Legislature(1997 - 1998)

04/09/1997 09:04 AM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 146 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS                       
 Number 364                                                                    
  CHAIRMAN WILKEN  announced that  SB 146  was the final order of              
 business before the committee.  Chairman Wilken passed the gavel to           
 Vice Chair Leman.                                                             
  VICE CHAIR LEMAN  noted that testimony beyond the sponsor's                  
 statements would not be taken today.                                          
  SENATOR WILKEN  noted that there were packets which contained SB 146         
 and other relevant data.  SB 146 is a result of the testimony taken           
 on CSSB 36(HES).  Senator Wilken said that SB 146 is an alternative           
 to CSSB 36(HES).  Senator Wilken then began an overview of the                
 packet (See Attachment A).  The front cover of the packet                     
 illustrates the four pieces of the pie of public school funding to            
 which everything in the packet relates.  Senator Wilken noted the             
 sponsor statement in the packet which contains the following quote            
 by Bill Demerest, "Long-term solutions create short-term                    
 difficulties".  On page 5 of the packet there is a map delineating            
 the organization of the state with regard to school districts.                
 Senator Wilken pointed out that 14 percent of Alaska's students are           
 located in 70 percent of the school districts.  Perhaps, that is a            
 problem in the current foundation.  Page 6 defines the four pieces            
 of the pie as well as the components to the piece of the pie.                 
 Senator Wilken noted that adjusted ADM is a cumulative                        
 multiplication factor of the size, area cost differential, and                
 single site.  Page 7 begins an analysis of which the majority is a            
 Senator Wilken directed the committee to page 25 regarding assessed           
 value per ADM which is the heart of SB 146.  Page 26 contains a               
 graphic disparity of wealth between the boroughs in Alaska.  The              
 following page graphically applies the assessed value per student.            
 The basic element of SB 146 is that if a government has the ability           
 to pay for its educational needs, then that is done and at the per            
 student level.  Senator Wilken pointed out that the graph on page             
 27 illustrates that the North Slope Borough School District has the           
 capacity of about $6.8 million assessment per student to fund the             
 district's educational needs.  The average in true ADM is $400,000            
 assessed value per year.  The assessed value is relevant in that it           
 is determined by the free market.  It rises and falls in relation             
 to the overall wealth of the state as well as a district's ability            
 to pay.  On page 28, the assessed value with the adjusted ADM tends           
 to narrow the numbers.  For example, on this graph the North Slope            
 Borough School District has the capacity for $2.6 million per                 
 student and the average ADM falls to $300,000.                                
 Number 438                                                                    
 Senator Wilken directed the committee to the required local effort            
 portion.  If an area is organized the required local effort is 3              
 mills of the assessed value or 100 percent of the state support,              
 whichever is less.  Therefore, every government in Alaska will pay            
 3 mills of its assessed value, except for the North Slope Borough             
 which will be required to pay about 1.8 mills of its assessed                 
 value.  The REAA gross wage tax is addressed on pages 29-31.                  
 Senator Wilken noted that all the numbers are run with a three                
 percent gross payroll tax collected quarterly through the                     
 Department of Revenue.  Page 31 illustrates the amount of wealth in           
 1995 in the amount of gross wages created in the REAAs.                       
 Senator Wilken noted that there is a transition period during which           
 there is money available in the first year.  The 1997 numbers                 
 essentially apply to 1998.  Page 33 lists those school districts              
 that are negatively effected.  By the year 2002, the new formula              
 would be in full effect.  Senator Wilken pointed out that the                 
 assessment normalization component had been added in response to              
 testimony regarding the effects to programs and students.  He noted           
 that an amount must be assumed in order to equalize.  Assessment              
 normalization essentially takes money from the districts with the             
 ability to create more wealth and places it in the communities                
 which lack the ability to create wealth.  Senator Wilken explained            
 that the money is accumulated according to a districts pro-rata               
 share of the assessed value of the state.  For example, Anchorage             
 has about 42 percent of the state's assessed value which translates           
 into a contribution of 42 percent of the three mills.  The money is           
 taken out based on head count.  Since Anchorage has 31 percent of             
 the adjusted ADM in Alaska, Anchorage only takes 31 percent of the            
 money while contributing 42 percent.  If a district's assessed                
 percent and adjusted ADM are the same, then that district would               
 receive as much as it contributes.  If a district's assessed value            
 is greater than the adjusted ADM, then that district would be a net           
 donor.  If a district's assessed value is less than the adjusted              
 ADM, that district would gain through the formula.  Senator Wilken            
 stressed that the North Slope Borough School District is not                  
 included in that because the North Slope is already paying for its            
 educational needs.                                                            
 The summary tables are located on pages 39-42.  Senator Wilken                
 suggested that placing the Combined State Support on page 40 beside           
 the Assessed Value column on page 41 allows viewing of the new                
 formula start to finish.  The information on page 42 regarding                
 state support with the 3 mill normalization per ADM assumes the               
 following:  1.5 percent student growth each year for the next five            
 years, a 3 percent wage tax generating $15 million from the REAAs,            
 and a 3 mill normalization.  The ADMs increase and decrease in                
 almost every district for different reasons.  Those districts that            
 experience a decrease should review the district's categorical                
 funding under the existing formula versus the proposed formula.               
 Districts with a decrease should review the number of sites in the            
 district with regard to the two units front loading; the greater              
 the sites in a district, the more front loading is experienced.               
 The new formula does not have a front loading component as the old            
 formula.  A district experiencing a decrease should also review the           
 value of the individual school district as it relates to the value            
 of other school districts.                                                    
 Senator Wilken directed the committee to page 38, the effects of              
 normalization.  As the 3 mill rate is approached the greater amount           
 is collected from the wealthier communities and distributed to the            
 less wealthy communities.  The higher the mill rate the more money            
 is accumulated to be divided up.  Senator Wilken noted it is a                
 political call, someone will have to determine where the sliding              
 scale starts and stops.  The differences between the current                  
 formula and the proposal are located on pages 35 and 36.                      
  VICE CHAIR   LEMAN  asked if the committee had any questions.                
 Number 524                                                                    
  SENATOR ELLIS  acknowledged that the proposed formula would not              
 consider the PL874 money.  Is there a way to calculate the greatest           
 potential disparity between per capita distribution to a student in           
 the wealthiest and the poorest school districts?  Is there a way in           
 which to assess the existing formula versus the proposed formula in           
 regards to potential disparity?  Senator Ellis said that he was not           
 advocating consideration of PL874 money.   SENATOR WILKEN  did not            
 know, but offered to work on that question.  Senator Wilken asked             
 if that would be measured on ADM or adjusted ADM.   SENATOR ELLIS             
 said he would have to think about that.                                       
  SENATOR ELLIS  inquired as to the reactions of various groups on             
 SB 146.   SENATOR WILKEN  characterized SB 146 as receiving cautious          
 optimism; it is a place to begin.  Senator Wilken expected to hear            
 some concerns, but the proposed formula no longer glosses over the            
 structural problems in Alaska regarding how education is funded.              
 Over the last month, there have been some excellent pro and con               
 discussions on the proposal.  Senator Wilken indicated that there             
 was a fairly good basis of support.                                           
  SENATOR ELLIS  asked if there had been consideration of SB 11 when           
 developing SB 146.  There is a cumulative impact of that and SB 146           
 and other related legislation; was SB 11 factored into the                    
 operational funding being proposed?   SENATOR WILKEN  replied no.             
 SB 11 is now in Senate Finance where the percentage is back down to           
 50 percent.  Senator Wilken believed that these efforts can only              
 help people feel better and perhaps loosen the purse strings with             
 regard to building schools statewide.                                         
 Number 576                                                                    
  SENATOR ELLIS  noted that the University of Alaska Board of Regents'         
 request for remedial education and developmental education through            
 the foundation formula or other funding sources is not included in            
 SB 146.  Senator Ellis hoped the committee would review that                  
 request and the accompanying issues.   SENATOR WILKEN  believed that          
 everyone was concerned with the University's comments that some               
 entering students need remedial education before beginning college.           
  SENATOR WILKEN  hoped that SB 146 would be held.                             
  TAPE 97-37, SIDE B                                                           
 In response to an inquiry about receiving testimony,  VICE CHAIR              
 LEMAN  announced that no testimony would be taken today, but written          
 testimony would be accepted.  SB 146 will be held.  Hearing no                
 further questions, Vice Chair Leman returned the gavel to Senator             

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