REINBOLD expressed her concern that if oil prices
drop the state would suffer a significant loss of funding and
this bill, which is forward funding, may place the state in a
difficult situation since she was unsure of the effects of the
bill.
MR. PASCHALL clarified that HB 27 would represent a minor change
in the actual expenditures for the state. Currently, the state
funds education through allocation, which is divided among
school districts based on the adjusted ADM for each school
district. He said if the amount of funds allocated from the
legislature to the department for funding is not sufficient, the
reductions would also be evenly divided based on percentages
among all school districts, which is what currently happens and
would continue to be the case.
8:15:01 AM
CHAIR GATTIS asked for clarification of the intent of the bill.
REPRESENTATIVE FEIGE emphasized the importance of school
districts to have certainty on the amount of minimum funding for
education for planning purposes. For example, a small rural
school district may have fluctuations in student populations and
need to hire teachers or certain types of teachers [such as
special education teachers]. Under this bill, the school
districts will know at the outset of the budget process - in
November or December - the amount of allocated funding for the
following year. Further, the approach taken in HB 27 would also
allow school districts to hire or dismiss staff. Currently,
school districts must plan for a range of possibilities since
the level of funding is uncertain and in some cases this
practice may even lead to inflation in budget figures. Further,
at the end of the school year, school districts may not have
sufficient student counts and revenue streams to hire staff for
the next year. In those instances, teachers are given pink
slips with an indication that the school district anticipates
sufficient student counts to rehire them in the fall. In turn,
some of these teachers may subsequently look for employment with
a guarantee rather than wait to see if their current district
will rehire them. Finally, the current funding process creates
turmoil in Bush districts, especially from a personnel retention
perspective.
REPRESENTATIVE FEIGE offered that HB 27 would provide
administrators and principals a better idea on the level of
funding for the beginning of the school year. If the student
counts increase, provisions are included in the bill to allow
school districts an opportunity to request supplemental funding.
Additionally, school districts can retain sufficient reserves to
cover cash flow shortages. Further, in the event the student
count rises above the three percent threshold, these school
districts can also apply directly to the Department of Education
and Early Development (EED) for additional funding to meet their
financial needs. Finally, the fiscal note is minor.
8:18:40 AM
REPRESENTATIVE P. WILSON offered her support for the proposed CS
for HB 27, Version N. She said she has many rural communities
in her district and it is difficult for them to plan for the
next year. She anticipated that HB 27 will make a huge
difference in school districts throughout the state. She
offered her belief that the current system is not fair.
8:19:46 AM
REPRESENTATIVE SEATON stated his support for Version N. He
expressed an interest in achieving stable known funding for
school districts. Of course, he still would like to be certain
the details are addressed to be sure the system works as
envisioned. He recalled Version N also includes intensive needs
and correspondence students in the student counts. He recalled
previously, concern has been raised about subsequent relocation
of intensive need students during a school year. He asked for
clarification on how funding would work when intensive needs
students move between school districts under Version N.
However, he stated he did not wish to hold up the bill in the
event any changes need to be made.
REPRESENTATIVE FEIGE responded that several scenarios could
occur. First, an intensive needs student could leave a school
district and that district would receive additional funding for
the intensive needs student. This funding could balloon the
school district's reserve account; however, this amount would be
capped at 15 percent so anything above that amount would be
returned to the state. In the event the school district
receiving the intensive needs student was a small district, it
would certainly run the adjusted ADM above the 3 percent
threshold, in which case the supplemental funding in Version N
would apply. If another situation arose, such that this school
district did not have sufficient reserve funds to cover the
shortage in cash flow, provisions also would allow the school
district to apply to EED for supplemental funding. He said he
did not "micromanage" the bill to cover all situations.
8:24:23 AM
MR. PASCHALL added that in most cases the school districts will
only receive funding for an intensive needs student for the year
in which the student is enrolled in the district. Thus if the
student is enrolled in the school district this year, that
district will receive funding next year for the student unless
the school district justified supplemental funding. He assumed
the EED's review of the process would consider whether
sufficient reserve funding exists to cover this situation. He
reported that the sponsor held discussions with the EED about
intensive needs students. He recalled these students do not
tend to move often since the nature of the disabilities requires
their homes to be modified. He further recalled some students
in his district also have a special bus route. He concluded
that the intensive needs students are fairly stationary compared
to the general population; however, he offered to research this
further to ensure the bill doesn't create any unintended
consequences.
REPRESENTATIVE SEATON hoped the department could supply a model
that tracks the intensive needs students and as this bill moves
forward the question can be answered about the lack of movement
by intensive needs students. He then asked about the
correspondence programs and whether any special impact will
occur with correspondence students.
REPRESENTATIVE FEIGE responded that the factor for the
correspondence students is found on page 7, line 18, in
subparagraph (D) of Version N. He said this language pertains
to the existing formula and this bill does not seek to change
how correspondence students are handled.
REPRESENTATIVE SEATON requested further information regarding
this sector of students as this bill moves along.
8:27:42 AM
CHAIR GATTIS said the charter school students should also be
included in any report.
REPRESENTATIVE FEIGE agreed.
The committee took an at-ease from 8:28 a.m. to 8:33 a.m.
8:33:02 AM
LUKE FULP, Chief Financial Officer (CFO), Matanuska-Susitna
Borough School District (MSBSD), said the MSBSD has been
encouraged by the proposed committee substitute (CS) for HB 27,
Version N. The MSBSD believes HB 27 would positively affect
funding for K-12 public education since it would remove one more
variable in the budgeting process, which is projected
enrollment. The bill would also bring the school district
certainty since the funding level would be based on the prior
year's student count. He addressed the fiscal note concern
raised and said the crux of the bill addresses a funding lag and
timing issue related to the school district's funding. He
offered support for the main provision, which is that the bill
would allow school districts to hold adequate fund balances.
Therefore a lag in funding would not be detrimental to a growing
school district such as the ones in the MSBSD. He addressed the
intensive needs student question, in which the school district
receives funding for an intensive needs student in one year but
the student moves. The receiving school district would cover
costs for the intensive needs student from its reserves, which
would subsequently be replenished the following year. He
characterized this as a timing issue on cash flow; however,
overall the bill would alleviate problems with respect to the
budget process since it would create additional certainty for
school districts than at present.
8:36:41 AM
REPRESENTATIVE SADDLER referred to the fiscal note of $7.1
million beginning in FY 16 and continuing through FY 19. He
expressed concern over the ongoing $7.1 fiscal impact.
REPRESENTATIVE FEIGE said he raised this issue with the EED and
anticipates a new fiscal note for the committee substitute
[Version N] will be forthcoming. He suggested that the fiscal
impact shouldn't be significant per his analysis.
8:38:08 AM
ELIZABETH SWEENEY NUDELMAN, Director, School Finance and
Facilities Section, Department of Education and Early
Development (EED), said a fiscal note has not been calculated
for the proposed CS; however, HB 27 changes the student count
process such that the EED would use the current year's student
count for the succeeding year's funding level. When there are
increases in the student count, the bill would allow an
opportunity for funding two times: once in the current year as
a supplemental, and next, in the following year when the count
is applied. The department's current fiscal note is based on
the supplemental funding cost. She offered to provide a fiscal
note for the proposed CS for HB 27, Version N.
8:39:29 AM
REPRESENTATIVE P. WILSON noted that the student counts fluctuate
in areas but usually balance out overall statewide. In response
to Ms. Nudelman, she restated her question. She said when the
student count increases in the MSBSD, a corresponding decrease
would also occur in another school district. She questioned
whether this could be considered neutral over time.
MS. NUDELMAN explained the process the EED uses to calculate the
fiscal note for the public school funding education formula,
which is to isolate the provision in the bill to determine how
the factor affects the cost of public school education. In the
fiscal note for HB 27, the EED isolated the impact of the
supplemental funding, but the department did not attempt to
compare the changes in relation to other components.
REPRESENTATIVE P. WILSON questioned the validity of this
approach, generally, in terms of fiscal notes since it's
important to consider ramifications of proposed bills. She
suggested if the EED performed that type of analysis, the
department would find the school districts' funding would
balance out over time.
MS. NUDELMAN responded that what is presented in the
department's fiscal note is the impact of the proposed change.
The fiscal note does not include variables or other impacts that
may occur elsewhere in the education funding formula; instead,
the fiscal note isolates the changes in the bill [and quantifies
the change.]
REPRESENTATIVE P. WILSON understood; however, the EED's practice
also tells her that she can't trust the department's fiscal note
since, in reality, it is inaccurate. Even though the fiscal
note is not inaccurate in terms of the department's view of the
isolated fiscal impact, the committee must consider the overall
ramifications, she said.
MS. NUDELMAN reiterated that the fiscal note accurately projects
the cost of the supplemental [funding] but it does not account
for other occurrences.
8:43:45 AM
REPRESENTATIVE SADDLER offered his belief that the department
analyzes the fiscal impact on the supplemental funding mechanism
so the committee can see the impact. However, Representative P.
Wilson pointed out that the fiscal note does not provide the net
impact. He asked whether there is an associated decrease
elsewhere that the EED has not calculated in the fiscal note.
MS. NUDELMAN emphasized that EED's fiscal notes present the
effects to the education funding formula. She suggested if this
change had been presented several years ago when the hold
harmless provision was added, the EED's fiscal note would
reflect the dollar amount if the bill passed. The fiscal note
would not have included any estimates for changes in population
or the base student allocation (BSA), but would have limited its
analysis to changes in the component that would affect the
foundation formula.
REPRESENTATIVE SADDLER responded that is a fair answer. He
highlighted that the committee considers this information;
however, he reiterated the committee must also consider whether
any corresponding decrease will occur. For example, when a
student moves from one district to another it results in an
increase to the incoming school district but also a decrease to
the outgoing school district so the net balance is zero. He
asked whether his portrayal is accurate and further asked
whether the fiscal note reflects both changes.
MS. NUDELMAN replied that when she prepared the fiscal note for
HB 27 she did not find any reductions to the public education
formula. She recalled the MSBSD previously testified that the
changes in HB 27 represent a lag in how school districts
receiving funding. However, she said the supplemental [funding]
is the only piece that is not a lag. Instead, supplemental
funding is additional funding in the year it is triggered or
otherwise applied for, she explained.
REPRESENTATIVE SADDLER asked whether the effect of the bill
would be a $7.1 million increase in the cost of public education
ad infinitum or if there would be a decrease at some point.
MS. NUDELMAN responded that the answer would be different each
year since the supplemental amount under the bill will depend on
the circumstances. For example, if a school district
experienced an increase of five intensive needs students, which
would be paid for the following year, the school district also
would need funding for the current year so it would trigger
supplemental funding. Thus, the EED will pay for the students
twice, once in the supplemental funding and again when the
student count is applied in the following year.
REPRESENTATIVE SADDLER asked whether it would be a fair
assumption that a balance in funding will occur since there will
be a corresponding loss of funding for an intensive needs
student in the "sending" school district sometime in the future
or if it will only represent an increase. In response to Ms.
Nudelman, Representative Saddler repeated his question in terms
of the costs to transfer an intensive needs student from the
["sending" to the "receiving"] school district.
MS. NUDELMAN answered that "two years out" there could be a
decrease in funding. She clarified if the intensive needs
student is not in the count "two years out" that the school
district would not be funded for the intensive needs student.
REPRESENTATIVE SADDLER asked whether that factor is reflected in
the fiscal note.
MS. NUDELMAN answered yes.
REPRESENTATIVE SADDLER questioned this rationale, noting he has
a fundamental problem in understanding [the department's
approach].
8:48:29 AM
REPRESENTATIVE REINBOLD acknowledged the importance of the
ability of school districts being able to plan ahead. She
related a scenario in which an intensive needs student, with a
multiplier of 13, moves from one school district to another,
whether it would take two years for the funding to follow the
student.
MS. NUDELMAN answered that once an intensive needs student left
a school district, it would take two years for the funding to be
removed from that school district.
REPRESENTATIVE REINBOLD asked whether it would take two years
for the receiving school to receive the funding.
MS. NUDELMAN answered the receiving school could apply for
supplemental funding [in the year the intensive needs student
transferred to the school district.]
8:49:51 AM
REPRESENTATIVE SEATON asked whether any spreadsheets have been
distributed to the committee. In response to the Chair, he
identified the spreadsheet in question as spreadsheet number 2.
MS. NUDELMAN interjected that the EED received some specific
questions from Representative Seaton and responded by generating
spreadsheets and distributing them to the bill sponsor and to
Representative Seaton.
REPRESENTATIVE SEATON suggested the spreadsheets be made part of
the bill packet.
8:51:17 AM
REPRESENTATIVE LEDOUX asked for clarification how the funding
would follow a student and whether unused funding is returned to
the state or to the organized borough.
MS. NUDELMAN answered that current law allows school districts
to retain 10 percent of their operating expenditures and fund
balances. In the event school districts go over that amount,
the districts are required to return the funding to the state.
Thus far school districts have not returned money to the state,
and instead have found other necessary expenditures or have
experienced a lower local contribution.
REPRESENTATIVE LEDOUX wondered whether an assumption could be
made that school districts would find other uses for the funding
rather than returning it to the state and that appears to be the
answer.
8:53:27 AM
REPRESENTATIVE SEATON remarked he was encouraged by the MSBSD's
superintendent that the school district would use its reserve
fund for the incoming student in anticipation of future funding.
He expressed concern whether the department would use the same
criteria. For example, if a school district has an incoming
intensive needs student, would the EED acknowledge that this
school district will receive its funding for the incoming
student in the next year and acknowledge it would be appropriate
for the district to use its reserve account for the current
year. He further asked whether it is likely that the department
would recognize the incoming intensive needs student as an
unexpected outlay and accept it as a reasonable request for
supplemental funding in the current year.
MS. NUDELMAN answered that these discussions have not ensued
with respect to supplemental funding requests and regulations
may need to be drafted to implement [these situations].
REPRESENTATIVE SEATON suggested a current mechanism might exist
to allow funding to occur, but it would lag a year. He
expressed his concern that intensive needs students moving
between school districts could result in automatic double
funding. However, he acknowledged he is more comfortable with
these situations since a mechanism exists in which the
department can inform school districts that they will receive
funding for their intensive needs students, but funding would
simply lag a year behind.
CHAIR GATTIS clarified for the record that Mr. Fulp is the
MSBSD's chief financial officer and not the superintendent.
8:56:33 AM
REPRESENTATIVE P. WILSON asked how contracts are handled in
instances in which school districts contract for one-to-one
staff for an intensive needs students but the students move to
other school districts.
MS. NUDELMAN deferred to the school district to answer.
REPRESENTATIVE P. WILSON maintained her question since she
believes it's important to know if school districts losing
intensive needs students must pay for the contract or whether a
contractual clause will address this issue.
8:58:01 AM
REPRESENTATIVE LEDOUX remarked that the hanging point on this
bill appears to be how it addresses intensive needs students.
She wondered about the overall level of funding for intensive
needs students and whether this represents a significant problem
or if it may just be an occasional issue.
REPRESENTATIVE SADDLER said it might be helpful when the EED
prepares the new fiscal note for the department to review
changes in student counts over three or four years to determine
the funding effects as the intensive needs student changes work
through the system. He suggested this would make him feel more
comfortable about the net effect [of intensive needs students
transferring between school districts].
8:59:32 AM
REPRESENTATIVE REINBOLD also thought it might help the committee
to consider the overall cost. She estimated that an intensive
needs student multiplier is 13 times the BSA of $6,000 or
$78,000 annually and $156,000 biennially. She suggested that
this amount is significant. She recalled that the multiplier
increases to 15 in FY 15 and to 17 in FY 17 for an intensive
needs student. For example, in FY 17, she estimated the cost of
one intensive needs student would be [$102,000] per year or
[$204,000]. She offered her belief this will impact the
students. She asked for the number of intensive needs students
statewide and whether federal funding is provided on a monthly
or annual basis. Additionally, she asked how often the
intensive needs students move between school districts. She
emphasized that the funding should follow the student
immediately and should not lag a year. She emphasized her
interest is in the students.
MS. NUDELMAN offered to prepare a further fiscal note.
REPRESENTATIVE LEDOUX remarked that student movement between
districts, with anticipated funding for the incoming students
should not negatively impact any given child. She identified
her focus as being on the changes in the state's spending
process. She agreed that further information, as requested,
would be helpful in sorting through the issues.
9:02:27 AM
REPRESENTATIVE DRUMMOND suggested it's not really possible to
predict decisions families will make with respect to their
children. She hoped that families would coordinate with the
school districts by giving them advance notice of anticipated
moves. Additionally, if the funding follows the intensive needs
students the other school districts will need to find
specialized aides to serve these students. Obviously, it's not
reasonable to expect the specialized aides to move from the
previous school district to the new location, she said.
9:03:19 AM
REPRESENTATIVE SEATON suggested that the committee has veered
off the track, especially with respect to contracts. He
expressed his concern on the effect of an intensive needs
students moving between school districts, but reminded the
committee what the Version N adjustment proposes to fund. He
suggested the movement of intensive needs students during a
school year should not be a weighty conversation since it
doesn't apply to HB 27. He outlined the committee's goal is to
contemplate any unintended consequences, and if so, to address
them. He maintained he did not wish to amend the bill or hold
up the bill [since further discussion can occur as the bill
proceeds through the process].
9:05:32 AM
REPRESENTATIVE DRUMMOND reported that she received a pertinent
comment from the Anchorage School District (ASD) superintendent,
Jim Browder, and paraphrased from the written statement, which
read:
The increase of fund balance retention to 15 percent
matches best practice for governmental accounting and
would allow ASD to maintain reserves at similar levels
to our national peer districts.
REPRESENTATIVE DRUMMOND asked whether Alaska is out of
compliance with best practices in governmental accounting.
MS. NUDELMAN explained that a range of best practices exists and
Alaska's current amount is acceptable but moving up on the range
is also acceptable.
9:07:00 AM
REPRESENTATIVE LEDOUX understood that if intensive needs
students move mid-year that the same glitch would occur. She
asked for further clarification.
REPRESENTATIVE SEATON responded that the mid-year movement of
intensive needs students is not being considered under the bill.
Instead, the issue pertains to funding for an intensive needs
students when the students moves and whether the ["sending"]
school districts will receive funding for the students in the
following year. Currently, the language in Version N provides
funding in the following year based on the current level. The
question remains on how to address this specific aspect, which
will be refined as the bill moves forward. He said he did not
want to see the bill held up since he views HB 27 as a good
bill. In fact, it's simply the future funding of [an intensive
needs student] who is no longer there that is at issue. He
acknowledged it's important to consider various aspects of costs
and whether any unintended consequences exist, but he did not
think the bill should be held up.
9:09:21 AM
REPRESENTATIVE FEIGE stated that the special needs students are
included in the student counts. He pointed out that only a few
school districts have significant attendance fluctuations from
year to year. Under the bill, funding for education will
basically remain unchanged without an unreasonable impact on the
state. He said most school districts don't experience changes
in enrollment of more than three percent, although it does
sometimes happen. He suggested that little difference exists
when considering the cost of public education now as compared to
the cost of public education under the bill. However, the
benefits are high, especially regarding district level budget
planning, he said.
REPRESENTATIVE SADDLER noted the $7.1 million yearly increase in
the fiscal note and asked for further clarification.
REPRESENTATIVE FEIGE stated his understanding that any school
districts with an increase in funding needs of more than three
percent would be eligible for supplemental funding. The
difference in cost - with or without the bill - is a
consideration. He explained that school districts receive money
when enrollment increases. The fiscal note does not represent
an additional cost to the state, beyond entitlement, he said.
9:13:31 AM
REPRESENTATIVE SEATON moved to report the proposed committee
substitute (CS) for HB 27, labeled Version 28-LS0171\N, Mischel,
2/19/13, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection,
CSHB 27 (EDC) was reported from the House Education Standing
Committee.
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