Legislature(2007 - 2008)HOUSE FINANCE 519

02/20/2007 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 1 INCREASE AMT OF BASE STUDENT ALLOCATION TELECONFERENCED
Heard & Held
+= HB 120 EXTENDING COUNCIL ON DOMESTIC VIOLENCE TELECONFERENCED
Moved CSHB 120(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 1                                                                                                              
                                                                                                                                
     An Act relating to the base student allocation used in                                                                     
     the formula for state funding of public education; and                                                                     
     providing for an effective date.                                                                                           
                                                                                                                                
REPRESENTATIVE CARL GATTO, SPONSOR,  explained that the bill,                                                                   
which  in  the  current  form,  increases  the  base  student                                                                   
allocation (BSA) by $1 to $5381  dollars.  The version is not                                                                   
meant to  represent the  total increase  needed, but  rather,                                                                   
providing   a  number   to  serve   as   a  placeholder   for                                                                   
deliberation.                                                                                                                   
                                                                                                                                
1:59:56 PM                                                                                                                    
                                                                                                                                
Representative  Gatto   continued,  including   the  Teachers                                                                   
Retirement  System  (TRS)  shortfall in  the  formula  allows                                                                   
local  districts  to  increase  their  portion  of  education                                                                   
funding by  placing TRS in the  formula and funding  at least                                                                   
70% of education  money, then placing funds  to the classroom                                                                   
becomes  more   difficult.     Either  way,  there   will  be                                                                   
repercussions.                                                                                                                  
                                                                                                                                
2:01:09 PM                                                                                                                    
                                                                                                                                
Representative Hawker  discussed whether to  place retirement                                                                   
contributions  into or  out of  the formula.   If  retirement                                                                   
contributions were placed inside  the formula, funds will not                                                                   
be  allocated   in  the  same  proportion  as   the  existing                                                                   
liabilities.                                                                                                                    
                                                                                                                                
2:02:47 PM                                                                                                                    
                                                                                                                                
EDDY JEANS, DIRECTOR, EDUCATION  SUPPORT SERVICES, DEPARTMENT                                                                   
OF   EDUCATION  AND   EARLY  DEVELOPMENT,   highlighted   the                                                                   
Department's fiscal notes and  offered to answer questions of                                                                   
the Committee.                                                                                                                  
                                                                                                                                
2:04:17 PM                                                                                                                    
                                                                                                                                
JAMIE  STACKS,   (TESTIFIED  VIA  TELECONFERENCE),   PRIBILOF                                                                   
SCHOOL  DISTRICT,   stressed  that  the   small-rural  school                                                                   
districts need the Public Employees  Retirement System (PERS)                                                                   
and TRS to be  funded outside of the base  student allocation                                                                   
(BSA).  She requested that the  BSA be increased a minimum of                                                                   
$600 per  student.  A cost  differential of 50%  indicated in                                                                   
the Institute  of Social and  Economic Research  (ISER) study                                                                   
would also  be of  benefit to small,  rural districts.   That                                                                   
funding would add  no new staff or programs,  maintaining the                                                                   
status quo.                                                                                                                     
                                                                                                                                
Representative  Gara understood that  the amount  proposed by                                                                   
Ms. Stacks would  provide only 50% of the ISER  study amounts                                                                   
and that the  PERS/TRS would be outside of  that, leaving the                                                                   
district  at  a  "hold-even"   point.    Ms.  Stacks  replied                                                                   
correct.                                                                                                                        
                                                                                                                                
2:07:04 PM                                                                                                                    
                                                                                                                                
JOE     BANGHART,     (TESTIFIED     VIA     TELECONFERENCE),                                                                   
SUPERINTENDENT,  IDITAROD  AREA   SCHOOL  DISTRICT,  MCGRATH,                                                                   
echoed sentiments of Ms. Stacks.   He added that the Iditarod                                                                   
School  District opposes  rolling the  unfunded liability  of                                                                   
the PERS/TRS into the foundation  formula.  The impact of not                                                                   
receiving the  increase and freezing  the BSA at  the present                                                                   
level  would  have a  dangerous  economic  result.   Lack  of                                                                   
increased funding  is of great  concern.  During  the FY05/06                                                                   
calendar  year, the  average  fuel increase  was  40% and  is                                                                   
expected to continue up.  It will  affect all the communities                                                                   
because there  will also be higher  fuel costs for  the pupil                                                                   
transportation  & for  heating  facilities.   He pointed  out                                                                   
that some  families are  moving from  these areas because  of                                                                   
the  economy, but  the buildings  still  must be  maintained.                                                                   
The increase this year is estimated to be a 20% increase.                                                                       
                                                                                                                                
Mr.  Banghart  explained that  viable  intervention  programs                                                                   
also increase  the school  districts budgets.   He  stated he                                                                   
could  demonstrate  that  what  the districts  are  doing  is                                                                   
actually helping their children  through those interventions.                                                                   
Some of these kids have demonstrated  over a 30 point average                                                                   
increase.   To  maintain  that level  of  student growth  and                                                                   
extra classes, video conferencing has become essential.                                                                         
                                                                                                                                
Mr.  Banghart recommended  basic  support  for the  teachers.                                                                   
The current starting teacher salary  in their district is $36                                                                   
thousand dollars  per year, which is embarrassing  to offer a                                                                   
contract to  someone when  they could  be getting a  starting                                                                   
salary  of  $42 thousand  dollars  a  year  in the  lower  48                                                                   
states.  The  district must have at least $500  dollars added                                                                   
to the basic BSA in order to maintain current programs.                                                                         
                                                                                                                                
2:13:01 PM                                                                                                                    
                                                                                                                                
SUE  HULL, (TESTIFIED  VIA TELECONFERENCE),  FAIRBANKS  NORTH                                                                   
STAR BOROUGH  SCHOOL BOARD,  FAIRBANKS, hoped  to be  able to                                                                   
eliminate  the school  district's current  "cut-list" and  be                                                                   
able to prepare children for the  work that they will need to                                                                   
enter employment  and college after  school.  In order  to do                                                                   
that, technology  areas must be  expanded, career  tech preps                                                                   
and  drop-out  prevention  reform  for the  middle  and  high                                                                   
schools.    She pointed  out  that  Alaska schools  need  the                                                                   
opportunity  to confront  the challenges  that are  currently                                                                   
present; to  do that, Ms. Hull  urged that the  dollar amount                                                                   
significantly  be raised  on the  BSA and  fund the  PERS/TRS                                                                   
outside the formula.                                                                                                            
                                                                                                                                
2:15:31 PM                                                                                                                    
                                                                                                                                
MARGO WARNING, JUNEAU SCHOOL BOARD,  JUNEAU, commented on the                                                                   
concerns of  the Juneau School  District, resulting  from low                                                                   
funding  over the past  few years.   Most  of the funds  have                                                                   
gone into  the retirement  system, increased  fuel costs  and                                                                   
special education  programs.   She emphasized the  importance                                                                   
of funding  the retirement system  outside the formula.   The                                                                   
main priority for  the Juneau District is increasing  the BSA                                                                   
with combined full-funding of the area cost differential.                                                                       
                                                                                                                                
Since  SB 36  was  enacted, every  dollar  has been  reduced,                                                                   
imposing  vast restrictions  on Juneau's  ability to  provide                                                                   
quality  education  for students.    Ms. Warning  urged  full                                                                   
funding.                                                                                                                        
                                                                                                                                
2:18:09 PM                                                                                                                    
                                                                                                                                
BILL   BJORK,   PRESIDENT  NEA-ALASKA,   JUNEAU,   noted   he                                                                   
represents 13,000  members statewide.  Mr. Bjork  pleaded for                                                                   
a substantial  increase to the  BSA.  The National  Education                                                                   
                                           th                                                                                   
Association (NEA) is confident  that the 25  Legislature does                                                                   
have the  necessary resources to  address such concerns.   He                                                                   
reviewed the numbers:                                                                                                           
                                                                                                                                
   · 130,000 students in Alaska's K-12 schools                                                                                  
   · The current BSA is $5380                                                                                                   
   · Inflation rate is 3%, so to stay even with inflation,                                                                      
     it will take about $29 million dollars per year                                                                            
   · Alaska is about $600 million dollars behind in funding                                                                     
     schools                                                                                                                    
   · He proposed funding the deficit over a period of seven                                                                     
     years                                                                                                                      
                                                                                                                                
Mr. Bjork urged that the PERS/TRS  be funded outside the BSA.                                                                   
He   mentioned    concerns    with   pupil    transportation,                                                                   
particularly   in   the   urban   districts   &   area   cost                                                                   
differentials.  He urged that  legislators re-examine the way                                                                   
Alaskan schools are funded in  order that the students can be                                                                   
prepared to meet the standards  set forth through regulation.                                                                   
                                                                                                                                
Co-Chair Meyer asked  if the PERS/TRS was funded  out side of                                                                   
the formula, would NEA still propose  the $115 million dollar                                                                   
increment.  Mr. Bjork said yes  and added that the dilemma of                                                                   
funding  it from  inside  the  BSA mean  the  dollars do  not                                                                   
necessarily go where the costs  are incurred.  He stated that                                                                   
the $573  dollar increase  on the  BSA would  be a "help"  in                                                                   
closing that funding gap.                                                                                                       
                                                                                                                                
Vice Chair Stoltze commented on  the many requests his office                                                                   
receives to repeal  SB 141, which creates the  new retirement                                                                   
system.  He inquired the biggest  issue for NEA members.  Mr.                                                                   
Bjork replied  that school  funding is  the biggest  issue as                                                                   
that  determines  whether  a child  has  the  opportunity  to                                                                   
learn.   The PERS/TRS  concern  is another  big concern.   He                                                                   
noted  that they  do  not  support the  defined  contribution                                                                   
system, which  is not in the  best interest for the  State of                                                                   
Alaska or the members of NEA.                                                                                                   
                                                                                                                                
Co-Chair Meyer clarified that  SB 141 was the change from the                                                                   
defined benefit program to the  defined contribution program.                                                                   
                                                                                                                                
Vice Chair Stoltze  advised that the retirement  issue is the                                                                   
number one concern brought forward by teachers.                                                                                 
                                                                                                                                
2:26:46 PM                                                                                                                    
                                                                                                                                
Representative  Hawker mentioned  exploring  the TRS  concern                                                                   
separate from the  BSA, which he supports.  He  claimed it is                                                                   
the only solution  for the situation, noting  the consequence                                                                   
of the 5%  increase each year.  Teacher's  contributions this                                                                   
year are approximately 54%, consisting of two components:                                                                       
                                                                                                                                
   · "Past sins" problem, and                                                                                                   
   · The cost of those now in the system to make a normal                                                                       
     retirement.                                                                                                                
                                                                                                                                
Representative  Hawker advised  that 40%+  relates to  paying                                                                   
off the  past service  liability.  He  noted the  increase to                                                                   
the BSA over  the past couple legislative sessions.   A large                                                                   
portion  of that increase  was necessary  from the  increased                                                                   
contributions  to  the  retirement  system,  driven  by  past                                                                   
service liability.                                                                                                              
                                                                                                                                
2:30:31 PM                                                                                                                    
                                                                                                                                
Representative  Hawker commented that  if the State  embarked                                                                   
on  a path  of taking  full  responsibility  for funding  the                                                                   
PERS/TRS outside the  BSA that would place more  funds in the                                                                   
classrooms.   Mr.  Bjork noted  that  regarding the  TRS/PERS                                                                   
shortfall, his comments had been  directed toward the FY07/08                                                                   
portion  and was not  looking  at the entire  increase.   Mr.                                                                   
Bjork  acknowledged   that  it  could  free-up   funding  for                                                                   
instruction.                                                                                                                    
                                                                                                                                
Representative  Hawker  believed it  should  reduce the  base                                                                   
student allocation, assuming that  all past service liability                                                                   
had been addressed.                                                                                                             
                                                                                                                                
Representative Hawker  added, it is important  to address how                                                                   
the money  would flow  to do  the work.   He  hoped to  see a                                                                   
reduction  to   the  BSA,   improving  the  school   district                                                                   
position.   Mr.  Bjork  agreed that  every  aspect of  school                                                                   
funding  should be  on  the table  and  discussed.   Co-Chair                                                                   
Meyer agreed.                                                                                                                   
                                                                                                                                
2:33:44 PM                                                                                                                    
                                                                                                                                
Representative  Gara  voiced concerned  just  increasing  the                                                                   
base student  allocation rather  than compensating  for pupil                                                                   
transportation costs.   He recommended possibly  returning to                                                                   
a  full  reimbursement  system.   He  asked  how  the  school                                                                   
districts   fare   given   the   new   system   for   student                                                                   
transportation costs.   Mr. Bjork replied that  the impact to                                                                   
pupil  transportation  has been  in  the urban  school  areas                                                                   
because  of the  extensive  bus transportation  patterns  and                                                                   
that the impact has been substantial.                                                                                           
                                                                                                                                
Co-Chair Meyer  requested that  Representative Gara  not move                                                                   
toward  a separate  area of  discussion,  rather keeping  the                                                                   
discussion on  the foundation  formula.  Representative  Gara                                                                   
stated that he was discussing "education" funding.                                                                              
                                                                                                                                
2:36:36 PM                                                                                                                    
                                                                                                                                
Representative  Gara  hoped  to  see a  budget,  which  could                                                                   
reduce class  sizes & return cut  programs.  He asked  if the                                                                   
$573  dollar BSA  proposal would  leave schools  at a  status                                                                   
quo.   Mr.  Bjork  stated that  the  $573 dollar  number  was                                                                   
determined by  adding 3% inflation  to the current  level and                                                                   
then looking  at adequacy  in school funding.   The  State is                                                                   
now approximately  $600 million dollars behind  from the last                                                                   
two  decades.   He  proposed that  amount  be addressed  over                                                                   
                   th                                                                                                           
seven  years;   1/7   would  be  approximately   $86  million                                                                   
dollars.    The  $29 million  dollars  allows  a  status  quo                                                                   
budget.                                                                                                                         
                                                                                                                                
2:38:41 PM                                                                                                                    
                                                                                                                                
MARY FRANCIS,  EXECUTIVE DIRECTOR,  ALASKA COUNCIL  OF SCHOOL                                                                   
ADMINISTRATORS,  (ACSA), spoke in  support of an  increase to                                                                   
the BSA.   She addressed termination concerns  resulting from                                                                   
flat funding.  School districts have been  preparing multiple                                                                   
budgets because  they do  not know what  the funding  will be                                                                   
until  very late  in  the school  year.   She  observed  that                                                                   
school  programs  are  being  eliminated  due to  a  lack  of                                                                   
funding.                                                                                                                        
                                                                                                                                
The Association  supports area  cost adjustments  as proposed                                                                   
by the  ISER study.   Ms. Francis  emphasized that  PERS, TRS                                                                   
and fuel  costs have  eaten away at  classroom dollars.   The                                                                   
Association has not  taken a stand on a specific  BSA amount,                                                                   
but supports numbers proposed by the [Senate].                                                                                  
                                                                                                                                
MARY  HAKALA,  COORDINATOR,  GREAT  ALASKA  SCHOOLS,  JUNEAU,                                                                   
spoke in support  of additional school funding.   She pointed                                                                   
out that the Great  Alaska Schools is made up  of many people                                                                   
statewide.     She   stressed   that  equity   in  the   cost                                                                   
differential is needed.  There  has been a growing gap in the                                                                   
minimum  required   local  effort.     Inflation   and  pupil                                                                   
transportation  have also  been a  factor.   There will  be a                                                                   
$200 million  dollar deficient with the  Governor's proposal;                                                                   
$500 thousand  will be  used for  pupil transportation.   Ms.                                                                   
Hakala spoke to  the cap and stressed the need  for solutions                                                                   
to infuse money into the classroom.                                                                                             
                                                                                                                                
2:48:58 PM                                                                                                                    
                                                                                                                                
In  response to  a  question  by Representative  Thomas,  Ms.                                                                   
Hakala spoke  to the change  in statute altering  the minimum                                                                   
required  local  contributions,  varying  from  community  to                                                                   
community.   She observed  that Juneau is  at the cap  of the                                                                   
maximum  allowed to contribute;  there  are very few  schools                                                                   
contributing  at that  cap.  There  is also  a minimum  local                                                                   
contribution,  which  she  recommended  be  discussed.    Ms.                                                                   
Hakala acknowledged  that different communities  have various                                                                   
purchasing power & that equity should be attempted.                                                                             
                                                                                                                                
2:51:53 PM                                                                                                                    
                                                                                                                                
CARL ROSE, EXECUTIVE  DIRECTOR, ASSOCIATION OF  ALASKA SCHOOL                                                                   
BOARDS, presented  members with a  list of six  issues, which                                                                   
the Association believes are the big "rock" issues.                                                                             
                                                                                                                                
   · BSA increase to $5,810                                                                                                     
   · District cost factor, increasing it to the levels                                                                          
     recommended by the 2005 ISER Report                                                                                        
   · Retirement costs                                                                                                           
   · Vocational Education - recognizing the importance of a                                                                     
     dependable funding stream for Voc-Ed outside the 20%                                                                       
     block grant for special education                                                                                          
   · Intensive Need Students, addressing the problems caused                                                                    
     by   inadequate    formula   funding,    post-enrollment                                                                   
     transfers and conflicting state regulations defining                                                                       
     intensive needs                                                                                                            
   · Early or forward funding - appropriating foundation                                                                        
                                            thth                                                                                
     funds & PERS/TRS costs by March 16 (60 day) or                                                                             
     setting aside sufficient funds in FY08 to forward fund                                                                     
     FY09 education budget                                                                                                      
                                                                                                                                
2:58:35 PM                                                                                                                    
                                                                                                                                
In response to a question by Representative  Foster, Mr. Rose                                                                   
noted that  in 1986, a Blue  Ribbon Commission  addressed the                                                                   
over   identification    of    special   education.       The                                                                   
recommendation was for 18.5%, later increased to 20%.                                                                           
                                                                                                                                
Representative  Foster  mentioned   the  lack  of  vocational                                                                   
education programs in his area.  Mr. Rose agreed.                                                                               
                                                                                                                                
3:00:38 PM                                                                                                                    
                                                                                                                                
PEGGY  COWAN,  SUPERINTENDENT   OF  SCHOOLS,  JUNEAU  BOROUGH                                                                   
SCHOOLS, CITY & BOROUGH OF JUNEAU,  discussed the increase in                                                                   
school  funding.     She  observed  that  class   sizes  have                                                                   
decreased  and there  has  been  a lack  of  books and  other                                                                   
necessary support aids.  She provided  members with a handout                                                                   
of the school's  legislative priorities; she  noted that PERS                                                                   
and TRS had not been included  in the calculations.  (Copy on                                                                   
File).                                                                                                                          
                                                                                                                                
Superintendent  Cowan urged  full funding  for district  cost                                                                   
factors  and  that communities  want  additional  funding  to                                                                   
close the achievement gap, workforce  development and reduced                                                                   
class sizes.                                                                                                                    
                                                                                                                                
3:03:43 PM                                                                                                                    
                                                                                                                                
Representative  Gara inquired  about the  Juneau class  size.                                                                   
Ms. Cowan responded  that at the primary school  level, class                                                                   
size averages  22 students,  grades 3-5  averages 25,  middle                                                                   
school at  about 31  and high  school average  is in  the low                                                                   
30's.  She pointed  out that progress had been  made in class                                                                   
size over  the past  two years.   The  Board had  prioritized                                                                   
that  issue.   The  funding  formula  is different  than  the                                                                   
actual class size.                                                                                                              
                                                                                                                                
3:05:34 PM                                                                                                                    
                                                                                                                                
Representative Joule referred  to the high statewide drop out                                                                   
rate.  He  asked if those  students are counted back  in when                                                                   
they  return.   Ms. Cowan  stated that  the school  districts                                                                   
would "embrace"  any student  back in  and acknowledged  that                                                                   
they would generate additional  funds, offset by the need for                                                                   
additional  teachers.   She observed  that  students tend  to                                                                   
drop out as the school year progresses;  some are lost during                                                                   
the summer and then again early in the first semester.                                                                          
                                                                                                                                
3:08:59 PM                                                                                                                    
                                                                                                                                
In response to a question by Co-Chair  Meyer regarding Alaska                                                                   
History, Mr. Jeans noted that  the School Board had adopted a                                                                   
mandatory  requirement for  that  course at  the high  school                                                                   
level.                                                                                                                          
                                                                                                                                
3:09:30 PM                                                                                                                    
                                                                                                                                
Representative  Thomas  reiterated  questions  regarding  the                                                                   
local  contribution  cap.    Mr.  Jeans  explained  that  the                                                                   
effects of SB  174 passed in 2001, requires  that as property                                                                   
values  of   each  community  increase,  the   Department  of                                                                   
Education and Early Development  is only allowed to count 50%                                                                   
of that  growth, which is  not the full  value as  counted by                                                                   
the State assessor.   The cap is 4 mills.   The amount varies                                                                   
from 4  mills in many  small, first class  cities.   In areas                                                                   
that are growing, only a portion  of their increased property                                                                   
value  is  counted  and  they   are  required  to  contribute                                                                   
something  less.  The  extreme would  be the Mat-SU  Borough,                                                                   
which  is required  to collect  a  2.8 mill  levy to  support                                                                   
education.                                                                                                                      
                                                                                                                                
Representative Bill Thomas asked  was the State assessment or                                                                   
the Senate bill adjustment required.                                                                                            
                                                                                                                                
3:12:47 PM                                                                                                                    
                                                                                                                                
In response Mr.  Jeans explained that the cap is  4 mills but                                                                   
the  difference  is  in  the  calculated  educational  value.                                                                   
Prior to  2001, the  full value was  accounted, but  now only                                                                   
the educational full value is calculated.                                                                                       
                                                                                                                                
3:13:50 PM                                                                                                                    
                                                                                                                                
Representative  Gara questioned  how much  was being  lost in                                                                   
pupil  transportation.   Mr. Jeans  offered  to provide  that                                                                   
information,  noting that statewide,  expenses are  exceeding                                                                   
the grant amount by a little over $2 million dollars.                                                                           
                                                                                                                                
3:14:49 PM                                                                                                                    
                                                                                                                                
Representative Gara  observed that under the  current system,                                                                   
some   school   districts   get  more   for   their   student                                                                   
transportation  needs than  needed &  some receive less  than                                                                   
their actual  expenses.   Mr. Jeans replied  that was  a fair                                                                   
assumption.                                                                                                                     
                                                                                                                                
Representative Gara thought that  the Railbelt districts will                                                                   
not do  well under  the new  contracts &  would receive  less                                                                   
than their  expense.  Mr.  Jeans explained that  the Railbelt                                                                   
districts being  Anchorage, Fairbanks,  & Kenai,  all entered                                                                   
into the  new contracts that took  affect this year  and have                                                                   
made money  under the new program  for the last  three years,                                                                   
but will  have to  go into  reserves for  this current  year.                                                                   
Some  of  those  districts have  reserves,  but  others  have                                                                   
transferred  savings into operations.   He  did not  know the                                                                   
estimated amount for the current year.                                                                                          
                                                                                                                                
3:17:00 PM                                                                                                                    
                                                                                                                                
In response  to  Representative Nelson,  Mr. Jeans  explained                                                                   
that pupil funding  is outside of the foundation  program and                                                                   
that  the  affects  of  SB 174  were  within  the  foundation                                                                   
formula.                                                                                                                        
                                                                                                                                
HB 1 was HELD in Committee for further consideration.                                                                           

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