Legislature(1995 - 1996)
04/04/1996 08:05 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 452 - CALCULATION OF STATE AID TO EDUCATION The next order of business to come before the House State Affairs Committee was HB 452. CHAIR JAMES called on Richard S. Cross, Department of Education, to present the bill. Number 0112 RICHARD S. CROSS, Deputy Commissioner, Office of the Commissioner, Department of Education, said he was here to discuss the committee substitute for HB 452 (9-GH2043/C). He explained the committee substitute was essentially the same system in place today for calculating state aid to schools except for one notable exception. The exception was the payment to regional education attendance areas (REAA) of $500 per unit to ensure that the state met the federal disparity test for the 1996 to 1997 school year. Furthermore, in-order-to recover the money that was required to make that $500 payment, the committee substitute increased the deductible federal impact aid for those districts by 5 percent. Therefore, by increasing the deductible, the state recovered a large portion of the payment that would be made to increase the value of the unit in those districts. Moreover, he explained in the original bill the calculation for the single site school districts was included in the foundation. The department strongly recommended that it be placed back into the bill for two reasons. The first was based on the calculation of the federal disparity test. The federal government had looked at the single site issue for a number of years now and had encouraged the state to incorporate an all encompassing calculation for the foundation payment. The second was based on the payment. It had become a consistent course of business. He reiterated the department recommended replacing the single site calculation back into the bill. He thanked the committee members for their time. Number 0355 CHAIR JAMES asked Mr. Cross to respond to the fiscal note. She wondered if more money was being added to the formula funding. Number 0379 MR. CROSS replied the calculation of increasing from 90 percent to 95 percent for the deduction did not exactly match the payment to the REAA's. Therefore, the fiscal note represented the difference between the $500 payment unit and what would be recovered from the deductible increase. Number 0439 CHAIR JAMES asked Mr. Cross if the amount given to the single site school districts affected the disparity test? MR. CROSS deferred to Eddy Jeans, Department of Education, to answer the question. Number 0465 EDDY JEANS, School Foundation, School Finance, Department of Education, explained the single site allocation was based on a formula that had been before the legislature a number of times. The table (Sec. 4) was deleted from the original bill (9-GH2043.A) creating the committee substitute (CSHB 452(HES) 9-GH2043/C). He reiterated the department would like to reinstate that section back into the bill. The single site allocations did affect the disparity test because they were not associated with the instructional units. Therefore, they increased the unit value of those school districts. Whereas, if the table was adopted and put back into the foundation formula, the instructional units then generated those dollars. Those dollars would not have any value outside of the unit value itself, however. Number 0538 CHAIR JAMES said she understood the formula, but had never understood how the single site formula affected the disparity test. Number 0580 MR. CROSS replied disparity did not depend on the amount of units received. It depended on the value of the unit. Therefore, if a district was given more units, a disparate situation was not always the case. If the unit value was increased, however, then a problem existed. If more units were paid as opposed to increasing the value of a unit then a wide disparity was not being created. Number 0648 REPRESENTATIVE CAREN ROBINSON explained she objected to deleting Sec. 4 in the original bill (9-GH2043.A) when it was in the House Health, Education and Social Services Committee. She wondered what the ramifications were by not including the table in the bill. Number 0666 MR. JEANS replied the Department of Education was put on notice by the U.S. Department of Education to include the payments in the foundation formula. The payments that were being made outside of the formula were circumventing the equalized plan. That was why the department recommended that those payments be included in the bill. Furthermore, it increased the value of the unit. The appropriation was made outside of the formula now so that the districts still had the same number of units. However, the additional revenue outside of the formula increased the unit value which was what caused the disparity. Number 0724 CHAIR JAMES asked Mr. Jeans what was the support for the difference in a unit value for a single site school district and a non-single site school district? She further wondered why a single site school district needed more money. She asked, was it because of the geographical location, for example? Number 0800 MR. JEANS said it was based on an economy of scale. The foundation program provided instructional units for a site. It was not enough for a single site school district to cover administrative expenses, for example. In the case of a multiple site school district there was enough front loading to provide additional money for its administrative expenses. A single site school district, on the other hand, did not have the benefit of using the table more than once. Number 0862 CHAIR JAMES wondered if there were ways for a single site school district to reduce its costs by combining administrative services, for example. Number 0907 MR. JEANS replied many of the superintendents of single site school districts also taught classes and acted as the business manager, for example. Whereas, in a larger school district those functions were specialized. Number 0929 CHAIR JAMES wondered where were the additional administrative expenses. Number 0945 MR. CROSS replied it was the ratio of the administrative cost to the total cost of the operation. Therefore, the larger a district, the smaller the ratio. The department preferred to compensate those districts with more units. The district, however, needed to makeup that ratio. Therefore, the percentage of a district's total business function, as a percentage of its' total operation, must be higher. Number 0997 REPRESENTATIVE ED WILLIS asked Mr. Cross if the changes in the committee substitute tilted towards the rural school districts compared to the urban school districts? Number 1029 MR. CROSS replied the single site calculation would not cause a tilt. The only change in the bill that shifted funds was the payment to the REAA's to meet the disparity requirements, and the department proposed a mechanism to try to recover those dollars. The only real shift would be the $223,800 in the fiscal note, out of an over $600 million program. Number 1078 CHAIR JAMES wondered if there would have been a fiscal impact by taking out the single site school districts because the bill would cover more. She thought there should have been a reduction in the fiscal note. Number 1116 MR. JEANS replied the Department of Education did not build the single site table in HB 452 (9-GH2043.A). It was currently built into the department's budget. Therefore, it was an appropriation made by the legislature annually. The fiscal note dealt only with the adjustments to the REAA school districts and the increase in the $500 per instructional unit. Number 1145 CHAIR JAMES said, for the record, she was interested in fairness and equity throughout the state for education. She did not want her questions to be construed that she separated the urban and rural school districts. However, she wanted to understand this issue to answer to her constituents in her district. She stated she understood the concerns in the urban areas, but was very sensitive to the needs in the rural areas. Number 1192 REPRESENTATIVE JOE GREEN wondered why the administrative services in the single site school districts could not be combined. Number 1223 MR. CROSS replied that issue had been studied before. He said he would be glad to forward the results of the most recent study to him. In theory, one would think it would save money, when in fact it really did not. REPRESENTATIVE GREEN asked if it would save $223,800? Number 1269 MR. JEANS replied the $223,800 addressed the change in the formula that increased the deductible impact aid to regional education attendance areas. It did not have to do with the single site school district issue. He said the single site was already built into the budget for FY 97. Moreover, the legislature had been appropriating funds annually to the single site school districts since 1988, with the exception of 1991. He reiterated the fiscal note dealt with the change to the REAA's to meet the federal disparity test. He reiterated it did not deal with the single site issue. Number 1310 CHAIR JAMES asked if there were any superintendents for a rural school district not located in the same area? Number 1333 JAMES ELLIOTT, Acting Director, School Finance, Department of Education, replied, "yes." He cited a superintendent for the Chugach School District that lived in Anchorage. He also cited a superintendent for the Yukon-Koyukuk School District that lived in Fairbanks. Number 1349 REPRESENTATIVE IVAN IVAN wondered if the bill was being amended to include the single site school districts. Number 1373 CHAIR JAMES explained the section (Sec. 4) that dealt with the single site school districts was deleted from the original bill in the House Health, Education and Social Services Committee. If the committee substitute was to pass, the single site school districts would continue to be funded as they were currently. Number 1400 MR. CROSS stated there were only three states in the country that included their federal payments as a part of their foundation. He cited Alaska was the biggest player at $35 million, out of a more than $600 million program. He cited Kansas was only $8 million, out of a more than $1 billion program. Therefore, it was a high stake for Alaska. He asserted the state must meet the disparity test. Number 1444 CHAIR JAMES said, for the record, her district was concerned how the impact aid was divided among the districts. She thanked the department for its cooperation by providing information to help her understand this issue. She explained the state applied for the impact aid as a whole for a larger portion compared to each district applying individually. Therefore, when the formula funding was presented to each district, the difference was reduced. She believed the calculations were equitable, and explained it was more of a control issue for the districts. Number 1532 REPRESENTATIVE GREEN said he would appreciate a copy of that formula explanation to take back to his constituents in his district. His constituents believed there was a funding disparity between the rural and urban school districts. Number 1554 CHAIR JAMES said it was a fact that it was more expensive per unit for smaller operations. If the state would stop dividing the school children between rural and urban, and start concentrating on the cost of an equitable education for each student, the cost of the rural school districts would not be an issue. She said, "if I had my choice to put kids in rural schools or urban schools. I would choose urban schools, any day." Number 1596 REPRESENTATIVE GREEN agreed that no child should be deprived of an education because of funding when another child received a benefit as a result of funding. He suggested that the House State Affairs Committee make sure that the single site school districts were doing all that they could to streamline the administrative expenses. Number 1624 MR. ELLIOTT said a number of the single site school districts contracted their services to economize. Furthermore, it was important to remember that the dollar value was different in the rural areas compared to the more urban areas. CHAIR JAMES called on the first witness in Juneau Virgie Fryrear, Hoonah City Schools. Number 1666 VIRGIE FRYREAR, Superintendent, Hoonah City Schools, thanked the committee members for their attention today. She said the single site school districts were discouraged that Sec. 4 was deleted from the original bill because it was a good "fix" for the foundation formula. The single site school districts wanted to stop coming to the legislature to "whine" for their money. There were 21 school districts impacted by this piece of legislation. She explained she had worked in both REAA and single site school districts, and stressed it was important to consider the special services of a school district. She cited the Hoonah City Schools spent $47,000 per year to contract for special services - psychologists and speech therapists, for example. Moreover, the section (Sec. 4) that was deleted from the original bill was supported by a variety of education associations, such as the National Education Association - Alaska. She urged the committee members to reinstate the section. CHAIR JAMES called on the first witness via teleconference in Kentucky, Wanda Cooksey. Number 1808 WANDA COOKSEY said the amount of money in the budget this year would not be taken from new legislation. She explained the cost was in the Governor's budget. She further explained the legislature had funded the single site school districts every year, except one, since the formula was on the books. Furthermore, the table in the section that was deleted had been used for several years to calculate the grant amount that went to school districts. Number 1902 REPRESENTATIVE ROBINSON moved to reinstate the original Sec. 4 back into the bill. She did not understand why it was removed originally. Number 1928 CHAIR JAMES said unless we adopt the CSHB 452(HES), the original bill was before the committee members. Therefore, the motion might not be necessary. She asked her staff to check the proper procedure. CHAIR JAMES suggested a motion to adopt the original bill, to make it perfectly clear, for the record. Number 2006 REPRESENTATIVE ROBINSON moved to adopt HB 452 (9-GH2043.A) for consideration. Representative Green objected, of which discussion followed. Number 2027 REPRESENTATIVE IVAN said he was effected by this piece of legislation. He supported the language to include the table for the single site school districts and would vote accordingly. Number 2045 REPRESENTATIVE ROBINSON said HB 452 (9-GH2043.A) was a fiscal issue as well. It was in the best interest of all the school districts that the bill move to the House Finance Committee where there was more knowledge of the budget to make the final decision. Number 2076 REPRESENTATIVE GREEN objected to moving the original bill because it already passed the House Health, Education and Social Services Committee that dealt directly with education issues. He felt it was undoing the committee process and stated "you might as well just bring everything to the Floor." Number 2100 CHAIR JAMES replied that was why multiple committees existed. Each committee was responsible for passing a bill that felt it was the best. CHAIR JAMES recognized the presence of Representative Con Bunde, Co-chair, House Health, Education and Social Services Committee, and asked him to join the committee members at the table. Number 2128 REPRESENTATIVE GREEN stated the committees were named accordingly, and each should deal with the portion of a bill it was named for. The process was not established to redo the changes of a committee. Number 2154 REPRESENTATIVE CON BUNDE explained the single site school districts were rolled into the formula to camouflage or lower the level of discussion. A decision had not been made, however. Therefore, it should be considered separately until an overall policy decision was made. There were two issues involved, the formula and the single site school districts. He recognized the roll of each committee, and he would not be offended if the House State Affairs Committee wanted to change the bill. Number 2205 CHAIR JAMES said the House of Representatives just passed the FY 96 budget this week which included the Governor's budget on funding for education including the single site school districts. Therefore, it appeared, the Majority had approved single site school districts already. She could not predict the next legislature, however. She wondered, if by including the calculation for single site school districts in the bill, did it become a part of the formula unit amount to allow for disparity. Number 2254 REPRESENTATIVE BUNDE replied the question was whether to continue funding single site school districts as a separate item, as in the past, or to submerge them into a formula so that they were less visible. Number 2278 CHAIR JAMES asked the Department of Education if she explained the formula issue correctly? MR. CROSS replied, "you were real close." He explained there was no difference in the amount of money paid to a single site school district. However, the difference was they would be included in the formula to allow for additional units. If they were out of the formula, the unit value would increase. Furthermore, increasing the unit value affected disparity, while paying for more units did not affect disparity. Therefore, the department preferred that the calculation be made within the formula. Number 2323 REPRESENTATIVE BUNDE stated if the unit value went up they received more money. CHAIR JAMES replied so does everyone else. REPRESENTATIVE BUNDE replied, "I know." He asked, do we want to continue to pay for the expensive units? Number 2328 CHAIR JAMES explained funding for single sites was like political "football." Sometimes it was approved as part of the budget, and sometimes it was not. Therefore, "do we really want to continue playing football or do we want to include them in the formula?" Furthermore, the question was also did it have meaning or no meaning? If it did have meaning, it should be included. If it did not have meaning, it should not be included. Number 2372 REPRESENTATIVE BUNDE replied Chair James summed the issue up as he saw it. By including the single site school districts in the formula, it "blessed" them so that it was not necessary to worry about the issues of high administrative expenses, the inequity between urban and rural school districts, and the inefficiencies, for example. By not including the single site school districts in the formula, it left the issues visible to be addressed by the legislature. Number 2388 REPRESENTATIVE ROBINSON stated, by keeping the single site school district table in the bill, policy was being set. Number 2396 REPRESENTATIVE BUNDE said the House State Affairs Committee would, yes, be setting policy that single site school districts were good and needed to be taken off the "burner." Number 2404 REPRESENTATIVE ROBINSON reiterated the bill would be forwarded to the House Finance Committee that would make the final decision. Number 2415 REPRESENTATIVE BUNDE replied the House Finance Committee could also choose to not include the single site table as well. Number 2418 REPRESENTATIVE ROBINSON said she also believed that there were urban communities that could "tighten their belts." The rural communities should not always be blamed. Number 2436 REPRESENTATIVE BUNDE replied that was not what he said. He cited the Juneau School District was asking its teachers to take a 6 percent decrease. However, he believed the money should be taken out of the administrative budget of which single sites had a larger budget for compared to other sites. It was a local call, however. Number 2455 REPRESENTATIVE IVAN said he did not agree with Representative Bunde that single site school districts had a high overhead cost. He said it was a given in a state the size of Alaska that the strength of the dollar in the urban areas versus the rural areas would be different, for example. TAPE 96-46, SIDE B Number 0015 REPRESENTATIVE GREEN stated he understood there was a difference in cost between the urban and rural areas. He was concerned, however, that each single site school district had a superintended when it was not necessary, for example. He said it appeared a superintended could cover several rural sites, for example, which was part of the administrative expenses. Number 0078 CHAIR JAMES explained the Fairbanks area was sympathetic to the rural areas because it felt disenfranchised at times because it was not located in Anchorage. She cited when the state budget was cut the state offices in Fairbanks were closed and moved to Anchorage. Furthermore, testimony regarding a new correctional facility in Anchorage indicated it would cost less there. She said, "we can't move the whole state to Anchorage." She further stated, people lived where they lived, and the services they needed should be addressed. Therefore, the House State Affairs Committee was an appropriate place to address that issue. Number 0123 REPRESENTATIVE BUNDE said he did not disagree with most of what he heard here today. He further stated there was a finite amount of money for education. He cited the single site school district in Galena where the superintendent spent most of his time writing grants so that the students received a power notebook computer. He wondered if a grant writer that made $100,000 per year was needed? He said it was a policy decision. He further cited there were two single site school districts in Southeast that were separated because of the clans. He believed, educationally, single site school districts were not defensible. Number 0196 CHAIR JAMES stated it was possible to legislate to merge single site school districts. She felt Representative Bunde was comparing apples and oranges. She agreed with Representative Green and Representative Bunde regarding the administrative expenses, however. The expenses should be as minimal as possible. She said she was going to further research the issue of the location of the superintendent to determine if it was more cost effective for one to live in a urban community, for example. CHAIR JAMES thanked Representative Bunde for his time. Number 0264 REPRESENTATIVE BUNDE replied, "thank you." He said the House State Affairs Committee had a good grasp of the issue. Number 0271 REPRESENTATIVE ROBINSON said she was glad to finally understand what was done in the House Health, Education and Social Services Committee even though she was a member. She asked the Department of Education to come to the table to further address the issues Representative Green discussed. CHAIR JAMES asked Mr. Cross to join the committee members at the table. Number 0295 CHAIR JAMES asked Representative Green to restate his concerns for the department. Number 0303 REPRESENTATIVE GREEN said, due to today's communication technology, it should be possible to combine the functions of the superintendent between single site school districts. There was an economy of scale issue also involved. Number 0332 MR. JEANS replied the law stated that every school district should have a superintendent. REPRESENTATIVE GREEN said that needed to be changed. MR. JEANS further stated a balance was necessary regarding Representative Green's economy of scale concern. He did not know what was the exact balance, but would support any discussion and study to determine that. He further explained the superintendents that lived in Anchorage and Fairbanks mentioned earlier were not for single site school districts. Number 0407 REPRESENTATIVE ROBINSON said she was aware of bills that were completely changed as a result of the committee process then gutted to return to the original bill in the House Finance Committee, for example. It was the prerogative of the committees to make changes. She believed the responsibility of the House State Affairs Committee was to reinstate Sec. 4 in the bill because it was a responsible state issue. She had no doubt it would be removed if the House Finance Committee did not agree with it. Number 0443 CHAIR JAMES said she agreed with Representative Robinson that her scenario was a possibility. She said, however, if there was a problem, this was the wrong way to address it. There was the possibility to change the law to combine single site school districts, for example. Number 0487 REPRESENTATIVE OGAN said he agreed with Representative Green. He said this issue was controversial and he was concerned about "locking" it into a piece of legislation. He agreed it needed to be addressed in the future with legislation. He would vote against the motion. Number 0546 REPRESENTATIVE IVAN asked for an at ease. CHAIR JAMES called for a five minute at ease. CHAIR JAMES called the House State Affairs Committee meeting back to order and asked for a roll call vote to adopt the original version of HB 452 (9-GH2043.A). Representatives Ogan and Green voted against the motion. Representatives James, Ivan, Robinson and Willis voted in favor of the motion. The original version of HB 452 (9-GH2043.A) was adopted. CHAIR JAMES called on the next witness in Juneau, Vernon Marshall. Number 0582 VERNON MARSHALL, Executive Director, National Education Association - Alaska (NEA - Alaska), said the association supported HB 452 as an opportunity to correct the federal disparity issue. He explained that NEA - Alaska had produced materials and a position statement to help further explain this issue. The association was concerned if the disparity was not corrected there would be a pro- ration impacting the instructional units and the school districts. He cited there would be a $2,800 impact on the instructional unit. There had only been one increase in the instructional unit which occurred in 1992, and raised the unit by $1,000. He said this impacted the children. A child did not choose where he was born, and the impacts were real for both urban and rural Alaska. The NEA - Alaska, therefore, encouraged the committee members to not loose ground on the fight to maintain the $61,000 instructional unit. Furthermore, if the value of the instructional unit was adjusted for inflation it was only worth $48,000. He reiterated the association supported HB 452. Number 0712 CHAIR JAMES asked if there was any more discussion. Hearing none, she called for a motion to move the bill from the committee. Number 0720 REPRESENTATIVE ROBINSON moved that HB 452 (9-GH2043.A) move from the committee with individual recommendations and attached fiscal notes. Representative Ogan objected. A roll call was taken. Representatives Ogan and Green voted against the motion. Representatives James, Ivan, Robinson and Willis voted in favor of the motion. The bill was passed out of the House State Affairs Committee.