Legislature(2013 - 2014)
02/24/2014 02:06 PM House JUD
| Audio | Topic |
|---|---|
| Start | |
| HB218 | |
| HB245 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 245-SCHOOL FUNDING: REQ'D LOCAL CONTRIBUTION
2:35:12 PM
CHAIR KELLER announced the next order of business would be HOUSE
BILL NO. 245, "An Act repealing the required local contribution
to school funding; making conforming changes; and providing for
an effective date."
CHAIR KELLER informed the committee there is a lawsuit
[Ketchikan Gateway Borough v. State of Alaska, Superior Court
Case No. 1KE 14-CI], and if the decision in that lawsuit is in
favor of the Ketchikan Gateway Borough (KGB) it would accomplish
the same goal as if HB 245 passed the legislature. He cautioned
the committee not to advocate in favor or against the bill as it
could be perceived as legislative intent and explained this
hearing is solely for the purpose of gathering information.
2:36:39 PM
REPRESENTATIVE TAMMIE WILSON, Alaska State Legislature, speaking
as the sponsor of HB 245, clarified that HB 245 can be passed
and the lawsuit can continue forward as one does not necessarily
void the other. She then paraphrased from the following sponsor
statement [original punctuation provided]:
House Bill 245 would reform the inequitable and
onerous state mandate for local contributions for
organized areas in the state of Alaska.
The State of Alaska has a duty under [Article VII],
Section 1 of the Constitution of the State of Alaska
to "establish and maintain a system of public schools
open to all children of the state". The Fiscal burden
placed on local governments that must bear that burden
is enormous and consuming. The State of Alaska
provides only partial funding to organized boroughs,
home-rule cities in the unorganized borough, and
first-class cities in the unorganized borough to carry
out the State's responsibility for education by
deducting a "local contribution" of 2.6 mils from the
level of state aid as stated in 14.17.410(G)(2)
In the area of Alaska outside organized boroughs,
home-rule cities in the unorganized boroughs, home-
rule cities in the unorganized borough, and first-
class cities in the unorganized borough, the State
carries out its duties for education through State
"educational service areas" established under AS
14.08.031, which exempt them from the required local
contribution. There are presently 19 State educational
service areas, referred to as regional educational
attendance areas (REAAs).
In 1963 Alaska State Legislature passed, and Governor
Egan signed into law, the "Mandatory Borough Act",
dictating that certain regions of Alaska; those
encompassing Ketchikan, Juneau, Sitka, Kodiak Island,
Kenai Peninsula, Anchorage, the Matanuska Susitna
valleys and Fairbanks to form organized boroughs by
January 1, 1964. Furthermore, Section 1 of the
Mandatory Borough Act promised that, "No area
incorporated as an organized borough shall be deprived
of state services, revenues, or assistance or be
otherwise penalized because of incorporation.
HB 245 removes the "required local contribution"
penalty imposed by the State of Alaska on organized
areas and again fulfills its Constitutional
responsibility.
REPRESENTATIVE T. WILSON then added that when an area becomes a
borough there is the assumption that services such as more
police, and parks and recreation will be added, and yet the
first issue to arise is the 2.6 mil [local contribution] tax
required for something the state is currently providing. She
explained that although when Alaska became a state a local
contribution provision was included but when oil was discovered
the state provided the municipalities' share [of local
contribution] until the state ran out of money. Consequently,
the state looked to the organized areas to fill the coffers for
[services] that are the state's responsibility. The state
developed the formula for basic needs to educate a student. She
characterized this as a constitutional issue that should be
rectified prior to going to court because it's the state's
responsibility to ensure the state pays its share and that the
issue is rectified prior to the commencement of Ketchikan
Gateway Borough v. State of Alaska.
2:41:36 PM
DAN BOCKHORST, Manager, Ketchikan Gateway Borough (KGB), stated
KGB supports HB 245 as it attempts to achieve the same goal as
the recently filed lawsuit by KGB, which is full funding of
basic need for all school districts whether they are municipal
districts or Regional Educational Attendance Areas (REAA). The
term "basic need," which is central to HB 245 and KGB's lawsuit,
is defined in [AS 14.17.410(b)(1)] and consists of seven
separate components. Beyond the technical jargon of the term,
he opined that it's a straight forward and fair formula. The
first component is student enrollment in each district and, he
explained, there are approximately 2,200 students in the
Ketchikan Gateway Borough School District which equates to
approximately $12.6 million in basic need. The second component
is the school size factor that takes into consideration
economies of scale as there are school districts with 15
students and others with approximately 50,000 students, such as
the Municipality of Anchorage. He explained that there is an
adjustment for the greater economies of scale in the larger
schools. The third component is the district cost factor, which
range from the base in Anchorage at 1.0 to a remote district of
2.116. The KGB District has a 17 percent increase in its cost
factor, which generates $2.7 million for Ketchikan. The fourth
component is funding for special education, gifted and talented
educational, vocational education, and bilingual education
services and the adjustment for the KGB District amounts to $3.7
million.
2:45:33 PM
CHAIR KELLER questioned if the factor is on the actual number of
special needs students, or on after the adjustment.
MR. BOCKHORST explained that every one of [the factors] adjusts
for the number of students, school size, and district cost
factor; it's an adjustment that continues to build. The fifth
component is vocational and technical instruction, which adds
approximately $350,000 for the KGB District; the sixth component
is correspondence students, which add approximately $150,000 for
the KGB District; and the seventh component is for special
education students who receive intensive services which adds
$3.3 million to the basic need for the KGB District. Mr.
Bockhorst expressed the importance of the "model" as it totals
$26.2 million, which is approximately $11,850.00 per student in
Ketchikan for its basic need. He acknowledged that Alaska is a
diverse state as there are 53 separate districts encompassing
over 650,000 square miles. In terms of per student basic need,
on one end of a spectrum the total is $5,200 per student and on
the other end the total is $48,500 per student, which is more
than nine times what it is at the lower end of the spectrum. He
related that the basic need formula equalizes the districts in
the state. In fact, the Department of Education and Early
Development (EED) says that "all districts are considered equal
at basic need." In other words, students, taxpayers, teachers,
parents, and others who support schools in Alaska's 34 municipal
districts have equal rights and opportunities under the basic
need formula compared to those in the 19 REAAs. The
aforementioned is a critical point when considering the merits
of HB 245 and the Ketchikan Gateway Borough v. State lawsuit.
2:49:28 PM
MR. BOCKHORST reiterated that the basic need formula ensures
every district [receives] adequate funding, and stated the
University of Alaska Institute of Social and Economic Research
(ISER)characterizes basic need as the dollar amount the state
determines sufficient to provide an Alaska school child with
acceptable educational services wherever the child lives. He
then highlighted the following by EED: "Basic need provides all
districts with needed resources based on the various formula
adjustments." Under the Alaska State Constitution, Article 7,
Section 1, the state has a constitutional obligation to provide
adequate funding to maintain a system of public schools. On
four different occasions over the course of 30 years, the Alaska
Supreme Court has stated that no other unit of government shares
the duty. In fact, Judge Sharon Gleason, Anchorage Superior
Court Judge, held it is the state's constitutional duty to
maintain and fund a system of schools. Therefore, it is
critical that basic need is recognized as adequate funding. Mr.
Bockhorst pointed out that on average municipal districts
receive approximately 80 percent of basic need from the state,
with some [municipal districts] receiving as little as 55
percent while REAAs receive full state funding of basic need.
Thus, while all districts are equalized in terms of
identification of basic need, only two out of three municipal
districts are not equalized in terms of funding. In other
words, on an average, municipal districts are only 4/5ths equal
to non-municipal districts in terms of state funding basic need,
he highlighted. The 34 municipal districts required by state
law to operate schools are forced to backfill [funding] and this
year KGB will pay $4.2 million for a community of 14,000 people
with 2,200 students. He estimated that within the last 22
years, KGB has been forced to pay in excess of $100 million,
which is a staggering amount
.
2:54:05 PM
MR. BOCKHURST referred to the 2/10/14 House Education Standing
Committee meeting regarding HB 245, wherein Representative
Reinbold questioned "Is it truly equal protection when some pay
and some don't?" He opined that Representative Reinbold's
question is critical given the lack of a rational basis of the
disparate treatment among districts that is evident in various
materials including the work prepared by Attorney Robert Hicks
for the KGB District in which he describes the stereotype that
unorganized areas lack resources while municipal districts have
substantial resources, which is not true. He then referred to
his written testimony wherein there is a listing of the per
capita income of the 53 districts in Alaska and the highest per
capita income in Alaska is a REAA. The REAAs have similar
income levels to boroughs that were mandated into existence.
For example, the per capita income of the Delta-Greely REAA
school district is virtually identical to that of the Fairbanks
North Star Borough. Although, 50 years ago the Fairbanks North
Star Borough voted against borough incorporation, Fairbanks was
incorporated by legislative fiat. He noted that the Chatham
REAA has virtually the same per capita income to the KGB
District. In contrast, the Delta-Greely REAA rejected borough
incorporation, and there has been no consequence. He recalled
discussions at the 2/10/14 House Education Standing Committee
meeting regarding the four separate school districts on the
Prince of Wales Island, of which there are three municipal
districts and one is a REAA. During that hearing Prince of
Wales Island expressed concern over the required local
contribution when considering borough formation. Although the
Prince of Wales REAA is not subject to the required
contribution, he pointed out; it has the highest per capita
income and is twice the size of the city school district that is
subject to the required [local] contribution on the low end of
the scale. Testimony provided at the 2/10/14 House Education
Standing Committee meeting by the Department of Law (DOL)
focused on a 17-year old case in which the Alaska Supreme Court
rejected a challenge of the required local contribution based on
equal protection grounds [Matanuska-Susitna Borough School
District v. State of Alaska, (1997) 931 P.2d 391]. The Mat-Su
case has significant weight on HB 245 issues. However, he noted
disagreement since the court decided in Mat-Su that it is up to
the legislature to choose an appropriate policy for funding
schools. Mr. Bockhorst opined that HB 245 is a viable choice
under the Mat-Su decision, but the current required [local]
contribution is not viable given the prohibition on dedicated
taxes and other constitutional infirmities raised in the
Ketchikan Gateway Borough lawsuit. During the same meeting, DOL
asserted the Alaska Supreme Court's decision stated the required
contribution is a "reasonable way to deal with the lack of
required contribution from Regional Educational Attendance
Areas," but the court never said the disparate treatment of
municipal districts compared to REAAs is reasonable. Rather, in
the Mat-Su case the court determined disparate treatment is
permissible by placing the interests of municipal taxpayers at
the low end of the scale of rights protected by the
constitution. The two justices, who weighed in on the decision,
added that the method chosen by the legislature may not have
been the most protective of taxing equality. In other words,
the method may not have been the most fair, but could be gotten
away with. He opined that is not the same as saying the
disparate treatment was reasonable. Moreover, when the Alaska
Supreme Court examines the equal protection claims it examines
"the purpose served by the challenged statute" which was the
requirement of local contributions on the part of municipal
school districts. Interestingly, he noted, rather than the
court applying the three-part test to the purpose of the
challenged statute, it reviewed the entire body of law dealing
with the foundation formula. He opined that in the Mat-Su, the
borough chose a cost saving strategy of attacking the statute on
its face and there was no evidence provided by the Mat-Su
Borough of the denial of educational opportunities and minimal
facts were presented with respect to tax payer inequity. There
were no facts showing disparities among school districts and no
challenge of highly inaccurate facts stated by witnesses called
by the State of Alaska. In the end, he noted, the cost saving
strategy of the Mat-Su Borough failed and the analysis of
Attorney Bob Hicks concluded it is a weak and vulnerable
precedent.
3:02:02 PM
MR. BOCKHURT opined that the vision of the framers of the Alaska
State Constitutional was for the state to create inducements
encouraging voluntary incorporation of boroughs. However, and
on the basis of the constitutional record the Alaska Supreme
Court concluded that the constitution encourage all intend that
the formation of boroughs organize yet the state has offered
disincentives and dismay with respect to incorporation of
organized boroughs. Interestingly, after 55 years of statehood
more than half of Alaska remains unorganized. This point is
clarified by the fact that 95 out of 100 residents of organized
boroughs live in organized boroughs that were formed as a result
of the 1963 Mandatory Borough Act. Former Governor Jay Hammond,
who served in the legislature during the adoption of the 1963
Mandatory Borough Act, observed "Attractive enough on paper, in
practice the organized borough concept had little appeal for
most communities. After all, why should they tax themselves for
services received from the state in gratis." The required
contribution imposed on boroughs is identified by some as the
greatest disincentive to voluntary incorporation. He highlighted
that the guarantee in the Alaska Constitution, Article 1,
Section 1, that leaves no room for interpretation or three-part
test of the interests of taxpayers at the low end of the scale.
The guarantee is found in 52 SLA 1963, as follows:
Chapter 52, SLA 1963
"No area incorporated as an organized borough shall be
deprived of state services, revenues, or assistance or
be otherwise penalized because of incorporation."
MR. BORKHORST opined that it is undeniable today that boroughs
are severely penalized because of incorporation, particularly
when it comes to funding of basic need. During the 2/10/14
House Education Standing Committee meeting it was observed that
the legislature amends laws all the time and the 1963 promise,
which exists in the uncodified laws of the state, could be
readily abolished by legislative action whenever the legislature
chooses to do so. However, the state's citizens, he opined,
rely on the guarantee when voting to incorporate, as in the case
of Ketchikan, Juneau, Sitka, and Kodiak, or take comfort if they
are forced into incorporation, as was the case in Fairbanks,
Kenai, Anchorage and Mat-Su. He urged the committee to keep the
promise and support HB 245.
3:07:25 PM
MR. BOCKHORST opined that at least the following five elements
of the Alaska Constitution have been violated.
Article I, § 1. Inherent Rights
This constitution is dedicated to the principles that
all persons have a natural right to life, liberty, the
pursuit of happiness, and the enjoyment of the rewards
of their own industry; that all persons are equal and
entitled to equal rights, opportunities, and
protection under the law; and that all persons have
corresponding obligations to the people and to the
State.
Article VII, §1. PUBLIC EDUCATION.
The legislature shall by general law establish and
maintain a system of public schools open to all
children of the State, and may provide for other
public educational institutions. Schools and
institutions so established shall be free from
sectarian control. No money shall be paid from public
funds for the direct benefit of any religious or other
private educational institution.
Article IX, § 7. Dedicated Funds.
The proceeds of any state tax or license shall not be
dedicated to any special purpose, except as provided
in section 15 of this article or when required by the
federal government for state participation in federal
programs. This provision shall not prohibit the
continuance of any dedication for special purposes
existing upon the date of ratification of this section
by the people of Alaska. [Amended 1976]
Article II, § 15. Veto
The governor may veto bills passed by the legislature.
He may, by veto, strike or reduce items in
appropriation bills. He shall return any vetoed bill,
with a statement of his objections, to the house of
origin.
Article IX, § 13. Expenditures
No money shall be withdrawn from the treasury except
in accordance with appropriations made by law. No
obligation for the payment of money shall be incurred
except as authorized by law. Unobligated
appropriations outstanding at the end of the period of
time specified by law shall be void.
MR. BOCKHORST pointed out that the last three elements are the
basis of the KGB lawsuit. He referred to the "red block"
[Ketchikan Gateway Borough, Written Testimony before the House
Judiciary Committee in Supportof HB 245, Repealing the Required
Local Contribution to School Funding, pages 2-5] which
symbolizes impairment of the vision of the constitutional
framers with respect to promotion and strength of Alaska's local
government system, while also breaching of the 1963 promise that
local governments would not be penalized.
3:08:39 PM
REPRESENTATIVE T. WILSON clarified that certain REAAs do pay
impact aid into the formula. With HB 245 [each district] will
continue to have a portion of its impact aid [credited] toward
the formula as the districts receive the same amount of credit
for their impact aid, "although it is different," she opined.
In response to Chair Keller, Representative T. Wilson explained
that impact aid [supports local school districts with
concentrations of children who reside on Indian lands, military
bases, low-rent housing properties, and other federal
properties, or who have parents in the uniformed services or
employed on eligible federal properties. The law refers to local
school districts as local educational agencies, or LEAs].
3:09:46 PM
CHAIR KELLER related his understanding that the intent is to be
in lieu of property taxes that would otherwise be collected if
it was in private ownership.
REPRESENTATIVE T. WILSON agreed and advised [the federal
government] pays into areas that may not have property tax or
personal taxes to go with it, although some may have sales tax.
She clarified that HB 245 is not requesting every area become a
borough, but if there are to be more boroughs the [legislature]
must incentivize and not penalize.
3:10:16 PM
REPRESENTATIVE FOSTER, referring to the remarks that some REAAS
may have per capita income similar to other areas in the state
that are not REAAs, pointed out that the Wade Hampton Area,
which would include Emmonak and Hooper Bay, is in an area where
its per capita income is very low. In fact, it is the poorest
area of the state. Representative Foster suggested that large
communities would receive funds that would replace property
taxes that would go toward local education. He further
suggested that larger communities could possibly lower their
property taxes and pass the savings on to property tax payers,
or keep the property taxes the same and add those to local
schools.
REPRESENTATIVE T. WILSON interjected there is a certain amount
of money that can be added to local contribution, but it is
capped by the federal government to maintain "equalization."
For example, she explained, Fairbanks' portion is approximately
$28 million and is shy $13 million for the cap, so theoretically
it could take the $13 million and "fill up" what Fairbanks can
give as a local contribution. However, Fairbanks cannot put the
remaining $15 million toward schools as it is part of the
"equalization" the federal government determines as a cap.
Representative T. Wilson related that the question was asked
whether in lieu of bonding the money could go to a school
building, and the answer was "not if it goes over the amount of
the cap." Hopefully, [the federal government] would give [the
money] back to Fairbanks; although it may be put into other
borough needs nothing more into schools for equalization
purposes.
3:12:41 PM
REPRESENTATIVE LEDOUX noted the equal protection clause in KGB's
[lawsuit] is missing and the lawsuit appears to be based on
taxes dedicated to a specific purpose.
MR. BOCKHORST agreed that at this point KGB's litigation does
not include equal protection claims, partly due to KGB's
financial concerns. Regrettably, he expressed, the Mat-Su
precedence creates an encumbrance on [equal protection claims]
and the precedence would have to be [overturned] in a lawsuit.
He opined that KGB is not a rich community and thus it chose
solid arguments that did not have to overcome that precedent [of
equal protection].
3:15:14 PM
SCOTT BRANDT-ERICHSEN, Attorney, Ketchikan Gateway Borough,
confirmed that KGB's claim doesn't pursue equal protection. He
then referred to the red block [on the model], which represents
an unconstitutional dedicated tax because the money is dedicated
to education spending and cannot be used for any other purpose.
He noted that federal impact aid money does not go through the
[constitutional] legislative appropriation process, as it is not
appropriated and the governor never has an opportunity to veto
it. In KGB's case the amount [of required local contribution]
is $4.2 million and based upon DEED's estimates for fiscal year
2014, the statewide amount is $221 million which is
approximately 2.5 times the next largest type of tax revenue the
state receives, outside of petroleum related revenues, he
explained.
3:17:05 PM
REPRESENTATIVE LEDOUX reiterated that the presentation appeared
to focus on the equal protection argument, but the lawsuit there
does not include equal protection.
MR. BOCKHORST stressed that equal protection is actually driving
KGB's lawsuit, but due to the Mat-Su decision pursuing equal
protection claims would significantly add to the cost of the
lawsuit. Therefore, KGB determined it would focus on issues
that are impairments to the circumstances and methods by which
the state is operating. In further response to Representative
LeDoux, he opined [local contribution] is unfair and a burden
for KGB to backfill the state's underfunding of basic need. A
burden which he expects to grow. In fact over the last 20
years, it's a burden that has cost KGB over $100 million. He
remarked that KGB's taxes are significant and the [lawsuit]
attempts to establish fairness with respect to funding of
schools.
3:19:05 PM
MR. BRANDT-ERICHSEN echoed earlier remarks that the motivation
behind the lawsuit is fairness. He related that there aren't
many folks who don't grasp the fairness concept; the concern is
regarding the cost of the lawsuit. He directed attention to the
spreadsheet in member's packets depicting, on a district-by-
district basis, how much each district might cost the state
additionally based upon EED's fiscal year 2014 budget.
Generally, the total [underfunding of the basic need] is about
$199 million and the reason it is less than $221 million, he
explained, is that the state would retain more federal impact
aid. Currently, the state retains 90 percent of federal impact
aid from REAAs and the remaining 10 percent the REAAs get to
keep is used as an incentive for REAAs to apply for the aid so
otherwise the aid doesn't come in and the state cannot intercept
it, he remarked. The state withholds 90 percent of "eligible"
impact aid for municipal districts and, he explained, the
eligible amount is determined by a ratio of voluntary
contributions to all contributions. He further explained that
if the state pays all of basic need, the state would take 90
percent of the federal impact aid from all districts. The
amount of federal impact aid Anchorage and Fairbanks retains
would be reduced and all districts would be treated the same at
90 percent of the total amount of federal impact aid. He
advised that it is completely within the legislature's purview
to change the percentage to any percentage it prefers. There
are similarities and differences, he pointed out, in the Federal
Impact Aid Program, and Payments in Lieu of Taxes (PILT.)
Federal lands cannot be taxed and PILT is a payment to counties,
local governments in lieu of the taxes they would otherwise
collect. The Federal Impact Aid Program bases the funding
related to federally connected children and a portion of the tax
base is available to fund education. For example, KGB receives
approximately $1 million in PILT funding and zero funding
through the Federal Impact Aid Program. He explained that the
two programs are distributed differently in that are REAAs and
municipal districts that receive zero funds through the Federal
Impact Aid Program, and other REAAs and municipal districts that
receive huge amounts of funding through the Federal Impact Aid
Program. He noted that the only objection the committee has
heard is, "Where the money is going to come from?" From where
the funding will come is something KGB cannot advise the
legislature about.
3:23:17 PM
CHAIR KELLER questioned why is Mr. Brandt-Erichsen so sure there
would be additional state funding provided because the
constitution is clear the state's responsibility is to provide
an open public school system. He opined that if HB 245 were to
pass, [the state] would not necessarily fill the backfill as
there could be less overall money distributed equitably in the
state. Furthermore, he stated, Mr. Brandt-Erichsen presumes in
his statement that the option would be additional funding from
the state.
MR. BRANDT-ERICHSEN posited that there are two relevant factors.
First, he pointed out that the educational funding statute
includes a provision for a pro-rata reduction if it is short-
funded. He explained that if the amount needed to fully fund
basic need is "X" dollars and the legislature provides "X" minus
"Y," the shortage is spread pro rata across all the districts.
Secondly, if the state has to provide $200 million to maintain
basic need for KGB it is probably not going to receive an
increase in per student funding, or as much supplemental
funding. However, the aforementioned depends upon the
legislature and the governor. Based upon KGB's observations
this year, the governor is recommending increases in the base
student allocation over a three year period. Mr. Brandt-
Erichsen related his belief that the public, legislature, and
governor place a sufficient value on education as compared to
other choices, and therefore it is unlikely that education would
receive less than basic need funding from the state at a time of
declining state revenue.
3:26:00 PM
CHAIR KELLER posed a scenario in which the legislature made the
[visual aid block area] formula equitable, and questioned
whether federal equity laws would prevent an organized
municipality from adding [funding] to the school system in their
area. He further questioned the effect of eliminating the local
contribution cap completely.
MR. BRANDT-ERICHSEN explained that the cap is in place and much
of the current formula is designed to capture as much federal
impact aid as possible. In 1985 when the current formula was
adopted, federal impact aid totaled approximately $100 million
and the state intercepted about $60 million, which is similar to
today except that all of the other costs have increased so there
is a greater consideration, he opined. The state is required to
meet a disparity test statewide in order to intercept any of the
money and, he explained, that by eliminating 5 percent of
students who receive the least amount of money together with 5
percent of students who receive the most amount of money, the 90
percent in the middle must be within 25 percent of each other.
He further explained that basic need is the formula everyone
receives and then the voluntary contribution maximum is 23
percent, and with 23 percent as a maximum there is not a chance
of going over 25 [percent]. He continued that state law limits
voluntary contributions to 23 percent and if that limit is
removed municipalities can provide more. Unfortunately, he
advised, one of the consequences is that if the 25 percent
disparity is exceeded the state could no longer intercept a
portion of the federal impact aid and it would go directly to
the districts.
3:28:35 PM
CHAIR KELLER remarked that if the state makes an equitable
distribution of state funds, the state should be eligible for
impact aid. Furthermore, if impact aid is delegated by federal
law for a certain criteria of students, he questioned should the
state would have to adjust its equitable formula to match [the
federal government]. He posed a scenario that the state advises
the federal government [it did not want federal impact aid], and
then the state could design a formula that would be equitable
for all Alaskans taking into account [the seven components of
basic need]. He surmised that the confusion factor seems to be
focused on impact aid.
3:29:34 PM
REPRESENTATIVE T. WILSON explained that this is a discussion
about the basic needs formula that the state put into place.
"It would not adjust at all with what we are asking how much
impact aid comes into the state, it would not at all affect the
additional amount the municipalities do." There are changes
that could be implemented, as currently [municipalities are]
bonding 70-30 and once that figure is equal the legislature
could determine not to bond with municipalities as
municipalities would be receiving additional funding. She
mentioned that she has been advised that [municipalities]
attempt to get the money back through capital projects. She
opined that the state will never be equitable as long there are
those that are governmental entities and those that are not.
Currently, for the REAAs, the state takes care of their
buildings as they are on the capitol maintenance list because at
this point they are not taxing in any fashion. She pointed out
that there are areas that could tax and areas that could try to
tax, but there would be very little to tax not just because of
the economy because so much of the areas are federal or state
lands. She opined that Alaska's founding fathers preferred
organized areas as they add extra money into education, maintain
most of their buildings even if it is a 70-30 or 60-40 ratio, it
is money the state does not have to [spend]. If the ultimate
goal is to be organized, the required [local contribution] must
be addressed first, she opined.
3:32:23 PM
REPRESENTATIVE FOSTER related his understanding that the base
student allocation should guarantee a certain level of funding.
He then posed a scenario in which HB 245 were to pass and the
legislature did not fully fund the $200-plus million [for
education], and asked whether that would result in the REAAs, as
in the Wade Hampton School area, experiencing a reduction in
education funding.
REPRESENTATIVE T. WILSON clarified that currently if the state
chooses not to fully fund the formula, [funding] would be
equally divided. For example, if HB 245 passes and next year
[the legislature] determines the [state] can only fund $1.2
billion rather than $1.6 billion, that amount would be divided
equally amongst all of the districts, she explained.
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