Legislature(2013 - 2014)SENATE FINANCE 532
04/14/2014 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB75 | |
| HB278 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 278 | TELECONFERENCED | |
| += | HB 75 | TELECONFERENCED | |
| += | SB 220 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 14, 2014
1:33 p.m.
1:33:20 PM
CALL TO ORDER
Vice-Chair Fairclough called the Senate Finance Committee
meeting to order at 1:33 p.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Heather Beggs, Staff, Representative Paul Seaton; Dan
Debartolo, Director, Permanent Fund Dividend Division,
Department of Revenue; Chris Christensen III, Associate
Vice President for State Relations, University of Alaska;
Michael Hanley, Commissioner, Department of Education and
Early Development; Linda Thibodeau, Director, Libraries,
Archives, and Museums; Erin Shine, Staff, Senator Anna
Fairclough; Robbie Graham, Assistant Commissioner,
Department of Commerce, Community and Economic Development;
David Teal, Director, Legislative Finance Division;
Elizabeth Nudelman, Director, School Finances and
Facilities, Department of Education and Early Development;
PRESENT VIA TELECONFERENCE
Wanetta Ayers, Department of Labor and Workforce
Development, Anchorage;
SUMMARY
SB 220 PERS/TRS STATE CONTRIBUTIONS
SB 220 was SCHEDULED but not HEARD.
CSHB 75(FIN)
CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY
CSHB 75(FIN) was HEARD and HELD in committee for
further consideration.
CSHB 278(FIN) am
EDUCATION
CSHB 278(FIN) am was HEARD and HELD in committee
for further consideration.
CS FOR HOUSE BILL NO. 75(FIN)
"An Act amending certain audit requirements for
entities receiving contributions from permanent fund
dividends; requiring the three main campuses of the
University of Alaska to apply to be included on the
contribution list for contributions from permanent
fund dividends; and requiring the university to pay an
application fee for each campus separately listed on
the contribution list for contributions from permanent
fund dividends."
1:34:19 PM
HEATHER BEGGS, STAFF, REPRESENTATIVE PAUL SEATON, offered a
sponsor statement for HB 75:
HB 75 allows greater participation in the
Pick.Click.Give program by small non-profits that meet
all of the eligibility requirements for the program,
but do not participate due to the cost prohibitive
audit requirement.
The creation of the popular Pick.Click.Give program by
the 25th Alaska State Legislature gave Alaskans a
simple and convenient option to donate to charities
and non-profits of their choice. These organizations,
which provide important services to our communities,
rely on donations to function.
One criterion that must be met by organizations
wishing to participate often stops smaller Alaskan
charities and non-profits from applying. This is the
required financial audit for organizations with a
total budget of $250,000 or greater. The cost of the
required financial audit for smaller groups is much
greater than the donations received by these groups
through the Pick.Click.Give program, which makes
participation in the program impractical. Not only
does this mean that these smaller groups will not
receive donations through the program, some groups
have found that exclusion from the program gives their
supporters the mistaken impression that they are no
longer certified non-profits.
This bill eases the financial burden on these
organizations and allows Alaskans a more complete
choice of organizations by eliminating the financial
audit requirement for organizations that do not file a
federal audit. This does not remove financial
accountability. All Pick.Click.Give donation
recipients must be 501(c)(3) tax-exempt organizations,
which are required to file the form 990 annually with
the IRS. The IRS form 990 was overhauled in 2008, is a
public record and accessible online to donors. The
annual filing now requires disclosure of not only
detailed financial information, but governance
practices, policies, program services, and other
compliance measures. This rigorous test of
accountability is already required and provides a
complete picture of finance and management of a
nonprofit. Additionally, an audit is required of
organizations that expend $500,000 or more in federal
awards. These organizations will be required to submit
a copy of this audit to the state. Entities that
expend less than $500,000 in federal funds still must
still make their records available for review by the
federal government.
This bill further requires each campus of University
of Alaska to pay the $250 application fee to
participate in the program, just as all other eligible
organizations do.
The Pick.Click.Give program encourages Alaskans to
give back to their community by bringing the many
worthy state programs right to their doorstep. Smaller
non-profits nourish Alaskan communities on a personal
level, open pathways for budding artistic talents and
provide educational opportunities that fit just right
with community needs. These organizations deserve the
chance to connect through Pick.Click.Give to the
Alaskans they serve.
Ms. Beggs furthered that the bill would add a 7 percent
coordination fee, which would begin in 2015, and be used
for statewide marketing and outreach. The fee would be
withheld from the annual payment to an organization, and be
based on the contributions received through the program.
She said that the Rasmuson Foundation had initially
promised to fund the statewide outreach and marketing, but
only for the first 3 years of the program, which made a
plan for sustainability necessary. She said that non-
profits that had been surveyed had expressed the desire for
the marketing and outreach to continue and the percentage
fee had decidedly been the best solution to keeping the
program sustainable. She shared that there was a committee
substitute that had been drafted that would correct the
non-conforming sections of statute that the drafter had
discovered. She said that the lasted version of the bill
solved a number of oversights in the original legislation;
The University did not object to paying the application
fee, and a plan was being made for long-term
sustainability.
1:39:47 PM
Vice-Chair Fairclough noted that there had been a drafting
error in the latest version of the bill and that there
would be a corrected CS before the committee at a later
date.
1:40:08 PM
DAN DEBARTOLO, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION,
DEPARTMENT OF REVENUE, testified that the legislation would
not make any fiscal changes to the operation of the
division. He said that the division supported the current
version of the bill. He relayed that once pledges were made
to the program the 7 percent would be taken out of the
distribution amount in October through December. He
explained that the money would be held in a separate
account and reported to the legislature as was required to
appropriate into the next year's budget. He related that
the division operated the program on the $250 fee and would
not be using donated monies to operate the program.
1:43:01 PM
CHRIS CHRISTENSEN III, ASSOCIATE VICE PRESIDENT FOR STATE
RELATIONS, UNIVERSITY OF ALASKA, testified that the
University had no issues with paying the application fee.
He noted that since the inception of the program the
donated amount had risen from $7,000 to $28,000. He shared
that for the last 2 years Exxon Mobile had matched all
raised funds.
Vice-Chair Fairclough related that one of the issues
pointed out by the non-profit community was that the
University could list all of its campuses in the program
and non-profits were restricted to one individual, specific
program. She noted that this gave the University the
advantage of a higher rate of visual recognition by donors.
She thought the issue should be considered by the
committee.
Mr. Christensen stated that he did not expect all of the
University campuses to be listed. He said that
approximately a half dozen of the campuses would not raise
as much money as the cost of the application fee. He
related that most people that gave to the University did
not was to give a check directly to the University, but
rather focus the donation on a specific campus or program.
He said that there had been proposals that University
programs be allowed to be listed, not just campuses
however; that could overburden the list of choices for
donors. He believed that there were 100's of charities on
the list, a dozen of which were related to the University.
Vice-Chair Fairclough OPENED public testimony.
There being none Vice-Chair Fairclough CLOSED public
testimony.
1:46:49 PM
Vice-Chair Fairclough directed the committee's attention to
the fiscal notes attached to the bill.
HB 75 was HEARD and HELD in committee for further
consideration.
CS FOR HOUSE BILL NO. 278(FIN) am
"An Act increasing the base student allocation used in
the formula for state funding of public education;
relating to the exemption from jury service for
certain teachers; relating to the powers of the
Department of Education and Early Development;
relating to high school course credit earned through
assessment; relating to school performance reports;
relating to assessments; establishing a public school
and school district grading system; relating to
charter schools and student transportation; relating
to residential school applications; relating to tenure
of public school teachers; relating to unemployment
contributions for the Alaska technical and vocational
education program; relating to earning high school
credit for completion of vocational education courses
offered by institutions receiving technical and
vocational education program funding; relating to
schools operated by a federal agency; relating to a
grant for school districts; relating to education tax
credits; establishing an optional municipal tax
exemption for privately owned real property rented or
leased for use as a charter school; requiring the
Department of Administration to provide a proposal for
a salary and benefits schedule for school districts;
making conforming amendments; and providing for an
effective date."
1:48:02 PM
AT EASE
1:49:53 PM
RECONENED
1:50:35 PM
Senator Olson wondered what the minimum amount of available
bandwidth should be for Alaska schools.
MICHAEL HANLEY, COMMISSIONER, DEPARTMENT OF EDUCATION AND
EARLY DEVELOPMENT, responded that the question was
difficult to answer because different districts used
different amounts. He said that the department would use
as much bandwidth as possible in all districts in order to
utilize all online applications.
Senator Olson believed that having more bandwidth would be
advantageous for distance learning through online classes.
Commissioner Hanley agreed. He said that increased
bandwidth was a quality of life issue as well as an
educational issue.
1:53:02 PM
Senator Olson inquired queried, if the funds were
unlimited, how much the department would be willing to
spend to increase bandwidth to school districts across the
state.
Commissioner Hanley responded that if funding was unlimited
he would look into the best bandwidth available for all
schools in the state.
Senator Olson assumed that reaching 10 megabits per second
for each district would be welcomed by the department.
Commissioner Hanley replied that any movement in a forward
direction would be beneficial for Alaska's students.
Senator Olson inquired what Ms. Thibodeau believed was the
minimum amount of bandwidth that should be at each school.
LINDA THIBODEAU, DIRECTOR, LIBRARIES, ARCHIVES, AND
MUSEUMS, said that it would depend on the particular needs
of the school. She felt that 10 megabits was too low a
number for seeking high-quality interconnectivity.
1:56:12 PM
Senator Olson asked what level of bandwidth would be
necessary in order to provide each school with high-
quality, interactive courses to middle and high school
students.
Ms. Thibodeau responded that 50 to 100 megabits would be
appropriate.
1:57:17 PM
ERIN SHINE, STAFF, SENATOR ANNA FAIRCLOUGH, stated that she
had been working with the department and the governor's
broadband taskforce and had discovered some leftover funds
that could be re-appropriated to perform a study on the
interconnectivity of school districts in the state.
Vice-Chair Fairclough explained that a survey had been done
on the issue and that the administration had been willing
to open the contract in order to perform an audit that
could detail the hardware capacity in districts and bring
communities online.
1:59:02 PM
Senator Olson commented that the legislature should act in
a timely manner on the issue of improving the available
bandwidth to districts because it would be several years
before it would become available to communities.
Vice-Chair Fairclough thought that addressing broadband and
the e-rate was important for an education bill moving
forward. She hoped that Commissioner Hanley would support
the committee's request to open up the broadband study to
determine the need for access throughout Alaska's schools.
2:00:22 PM
Senator Dunleavy queried whether department had a position
on tenure.
Commissioner Hanley responded that DEED had not taken a
specific position on the issue.
2:00:56 PM
Senator Dunleavy understood that the rating system for
schools was necessary under the waiver from the federal
government for No Child Left Behind (NCLB).
Commissioner Hanley said that a separate accountability
system had to be created when the state dropped the system
under NCLB.
Senator Dunleavy understood a rating system using either
letters or numbers would be put into place within the next
two years.
2:01:40 PM
Commissioner Hanley shared that a rating system had been in
place for nearly a year.
Senator Dunleavy understood that the system had criteria
for rating. He asked what the department would do for
schools that received low ratings and whether there were
mandates from the federal government to move the school
from a low rating to a higher rating.
Commissioner Hanley said that the rating system was not
simply words on paper. He asserted that it was an
accountability system that informed schools and the state
where additional resources were necessary and where great
performance had occurred. He stated that the department had
prioritized providing mentors and coaches to schools that
had one and two star ratings.
Senator Dunleavy wondered what happen to a school that
failed to increase its score. He queried whether there was
an ultimate goal of addressing the needs of low scoring
schools in order to improve their performance.
Commissioner Hanley responded that the department would
maximize its resources and work with low rated schools to
its best ability. He said that additional funding could
help to meet the needs of more schools on the lower end of
the rating spectrum. He expressed appreciation for mentors
and coaches throughout the state. He felt that it was
important to recognize that the majority of the rating
system was academic, but many of the issues facing schools
had nothing to do with academics. He relayed that there
were schools that were struggling with social issues,
suicide, and alcoholism; some schools in the state were
reporting that over 80 percent of their student body
suffered from Fetal Alcohol Spectrum Disorder (FASD). He
stressed that the district would support all these schools
to the greatest extent possible.
2:05:43 PM
Senator Olson inquired whether the state offered incentives
for teachers to work in the lower rated schools.
Commissioner Hanley replied no.
2:06:02 PM
Co-Chair Meyer asked for an explanation of the funding flow
for charter schools. He noted that there was concern over
the 4 percent administration cap in one of the education
bills being considered by committees. He asked how large
charge backs by school districts could be prevented.
Commissioner Hanley related that current statute stated
that the budget for a charter school shall not be less than
the amount generated by the students enrolled in that
school. He said that funding for charter schools should be
determined in the same manner as all of the other schools
in the district. He clarified that the funds generated by a
student was more than the base student allocation (BSA)
component, but included the 20 percent special education
component, vocational/technical education, and
transportation costs. He stated that the one-time, $25
million funding that had been appropriated for energy costs
had been generated to the districts by students. He
stressed that the idea was not to create "super schools"
but to create equity and make sure that the intent of the
original statute was met. He said that the idea behind the
4 percent cap was to be sure that districts were not
withholding more than they should. He explained that a
school district provided solidity and support for charter
schools. He believed that the legislation would help school
districts and charter schools to continue having strong
communication.
2:11:48 PM
Co-Chair Meyer asked about the potential cost of expanding
the Alaska Native Science and Engineering Program (ANSEP)
to middle schools.
Commissioner Hanley responded that the ANSEP component was
currently a function of the University of Alaska. He said
that just under $1 million flowed through the department's
budget to support the program. He stated that the program
had yielded excellent results. He explained that the
program was introduced in the 8th grade with a computer
build program; students build their own computer and upon
completion of required math courses the student gets to
keep the computer. He said that the intent of the language
in the bill related to ANSEP was to encourage the 8th grade
component and set the stage for high school.
2:14:27 PM
Senator Dunleavy noted that the legislature was tasked with
the job of assisting and maintaining public schools in the
state's 54 school districts. He wondered how local control
and state funding worked together. He asked what the
legislature should expect from schools that were left to
determine how education was delivered to students.
Commissioner Hanley responded that there were targets that
were in place to assure that students had the opportunity
to receive an education in a healthy and safe environment,
with the progression towards a time when they are equipped
with the tools they will need to be successful beyond high
school. He said that assessments in grades 3 through 10
measured student success in academics and the
accountability for schools in the areas of attendance and
graduation rates.
2:17:42 PM
Senator Olson reiterated his question about minimum amounts
of bandwidth for schools.
ROBBIE GRAHAM, ASSISTANT COMMISSIONER, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, responded
that the minimum speed that most schools had was 1.5
megabits per second; some in urban areas had faster speeds.
The federal government had recently issued a notice of
proposed rulemaking that would change the e-rate program
and require American schools have broadband speeds of no
less than 100 megabits per second by 2015. She said that
the department was working towards greater speed to support
the increase in demand for digital learning.
2:18:50 PM
Senator Olson queried how much the federal match would be
for the funding of increased broadband.
Ms. Grahm replied that she was not sure. She said that the
entire e-rate program was part of the universal service
reform, which was subject to change. She understood that
$2.3 billion was available for schools and libraries
through the universal service reform, but it was unsure
what funding would look like in the future.
2:19:44 PM
Senator Olson understood that to assist with funding
broadband expansion the federal government matched every
state dollar with $4 additional dollars.
Ms. Graham responded that the figure sounded accurate.
2:20:07 PM
Senator Olson inquired what amount of bandwidth would be
necessary to provide high quality interactive courses for
high school and middle school students for basic Science
Technology Engineering and Mathematics (STEM) courses.
Ms. Graham responded that the ideal amount would be 100
megabits per second, but that speed carried a price tag
that the department could not currently support. The
department was hoping that 15, 25 and up to 50 megabits per
second would be a reasonable amount of speed for the time
being. She asserted that the department was working towards
100 megabits per second.
2:21:11 PM
Senator Olson opined that there was nothing to be gained by
waiting for survey results to determine whether schools
that were less than 10 megabits needed to increase their
bandwidth.
Ms. Graham replied that the survey that Connect Alaska
would perform on behalf of the statewide broadband
taskforce would begin in May or June of 2014 with the
intent to survey most rural schools in order to determine
what speeds were currently being delivered and what kind of
connectivity each school had to receive the bandwidth.
Senator Olson commented that the schools that had less than
10 megabits per second would have to wait for the analysis
to be done on the survey, which will be detrimental.
2:23:07 PM
Commissioner Hanley offered Senator Olson's analysis was
correct. He wondered whether the federal e-rate match would
generate the same numbers if Alaska put in additional
funds.
Ms. Graham responded that she was unsure.
2:25:08 PM
Senator Hoffman thought that the longer it took to bring
the entire state up to 100 megabits per second, the farther
students would fall behind.
Commissioner Hanley admitted that the lack of bandwidth
created greater challenges for students.
Senator Hoffman queried whether the lack of bandwidth would
allow students to academically advance faster than student
in schools with faster broadband.
Commissioner Hanley responded that that would be an even
greater challenge. He recognized that the lack of speed
presented a challenge but he did not believe that it meant
student would necessarily fall behind.
2:27:08 PM
Vice-Chair Fairclough wondered whether the department could
prioritize extra funding to communities affected by lack of
internet speed if the committee included additional
appropriations in the omnibus education bill.
Commissioner Hanley said absolutely.
Vice-Chair Fairclough stressed importance that the survey
conducted by the taskforce be conducted using terms that
could be understood by people unfamiliar with technical
jargon. She asked whether the federal government was going
to attempt to implement 100 megabits per second in all
schools in the country by 2105.
Ms. Graham responded that the notice of proposed rulemaking
had stated that the federal government was targeting 99
percent of America's schools to have broadband speeds of no
less than 100 megabits per second by 2015. She added that
the ultimate goal was 1 gigabit per second by 2020. She
said that the recommendation had come from the FCC.
Vice-Chair Fairclough informed committee members that
amendments for HB 278 were due by 5pm. She wondered if Ms.
Graham could provide the FCC recommendation to the
committee so that intent language could be crafted to
include in the bill.
Ms. Graham agreed to provide the information.
Senator Dunleavy stressed the importance that schools have
the hardware, software and training in place to utilize any
increased broadband. He believed that an audit would be
necessary in order to ascertain the capability capacity of
each school, in every district.
Vice-Chair Fairclough felt that more could be learned by
conducting a study on the matter rather than a survey.
2:31:37 PM
Senator Bishop discussed broadband related to career
technical education. He queried the department's role in
implementing a career in technical education plan.
Commissioner Hanley said that the department supported the
district-wide implementation of the plan.
Senator Bishop believed that the plan was a pathway forward
for students. He recalled a statistic that suggested that
80 percent of students leaving high school would continue
into trade schools; 20 percent would go to college. He
wondered if that statistic had changed.
Commissioner Hanley said that he could not speak to exact
percentages, but thought that the 80 percent figure had
dropped to 60 percent.
Senator Bishop believed that DEED, DOL&WD and the
University of Alaska should continue to work together, in
collaboration with the state's 54 school districts, to
educate and train Alaska's future workforce.
Commissioner Hanley agreed.
Senator Bishop noted that TEVEP was a small portion of the
money that would be needed for career technical education.
2:35:10 PM
Vice-Chair Fairclough wondered how DOL was collaborating
with the University or DEED to track student's performance
once they exited the school system and entered into the
workforce.
2:35:55 PM
WANETTA AYERS, DEPARTMENT OF LABOR AND WORKFORCE
DEVELOPMENT, ANCHORAGE (via teleconference), replied that
some data was available. She said that a complete picture
was not yet available due to technical and legal data
sharing issues. She relayed that labor and job and wage
outcome information was regularly reported by the
department for federal and state training grant programs.
Vice-Chair Fairclough assumed that DOL was not opposed to
sharing information with the K-12 or University systems.
Ms. Ayers replied that the information sharing was already
taking place between the entities. She explained that the
research and analysis division of DOL&WD conducted a
variety of job and wage outcome research operations in
cooperation with the University. She said that there were
technical and legal challenges involved in sharing with
DEED, which DOL&WD was working to overcome.
2:37:30 PM
Senator Dunleavy spoke to the issue of tests for credit. He
mentioned the College Level Examination Program (CLEP) and
its growing popularity nationwide. He said that the Mat-Su
Borough had adopted the test for credit option. He stressed
that resources already existed for the program and were
mass produced. He strongly urged the committee to consider
that the program would easy to implement.
2:39:13 PM
Vice-Chair Fairclough inquired whether DEED maintained the
desire to allow students to opt out of core subjects only.
Commissioner Hanley replied that districts could currently
assess students in any way that they chose and to give
credit to students that showed proficiency or mastery of a
subject. He asserted that the department wanted to require
that districts provide a test out option for core courses.
He stated that the bill only asked that opt out test be
provided only for courses already offered by the school.
2:41:13 PM
Co-Chair Meyer noted that the amendments to the legislation
should be submitted to his office before 5pm.
2:42:22 PM
AT EASE
2:53:45 PM
RECONVNED
Vice-Chair Fairclough handed the gavel to Co-Chair Meyer.
Co-Chair Meyer noted that school funding was one of the
most confusing areas of the bill.
2:54:48 PM
Co-Chair Meyer noted that the governor had looked at adding
$85 in the base student allocation (BSA) and that the House
had added another $100. He understood that the house had
added an additional $30 million outside of the BSA.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION, replied
in the affirmative.
Co-Chair Meyer inquired how the $30 million outside of the
cap would be distributed to schools. He asked whether
additional local contribution could be made to funding
outside of the BSA.
2:55:59 PM
Mr. Teal responded that from the state's perspective,
assuming that the funds were distributed according to
adjusted average daily membership (ADM), the same amount of
money went to the same school districts exactly as if it
had gone through the formula. He said that school districts
might argue that money in the BSA was permanent and allowed
for long-term planning; money outside of the formula would
not give as much of a planning horizon because it was not
guaranteed. He stated that in his experience he had not
seen one-time money go away in the sense that it had been
removed, but rather in the sense that it had been
incorporated into the BSA. He relayed that in the past the
senate had addressed the issue by putting outside money in
for multiple years. He agreed that the funding was not
permanent, but thought that planning should not be affected
if spending history was reviewed. He offered that the
funding could affect local contribution; when monies ran
through the formula the basic need was higher, voluntary
local contribution were capped at 23 percent of basic need,
so more could be contributed at the local level. He gave
the example that if the funding was increased $100 million
outside of the BSA and Anchorage received roughly $30
million of those funds, if it were outside of the BSA then
Anchorage would lose the ability to contribute 23 percent
to the district. If the money was inside the BSA, Anchorage
could contribute an additional $6 or $7 million to the
district.
2:59:01 PM
Mr. Teal said that the contribution would make a difference
because Anchorage was at the cap. He related that it would
make no difference for districts that were not at the cap.
He stated that there were some districts in the state whose
communities funded them to the cap, so running the monies
outside of the formula would arguably not allow them to
contribute as much as they would like to contribute.
2:59:39 PM
Co-Chair Meyer understood that every $25 million equated to
an approximate $100 increase in the BSA. Mr. Teal agreed.
3:00:11 PM
Co-Chair Meyer said that $100 million had been set aside
for education in the operating budget, which equated to a
$400 BSA.
Co-Chair Kelly interjected that the total money set aside
for 2014 was $75 million because the other $25 million was
incorporated from 2013.
Co-Chair Meyer inquired whether putting the $ 75 million
outside of the cap would prohibit local municipality's
ability to increase contributions. Mr. Teal responded in
the affirmative.
Vice-Chair Fairclough understood that if the funds were
inside the BSA then taxpayers could see a tax increase.
Mr. Teal responded that Vice-Chair Fairclough was correct.
He said that if the city needed to raise funds to pay the
extra money then taxes would increase; however, the local
contribution was voluntary and the city was under no
obligation to increase payments.
Co-Chair Meyer asked if there was a scenario that
considered a non-adjusted ADM. Mr. Teal responded that the
non-adjusted ADM would be the head count. He said that if
the money were distributed according to ADM then Anchorage
would receive more than its formula share. He explained
that Anchorage was already at the cap and federal disparity
(dollars per student differences) testing would not allow
more than 25 percent. He relayed if money was distributed
in Anchorage according to the unadjusted ADM, Anchorage
would exceed the disparity test.
3:03:37 PM
Vice-Chair Fairclough opined that the state was limited by
the disparity test.
Mr. Teal replied that the federal government allowed
districts to receive as much as 25 percent disparity. He
explained that Alaska did not fund by head count, Alaska
funds by adjusted student count. The federal government had
reviewed the formula and approved the method because the
formula factors used to adjust for geographic issues were
legal on allowable adjustable factors. He furthered that if
factors not approved by the federal government were added,
the disparity test would be broken, even though the formula
had been used. He relayed that where no local contribution
was required at all the municipality paid zero; however
some Alaska urban areas had a required local effort. He
stated that the lower districts could have no more than 25
percent less funding than the higher districts, and so,
money could not be distributed outside of the formula and
still meet the disparity test. He reiterated that local
contributions already made up 23 percent of the 25 percent
disparity.
3:06:46 PM
Co-Chair Meyer asked about the idea of adjusting school
sizes so that urban schools could get more funding and the
rural schools would be held harmless.
Mr. Teal replied that the other body had removed the top
two brackets from the size factor, but that would not
affect the federal test because size was a valid
adjustment. He said that if it were to be decided that size
factors had changed then they could be modified. He felt
that the concern that would be raised by the department was
the study that would support the size factor change would
need to be produced; should the formula be taken seriously
enough that changes were not made via amendment, or another
quick process, because the money flow was satisfactory. He
said that the formula should be based on the economies, or
diseconomies, of scale that were experienced in the state
and should not be changed in haste.
Co-Chair Meyer probed the advantages, or disadvantages, of
putting money outside of the formula.
Mr. Teal replied that the advantage of keeping money
outside the formula was that it would appear to be one-time
money. He thought that a solid reason for putting it
outside the formula would be that the formula was going to
be studied again; size factors had been in place since 1997
and the geographic factors had not been studied since 2007.
He said that a completed study of whether the factors were
adjusting for differences the way they should be adjusting
should be conducted before the BASA were increased
permanently. He asserted that there could be schools that
would lose out were the formula to change; if money was
going to be moved around because factors had changed, the
BSA would need to be increased in order to appease the
districts that did not receive more money through the
formula adjustments. He stated that if money was held
outside of the BSA it could be argued that the "winners and
losers" argument would go away because the funding was one-
time funding, given while the study was being completed,
and not that there were new numbers, a new formula and new
allocation dollars the money could be put in the BSA.
Co-Chair Meyer asked if one of the studies addressed in the
legislation was a BSA study.
Mr. Teal though that the only study in the bill was a state
salary study.
3:11:20 PM
Co-Chair Kelly inquired how the federal impact aid played
into the discussion regarding the disparity test.
Mr. Teal directed the question to DEED.
3:12:12 PM
Senator Dunleavy understood that the disparity test
revealed how much the state contributed within the 25
percent limit.
Mr. Teal replied that the 25 percent applied to any funds,
state or local.
Senator Dunleavy spoke of districts in the state that were
not currently experiencing a shortfall, he wondered if the
issue was one of funding and not expenditure.
Mr. Teal responded that the disparity test was based on
revenue and not expenditures.
3:14:30 PM
Co-Chair Kelly asked how federal impact aid played into the
disparity test.
ELIZABETH NUDELMAN, DIRECTOR, SCHOOL FINANCES AND
FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT,
replied that the Alaska had an equalized formula for
distributing public education funding. The formula was set
out to provide the same education across the state for
different regions with different expenditure levels to
acquire a teacher and the other things that supported
education. She stated that because Alaska maintained an
equalized formula within 25 percent from the most expensive
area to the least expansive area the state, through the
federal aid program, was allowed to use federal impact aid
dollars to fund the foundation program. She said that there
was approximately $140 million in impact aid funds sent to
school districts across Alaska. She relayed that the funds
were payments in lieu of taxes for federal lands where they
could not be taxed locally. Of the $140 million distributed
to school districts, Alaska used approximately $70 million
to fund the foundation program. She explained that without
the impact aid, without maintaining an equalized program in
passing the disparity test, Alaska would not be able to use
the payments in lieu of taxes to fund the foundation
program, if the program continued the state would need to
find $70 million to replace the impact aid.
3:16:46 PM
Senator Hoffman wondered where the $70 million went.
Ms. Nudelman replied that there was a calculation that
provided for how much school district's retained versus how
much the state retained. The calculation was a ratio of
local effort: districts that were putting in local effort
retained a portion of their impact aid. She said that
regional educational attendance areas (REAA) did not need a
local effort in order to retain 10 percent of the impact
aid. The $70 million that was left in the districts would
be based on a calculation of 90 percent local effort.
Senator Hoffman inquired if the federal lands that were the
result of the revenue were primarily in rural Alaska.
Ms. Nudelman replied no. She said that larger school
districts had military bases and the state received
significant impact aid funds from the bases.
3:18:36 PM
Senator Dunleavy relayed that the question of what was
enough money was one that was discussed from year to year.
He asked why some school districts had a fund balance in
term of expenditures and some did not, and whether the
problem had to do with flat funding. He noted that the
larger schools districts seemed to be in the most financial
trouble.
Ms. Nudelman said that by statute districts could only
maintain 10 percent of their expenditures in a fund balance
for an operating fund at the end of each year. She believed
that this made sense in order to account for emergencies.
She relayed that the factors leading to why one district
would hold over money from one year to the next would be
unknown. She stated that she could not speak to the
particular needs of each individual district she mentioned
a Senate Education Task Force meeting from summer 2012,
where several districts gave presentations that described
cost drivers but controllable and uncontrollable.
3:22:49 PM
Senator Dunleavy commented that large school districts were
having a difficult time handling insurance costs. He said
that the largest school districts in the state were
experiencing similar problems with regard to deficits. He
noted that smaller school districts were not. He hoped to
figure out why.
3:24:10 PM
Senator Hoffman noted that rural schools faced the same
funding problems although they might not receive the same
publicity as larger districts statewide. He agreed with Mr.
Teal that formula changes needed to be made with caution.
3:25:49 PM
Co-Chair Meyer asked how correspondence schools were funded
through the formula.
Commissioner Hanley replied that they were funded at .8
percent of the BSA.
3:27:45 PM
Senator Dunleavy shared that Mat-Su Central School had 1700
students in its correspondence program. He felt that the
correspondence percentage number had been chosen
arbitrarily.
Co-Chair Meyer admitted that the bill included many
challenging issues pertaining to education.
3:29:53 PM
AT EASE
3:31:32 PM
RECONVENED
CSHB 278(FIN) am was HEARD and HELD in committee for
further consideration.
SB 220 was SCHEDULED but not HEARD.
Co-Chair Meyer discussed housekeeping.
ADJOURNMENT
3:31:54 PM
The meeting was adjourned at 3:31 p.m.