Legislature(1993 - 1994)
02/16/1994 03:00 PM House HES
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HB 267 - REVISE FOUNDATION FORMULA, SMALL SCHOOLS Number 053 REP. RICHARD FOSTER, Prime Sponsor of HB 267, said the bill would increase funding for school districts that are comprised of one funding community (single site school districts) and an average daily membership (ADM) of 800 or less. He stated that he had a sponsor substitute for the bill that would change the effective date to July 1, 1994, preventing small school districts from being paid twice. He explained that the change in the formula that is being proposed would not be an increase in school funding. He stated that the funding that was provided as a grant during the last fiscal year would be transferred to the foundation formula, subject to the same proration as other funding. Rep. Foster stated that the legislation was endorsed by the Department of Education (DOE) and he had many other letters of support. Number 152 REP. G. DAVIS asked how the funding for single site school districts related to the larger school districts, explaining because the small districts are separated at this time, they are considered to be funded separately. Number 201 LARRY LABOLLE, Legislative Aid to Rep. Jerry Mackie, said that funding communities assist large school districts with additional money. He stated that single site school districts do not have that type of funding, and HB 267 was an equity response. (Note: Rep. Bunde arrived at 3:12 p.m. and assumed the position of Chairman for the remainder of the meeting.) Number 234 CHAIR BUNDE asked Mr. LaBolle to continue with his testimony. Number 238 MR. LABOLLE stated that Rep. G. Davis was correct. He said the more funding communities within a district, the greater the number of foundation units are contributed. He added that a single funding community or single site school only receives the calculation one time. He said there is a certain cost factor associated with operating. He stated that the ability to absorb administrative costs is accrued and that he suspected with only one funding community there would not be enough funding for the basic administrative costs based on instructional units. Number 278 REP. BRICE said that it was his understanding that the current foundation formula was written with the understanding that the inequity exists, and it was hoped the issue would be addressed at a later date. He asked Mr. LaBolle to provide the history of that issue. Number 296 MR. LABOLLE stated that he was the superintendent of Nome at the time the foundation formula was adopted. He said that there was something working consistently in the formula that worked against single site school districts, but the factor was not identified, and studies that were supposed to be done to remedy the problem were never implemented. He further stated that instead of finding the problem within the formula foundation, the solution has been to grant additional funds to single site school districts. Number 330 CHAIR BUNDE stated for the record that Rep. Vezey arrived at 3:16 p.m. and asked for further questions. He commented that the school budget that Governor Hickel submitted would involve a decrease in school funding for urban schools and that it did not fund single site schools on a supplemental. Referring to the proportional decrease that urban schools will incur, Chair Bunde asked Mr. LaBolle what kind of funding would the single site school districts need. Number 371 MR. LABOLLE responded by saying that in the past single site school districts have been identified and given an additional amount of funds. He felt that a mechanism must be put into the foundation formula to address the inequity. He further stated that they would be subject to proration under the foundation formula. Number 400 CHAIR BUNDE said "we all have to take our turn, and fair is fair." Number 405 REP. TOOHEY asked if a supplemental funding was being asked for this year, instead of new legislation including single site school districts in the foundation formula. She then asked if it would be the same amount as the formula. Number 415 MR. LABOLLE agreed and said it was the same formula used last year to derive the supplemental that was granted. He indicated a list of single site schools in the bill packet that showed the total amount as identical to last year's grant. Number 434 CHAIR BUNDE said that testimony would be heard via teleconference from Anchorage, Nome and Skagway. Number 456 MICHAEL MURPHY, Member, Nome School Board, testified via teleconference from Nome in support of HB 267. He stated that HB 267 was not the perfect solution, but it was a good start. Number 479 CHAIR BUNDE asked Mr. Murphy, if education were to be cut, would Nome be willing to be subject to proration? Number 486 MR. MURPHY responded by saying he felt education should not be cut. He said the district has made several cuts over the past few years and should not be penalized again. He felt there were districts who have made no cuts that continue to be "rewarded." Number 521 CHAIR BUNDE asked Mr. Murphy to tell him which districts continue to spend and now have too much money. Number 523 MR. MURPHY suggested that several rural education attendance areas (REAAs) had access to more funding. He stated that Nome has one of the lowest administration costs in the state. Number 545 CHAIR BUNDE thanked Mr. Murphy for being fiscally responsible. He further stated that all areas would be included when balancing the budget, and his intention would be to reduce as much negative impact on education as a whole. Number 558 REP. TOOHEY stated that there was, indeed, inequity regarding the relative amount of funds for single site school districts. She asked Chair Bunde in which year the inequity started. She was informed by a number of people that it started in 1978. She continued on to ask Mr. Murphy if Nome came to the legislature every year to ask for a supplemental. She then asked, if the proposal did pass, would Nome be willing to take a cut like everyone else? Number 576 MR. MURPHY replied that he really would not like to take the cut, explaining that any cut would impact the district immensely. He felt as long as the foundation formula was cut and the cuts were equal across the state, Nome would have to deal with that. He challenged all other districts to be as fiscally responsible as Nome. Number 613 CHAIR BUNDE asked if Mr. Murphy knew the administrative cost per student for the Nome school district, explaining that the figure would help in comparing school districts in regards to efficiency. Number 622 MR. MURPHY answered that in fiscal year (FY) 1993 the budget was for $6.9 million and the district office administration runs at 5.8%. He said total school administration is 12.5% of the budget. He found that of the schools that he compared these figures to, their administrative costs ranged between 15% and 20% of budget. Number 642 CHAIR BUNDE said those figures reflected well on Nome. Number 646 MR. MURPHY stated that he would be in Juneau the following week and would give Chair Bunde a packet of information. Number 652 JUNE WARDLE, Member, Nome City Council, testified via teleconference from Nome in support of HB 267. She said the legislation was not perfect, but it was a fair proposal. She hoped the legislation would pass. Number 668 CHAIR BUNDE continued taking testimony. He introduced Al Weinberg. Number 677 AL WEINBERG, Chairman, Single Site School District Consortium, testified via teleconference from Anchorage in support of HB 267. He stated that the current foundation formula went into effect in FY 1987. At that time, the legislature recognized an inequity of funding regarding single site schools. Subsequently, a separate sum of money was appropriated to the DOE to allocate to districts that were suffering the inequity. In most of the years following there have been supplemental grants allocated to those same schools to compensate for the initial error inherent in the foundation formula. During the past two years the formula that was used to appropriate funds was the exact same formula contained in HB 267. By enacting HB 267, there would not be an increase of funding for single site school districts, but the school districts would maintain the same total state funding that they had been receiving. MR. WEINBERG explained that the inequity is caused by the "front end load" in the foundation formula. He said "two instructional units are generated for the first ten students, actually for up to the first ten students in a funding community. Then it drops off dramatically after that. So, the more funding communities you have, the more opportunity you have to take advantage of the front end load in the formula." He said he compared two school districts with the exact ADM and used their projections for the next fiscal year. Chugach school district, which is a multiple site school district, projected 133 students and Skagway, which is a single site, projected 135 students. He said if the area differential was eliminated to equalize dollars across the state, and the K-12 unit was recognized, the single site school district would generate approximately 34% less money than the multiple site school district. He explained that the process was a function of the front end load in the foundation formula as it applies to each funding community that each district has. He further stated, if the single site supplement was added to the foundation formula in HB 267, multiple site school districts would still generate 26% more funds than single site school districts. He felt that the differential in the current formula is too severe. MR. WEINBERG further stated that equity would need to be created within the formula before the Kashunamiut school district would be willing to be subjected to proration. He stated that if Chugach was to be prorated, the proration would reduce funds by 2% next year. A proration for Skagway would also mean a reduction of 2%, but if they did not get the single site funding that they've obtained in the last few years, they would be prorated an additional 10.5%. MR. WEINBERG said administrative costs comparisons are impossible to do because of the varying accounting procedures within each district. He further stated that indirect cost rate is an accepted measure of administrative overhead. He said Anchorage has an indirect cost rate of 12.31%, Nome has a 11.17% cost rate, and Kashunamiut has an indirect cost rate of 13.34%. He stated that the multiple site districts that surround Kashunamiut have 18.39% and 16.30% indirect cost rates. MR. WEINBERG also said that he would like to see the Single Site School Consortium disband as a result of the passage of HB 267. Number 903 CHAIR BUNDE asserted that the public would like every entity that receives state funds to justify their existence every year. He also said the public is insisting that education be cut, period, and specifically in the area of administrative costs. Chair Bunde stated for the record that Rep. Lyman Hoffman and Rep. Jerry Mackie joined the hearing. Number 935 RALPH TRONRUD, Vice-President, Skagway School Board, testified via teleconference from Skagway in support of HB 267. He said that without the money provided for in HB 267, Skagway will face severe problems. When the foundation formula went into place, Skagway had just shut down the railroad, which was Skagway's largest employer. As a result, there was a decrease in ADM and Skagway was still undergoing numerous cuts. He said currently there are 14 teachers who provide instruction for K-12, and they were projecting a decrease in enrollment next year from 143 down to 135 students, which will subtract approximately $180,000 from the budget. He said if the single school site funds are not received this year, an additional two teaching positions would have to be dropped, along with one position already slated to be cut. He said if there were to be further cuts, the maintenance and custodial people and library book reorders would have to be cut almost completely. Also, the junior high sports programs, the community education program, and the new pre-school program would have to be cut. Number 992 CHAIR BUNDE asked what would happen to the teacher/pupil ratio if two teachers were cut. Number 993 MR. TRONRUD answered that it would be 12 students per one teacher. Number 031 DEBBIE MILLER, Member, Nome School Board, testified via teleconference from Nome in support of HB 267. She said every year Nome has come down to Juneau to lobby for supplemental aid for the Nome school district, and each time Nome has proven that they have continually made cut after cut to balance the budget. She felt there were no more cuts to be made. She said since 1988 the expense for total administration was 13.26% to 12.5% of budget. She said HB 267 would be a "fix" to the supplemental issue for single site school districts. Number 052 CHAIR BUNDE asked what the pupil/teacher ratio is for the Nome school district. Number 054 MS. MILLER said it was approximately 16 pupils to one teacher. Number 056 JOHN HANDELAND, Mayor, Nome, Alaska, testified via teleconference in support of HB 267. He said over the years the city has worked diligently to contain and cut costs. He noted that community funding was doubled last year, and this year he was projecting that the community funds would be more than doubled. He said HB 267 would make funds equitable within the foundation formula, but he felt more could be done to help single site school districts. He referred to the "front end loading concept," and said that something is wrong with the formula if there are ways to manipulate it. He further stated that as many cuts as possible have already been made. Number 111 CHAIR BUNDE inquired as to the maximum amount that communities can fund their districts at. He asked Mr. Handeland how it was possible to double the mandatory contribution. Number 123 MAYOR HANDELAND said that Nome is obligated by law to contribute four mils of property tax to the foundation program. He further stated that Nome found it to be necessary to contribute eight mils of property tax. TAPE 94-21, SIDE B Number 000 MAYOR HANDELAND continued by saying that the community has recognized its obligation to support education. He felt that Nome was doing more than their part. He said a 1% cut to a single site school district is more than a 1% cut to multiple school districts. Number 062 CHAIR BUNDE acknowledged the efforts Nome has made to carry their fair share of economic burdens. He then asked Duane Guiley about the maximum funds a community can contribute to a school district. Number 092 DUANE GUILEY, Division of Education Finance and Support Services, Department of Education, answered questions about local funding for school districts. He stated that there is a requirement in statute that organizes city and borough school districts, allowing them authority by statute. They must contribute a minimum of four mils based upon the assessed value of real and personal property within the district. He further explained that districts are provided the opportunity to contribute in excess of the four mils in an amount equal to 23% of the current year's basic need. He stated that the current statewide contribution is 7.8 mils, 3.8 mils above minimum. He commented, indeed, Nome was above the state average by three-tenths of one mil. He said Nome has doubled the minimum required local contribution by statute. Mr. Guiley said the total allowable excess across the state totals $269 million, and local school districts through cities and boroughs are currently contributing $208 million, allowing for an additional increase in capacity of $61 million. Number 138 CHAIR BUNDE clarified by saying up to 23% of the state funds is the maximum that local communities can contribute. Number 145 MR. GUILEY mentioned three exceptions in the state as being the three wealthy districts which have a different limit. Number 148 CHAIR BUNDE listed for the record those exceptions as being North Slope Borough, Unalaska, and Valdez. MR. GUILEY said the three districts' limit is based on 35% of the current year's basic need plus two mils, regardless of the value of the two mils. He explained that North Slope reaches 35% of their budget with four-tenths of one mil local contribution rate, hence with a 1.2 mil they reach 100% of their budget. Number 172 STEVE MCPHETRES, Executive Director, Alaska Association of School Administrators, testified in Juneau in support of HB 267. He stated that before legislation for the formula foundation was passed, it was acknowledged then that there was an inequity within the formula that was detrimental to single site school district funding. It was said that the problem would be addressed before the legislation was passed. He stated that, indeed, the legislation had passed without being fixed and eight years later the formula is still trying to be fixed. He felt that children of Alaska were held hostage last year over the single site school district issue. He said a number of single sites were being held up for various political reasons in the legislature. He urged that HB 267 to pass out of committee so that students are not subject to the same situation as last year. He said the issue must be resolved this year with the enactment of HB 267. Number 238 REP. MACKIE asked Mr. McPhetres if he was aware of any school district or school district administrator that was unaware of the existing inequity inherent in the current foundation formula. Number 251 MR. MCPHETRES stated that all administrators are sympathetic to the "single site cause." Number 257 REP. MACKIE asked if the entire education community was supportive of HB 267. Number 262 MR. MCPHETRES stated he could speak only for the Alaska Association of School Administrators. Number 267 REP. TOOHEY asked if a supplemental budget was being asked for this year and how much the grant was for. Number 272 REP. MACKIE answered that there was a supplemental applied for by single site school districts, but he did not know how much the supplemental was for. Number 280 REP. TOOHEY said that the problem would continue if nothing is done. Number 284 REP. MACKIE said that the single site school districts would continue to come to the legislature asking for a supplemental and additional funding, whether it be in the form of a supplemental grant or through new legislation. Number 291 CHAIR BUNDE stated there was a HESS committee substitute (CS) that would fund single site schools, but it would require broad base support to pass. Number 304 WANDA COOKSEY, Representative, Single Site School District Consortium, testified in support of HB 267. She stated that she could supply further history pertaining to the inequity in the foundation formula. She urged the committee to pass HB 267 out of committee and stated that the passage of the bill would be in the spirit of the legislative intent of 1987 when they acknowledged the inequity. She said the person who authored the foundation formula, Dr. Cole, came back and studied the effect of the legislation on the 21 districts and recommended changes contained in HB 267. She also said that passage of the proposal would end the annual requests for supplemental funding outside of the foundation formula. Number 373 CLAUDIA DOUGLAS, President, National Education Association/Alaska (NEA/AK), testified in support of HB 267. She felt it was unfair that school districts had to come every year and undergo extra legislative scrutiny relative to their basic needs under a formula that should be equitable for all school districts. She said she did not want to experience the same political warfare as last year in regards to the students, and felt that no district should have to come to Juneau to "beg" for equal funding. Number 398 CHAIR BUNDE asked her to find out from the NEA/AK what their position would be on supporting maximum local contributions that might make it easier to address some of the aforementioned questions. Number 415 CARL ROSE, Executive Director, Association of Alaska School Boards, testified in Juneau in support of HB 267. He said that most of the single site school districts feel like the world has passed them by since 1987 and that they are being treated like second class citizens. He said any increases that have been given in the absence of a supplemental have affected them twofold. First, single site school districts are not receiving what they should have been receiving; and secondly, a $1000 increase in the instructional unit does not have a major impact. MR. ROSE shared an example with the committee. He said district A has 127 students in a single site school and one superintendent/principal. School district B has 1000 students, five sites, a superintendent, an assistant superintendent, and a principal at each site. He referred to the purpose of administrative cost and equity and stated that school district A would have one full time administrator for the entire school of 127 students. School district B would have one full time principal at each school and a superintendent and assistant superintendent to provide for maintenance and operations of transportation, federal programs, curriculum, attendance, discipline, personnel, and program support. He said clearly the quality of education in district B would be superior to that of district A, based on the ability to provide administrative services and program support. MR. ROSE stated that the inability of single site school districts to substantiate how much funding they will receive under the formula is devastating the small districts. He felt all districts should be made equal. He urged the committee to pass HB 267. Number 534 REP. VEZEY asked why single sites schools do not consolidate and asked if they choose to be autonomous. Number 566 MR. ROSE responded by saying that Yukon Koyukuk is an organized borough and an REAA. He said within the REAA there are first class cities that provide local support through local city council. He stated that they are autonomous in that they are first class cities. Number 577 REP. VEZEY asked why single site school districts do not incorporate into larger school districts to solve the funding problem. Number 588 MR. ROSE said it was his understanding that in an unorganized borough, one of the main incentives for them to organize as a borough is obtain to potential revenues that may be encompassed within the borough. He said that first class cities do assess themselves and do pay a portion of the local contribution, and therefore they want the ability to operate their schools. MR. ROSE said that questions have come up regarding the opportunity that may be granted to the first class single site schools to obtain second class city status, thereby being included in an REAA. He said the Department of Community and Regional Affairs (DCRA) is not in favor of that movement, and felt that the state government wants to organize the state instead of allowing for unorganized boroughs. Number 631 MR. LABOLLE said if the first class cities within unorganized boroughs were put into second class status, the unorganized borough would "pick them up" and they would become three additional funding communities for the Yukon Koyukuk School District. He said the local tax contribution would be lost and there would be no reduction in administration. Number 651 REP. VEZEY indicated that the laws can be modified. He said the economic forecast for Galena was "dreary" and further questioned if the basic structures of such school districts should be fostered and encouraged. Number 671 MR. LABOLLE said the proposal was working under the structure that the state has established. Number 685 THOMAS TILDEN, Mayor, Dillingham, Alaska, testified in Juneau in support of HB 267. He stated that he had one child in junior high, one child in senior high, and another child in third grade. He stated that presently his son is attending school in Anchorage because the school in Dillingham does not provide the sports programs that he wanted. He stated that single site school districts have been impacted in various ways. Dillingham has been forced to let good teachers go because they cannot be tenured, forcing the district to hire "beginning" teachers. He felt when teacher quality goes down it affects the students negatively. He also said that the school districts are finding it difficult to maintain the buildings, citing an overhang that is endangering grade school students. He said the city of Dillingham has come forward with funds to fix the building. He said not only are books worn and outdated, but student morale is very low. He explained that due to the current financial situation, there are less opportunities to put on extracurricular activities; i.e., alcohol and drug awareness meetings. He further stated that a way must be found to increase resources. He said as a cost saving measure the administrative offices of the school district joined offices with the school board, including maintenance programs. Still, the school district was forced to cut basketball, wrestling, and other extracurricular activities. He said the citizens of Dillingham came forward and personally funded those programs. He felt the students in single site districts deserve an equal opportunity for a good education. Number 773 CHAIR BUNDE asked Mayor Tilden to clarify what was meant when he said the school district was forced to not give teachers tenure due to lack of funding. Number 779 MAYOR TILDEN said that after three years teachers must be tenured, and then they become part of the system. Number 786 CHAIR BUNDE clarified further by saying it was because of the uncertainty of future funding that tenure was not being granted. He also commented that parents in Anchorage are paying fees for their children to be involved in school athletics. CHAIR BUNDE closed public testimony and stated that it was not his intention to pass the proposal out of committee, and he cautioned that it should not be misconstrued as an intention to kill the bill. Number 813 REP. OLBERG said, "with respect, what... we're looking at a bill that's got about four lines to it. What do we need further to deliberate about the status of the bill." CHAIR BUNDE indicated his concern with the lines in the fiscal note. Number 819 REP. OLBERG said they were the same as the lines in last year's note. Number 823 CHAIR BUNDE said the legislature may be cutting many things and HB 267 may be one of them. Number 823 REP. OLBERG suggested that the Finance Committee make that decision, not the Hess Committee. Number 830 REP. BRICE suggested that education was not going to be funded at the $61,000 level. He felt it would be appropriate to adjust the foundation formula in statute as quickly as possible, explaining that if there is to be a required proration, the single site school districts would be prorated, but at an equitable level of foundation formula. He urged expediency. Number 864 REP. MACKIE stated that nine of the school districts affected by the inequity are in his district. He stated that the issue has been around for several years and every year work has to be done to make single site school districts part of the budget. He felt the issue was one of fairness and asked committee members to put themselves in the same position as representatives of districts with single site school districts in them. He stated that HB 267 is fair and is supported by all facets of the education community. TAPE 94-22, SIDE A Number 000 REP. MACKIE asserted there was a perception by new and old members of the legislature who haven't been exposed to single site school districts that think the problem is that districts are wasting money. He said the perception is unjustified. He said in the community of Craig, some classes are held in the hallway or in the lunch room, which no longer serves lunch. He said he has seen a superintendent of a district with approximately 400 students teaching classes. He stated that to pass HB 267 would be to acknowledge the inequity and to ensure that the committee would not have to hear in the following years the requests for supplementals and grants. He reiterated that the single site school districts are not "fat" school districts, citing that many districts share teachers and counsellors. He urged the committee to act quickly and pass HB 267. Number 199 CHAIR BUNDE reiterated that it was not his intention to kill the bill, and said he was not playing political games with Rep. Mackie's students. He further stated that the majority of people in Alaska do not have children in school and that there are those who feel that education should be cut, period. Number 235 REP. G. DAVIS stated that HB 267 is not a funding bill. He indicated that the legislation would include the single site school districts into the foundation formula, which would make them accessible to proration. He felt HB 267 would simplify the process of the formula and would "get rid of a headache." Number 290 REP. TOOHEY agreed with Rep. G. Davis. She felt there was obvious inequity that was not being addressed. She said that by enacting HB 267, they would be on an "even playing field" when funding cuts are made. She was surprised that the legislature has waited seven years to fix the problem. Number 304 REP. NICHOLIA concurred with Rep. Olberg. She felt the committee should not grapple with finance issues. She stated that the committee is a health, education, and social services committee, and should review the proposal in an educational context and leave the financial decisions to the Finance Committee. She felt if committee members had no problem with the wording of bill, she saw no reason to hold it. She also stated that she has never heard anybody from rural Alaska ask for cuts to education. She said that not only do superintendents teach classes in addition to their administrative duties, but also there are teachers with three different grades with multi-subjects in the same classroom. Number 369 REP. MACKIE said he agreed with Rep. Davis. He said HB 267 is not a funding increase for education, it is a bill that creates equity. He also felt that HB 267 should be passed out of committee so that the Finance Committee could handle the financial issues. Number 422 CHAIR BUNDE clarified that he did not favor cutting education. He specified that it was a large number of citizens who want the cuts, and he was just giving a voice to those positions. CHAIR BUNDE brought HB 339 to the table.
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