Legislature(1995 - 1996)
04/11/1996 09:50 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 244
An Act relating to state foundation aid and
supplementary state aid for education; and providing
for an effective date.
Co-chairman Halford directed that SB 244 be brought on for
discussion. Co-chairman Frank distributed a draft CSSB 244
(Fin) (9-GS2043\F, Ford, 4/4/96) and said the intent was to
solve the disparity problem in a manner similar in concept
to the department's proposal but to make it revenue neutral
and applicable to FY 96. The draft does not include single-
site districts, with the recognition that they will be dealt
with as they have, in the past, through supplemental
funding. A hold harmless provision within the bill ensures
that no district will lose money this year because of the
increase in the deduct from 90 to 96 percent.
Co-chairman Frank voiced need for an updated fiscal note
from the department, to accompany the bill.
JAMES ELLIOTT, Acting Director, School Finance, Dept. of
Education, came before committee. He advised of no
opposition to the proposed draft with the exception of the
single-site issue. The department has received several
notifications from the federal government, in administrative
appeals of Alaska's standing as an equalized state, that
"They consider this to be a circumvention of the formula."
Mr. Elliott expressed the department's preference for
retention of single sites within the formula.
Speaking to the new fiscal note, Mr. Elliott advised that
hold harmless provisions for FY 96 would total $311.7. The
cost for FY 97 should approximate $20.0. Senator Rieger
voiced his understanding that, exclusive of the hold
harmless, the bill "causes a $20.0 per year increase in
foundation expense." Mr. Elliott concurred. Co-chairman
Frank noted that the hold harmless cost of $311.7 for FY 96
reflects a one-time only cost. He further attested to the
neutrality gained by increase of the deduct from 90 to 96
percent and reduction of FY 96 costs from $1.2 million to
$300.0.
In response to a question from Senator Zharoff regarding the
single-site issue, Mr. Elliott explained that any 874
recipient district can challenge the department's standing
as an equalized state. One is currently ongoing. The
administrative law judge hearing the appeal noted that this
appeared to be a circumvention of the formula and that it
had been repetitive, year after year. An issue has not been
made beyond that. Funding has been provided in this manner
in the past, and the state still passed the disparity test.
With single sites out of the formula, the state will
continue to pass the disparity test. The department was
attempting to place itself in the best position in case of
subsequent challenges to Alaska's equalized standing.
Senator Rieger voiced his understanding that the basic
"change of shape of state aid because of this bill is to
increase aid to districts which do not have a local
contribution." Mr. Elliott concurred, advising that it
provides an additional $500.00 per instructional unit.
Further discussion of the disparity test and local
contributions followed.
Co-chairman Halford directed attention to Page 2, lines 17-
19, and questioned need for the bill in light of regulation
authority within subsection (b). Mr. Elliott advised that
the department does not currently have the authority
provided by the subsection. Co-chairman Frank acknowledged
that authority granted by the subsection appears to be broad
and suggested that the subsection be removed in order to
keep the issue of school funding within the legislative
arena. He then formally MOVED to delete subsection (b).
Senator Zharoff OBJECTED. Co-chairman Frank REMOVED his
MOTION and MOVED instead for adoption of CSSB 244 (Fin).
Senator Zharoff again OBJECTED, noting deletion of single-
site schools. He then said he would withdraw his objection
and offer reinstatement of single-site schools as an
amendment. No further objection having been raised, CSSB
244 (fIN) was ADOPTED.
Co-chairman Frank then replaced his MOTION for removal of
subsection (b) at Page 2, lines 17-19. Mr. Elliott
explained that authority provided by subsection (b) was the
main purpose of "having the bill in the first place." It
would give the department the ability to make necessary
adjustments to ensure that the state meets the disparity
test. The department presently has parallel authority to
restrict or lower local contributions for cities and
boroughs. That proved to be unpalatable for districts like
Juneau, Ketchikan, and Kenai, which are at the cap.
Provisions within subsection (b) are viewed as a mechanism
by which the department could adjust the floor and the
ceiling. Removal would entail a major change from what the
department intended. Co-chairman Halford commented that the
bill, as introduced by the administration, reflects a major
change in existing law. Co-chairman Frank voiced his
understanding that the $500.00 per instructional unit
allotment would solve the problem for the current year. Mr.
Elliott noted that the variable is the amount of local
contributions. That will not be known until late in the
spring. If there are no changes in local revenues, the
$500.00 (the department's best estimate of what would be
needed) should serve as a place-holder. Co-chairman Frank
suggested that the subsection be removed, and, as the bill
moves through the process and better numbers are available,
the department notify the legislature if the $500.00 figure
needs to be changed.
Senator Zharoff voiced OBJECTION to the proposed amendment,
advising that it appears to remove the "heart" of the
administration's legislation. Co-chairman Halford called
for a show of hands. The AMENDMENT was ADOPTED on a vote of
4 to 1.
Senator Sharp said he continued to have difficulty with "the
logic and the fairness of this application." He noted that
the Alaska Gateway district will gain $25.0 (the average ADM
is $9,178.00) while Annette Island (with an ADM of
$4,100.00) loses $28.0. It appears that the lower the ADM,
the more a district loses; the higher the ADM, the more a
district gains. He suggested that the bill makes "a bad
situation worse." Mr. Elliott explained that since Annette
Island is part of a reservation, it receives over half of
its budget as 874 funds. The Gateway district has very few
federally-connected students. The $500.00 per instructional
unit will mean that districts with a greater number of units
will receive more money. Senator Sharp cited the reduction
for the Lower Yukon District and the increase at Yukon Flats
District as a further example of funding that does not make
sense in terms of educating children. He expressed
frustration over federal mandates and bureaucracy and
suggested that the legislation adds "fuel to the fire."
Discussion followed between Co-chairman Frank and Senator
Sharp regarding elimination of the $1.2 million in
supplemental funding, the $311.7 for FY 96 hold harmless,
and the ongoing additional $20.2 commencing in FY 97. Co-
chairman Frank shared in Senator Sharp's frustration
regarding changes in funding for individual districts. He
advised that the proposed bill "makes it somewhat revenue
neutral in totality." He acknowledged that "It doesn't make
it neutral with regard to each district."
[Senator Phillips arrived at the meeting at this time.]
Senator Sharp expressed need for development of a new
foundation formula that is fair to all districts.
Senator Zharoff said the proposed bill represents an
opportunity to "take care of the single-site question" so
that it is not raised year after year. He then offered
Section 4 (single-site funding) from the original bill as an
AMENDMENT to CSSB 244 (Fin). He noted support for the
funding by the department, educational-related entities, and
rural legislators. He then formally MOVED for adoption and
requested unanimous consent. OBJECTION was raised. Senator
Randy Phillips noted an opportunity within SB 7 to deal with
the single site/duel site question. Co-chairman Halford
called for a show of hands on adoption. The motion FAILED
on a vote of 1 to 5.
[Senator Donley arrived at the meeting at this time.]
Co-chairman Frank MOVED for passage of CSSB 244 (Fin) with
individual recommendations and a new Dept. of Education
fiscal note to show costs of $311.7 in FY 96 and $20.0 "per
year into the future." No objection having been raised,
CSSB 244 (FIN) was REPORTED OUT of committee with the above-
noted Dept. of Education fiscal note. Co-chairman Frank
signed the committee report with a "do pass" recommendation.
Co-chairman Halford and Senators Donley, Phillips, Rieger,
and Sharp signed "no recommendation." Senator Zharoff
signed, "No recommendation. (No single/dual sites--!!!)"
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