Legislature(1993 - 1994)

03/22/1994 03:00 PM House HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  Number 359                                                                   
                                                                               
  CHAIR TOOHEY brought HB 533 to the table and said it was not                 
  her intent to move the bill out of committee that day.  She                  
  asked Duane Guiley to come forward to answer questions.                      
                                                                               
  HB 533 - ALLOWABLE EFFORT FOR SCHOOL FUNDING                                 
                                                                               
  DUANE GUILEY, Director, Division of Education Finance and                    
  Support Services, Department of Education, testified on HB
  533.  He stated that the legislation would provide an                        
  opportunity for districts to assist in the budget process of                 
  running schools with locally contributed dollars without                     
  putting additional burden on the state of Alaska.  He                        
  indicated that under current state statute, the maximum                      
  amount that a district can contribute is 23% of the current                  
  year's basic need as adjusted for the actual appropriation,                  
  or the prorated dollar amount of basic need.                                 
                                                                               
  MR. GUILEY indicated that the reason for the cap is so that                  
  the state of Alaska stays in compliance with the federal                     
  test, in order to recognize $43 million of federal impact                    
  aid in the state formula.  He maintained that the bill                       
  proposes to raise the cap to the federal limit of 25%.  He                   
  explained that the actual local contribution is not known                    
  until after the year is closed out and audits are received                   
  by the Department of Education (DOE).  At that time, the DOE                 
  calculates the actual disparity amount and makes adjustments                 
  to school district's total state aid.  He indicated that the                 
  DOE had just completed adjustments for the 1993 fiscal year                  
  in the month of March 1994.  He said if the limit is raised                  
  to 25%, the state would be asking districts to retroactively                 
  return any excess local contribution to the municipality or                  
  borough after the year has ended and the money is expended.                  
                                                                               
  MR. GUILEY further explained that in the past the cap has                    
  been less than 23%.  He said when the bill that created the                  
  current foundation formula passed in 1987, the cap was 21%.                  
  Based upon the request of local school districts, to raise                   
  that cap to allow for additional contributions, the bill was                 
  amended and raised to 23%.  He indicated that if the cap is                  
  raised to 25%, there is additional capacity provided to                      
  districts throughout the state that would total $11,397,318.                 
  He said, "That again is the amount of additional capacity                    
  that would be afforded to local municipalities and boroughs,                 
  additional contributions to the budget, and staying within                   
  the 25% level."                                                              
                                                                               
  Number 453                                                                   
                                                                               
  REP. B. DAVIS asked for clarification regarding                              
  municipalities asking for rebates up to a certain amount.                    
                                                                               
  MR. GUILEY explained that the disparity standard controls                    
  the actual limit in order for the state to stay in                           
  compliance with federal law.  He said once the audits are                    
  submitted, the process of confirming actual local revenues                   
  begins.  He indicated that prior to that time the DOA works                  
  from the budgeted number.  He said if a district actually                    
  contributes more than they are allowed under law, the DOA                    
  asks the district to refund local money.                                     
                                                                               
  REP. B. DAVIS said she understood.                                           
                                                                               
  Number 482                                                                   
                                                                               
  REP. BUNDE said he had heard that the 25% might cause some                   
  concern regarding federal regulation.  He asked Mr. Guiley                   
  why 25% is a better level for the legislation.                               
                                                                               
  MR. GUILEY indicated that under current statute, the cap is                  
  at 23%.  He said the DOE has already gone on record                          
  supporting an increase to as high as 24% and have indicated                  
  that under the current disparity calculation it is not                       
  problematic in relation to the federal regulation.  By                       
  raising the limit to the full 25%, the state may be put in a                 
  situation where districts would be asked to retroactively                    
  return local dollars or put them out of compliance with                      
  state statute which would keep them from receiving any state                 
  aid.                                                                         
                                                                               
  MR. GUILEY further explained that the choice a local school                  
  district has is to continue to receive the excess local                      
  dollars and forfeit 100% of their state aid or give back a                   
  minimal of excess local dollars that put them over the 25%                   
  cap should the legislation pass.  He pointed out the bar                     
  graph schedule supplied in the committee bill packets and                    
  explained that it demonstrates the effects of the cap.  He                   
  pointed out that the white bar indicates the four mill                       
  minimum contribution.  He explained that the three                           
  exceptions to the rule are North Slope, Unalaska, and                        
  Valdez.  He said their four mill contribution exceeds 35% of                 
  basic need and therefore a different cap applies to those                    
  districts.  He indicated that the shaded bar represents the                  
  maximum allowable excess.  He stated that the district of                    
  Hoonah contributes absolutely all they can to their local                    
  budget.  He indicated that where there are black diamonds at                 
  the top of shaded bars, it represents the districts that                     
  would benefit from the legislation.  He said those districts                 
  could choose to assist their schools with a greater amount                   
  of local contribution without fear of losing state aid.                      
                                                                               
  Number 556                                                                   
                                                                               
  REP. BUNDE stated that he supported the bill as it would                     
  encourage local support for school districts at a time when                  
  the state has to do more with less.  He said federal                         
  regulation keeps the state from going beyond 25% and the                     
  state should allow and encourage districts to come as close                  
  to 25% as possible.                                                          
                                                                               
  CHAIR TOOHEY asked Mr. Guiley if the areas affected by the                   
  legislation would have to vote on the issue or would it be                   
  an automatic option.                                                         
                                                                               
  MR. GUILEY indicated that if the revenue is available to a                   
  municipality or borough, through their budgeting process                     
  they would provide an amount requested by the local school                   
  district.  Under state statute, school districts must                        
  provide their request to the municipality by April 1.  He                    
  said once the request is provided, the district has 30 days                  
  to act on it through their budget process.  He indicated                     
  that the money may be available already to the local                         
  municipality without an increase tax revenue or other                        
  sources of revenue.  If the money is not available, it might                 
  result in additional tax increases through sales tax, bed                    
  receipts, fish tax, federal forest receipts, or any other                    
  source of revenue to meet the need if they have the desire.                  
                                                                               
  Number 612                                                                   
                                                                               
  CHAIR TOOHEY stated for the record that she rescinded her                    
  statement that the bill would not be moved out of committee                  
  that day.                                                                    
                                                                               
  REP. G. DAVIS indicated that some local taxes need tax payer                 
  approval and some assemblies and council have the authority                  
  to raise taxes without voter approval.  He said it depended                  
  on what tax they want to obtain it from and how their                        
  ordinances read.                                                             
                                                                               
  REP. BUNDE observed that nothing in the proposal requires                    
  local taxes to be raised.  He said it allows those that                      
  would like to assume more responsibility for their school                    
  district to do so.  He reminded the committee that the state                 
  may not fully fund education this year and that local                        
  municipalities could assume some of that responsibility if                   
  they choose to do so.                                                        
                                                                               
  Number 640                                                                   
                                                                               
  REP. NICHOLIA asked what type of impact the formula would                    
  have on school districts, single sight school districts, and                 
  REAAs in rural areas.                                                        
                                                                               
  Number 645                                                                   
                                                                               
  MR. GUILEY stated that the proposal would provide an equal                   
  opportunity for all organized municipalities and boroughs to                 
  provide additional support to their school districts.  He                    
  said there is no opportunity for local contributions                         
  regarding REAAs.  He indicated that the state of Alaska                      
  funds basic need at 100% in the case of REAAs without a                      
  local contribution requirement.                                              
                                                                               
  REP. NICHOLIA asked what impact the legislation would have                   
  on Galena or the Tanana city school district.                                
                                                                               
  Number 671                                                                   
                                                                               
  MR. GUILEY directed the committee's attention to the                         
  schedule included in the bill packets that indicates that                    
  Galena could contribute an additional $14,756 at a 1%                        
  increase which would be 24% total.  He said under the                        
  proposal Galena could contribute an additional $29,512 if                    
  they are already at the cap.  He said, currently, Galena is                  
  not at the cap so they do have additional contribution                       
  capacity within existing statute.                                            
                                                                               
  REP. NICHOLIA asked Mr. Guiley if he has been in contact                     
  with Galena so they could comment on the formula.                            
                                                                               
  MR. GUILEY responded he had not been in contact with any                     
  specific district so that they might comment, but he                         
  indicated that attached to the sponsor statement is a                        
  schedule of what Galena currently contributes to the local                   
  school district.  He asserted that under the existing                        
  statute, the total allowable excess is $360,000 over the                     
  required local effort, giving a total allowable contribution                 
  of $440,000 compared to the $253,000 that Galena currently                   
  budgets.  He said Galena may not benefit from the statute                    
  because they are not currently contributing at the cap but                   
  may find themselves in that situation in the future.                         
                                                                               
  Number 711                                                                   
                                                                               
  REP. NICHOLIA stated that she had concerns regarding the                     
  legislation.  She indicated that HB 533 was first introduced                 
  March 16, 1994, while she was attending a conference in                      
  Fairbanks.  She said she had not had time to speak to her                    
  school districts about the bill.                                             
                                                                               
  Number 721                                                                   
                                                                               
  REP. BUNDE reiterated that the legislation does not require                  
  local districts to do anything, it allows them to take                       
  responsibility if they wish.                                                 
                                                                               
  REP. VEZEY observed that there are not very many areas that                  
  will be affected by the legislation.                                         
                                                                               
  MR. GUILEY clarified that the bill provides opportunity to                   
  districts that have the desire to contribute more.  He said,                 
  "So those districts that are currently at the cap, or in the                 
  event if we have proration, the cap is applied to the                        
  prorated dollar amount.  That would change the schedule                      
  somewhat and more districts would find themselves closer to                  
  that cap.  So, especially in the event of proration, you may                 
  find more districts than what are indicated here in the                      
  position to take advantage of this legislation, should it                    
  pass."                                                                       
                                                                               
  Number 758                                                                   
                                                                               
  REP. VEZEY asked if his observation is wrong, as he saw only                 
  three or four communities currently that would benefit from                  
  the bill.                                                                    
                                                                               
  MR. GUILEY said Rep. Vezey is correct.  He stated that                       
  historically Ketchikan, Kenai, Fairbanks, and Juneau have                    
  been the four districts that have repeatedly contributed                     
  very close to the cap.                                                       
                                                                               
  REP. G. DAVIS offered to Rep. Vezey that the legislation                     
  would allow those districts that are in "dire straits" to                    
  gain more funding.                                                           
                                                                               
  REP. B. DAVIS indicated that there may be only a few                         
  districts at the cap currently, but in the future other                      
  districts would have the opportunity to rise to that                         
  maximum, especially if state funding is cut back.  She said,                 
  "Anchorage, for example, does not reach the cap that's set                   
  by, we reach the artificial cap that we have in our city,                    
  but not what's set here.  But, that would give us an                         
  opportunity to do it should there be a need to do it."  She                  
  reiterated that the legislation would be beneficial to other                 
  districts in the future.                                                     
                                                                               
  Number 805                                                                   
                                                                               
  REP. BUNDE made a motion to pass HB 533 out of committee                     
  with individual recommendations and accompanying fiscal                      
  note.                                                                        
                                                                               
  CHAIR TOOHEY asked if there were any objections.                             
                                                                               
  REP. OLBERG objected.                                                        
                                                                               
  CHAIR TOOHEY called for the vote.  Reps. Toohey, Bunde, G.                   
  Davis, Vezey, B. Davis, Nicholia, and Brice voted "Yea" and                  
  Rep. Olberg voted "Nay."  Chair Toohey declared that HB 533                  
  was so moved.                                                                
                                                                               
  (Chair Toohey handed the gavel over to Rep. Bunde to preside                 
  over the remainder of the meeting.)                                          
                                                                               
  Number 845                                                                   
                                                                               
  CHAIR BUNDE indicated that there would be teleconference                     
  testimony starting at 3:45 p.m.                                              
                                                                               
  (Chair Bunde took a brief at-ease from 3:30 until 3:45 p.m.                  
  to accommodate teleconference testimony.)                                    

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