Legislature(1997 - 1998)

11/12/1997 05:00 PM Senate HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SB 36 Public School Funding                                 
          SB 146 Public School Funding/Child Care Grants                       
         SB 193 Administrative Spending Limit For Schools                      
CHAIRMAN WILKEN called the Joint Senate Health, Education and                  
Social Services (HESS) and Finance Committee meeting to order at               
5:00 p.m. and announced they would be discussing the education                 
foundation formula.  He noted they would be discussing SB 36 and SB
SENATOR TAYLOR welcomed everyone for coming and explained that in              
the 1980's all towns in his area were stopped at the very same                 
formula funding level as Anchorage and Anchorage has economies of              
scale that his areas don't have the benefit of.  He said all four              
of his communities of Petersburg, Wrangell, Ketchikan, and Sitka               
have been up against the cap for several years and they have seen              
school functions get transferred over to cities and boroughs to                
carry the load.  Swimming pools are now operated by cities.                    
He said his communities had been advocating for the last eight                 
years that there is disproportionate treatment of Southeast Alaska             
and other communities in the State, because of the cost                        
differential and the failure to recognize the 3% - 5% cost of                  
living differential that has always existed in Southeast Alaska,               
separate from the railbelt.  He noted that they had over the years             
incrementally increased the instructional unit and the community of            
Mat-Su did sue the State for inequitable treatment, but lost the               
case.  There was a temporary fix in that situation or Mat-Su would             
have sued again and would have won.                                            
Consequently, the bush communities are getting $61,500 per unit.               
There has been no change in the unit value in his area.  He has                
suggested what appears in SB 36.  The concept in the legislation               
requires that every community in the State, rich or poor, would                
contribute five mills or the equivalent in local effort to support             
education.  Right now each of the taxpaying districts he is talking            
about are paying more than five mills.  They are paying up to the              
cap and then taking over all the other functions.  So, every                   
community that is paying more than five mills would benefit from               
this.  Those communities that will be paying less than five mills              
are being subsidized.  The North Slope Borough is paying about two             
SENATOR TAYLOR explained that by taxing ourselves, we are                      
subsidizing the North Slope Borough.  Their Borough is so wealthy              
that, were they to pay the same amount as they are required to pay             
under the existing formula, they would pay for all of their cost of            
education and they would derive about $30 million additional                   
funding into the formula.  The same happens in Valdez and Unalaska,            
but there are no additional monies that come into the formula.                 
He wants to level the playing field.  He thought it was important              
for everyone in the State, rich or poor, to pay five mills and this            
would be the basic support required.  The State would supplement               
the rest of the cost of education.  Many communities are setting 6%            
- 9% mill equivalency and they are putting that amount into their              
school district right now.                                                     
SENATOR TAYLOR said there are two things that have to be                       
accomplished by any funding formula.  One is that area cost                    
differential has to be adjusted and it has to be adjusted based on             
some objective number.  Not one that is politically driven.  It                
would have to mean something to the people in that community.                  
There is a significant difference in the cost of education between             
Wrangell, Petersburg, Juneau, Ketchikan, Sitka, and Anchorage.  Yet            
they are all at the same level.  They are going to also have to                
bring everyone to the table to share the pain or they are never                
going to have a fair formula.  It has to be fair or sooner or later            
a school district is going to sue and the public will not be the               
one's making the decision.  It will be the courts.                             
TAPE 97-50, SIDE B                                                             
SENATOR TAYLOR said he believed the legislature would rewrite the              
funding formula this year and their input would make a difference.             
SOME OF THE SPEAKERS.]                                                         
SENATOR TORGERSON explained the legislation he had introduced a                
couple of years ago attempting to eliminate school districts.  If              
a community voted not to form a borough, the State would come in               
and assess and levy of 4 - 4 1/2 mills and there would be no option            
of not paying.  He reintroduced that bill this year and SB 142,                
which does a lot of the same things, but doesn't have the borough              
issue in it.                                                                   
He said that SB 142 establishes a tax in the unorganized boroughs              
in Alaska, parts of which aren't currently contributing to                     
education.  Some of the facts that have been accumulated over time             
are that 92% of Alaskans pay a local effort either in a single site            
school or in a borough.  That 92% receives 79% of the funding.  The            
8% that are not required to pay anything receives 21% of the pot.              
This bill equalizes the formula across the State and adopts model              
borough boundaries and says there can only be one school district              
per boundary.  There are 53 school districts that operate in the               
State ranging in size from 31 students to 53,000 students in                   
Anchorage.  This bill would eliminate school districts down to one             
model borough per boundary.                                                    
He said that SB 193 sets administrative costs at $950 per student              
per district and then multiplies that number by the ACED.  Senator             
Torgerson said that if it were fair to use the ACD for books and               
things, then administrative costs would trail along.  It's a $20               
million savings.                                                               
If the administrative bill passes, the consolidation of school                 
districts is not an issue.                                                     
SENATOR WILKEN said SB 146 shows some of the problems in the                   
current formula and suggests at least one way to fix it.  He said              
it took three tries in Fairbanks to pass a $64 million bond issue.             
The third time the people didn't like the fact that they were going            
to spend money to build schools for their region and asked why they            
should pay 30% when others paid nothing.  There are places in the              
State that are wealthy and don't pay anything for education close              
to what Fairbanks does.  He said fixing funding for schools was one            
of the main things he wants to do for his kids and his grandkids.              
The problem is that the formula is complicated and unfair, said                
Senator Wilken.                                                                
He broke the formula down into four pieces: State support, required            
local (you have to do something locally in order to get State                  
money), local contributions, and assessment normalization.                     
Forty-three school districts in 2002 benefit from SB 146.  Some                
people have characterized SB 146 efforts as stealing from the rural            
areas and giving to the urban areas.  In the last 10 years the                 
amount of general fund money has increased 51% and the amount the              
State has have been asked to contribute has increased by 26%.  If              
you assume that 2.75 is the inflation rate per year for the last 10            
years in Alaska, the purchasing power of the education dollar today            
is the same as it was in 1986.                                                 
He said there was some question about the Teacher Retirement System            
in 1986, but that was included in the formula.  So, he stands by               
his numbers of $409 million in 1986 and $628 million in 1997.  The             
question is where did the money go.  The problem is with the                   
formula.  Forty-three states have per student public school funding            
and seven have instructional units.                                            
He explained that the amount per student dollar, times the number              
of students, times developmentally disabled students (a fixed                  
number), minus the required local equals the State's support for               
The number of students is adjusted for where they live, how many,              
and special needs; that's all.  You multiply that times the student            
dollar and that's the public school foundation.  He said this                  
equates education to the voter through the dollar and it's simple.             
He said it is essential to adjust the foundation formula to                    
establish a per student dollar.                                                
In 1995 Governor Knowles and the Department of Education conducted             
a survey that asked if education monies were increased tomorrow                
would it increase the quality of education in Alaska. Three percent            
didn't know; 30% said yes; and 66% said no.  Forty-seven percent of            
the voters had children in schools and didn't think more money was             
going to fix the problems.  Eighty-one percent of the group thought            
we should go on a student dollar.  Seventy-four percent thought it             
should be simplified.  These are the numbers he thought were                   
driving the Governor.  The survey results show the need to go to a             
per student dollar and the legislature should be paying attention              
to these results.                                                              
CHAIRMAN WILKEN said there were two sets of rules for the organized            
and the unorganized areas of the State.  The organized areas give              
4 mills or 35% of the required State basic need.  The change in SB
146 is significant.  It asks for 3 mills.  It doesn't decrease the             
amount of education money; it changes the qualifying number for                
receiving State money.  There won't be a sudden decrease in the                
funding for education at the local level because of the decrease to            
3 mills.                                                                       
He explained a graph that he presented to the committee of how much            
each community was contributing.  He noted that Ketchikan, Sitka,              
Kenai, and others were at the cap.  He said this slide shows the               
disparity between communities and then he discussed what he thought            
was a "fair share."  He said it was based on assessed value of the             
organized area.  Fair share is determined by the free-market forces            
at work within the organized community's boundaries.  It is a clear            
reflection of the ability or inability of an organized area to                 
create varying degrees of wealth.  On a larger scale, it is a clear            
indication of the health of the State.                                         
SB 146 is based on the assessed value divided by the number of                 
students which Senator Wilken thought was fair.  Each district is              
required to contribute an equal amount based on its assessed value             
in order to qualify for State basic support, but never more than               
what is required to educate its respective children.  This                     
redistributes State formula money from the more wealthy districts              
to the less wealthy.                                                           
In the unorganized areas the State gave $135 million (22% of                   
education monies) to REAAs in 1996, but the REAAs did not                      
contribute to the education formula.  Locally generated revenues is            
each district's choice.                                                        
SENATOR WILKEN said under SB 146 the State spreads $90 million                 
around the State in order to equalize the funding.  He explained               
that districts put money in the pot based on assessed value by the             
State; money is taken out based on the number of students that are             
going to be educated.  He reiterated that SB 146 was based on                  
simplicity and fairness.                                                       
TAPE 97-51, SIDE A                                                             
MR. GREG MIDDAG said that there had been no real increase in the               
amount of funding for education since 1986.  He said that figures              
for the total cost of education did not reflect the amount of money            
that goes to each child which amounts to $150 per child over the               
last 12 years - not near enough to cover the cost of inflation or              
increasing the quality of what might be possible in education.  Per            
diem and allowances in other areas that have been approved by                  
legislators have increased by $8,000.  The people want to hear that            
the children of Alaska are going to get the same type of advantages            
that the legislature looks at giving to themselves in terms of                 
where they are and how they need increased monies for inflation and            
cost-of-living.  He said that education needs more money.  In 1992             
they had five teachers and one aide working with disabled students             
at his school and today there are two teachers and an aide.  They              
can't function like that.                                                      
CHAIRMAN WILKEN said he couldn't agree with him more and that's why            
they are doing all this work.                                                  
An unidentified teacher said that they would not even consider                 
having a meeting in her school because the lines and temperatures              
are so bad.  She said that her buying power continually goes down              
and she is asked to do more.  She said she will give more, but it              
is time for everyone to give more.                                             
An unidentified speaker said he favored slicing the pie differently            
and he also thought the pie was too small to start with.                       
SENATOR TAYLOR answered that there are two different ways to                   
calculate the millage rate.  They have been tempted to set the                 
formula is SB 36 in a fashion that would not cost the individual               
tax payers in the tax paying districts more money.  To answer when             
they are going to put more money in the bucket, he said that SB 36             
puts about $50 million more into that bucket.  It, then, gets                  
divided out among the tax based communities.  Under this scenario              
almost every tax paying district in the State would have a                     
significant increase in the amount of money they would receive.                
The same thing will happen with SB 146.  There will be an increase             
in the amount of money the State sends to districts to educate kids            
with.  He said school districts need more dollars flowing into the             
communities that have been deprived.  He did not want to increase              
taxes;  Senator Wilken's formula increases taxes with a 3%                     
employment tax for those people living in the REAAs.  This he                  
thought would be tough to sell politically.  The legislature wants             
a level playing field for their tax-based districts and some more              
money in the pot so that districts can take care of deferred                   
building maintenance. He noted that the North Slope Borough had a              
$120 million swimming pool and the Arctic Slope had three airplanes            
maintained for the children to learn to fly airplanes.  Ketchikan              
didn't even have a nurse in their whole school district.  He didn't            
think that was equitable funding.                                              
There was general discussion, but the tape was indiscernible.                  
MR. MIKE MCCONNEL, Ketchikan parent, commented. [INDISTINCT TAPE]              
SENATOR TAYLOR said he supported his recommendation of not leaving             
it to the legislature to set the area cost differential, but to                
find an objective way to do it.                                                
An unidentified speaker asked about cutting funding for                        
transportation to schools.                                                     
CHAIRMAN WILKEN responded that they intended to cover                          
transportation, but it's not part of these bills.                              
An unidentified speaker reported that they do not have art                     
instruction at the elementary level, nor counselors.  They have                
only half time P/E and music teachers at the elementary school                 
SENATOR TAYLOR explained that Ketchikan's increase next year is                
about 5% in SB 146.  He also said that SB 146 didn't take money                
from one district and give it to another.                                      
MS. KAREN FRYE, teacher, said she had seen programs and support                
staff go down in the 17-years she had been teaching and she thought            
the formula needed to be redone.  She thought something needed to              
be done to increase the dollars in the pot.                                    
An unidentified speaker questioned if they were looking at the cost            
of living versus the cost of operating schools and if they were                
looking at the cost the way the schools are currently or they way              
they want them to be.                                                          
MR. MIKE HAPOLD testified. [INDIS]                                             
TAPE 97-51, SIDE B                                                             
Several unidentified speakers testified briefly, but the recording             
was indiscernible.                                                             

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