Legislature(1997 - 1998)
03/21/1997 09:05 AM Senate HES
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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
SB 36 PUBLIC SCHOOL FUNDING
Number 001
CHAIRMAN WILKEN called the Senate Health, Education & Social
Services Committee (HES) to order at 9:05 a.m. and introduced
CSSB 36(HES) as the first order of business.
JOHN CYR , President of NEA-AK, informed the committee that he was
testifying from San Diego, California. Mr. Cyr informed the
committee of the following demographics:
34 percent of Alaskans are children
15 children commit suicide every year
85 children die of injury, homicide, suicide, unintentional
injury
125 babies die before reaching age one
160 babies are born with fetal alcohol syndrome
580 babies are born at low birth weight
600 children are admitted for inpatient psychiatric care
915 babies are born to mothers with less than 12 years of
education
1,235 babies are born to teenager mothers
1,450 children will be arrested for felony offenses
more than 2,000 children will drop out of school
3,500 children are reported as runaways
3,700 children are abused or neglected
10,500 preschoolers live below the poverty level
almost 25,000 children receive AFDC
Mr. Cyr said that all these children are in Alaska's schools. What
is done with the foundation formula has a direct impact on those
children. In the first year Alaska was a state, 44 percent of the
budget went towards education. By 1970, that amount had dropped to
35 percent and in 1991 that was 17 percent. The foundation was
$60,000 in 1987-88, then in 1992 the foundation unit increased to
$61,000. Mr. Cyr noted that in 1996, Alaska ranked last in
resource allocation towards education for all 50 states. Alaska
also ranked last in aggregate salary for education employees after
being inflation adjusted. There has been a 10.9 percent loss in
real buying power since 1985/86. In the classroom, that results in
larger class sizes. Mr. Cyr informed that committee that in his
last year at Wasilla High School, he had 168 children in 5 classes.
One cannot deliver the program needs with that many children.
Alaska ranks 49 in the number of advanced placement classes offered
in the U.S. Alaska pays less attention to marginal students.
Alaskan schools have inadequate technology. Schools do not have
academic or vocational counseling at the elementary level, there is
one counselor at most middle schools. Mr. Cyr believed that the
children of Alaska are being done a great disservice.
Mr. Cyr turned to the foundation formula. He asked if the numbers
on the reallocation of dollars in each of the five years were
available.
CHAIRMAN WILKEN said that those numbers are being developed and
should be available today or the first of the week. Chairman
Wilken reminded Mr. Cyr that in years three through five, the
reallocation becomes a function of the ACD study.
JOHN CYR calculated that over the first two years of the program,
Anchorage gains a little over $16 million, Fairbanks gains $5.1
million, Mat-Su gains $69,000 and Kenai and Juneau pick up a little
less than $1 million. Mr. Cyr asked if those numbers are correct.
CHAIRMAN WILKEN did not know and suggested that Mr. Cyr provide the
committee with his concerns about CSSB 36(HES).
JOHN CYR said that the equalization of funding must be based on
programs and not the equalization of dollars. In fact rural
dollars are being removed from rural children, for the short term
benefits of urban districts. NEA-AK believes that to be a mistake.
Funding must also reflect the needs of students in single site
districts. Mr. Cyr stated that it was unacceptable for the
students of single site districts to be left political hostage
every year. Full funding must come with student growth which is
unprecedented in Alaska. Some mechanism must be built into the
foundation formula for increased renovation, research grants,
incentive grants, new programs for violent students and parental
involvement technology.
Mr. Cyr was pleased that pupil transportation was included as well
as the area cost differential study. Mr. Cyr noted that Alaska has
experienced a 30 percent loss in buying power, inflation proofing
is necessary. Oversight and auditing positions are missing from
this proposal; those positions would assure that education dollars
are being spent on education.
Number 199
SENATOR WARD believed that Mr. Cyr indicated that NEA-AK was
opposed to CSSB 36(HES). Is NEA-AK opposed to or in favor of the
Governor's proposal or Senator Randy Phillip's proposal? Senator
Ward asked if Mr. Cyr had his own proposal. JOHN CYR said that
NEA-AK was not in opposition to CSSB 36(HES) or SB 146 in its
entirety. All of the proposals have some positive aspects. Mr.
Cyr informed the committee that NEA-AK liked the incentive grants
and Quality Schools Initiative in SB 85. The area cost
differential study is good. Mr. Cyr suggested that the best of
each be packaged as one bill. In further response to Senator Ward,
Mr. Cyr clarified that NEA-AK supports a number of items in this
bill and others as well as opposed to some of the provisions.
SENATOR WARD thought that Mr. Cyr indicated that the communities of
Anchorage, Fairbanks, Juneau, and Kenai were to receive more than
a fair share; is that correct? JOHN CYR said that it is a mistake
to take money from rural children. SENATOR WARD inquired as to how
much those numbers should be reduced for the various communities
Mr. Cyr cited. Does NEA-AK want those allocations to be reduced?
JOHN CYR replied, no. SENATOR WARD said that it would be helpful
to have suggestions regarding the allocations, if Mr. Cyr had such.
JOHN CYR said it would be easy to determine the money necessary to
fund education across the state.
Number 245
SENATOR LEMAN noted that Mr. Cyr supported the incentive grants for
schools while in the past incentive grants for teachers have been
opposed by NEA-AK. Senator Leman asked if this was a philosophical
shift towards his view that teachers should be paid on performance
instead of encouraging mediocrity. JOHN CYR did not know that
mediocrity was being encouraged. Mr. Cyr said that he would be
happy to review any concrete proposals regarding incentive grants
for teachers with Senator Leman.
SENATOR LEMAN said that in the past, NEA-AK's opposition has been
rooted in who actually decides who receives the grant. Senator
Leman believed that there was merit for incentive grants for
schools. Therefore, if an incentive grant is appropriate for
schools it should also be for teachers. Senator Leman urged Mr.
Cyr to think about this issue.
CHAIRMAN WILKEN informed the committee that he had ran some numbers
in order to get a sense of the growth of the formula. Those
numbers say that the formula has grown 50.2 percent in actual
dollars and the ADM has increased 23 percent during that same
period. Therefore, inflation proofing has been built in and the
state has kept up with inflation proofing the formula. With
regards to Mr. Cyr's comments about delivery by program, how would
that be accomplished? JOHN CYR believed that most could agree on
the general areas of what it takes to have a quality school which
makes it possible to determine the program needs of schools. Mr.
Cyr informed the committee that in his last years teaching, his
classroom supplies consisted of a box of chalk. Mr. Cyr suggested
that the costs of supplies should be reviewed in order to deliver
a program.
CHAIRMAN WILKEN pointed out that the ACD study in the bill would
review the cost of running a school, not a school district. JOHN
CYR said that NEA-AK was on board with that. Mr. Cyr inquired as
to what happens to the children when a school with less than 10
students is closed. How many small schools would be closed?
CHAIRMAN WILKEN said that very few, if any schools would close, but
there are centralized correspondence programs within Alaska.
Number 311
AL WEINBERG , representing the Single Site School District
Consortium, appreciated the goals set forth for the revision of the
foundation program. Mr. Weinberg was not convinced that this
proposal was any simpler. Equity is extremely important, but
unfortunately there is no mention that school districts be provided
adequate funding. Mr. Weinberg noted that a purpose statement of
the foundation formula as well as the proposal before the committee
is that the foundation formula provide an equitable level of
educational opportunities. The proposed formula takes portions of
other proposed formulas which means that those components may not
produce the same result, especially with equity. Mr. Weinberg
noted that the adverse impacts occur to single site districts,
REAAs, and rural boroughs. In the second year, 15 single sites
would face reduced funding as would 10 REAAs and 5 rural boroughs.
During this same time, the winner districts would receive an
additional $25 million while the losers would loss about $14
million. Of the $25 million going to the winner districts, $15
million would be given to Anchorage and Fairbanks. Mr. Weinberg
stressed that there is no assurance that the additional $15 million
would benefit the children in those districts because the local
district could reduce its local contribution.
Mr. Weinberg believed that the 20 percent supplemental needs factor
was simpler than the existing categorical funding, however it is
not necessarily more equitable. For instance, the current
percentage statewide in special education enrollment is 14 percent
while the spread ranges from 7.3 percent to 38.9 percent. The
spread is even greater for bilingual education. Mr. Weinberg
pointed out that the 20 percent supplemental needs factor would not
eliminate the federal and state requirements that school districts
identify special needs students and provide appropriate programs
for those students. The concern is that this may adversely effect
equity for the sake of simplicity.
Mr. Weinberg applauded the area cost differential study. The
proposed study is a bit more extensive, addressing the size factor
and the single site factor. Mr. Weinberg noted that the
Legislature has not accepted the results of past studies. The
notion that the area cost differential be reviewed by funding
community is meritorious, however the numbers to be in effect prior
to the study are flawed. For example, Bristol Bay and Wales have
the same area cost differential as do Bethel and Lyon Village.
Bethel is a major river port and airport while Lyon Village is one
of the most remote villages in Alaska.
Number 401
With regard to the REAA tax, this is the most regressive tax and is
being imposed in may instances on the poorest in Alaska. Mr.
Weinberg did not have a problem with taxpayer equity in Alaska,
however this proposal does not provide such taxpayer equity. In
conclusion, Mr. Weinberg hoped that the focus remain on the
children and adequate and equitable funding for all children
regardless of geographic location, community wealth, or political
influence.
SENATOR LEMAN understood Mr. Weinberg's testimony to be that the
proposal before the committee was not equitable. Senator Leman
asked Mr. Weinberg if he believed that everyone should participate
in some manner in funding a local share. AL WEINBERG did not have
a problem with that concept. That is not occurring now in the
municipal districts, but there is no contribution from REAAs now.
SENATOR LEMAN expressed interest in Mr. Weinberg's proposal. AL
WEINBERG identified the following as more equitable solutions: a
statewide property tax including REAAs as well as municipal
districts, a statewide income tax applied to all earners in Alaska,
and a flat school tax on all earners in Alaska. By singling out
those in REAAs, the state would be requiring a tax on those
citizens while not requiring a tax on citizens in municipal
districts for the support of schools. Mr. Weinberg recognized that
many municipal districts do levy property taxes on property owners
for the support of schools, but not all municipal districts do.
SENATOR LEMAN pointed out that all municipal districts do
participate with a local share in some way. Senator Leman
understood Mr. Weinberg to mean that in order to make the proposal
before the committee less regressive the tax should apply to more
people, but an income tax is regressive. AL WEINBERG clarified
that an income tax based on the ability to pay is typically
referred to as progressive. A tax that disproportionately takes a
higher percentage of income from poor people than from wealthy
people as would a head tax or a sales tax, is referred to as
regressive.
CHAIRMAN WILKEN inquired as to Mr. Weinberg's thoughts about a two
percent tax or a tax on gross earnings that is remitted on a
quarterly basis, only in REAAs. Chairman Wilken explained that the
numbers show that the local contribution required from the
organized areas to qualify for state need is about 15.6 percent.
The REAA need is about $150 million in 1996, therefore 15 percent
of that would result in about $24 million. In 1995, about $475
million in wages was paid in the REAAs outside of organized areas.
If a five percent labor tax was taken on gross wages, about $23
million would result. Therefore, the REAAs would end up paying
essentially what all the organized areas are paying.
AL WEINBERG did not know if it was more equitable. The only way to
achieve equity is to have a statewide program that impacts all in
the same way. Mr. Weinberg agreed with Chairman Wilken that there
are organized areas that are paying 15 percent of the local school
need in order to qualify for state money and there are REAAs that
do not pay anything to receive that same money. Mr. Weinberg
pointed out that there are those in organized areas who pay nothing
as well. For example, the Denali Borough receives revenue from a
bed tax which is paid primarily by tourists and not the residents
of the borough.
With regard to the issue of single sites, CHAIRMAN WILKEN noted
that there has been much discussion about cutting the budget and
forcing consolidation. Chairman Wilken informed everyone that 13
percent of Alaska's students are in 70 percent of its school
districts. Chairman Wilken hoped that the area cost differential
would provide for consolidation of school districts in Alaska.
There are school districts that need to be consolidated and
hopefully, the study will illustrate how that can be done.
Number 503
DEBORAH VOGT , Deputy Commissioner of the Department of Revenue,
said that she would be discussing the tax provisions of the
legislation. Ms. Vogt understood the rationale for levying a tax
on a portion of Alaska. The courts will review whether the lines
of distinction of a tax are rational or not. As a former Attorney
General, Ms. Vogt was familiar with the standards utilized for
equal protection as applied to tax. Ms. Vogt said that it was a
fairly lax standard. The distinction here is for the purpose of
reducing an inequity and there can be some justification for this.
Ms. Vogt stated that the question would be whether this legislation
provides that equity.
Ms. Vogt agreed with Mr. Weinberg that the flat employment tax is
a very regressive tax. Property taxes are progressive, the tax is
related to the value of the property. Although a sales tax is
traditionally viewed as regressive, it is related to the amount of
goods and services purchased. A flat employment tax would impact
those without the ability to pay more than those making better
wages. Ms. Vogt noted that there are ways to address this such as
the statewide property tax. The oil and gas property tax is a
statewide tax with a credit for any municipal tax paid on that
property which would be possible on a statewide property tax. Ms.
Vogt acknowledged that such a tax would necessitate a legion of
assessors, furthermore each municipality does not determine its
contribution in the same way. Ms. Vogt said that a more equitable
tax would be a percentage of earnings. In conclusion, Ms. Vogt
mentioned that the legislation exempted nonresidents. She was
unsure as to this exemption because taxes generally apply to the
people who take advantage of the economic opportunity in places
where the tax is levied. In response to Chairman Wilken, Ms. Vogt
said that was located on page 23, line 28.
CHAIRMAN WILKEN held CSSB 36(HES) and informed the committee that
SB 146 would be before the committee Monday, but there would not be
any public testimony.
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