Legislature(1997 - 1998)
11/12/1997 05:00 PM Senate HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 146. 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 mills. 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. [DUE TO POOR TAPING QUALITY, TRANSCRIPTION WAS NOT POSSIBLE FOR 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 education. 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 levels. 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.