Legislature(2001 - 2002)

04/20/2001 02:05 PM Senate HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
     CSHB 203(FIN)-SPECIAL APPROP: SCHOOL DIST. COST FACTORS                                                                
                                                                                                                                
REPRESENTATIVE   PEGGY  WILSON,   sponsor,  explained   that  CSHB
203(FIN) appropriates money to Legislative  Council for a study of                                                              
school district  cost factors.  The  current formula has  a design                                                              
error.   It  tracks expenses  as opposed  to the  actual costs  of                                                              
providing  an  education  in  each   school  district,  which  has                                                              
resulted in  flawed district cost  factors.  Failure  to precisely                                                              
measure  differential  costs  across  the state  has  resulted  in                                                              
inequitable funding.   Alaska has  a constitutional  obligation to                                                              
provide a full education to all students.   The challenge inherent                                                              
in this mission  is to account for Alaska's diverse  geography and                                                              
cultural and economic conditions.   CSHB 203(FIN) proposes that an                                                              
independent study be done at a cost of $350,000.                                                                                
                                                                                                                                
VICE-CHAIR  LEMAN   said  he  agrees   with  the  need   for  good                                                              
information  and  he  does  not  believe  the  current  geographic                                                              
differentials  are  accurate,  but  he  believes  the  information                                                              
should  be based  on  the cost  of operating  schools  and not  on                                                              
incidental costs.  Any study should  be designed so that  the data                                                              
can be updated every two years, as mandated by SB 36.                                                                           
                                                                                                                                
REPRESENTATIVE WILSON  agreed it is important to  design the study                                                              
so that DOEED can update the information every two years.                                                                       
                                                                                                                                
Number 447                                                                                                                      
                                                                                                                                
MR. CARL ROSE, Association of Alaska  School Boards (AASB), stated                                                              
support  for  CSHB  203(FIN).  He  noted  that  many  people  have                                                              
lingering concerns about SB 36, one  being the information used to                                                              
develop the  foundation formula.   The McDowell study of  1996 was                                                              
expenditure  based  and  many believe  schools  were  inadequately                                                              
funded  at that  time.   The  funding  task force  recommended  no                                                              
change to  the foundation  formula until the  state could  come up                                                              
with empirical data  on which to underwrite the change.   The task                                                              
force felt to change the foundation  formula without a good set of                                                              
indices would further exacerbate  the problem. The AASB identified                                                              
the need for such a study in its  A+ document.  He pointed out the                                                              
AASB  has a  dues formula  that contains  factors  so that  during                                                              
times  of financial  prosperity,  dues  can  be reduced  and  vice                                                              
versa. He suggested  that using 2002 as the timeframe  to complete                                                              
the  product is  too short  and will  produce a  poor product.  He                                                              
would like  to see the study in  place very soon and  if the study                                                              
lasted until 2003, the legislature  would have another year's data                                                              
to consider.  He  stated the need for this bill  is more important                                                              
since SB 36 is  in place.  The district cost factors  used now are                                                              
very questionable                                                                                                               
                                                                                                                                
MR. DARROLL  HARGRAVES, Council  of School Administrators,  stated                                                              
support for CSHB  203(FIN) because of the low  confidence level in                                                              
the current  chart of accounts set  in statute, which  he believes                                                              
is inadequate.                                                                                                                  
                                                                                                                                
MR. EDDY JEANS, School Finance Manager,  DOEED, stated support for                                                              
CSHB  203(HES).  DOEED believes  a  study  needs  to be  done  and                                                              
completed  by January  15,  2003 instead  of  2002. Requiring  the                                                              
study to be  done in a very  compressed time frame will  produce a                                                              
product that does  not serve the state's needs.  He requested that                                                              
CSHB 203(FIN) be amended to change  the date from 2002 to 2003. He                                                              
stated he spoke  with Representative Wilson about  that amendment.                                                              
She would  like to do a little  bit of research  before supporting                                                              
it.                                                                                                                             
                                                                                                                                
VICE-CHAIR  LEMAN   suggested  requiring  a  draft   study  to  be                                                              
completed by January 1, 2002 and to then have a comment period.                                                                 
                                                                                                                                
MR. JEANS said DOEED requested amended  language on the House side                                                              
that  would   have  required  Legislative   Council  to   work  in                                                              
consultation  with DOEED to  develop the  contract for  the study.                                                              
DOEED intends to work with the school  districts to make sure they                                                              
buy into the product  before it goes out for bid.  That way, DOEED                                                              
will  be asking  the  contractor  to measure  the  items that  the                                                              
school districts  feel are truly  driving the difference  in costs                                                              
between districts.  He said he doesn't  believe a good request for                                                              
proposals (RFP) could be crafted  in less than two months and that                                                              
development needs to be done on the front end.                                                                                  
                                                                                                                                
VICE-CHAIR LEMAN  agreed.  He asked  Mr. Jeans if he  is satisfied                                                              
with  the information  the state  is  collecting on  the costs  of                                                              
running  school districts  and whether  DOEED has  the ability  to                                                              
compare districts from that information.                                                                                        
                                                                                                                                
MR.  JEANS stated  that  two  additional positions  were  approved                                                              
under SB 36.   He now has two internal auditors  working for DOEED                                                              
that review  school district  audited financial  statements  on an                                                              
annual  basis.   DOEED  has  also  done  an extensive  review  and                                                              
revision of  the uniform  chart of accounts  adopted by  the state                                                              
board of education in December.   That chart of accounts will take                                                              
effect in July so it will be at least  one year before the results                                                              
are  in.   He believes  the new  chart  of accounts  will get  the                                                              
expenditure data in  line. DOEED is not suggesting  that this cost                                                              
model  be developed  based  on  audited financial  statements  for                                                              
expenditures because  districts spend what they get.   If they are                                                              
not  getting sufficient  funds, they  must cut  in certain  areas.                                                              
DOEED wants to look at the actual  costs of providing an education                                                              
in  the various  communities. Fuel  costs  and consumption  varies                                                              
greatly among  districts. The contractor  needs to  identify those                                                              
indices that DOEED can update regularly.                                                                                        
                                                                                                                                
VICE-CHAIR  LEMAN  said  he  agrees but  would  be  careful  about                                                              
interpreting too much  from the costs unless a common  base can be                                                              
found  to  determine  comparable  deliveries  in  communities.  He                                                              
announced he  would hold CSHB  203(FIN) and adjourned  the meeting                                                              
at 3:32 p.m.                                                                                                                    

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