Legislature(1997 - 1998)
04/09/1997 09:04 AM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 repealer. 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 Wilken.